If you spend much time on the ‘right’ side of social media, you will encounter countless warnings about the disconnect between overarching net-zero policies and the on-the-ground implementation of the same.
The clear message, repeated as often as you care to seek it out, is that government interventions towards net-zero are grandiose, if not impossible.
The ‘all EV by 2050’ and ‘nothing but solar and wind for power’ mantras are little more than pipe dreams. It is not surprising, therefore, that some of the bluster around environmental, social and governance (ESG) outcomes has died down recently. Thankfully, that does not mean that allocators of capital and insurers can sit back and leave matters of resilience and sustainability to the gods.
Prior to penning these opening lines, you writer stumbled upon an intriguing thought leadership piece on the trade-off between ESG and sustainability which could well help us further the ‘save the planet’ debate. In a well-written piece, Johan Durand of Energy Partners sets out to answer which of the two constructs the private sector should obsess over. Energy Partners invests in, owns and operates energy solutions in Africa.
There are subtle differences between the two. ESG is best described as a framework that companies and investors use to assess progress based on specific, measurable criteria – it is largely data-dependent and risks becoming a check-box driven exercise aimed at encouraging inward investment. The industry calls this greenwashing; but that is a topic for another day.
Durand restated this short definition, writing that “ESG provides a much more granular view, emphasising specific measurable criteria as they relate to environmental impact, social responsibility and governance standards.” For example, companies will track and report on their carbon footprint, or go above and beyond to interact with the local community and improve social conditions there, among other initiatives.
Sustainability is broader, referring to the overarching goal of meeting present needs without compromising the ability of future generations to meet theirs. Things that come into focus under this heading include protecting the environment and working towards long-term economic and social wellbeing. But private businesses must also ensure operational sustainability, protecting the interests of their shareholders.
According to Durand, sustainability refers to “the ability and practices of a company to optimally manage economic, social and environmental resources to ensure long-term viability” – and although he does not mention profit here, it is implied in the word ‘viable’.
Unfortunately, the measurable global interventions aimed at reducing global temperature rises are often in conflict with sustainability – and more so over shorter timeframes. In their haste to meet ambitious net-zero targets, policymakers and businesses alike sometimes overlook the broader social and economic impact of their actions.
For example, while transitioning to electric vehicles and renewable energy may be a necessary environmental goal, the associated costs can disproportionately affect lower-income communities, driving inequality. And the rush to decarbonise entire industries can also lead to job losses in traditional sectors, exacerbating societal challenges. These statements resonate in Africa, where many economies rely on fossil fuels for their energy needs.
Durand argues that an integrated approach is essential, noting that the challenge becomes how to merge the holistic practices of sustainability with the detailed insights provided by ESG metrics.
“Given the global importance of these constructs, understanding their distinct roles and interconnections is critical for companies aiming to thrive in the modern economic landscape and maintain organisational sustainability,” he wrote.
His thought leadership piece offers a unique view into the overlap of ESG and sustainability in a South African context – declaring that companies did not have the luxury of choosing between the two.
Durand drew attention to South Africa’s – and many countries in Africa, for that matter – well-documented issues with energy and water shortages; lacklustre economic growth; and high unemployment rates before declaring: “An integrated, pragmatic approach that incorporates the broad, holistic practices of sustainability with the detailed, specific metrics of ESG is essential.”
Many Africa Ahead readers no doubt share Durand’s view that the international doctrines calling for an immediate shift to net zero are somewhat disconnected from South Africa’s unique circumstances. And your writer loved the following turn of phrase: “Countries must balance net-zero expectations against current economic realities.”
Anecdotally and when measured on short-term impacts, the conversion of a coal-fired electricity plant to renewable energy producer does not leave society better off. Forget the difference in employee headcounts before and after, and think about the upstream jobs that will simply evaporate too. For some context, local coal miner Seriti Resources recently announced plans to cut more than 1,000 workers at two opencast coal mines, on profitability concerns.
Statistics from MineralCouncil.org show just over 90,000 employees in the sector circa 2022, with coal providing around 70% of South Africa’s electricity. The problem compounds due to the concentration of these jobs in poorer provinces such as Limpopo and Mpumalanga.
No surprise, then, that Durand advocated for a softer approach. “Our pathway to sustainability may require a more gradual adoption of renewables, prioritising first the economic and social pillars of ESG by stabilising the economy and reducing unemployment; this would lay the foundation for a successful transition to renewable energy, meeting environmental goals in a way that supports the country’s long-term growth and development,” he wrote.
The thought leadership piece held that South Africa should approach its economic and environmental challenges using a Chinese rather than European Union (EU) or United States (US) lens. A 2023 World Economic Forum (WEF) report suggests that China is shifting from a GDP-focused growth model to a Gross Ecosystem Product (GEP) development strategy.
“In just one generation, China has achieved remarkable social progress – extending life expectancy by 10 years, reducing infant mortality by 80% and lifting more than 800 million people out of poverty,” Durand wrote. To which the cynic might respond: “They achieved ‘S’ by sacrificing ‘E’ and ‘G’.
So, how can Africa ‘learn’ from China? “In a global context where the US uses sustainability as a political tool and the EU risks overregulation, collaboration with China could offer valuable insights; by adapting elements of China’s nature-positive transition, Africa may find a path to sustainable growth that addresses its unique needs and circumstances,” Durand opined.
He concluded his piece by drawing attention to the potential impact of EU and US sustainability standards on global trade, with more and more African companies forced to rethink how they ‘spread’ their goods and services around the globe.
“South African companies [must] maintain their future relevance; resonate with investors, customers and regulatory bodies; mitigate risks; and seize new opportunities in a rapidly evolving world,” he wrote.
In your writer’s humble opinion, the sustainability challenge will eventually boil down to global commitments to achieving the 17 United Nations Sustainable Development Goals (UN SDGs). If each country makes incremental moves towards earning those SDG ‘badges’, the world will be on a far better footing come 2050.
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