Environmental Social Governance (“ESG”) is not simply a box ticking exercise.  Its about how your company can make a difference for both your business and the world.

Environmental risks collide with financial capital risks as investors inspect the long-term viability of companies with regard to climate change.

Social factors have become the focus of many boardroom discussions.  The impact of Covid and major economic disparities have led to the need for companies to respond to social shifts.  Corporate Social Responsibility (“CSR”) has been on the agenda for many years.  ESG creates a new level of inspection that organisations face when it comes to dealing with these issues.

ESG is fundamentally a forward-looking Integrated Risk Management approach which acts a barometer for which companies are willing to thrive and which are likely to decline in a world of social and environmental uncertainty.

Companies who are heavy Green House Gas (“GHG”) emitters are unlikely to attract investor interest if they do not have a credible ESG story explaining their approach to long-terms viability.

ESG and CSR are both ways that businesses can demonstrate their commitment to sustainable business practices.  CSR can be seen as the “big-picture” perspective on sustainability, and ESG is the practical, detail-orientated perspective on sustainability.

In other words, CSR is the precursor to ESG.  Companies can commit to sustainable practices with the aim of making a positive impact on society.  Then, the action undertaken in a CSR strategy can be refined and fit into ESG metrics and reporting.

CSR reaches beyond social and environmental help; it also positively impacts business reputation.

Examples of CSR include:

• Lowering carbon footprint
• Investing in environmentally conscious businesses
• Participation in volunteer work
• Engaging in charitable projects.

How is CSR reflected in the Companies Act?

Section 7 highlights the purpose of the Companies Act:

• Promote compliance of the Bill of Rights
• Promote the development of the South African economy
• Encouraging transparency and high standards at Corporate Governance.

How is Corporate Social Responsibility reflected in the B-BBEE Act?

• Companies are encouraged to play their part in the upliftment of black communities by working with Small, Medium and Micro Enterprises (“SMME’s”) and Non-Profit Organisations (“NPO’s”)
• The B-BBEE Act also encourages the participation of designated groups in shareholding, either directly or indirectly through trusts or NPC’s. The Act also encourages companies to assist NPO’s.  The specific aspect is recognised under the statement 500, Socio Economic Development.

B-BBEE objectives, together with CSR, are necessary elements in the positive socio-economic transformation of the country.  EST manifests in the Quantitative, externally regulated evaluation of both the initiatives of CSR and integrated B-BBEE initiatives.

It is clear that there is a need for an integrated strategy for CSR, ESG and B-BBEE.

Carbon Zero Solar will continue to provide you with the ongoing developments around the initiatives and regulations associated with ESG, both for the private sector and publicly listed entities.  The current position forms part of this article with updates to follow our time.