Carbon-neutral commitments lacking in SA corporates

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South African firms are significantly lagging behind global counterparts in terms of carbon-neutral and net-zero commitments and implementation.

This is according to PwC’s environmental, social and governance (ESG) South Africa report released this week. The study, based on a survey of South African CEOs, summarises critical issues affecting society, companies and individuals that are challenging to resolve.

It looks at asymmetry, disruption, age, polarisation and trust – elements that speak directly to many factors addressed by companies’ ESG strategies, and how these factors have accelerated since the onset of COVID-19.

According to the report, South African CEOs are definitely concerned about the impact of climate change on their businesses over the next 12 months. Six out of every 10 South African CEOs polled are moderately, very, or extremely concerned about physical and transition risks associated with climate change, which is roughly on par with the global average.

However, it notes that an overwhelming majority (80%) of South African organisations are lagging behind global trends in taking action on climate change.

For example, 77% of South African CEOs say their company has not made a carbon-neutral commitment, while the global average is 71%.

Carbon neutrality, or net-zero carbon dioxide (CO2) emissions, is achieved when an organisation’s CO2 emissions are balanced globally by CO2 removal, typically over one year, according to PwC.

Lullu Krugel, PwC ESG lead for Southern Africa, says: “The risks associated with climate change have many social implications, including unemployment, food insecurity, increasing health risks and migration.

“Last, but not least, all of the risks mentioned increase the risk for social unrest and upheaval. This emphasises the need to always evaluate the social impacts of climate risk rather than dealing with it in isolation.”

The report warns that businesses with low ESG scores are missing out on funding and support opportunities.

Social conscious capital is increasingly gaining momentum across the globe, with tech firms such as Amazon, Intel, Microsoft, Oppo, Google and Apple being among the organisations that have announced initiatives to help preserve and protect Earth.

Last year, carbon dioxide emissions reached the highest levels ever recorded, according to IEA analysis.New research by the World Meteorological Organisation shows the world is increasingly likely to experience global warming of 1.5°C within the next five years because of record greenhouse gas (GHG) levels.

In 2015, the South African government submitted an ambitious Nationally Determined Contribution (NDC) ahead of COP26. Under the plan, the country’s emissions are set to peak in 2025 at 510 metric tonnes CO2 equivalent, and the entire target range has been lowered for 2030.

The adjusted NDC is a challenge but also an opportunity for South African industries and will likely result in GHG and carbon emission targets swiftly appearing in the KPI structure of South African companies, notes PwC.

South African companies have made some progress and are more likely to have non-financial ESG-related outcomes – such as GHG emission targets included in their long-term corporate strategy than their global counterparts.

However, this is not yet as prominent in CEOs’ annual bonuses or long-term incentive plans, asserts PwC.

“Business leaders can no longer afford to ignore the importance of ESG performance as this can have a direct impact on societal well-being. Research conducted by the University of Oxford’s Sustainable Finance Programme shows that an increase in company-level ESG performance can result in a positive effect on a country’s living standards − both in developed and emerging markets,” says PwC.

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