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• June 2012 Issue
• updates
  • CAs(SA) - proudly South African: commited to maintain IFRS
  • Dictionary of accounting: Cutting through the confusion
  • SAICA advises accountants not to misinterpret the dti and SANAS communications
• commentary
  • Africa - the forgotten giant offers an untapped market
  • Full stop: on his high horse
• focus
  • Developing the soft skills of professionals: the hard part of talent management
  • Effective credit risk management: vital for business survival
  • Effectively managing your fixed assets in Ten steps
  • From local to global: the South African way
  • How to lead: by SA's most admired leaders
  • Leadership lessons: nurturing the future
  • Managing change: is it about compliance, or a new process?
  • Sustainability management - industries can tread more lightly on the planet: A case study
  • Sustainability management: the next big challenge
• analysis
  • Basel III - Liquidity risk and SA Banks
  • New companies act: key features of non-profit companies
• life
  • Coaching: unconventional thinking for business success
  • Motoring: Mercedes-Benz CLS 500, BMW 640d coupé
  • Tribute to Julius Feinstein: doyen of the South African accounting profession
  • Wines that guarantee lingering impressions
• CPD Verifiable Articles
  • New companies act: key features of non-profit companies (30min)
  • Basel III - Liquidity risk and SA Banks (30min)

“So, how do companies shift to this new type of management? How do they engage issues such as climate change, sustainable development and community development?”

Sustainability management: the next big challenge

It is widely recognised that sustainability is important, if not vital to business. And that it will likely become even more so as natural resources become scarcer and consumers, civil society and governments increasingly demand more self-discipline from the private sector. One only needs to look at the introduction of carbon taxes, the emergence of sustainable investment indexes and low-carbon policy government papers, to realise that the world's commercial dynamics are shifting to sustainable business models.

The traditional view of business – one that focuses on maximising returns to shareholders - has unfortunately led to many undesirable social and environmental consequences. The tendency of this business model to externalise and make societies responsible for social and environmental costs had unforeseen impacts on the environment and on individual livelihoods.

Fortunately, a growing number of companies recognise that it is neither in their own interests nor those of society to continue with this ‘take-make-waste'1 model. In an economy heavily reliant on natural resources, leading South African companies are paying increasing attention to the amount and type of resources they use, the emissions they generate, the sustainability of their supply chains and the communities they operate in. Companies have recognised that a sustainable and prosperous external environment creates the conditions for a secure long-term revenue stream.

In short, sustainability management is ‘long-term business management'. So, how do companies shift to this new type of management? How do they engage issues such as climate change, sustainable development and community development?

One could, however, argue that finding new ways to shift management thinking or for them to navigate the complexities of the sustainability path may not be the primary challenge companies will be facing. The most pressing issue could be that over the next 15 to 20 years, the ownership structures of larger companies could radically change. It appears likely that decisions will no longer be exclusively made by a core of executives, but these will have to be agreed upon by community leaders and government sovereign funds.

Zimplats, which is Impala Platinum's (Implats) subsidiary in Zimbabwe, is probably one of the first companies in the world to have to deal with this form of decentralised and pluralised decision-making structure. Due to Zimbabwe's Indigenisation Act, Implats has agreed to relinquish 51% of its shareholding in Zimplats as follows2:

• 10% will be given to the community in the Ngezi area where Zimplats mainly operates;
• 10% will be given to Zimplats employees; and
• 31% will be transferred to the state-run National Indigenisation and Economic Empowerment Fund.

It is unlikely that all company ownership across the world will change to this multi-titleholder structure in the next 20 years, but is this again “always something new out of Africa” (Aristotle)?. At this time Zimbabwe is the only country in the world that requires foreign-owned firms to be at least 51% owned by locals, but South Africa's black economic empowerment (BEE) has resulted in an average black ownership of 26.1% (varying across industry sectors), while Kenya is considering 33% indigenous ownership.

In future foreign companies expanding across Africa will have to negotiate with national governments on ownership or profit-sharing structures. It is these negotiations that will be the single biggest sustainability-related challenge to companies in Africa, and not how to report against the Global Reporting Initiative or how to reduce carbon emissions.

The private sector has an impressive track record of overcoming problems with innovative solutions. Resources already at the disposal of the private sector include reporting templates, sustainability management methods and efficient environmental technologies. The centralised decision-making structures of most private sector companies enable them to quickly address challenges.

But what does not yet exist is a tried and tested method of managing relationships with new owners. How will common ground be found? Whose decisions take precedence and how do decisions get implemented?

Managing relationships and finding common priorities is an art. Some companies are expert at stakeholder engagement, public affairs and managing sustainability expectations. These skills and the tools that come with it, such as perception audits, sentiment trackers, long-term communication scenario planning, will play an increasing role in the way the private sector manages relationships.

Businesses will need to start thinking about ‘Shared Advantage™', which is based on identifying common objectives and capabilities to create opportunities of mutual advancement. Establishing ‘Shared Advantage™' in companies allows “two or more parties to cooperate in a process and dialogue that is free from coercion to secure mutual benefits through improved performance and competitive gain”3.

The aim would be to create a relationship of mutual dependency to achieve key objectives. In essence, instituting ‘Shared Advantage' relationships to work towards a common mission and vision, will be the main solution for addressing the sustainability challenges that businesses will face in the next few decades. asa

References
1The Cambridge Sustainability Leadership Programme – www.cpsl.cam.ac.uk
2http://mg.co.za/article/2012-03-16-struggle-for-zimplats-not-over-yet
3Africapractice London, March 2012.

Author: Camilla Flatt, M (Environment and Development), is the Head of Sustainability at africanpractice.

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