Stakeholders of all kinds increasingly hold organisations accountable for delivering sustainable value. In fact, stakeholders tend to place more trust in organisations that demonstrate a sustained interest in communities, the environment and good governance. They expect organisations to do more than simply ‘tick a box’
Organisations can help to build trust and deliver sustained outcomes by implementing effective environmental, social and governance (ESG) strategies. That is why we have chosen ESG as one of six areas that we are focusing on, as PwC Africa, to bring The New Equation to life − both within our own organisation and in our work with clients.
The New Equation is a useful framework for understanding the current needs and changes in the world and in Africa. The COVID-19 pandemic, climate change, economic disruption and governance challenges are not unique to Africa, and likewise social imperatives such as unemployment and inequality are relevant to organisations of all kinds. We believe that organisations in Africa and beyond must integrate ESG considerations into their corporate and investment initiatives and activities, and internalise ESG holistically, to build trust and ensure long-term sustainability, agility and competitiveness.
Investors, lenders, rating agencies and other interested stakeholders expect more transparency on financial and non-financial metrics to better understand a company’s performance and risks. Organisations also need to show how they create value − for shareholders and society alike − through insightful, balanced and trusted performance and disclosure.
It is clear, now more than ever, that organisations simply cannot afford to downplay the importance of ESG.
Stakeholders increasingly expect organisations to communicate and deliver convincing and measurable, sustainable ESG strategies. The key drivers influencing the relevance and importance of ESG strategies differ by industry but typically include disruption and vulnerability in socio-economic circumstances, regulatory requirements, changing market supply and demand priorities, environmental anomalies, transformation of investor perspectives, and technological and academic progress.
In our work helping organisations to implement and manage their ESG strategies, we have helped our clients to develop and communicate ESG strategies and measure and report outcomes. We have walked this journey with them and helped them manage stakeholder advocacy for net-zero policies and commitments, as well as increased pressure to incorporate ESG metrics into executive pay packages. We are also deeply committed to implementing our own ESG strategy as PwC.
Integrating ESG for the long term
PwC research on the prioritisation of ESG indicates that business leaders in most organisations (almost three-quarters) are just embarking on their ESG journeys. A few other companies, however, have already started reorienting their businesses toward a value creation ecosystem that includes environmental sustainability, employee engagement, and broader societal impact to financial imperatives as measures of success.
It is critical that organisations take steps now in order to future-proof their businesses by implementing and accounting for their ESG matters. Fully integrating ESG into the overall corporate strategy and operating model, as well as adapting to a changing environment, begins with the tone at the top. A company’s ability to control and report on its operations in alignment with its ESG strategy may also require technology-enabled data transparency, new systems and processes, and potentially training and skills development.
Going forward, an organisation’s competitiveness and value-add will depend on:
- Understanding the potential effects of ESG drivers on the organisation now and in the future
- Continuously adjusting the business strategy and operating model to the ever-changing environment combined with the ability to innovate.
- Detecting risks and harnessing opportunities along the entire value chain, as well as investing in technology, and
- Responding appropriately and in good time to outside pressure
As an organisation, PwC has pledged to achieve net-zero greenhouse gas emissions globally by 2030, decarbonise our supply chain, embed ESG factors in the work we do with clients, and support efforts to develop ESG reporting frameworks and standards. Recently, the global PwC network received validation for its science-based targets and reaffirmed its commitment to achieve net-zero greenhouse gas emissions by 2030.
Every organisation is unique, as is the scope of change required to implement an ESG strategy. However, there are two interconnected needs that we believe help to explain the imperative for ESG strategies at every organisation including ours: the need to build trust and the need to deliver sustained outcomes. That’s what we call The New Equation.
Jayne Mammatt, ESG Africa Leader, PwC Africa