People walk at the green zone of the Sharm el-Sheikh International Convention Centre, during the COP27 climate conference in Egypt's Red Sea resort city of the same name, on November 9, 2022. PHOTO | AFP
Sustainability moved from the mainstream to become a global agenda this year. COP 27 took place in Egypt and was christened the CoP of action and implementation resulting in an intentional attempt to leverage all actors to accelerate the action of climate action.
Currently, 70 per cent of global carbon emissions can be attributed to the activities of the private sector and there is a need to ensure that these emissions are substantially reduced to become net zero by 2050 to achieve the ambitious targets of the Paris Agreement.
Sustainability has and will continue to shape how companies have conducted business and create, retain and share value.
As we reflect on the year 2022, here are some mega trends observed in the year 2022 and some that will be key in pushing through to 2023.
Boards are aware of and are increasingly prioritising the important role environmental, social and governance (ESG) issues at play in their companies because of their longer-term impact on the bottom line.
Most companies have strengthened board stewardship of sustainability. Board members of most companies have moved sustainability to become a core activity.
Traditionally boards focused mainly on financial performance and risk management, but now we see that sustainability matters are being given an equal footing.
To well-equip boards on matters of sustainability, companies have increased their efforts to develop their boards through education and exposure on matters of sustainability to keep them updated on emerging issues.
Companies are also recruiting board members with expertise on the strategic implication of sustainability issues.
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In addition to this, companies have been ensuring that they embed a sustainability committee as a committee of the board.
Sustainability reporting is now key for any business that has ambitions to play in responsible capitalism.
Currently, only 10 per cent of companies listed on the NSE are reporting on ESG. They include Safaricom, East African Breweries, Nation Media Group, Bamburi Cement, KCB Bank Group, Kakuzi, and Standard Chartered.
However, we have seen that there are efforts to start reporting on sustainability from most listed companies and banks which are aiming to meet the regulatory guidelines but more importantly on a voluntary basis.
Companies are embedding sustainability strategies that are cutting across their departments as a way of doing good business.
Going forward sustainability transparency and disclosures are going to be for all including SMEs who should brace themselves to start sustainability reporting including carbon emissions.
With globalization, we are starting to see international policy affecting local companies.
EU parliament recently approved regulations that will see companies exporting to the EU disclose their emissions across the value chain.
This will have tremendous effects, especially on horticultural products.
Climate change is a clear threat to societies around the world, with short, medium and long-term impacts on their livelihoods.
Climate change mitigation is paramount if we are to reduce greenhouse gas emissions to a safe level, preferably no more than 1.5o C above pre-industrial levels.
While many development partners and donor organizations around the world support countries and communities to better mitigate and adapt to climate change, the private sector needs to do more.
During COP 27, ISO released the Net Zero Standards and that gave a signal to the global markets that business unusual is here!
Net Zero commitments now need to be continuously audited to ensure companies are aligning with the end goal.
Companies are also developing stronger and clearer standards for net zero emission pledges as they seek to speed up their implementation to a net zero future.
This is mainly done by companies setting up SMART targets to ensure that in the near future they are able to achieve this by 2050.
Companies have also been engaging in the circular economy to create more sustainable supply chains.
This shift to sustainable production and consumption is set to continue as reducing carbon emissions remains a priority for companies, consumers, investors, and governments.
Carbon trading and pricing are fast becoming a must-have for companies in the wake of one of the working intervention mechanisms of climate action.
Other elements for consideration will include green fiscal incentives which the private sector must be ready to benefit from them.
The carbon tax is on the table and the development of a long-term emission strategy (LETS) means that the carbon tax in the coming years will be a reality.
Currently, there is a twin challenge of realizing the NDCs target as well as closing the national budget hole that carbon tax can fulfil going forward.
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It’s imperative that companies allocate an internal carbon price that would go a long way to be appropriate in enhancing low carbon emissions as well as the impending carbon tax.
Going forward sustainability is moving from a nice to have to become a must to have backed by policy, oversight by investors and implemented at the top leadership of a business.
Negating sustainability is setting up negative externalities, which will be tomorrow's risks and will become the day after tomorrow's losses.
It’s important for sustainability going forward to be data-driven and expert-led for success.
Dr Edward Mungai is the Global Sustainability Lead at Impact Africa Consulting.
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