Corporate SA must move fast to plug glaring ESG gaps

Adapting to, and surviving in the complex, modern world requires more than ticking boxes and talking. It will require a culture shift – a significant commitment to genuinely addressing and complying with all aspects of environmental, social and governance (ESG) challenges in a real, practical, sustainable, and tangible way.

This will require broad action to fill the concerning inconsistencies in the way these issues are being addressed. It is up to the corporate sector to firstly acknowledge its role in being slow to meaningfully address these inconsistencies and to take a stronger stand to drive sustainability for all.

Read: As ESG moves front and centre, what does it mean for corporates’ supply chains?

This means having the courage to stand up for what is right, champion what is ethical, and continually work towards correcting where things have gone wrong. Any company that does not take these genuine threats seriously is unlikely to survive the next few challenging years.

It is worth noting that the World Economic Forum (WEF) says ESG today should be a strategic concern for business as social justice protests have drawn attention to gaps in diversity, equity, and inclusion; and the impacts of climate change and the importance of environmental sustainability are becoming harder, if not impossible, to ignore.

This is why it cannot just be a “nice-to-have” popping up on the C-suite agenda once a year.

Get it right and the benefits are immense: Better manage risk; meet stakeholder expectations; improve financial performance; support competitiveness; ensure compliance with regulations; and most importantly, build long-term resilience.

The reality is environmental and social governance directly affects business performance, leading to outperformance, fewer losses, and faster recoveries.

According to McKinsey value is enhanced by helping companies tap new markets and expand into existing ones. Focusing on value-creation through long-term sustainable ESG thinking also creates innovative opportunities for business and its stakeholders.

You can reduce water intake, lower energy consumption, uplift productivity, enhance investment returns by better allocating capital for the long-term and if done correctly, and with the right intent, you can even reduce regulatory and legal interventions – read fines and excessive red tape.

The Spar Group is taking note of all these key developments and aims to take a lead in this space in the retail sector in SA. We have adopted a robust process to develop The Spar Group ESG strategy to match current risks.

Listen/read:
Shoprite vs Spar: ‘Better to pay more for quality’
Spar surges 11% on plan to offload struggling Polish business
Spar appoints Angelo Swartz as new CEO

This new and expanded strategy effectively acts as the “radar” that spots future ESG challenges and opportunities and inspires action. For me, ESG is the facilitator for how business needs to change the way it does business.

This approach ensures the ecosystem in which we operate is environmentally, socially and economically resilient and sustainable, and results in responsible and ethical culture across all players in our value system. All decisions taken by our business must therefore actively seek to create and preserve value.

Change at this scale is not something that will happen overnight or can be done by a department – it must be done by the entire business. Ultimately, it is imperative to pivot towards value creation on a broader basis and scale – profits remain a critical lever but should never come at the expense of purpose and long-term sustainability. That is the death knell for any business.

For instance, a recent McKinsey study highlights what happens when ESG is not done properly: A business will lose customers through poor sustainability practices or a perception of unsustainable/unsafe products; it will lose access to resources; generate unnecessary waste and pay correspondingly higher waste-disposal costs; expend more in packaging costs; incur fines penalties, and enforcement actions; lose talent as a result of weak purpose; suffer stranded assets as a result of premature write-downs; and fall behind competitors that have invested to be less “energy hungry”.

It is a long and worrying list best avoided…

At Spar, we know we have a responsibility to show up as a brand in what is a fast-changing and dynamic new market. By focusing on purpose alongside profits we are laying the foundations for The Spar Group’s long-term sustainability and success.

Kevin O’ Brien is group ESG executive at The Spar Group.