South African CEOs are not taking environmental, social and corporate governance reporting seriously – KPMG survey
When it comes to ESG reporting, only about 8% of South African CEOs have invested money towards adopting a more transparent approach, according to the KPMG 2022 CEO Outlook Survey released this week.
The survey – which canvassed the opinions of about 50 C-suite executives in South Africa – mostly included listed companies with 14% from the insurance sector, 12% banks, 10% infrastructure, and a much smaller percentage from the consumer and retail sectors.
The 8% statistic supports the news that environmental, social and corporate governance (ESG) has fallen down the boardroom agenda as a top operational priority for nearly 70% of executives (compared with 58% last year). However, the companies that are paying attention seem to be getting it right.
In the company ESG report for 2022, Pick n Pay chief executive Pieter Boone says there is no question ESG should be a major part of the company’s decision-making strategy.
“In South Africa, we have recently experienced climate-related challenges such as droughts and floods. We also face ongoing socioeconomic factors, compounded by inflation in basic goods, and record unemployment.
“Last year, the unprecedented civil unrest introduced new sociopolitical challenges that we will need to address as a broader society,” he says.
In the 2022 financial year, the retailer installed 15 CO2 plants and one hybrid CO2/134a plant – 37% of Pick n Pay company-owned stores use a form of natural refrigerants, while 36 have full CO2 refrigeration systems and 80 have CO2 hybrid systems.
Shriya Roy, a quantitative analyst at Prescient Investment Management, says although ESG reporting has improved over time, providing investors with more transparency, there is still ample room for improvement.
Visit Daily Maverick’s home page for more news, analysis and investigations
Roy hails the recent introduction of the JSE Sustainability Disclosure Guidance as a step in the right direction.
“Reportable items force companies to reflect on their operational practices and policies. This could highlight their operational impact on society and the environment, and any areas of improvement required. It allows companies to improve and ultimately become more sustainable in the long term,” she says.
Only 10% of South African CEOs say stakeholder scepticism around greenwashing is their top challenge in communicating ESG performance, while more than one-third of CEOs say ESG performance reporting within their organisation doesn’t yet have the rigour of financial reporting.
The study showed that, globally, there was greater understanding of the importance of ESG reporting and how it can benefit companies.
Forty-five percent of CEOs globally agreed that ESG programmes improved financial performance, up from 37% last year.
KPMG says CEOs increasingly understand that businesses embracing ESG are best able to secure talent, strengthen employee value proposition, attract loyal customers and raise capital.
In line with this, 69% of CEOs reported a significant increase in stakeholder demand for ESG reporting and transparency, while 72% believed scrutiny of ESG by stakeholders would continue to accelerate.
The survey showed that the top five challenges identified by CEOs when it came to delivering ESG strategy over the next three years were:
- The effect of other pressing business/economic matters that would cause the company to shift its focus away from ESG (17%).
- Increased or frequently changing regulations (16%).
- Lack of budget to invest in ESG transformation (15%).
- Absence of necessary technology to effectively measure and track ESG initiatives (14%).
- Identifying and measuring agreed metrics (14%).
Chief executive of KPMG Ignatius Seehole says 82% of local CEOs believe their companies are well prepared and protected from cyber risk, compared with 49% of their global counterparts with the same level of confidence.
This is interesting, given that South Africa has been witness to some large-scale cybercrime over the past year.
A TransUnion cyberhack that came to light around March this year affected about 3 million consumers and 600,000 businesses.
The Cybercrimes Act, signed into law last year, requires that companies report any cybercrime offences to the police within 72 hours and retain all information related to it. Failure to do this can result in a R50,000 fine. BM/DM