Until recently, most businesses considered sustainability a minor part of their strategy and operations, despite the global focus that began with the 1997 launch of the Global Reporting Initiative (GRI) in response to the 1989 Exxon Valdez oil spill. The GRI created an accountability mechanism for responsible environmental conduct, guiding companies in managing and reporting their sustainability performance.
Many organisations, however, focused on superficial reporting rather than integrating sustainability into their core strategy. South Africa, led by Professor Mervin King, was instrumental in developing the IFRS Integrated Reporting Framework in 2012, which South African companies adopted with pride. However, despite comprehensive reports, true integrated thinking was often lacking internally.
Even as investors began assessing companies on environmental, social, and governance (ESG) factors in 2004, companies were slow to fully embrace sustainability. The United Nations Principles for Responsible Investing (PRI), launched in 2006, initially attracted over 50 investment companies managing $6.5 trillion in assets. By 2023, PRI had 5,400 signatories with over $120 trillion in assets.
The United Nations Framework Convention on Climate Change, particularly the Paris Agreement, significantly pushed businesses to prioritise climate change and sustainability. The IFRS Foundation further contributed by consolidating reporting standards, which are now being adopted globally.
Integrating and embedding sustainability at Absa
Sustainability is now being elevated rightly, and rapidly, to being an essential foundation of business strategy. By combining strategy and sustainability as an executive function, Absa has been able to improve its approach to embedding sustainability throughout the business. It is the foundation of our strategy and ensures that our short-, medium- and long-term objectives meaningfully address our financial, social and environmental material issues.
We developed sustainability strategic pillars with specific actions and outcomes, including key sustainability metrics and targets that are measurable, impactful, and aligned with our broader business objectives. Establishing control measures was important to ensure the delivery of our sustainability ambition, including linking leadership rewards and incentives to sustainability outcomes. Examples of setting targets include our climate pillar, where we set targets this year for our financed emissions in the coal, oil and gas sectors.
This approach is improving the way we manage our own footprint across the continent, integrating sustainability principles when developing financial products, as well as how we support clients transition to greener alternatives and individuals improve their level of financial inclusion.
A key aspect of sustainability and integrated thinking is a focus on trade-offs. By integrating sustainability and strategy, we better understand the need to balance shareholder value, socioeconomic development objectives, as well as climate change imperatives. Our approach to a just energy transition highlights the need to manage trade-offs carefully. That is why we believe in non-linear path to meet our 2050 net zero greenhouse gas commitment, to ensure we have the ability to meet developmental goals as well as maintain shareholder credibility.
We are now executing a sustainability data programme to enhance data availability and quality so we can accurately measure, analyse, and report on our ESG performance, enabling informed decision making and fostering transparency and accountability.
Our board has supported the executive team on the ESG journey by establishing a governance structure that prioritizes sustainability and aligns with the Group’s ambitions in this area. This structure is essential for overseeing the management of climate change impacts and broader social issues. Furthermore, the board’s commitment to sound corporate governance practices is fundamental to maintaining ethical, legal, and transparent behaviour, which is key to creating and preserving shareholder value and minimizing the risk of value erosion.
Collaborating with our people to transition to a sustainable future
While our sustainability efforts are centrally coordinated, we are empowering individual business units to develop responsive initiatives that align with our sustainability goals. In addition, each of our five business units (revenue-generating business units) and functions (from IT to HR) has developed their own plan to integrate sustainability into key aspects of our operations.
Our sustainability journey is a process of transitioning people, and we enable this transformation through sustainability communication and stakeholder engagement approach. We recognise that our stakeholders need to know about our sustainability endeavours, and we must present commercial opportunities that add value to them. To achieve this, our colleagues, require the skills that will build the necessary capacity to drive our sustainability agenda.
We are building a ‘Sustainability Capability Academy’, driven by ESG & sustainability colleagues across the group, commercial and non-commercial roles. The primary focus will be to create an active learning community and build skills constantly in an agile way to lead the group in the right direction.
In this way, our Absa colleagues are equipped with the knowledge and tools necessary to champion sustainability practices within their respective roles.
Operationalising our sustainability framework is indeed a complex endeavour for a business of our size, spanning over a thousand outlets across 16 countries, each with its unique regulatory landscape. Yet, our commitment to being an Active Force for Good drives us to navigate these challenges with a proactive and strategic mindset. We are turning our ambitions into tangible actions and impactful outcomes. As we advance on our sustainability journey, we are excited to share our experiences and successes, ensuring that we champion sustainability for our business, our people, and our planet.
Visit https://www.absa.africa/sustainability/ for more information on Absa’s Sustainability journey. DM
Author: Punki Modise – Group Chief Strategy and Sustainability Officer at Absa Group
