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Impact Investing Forum 2023
London. May 04-05, 2023.
Public consciousness about the effects of environmental, social and corporate governance (ESG) are gaining traction in South Africa. While the country is not yet at the level of regulating for ESG practices, in some countries this is the case and South African organisations will need to embrace it before long. What does this mean in day-to-day business and what will change in 2022? As ESG moves from corporate policy to Government regulation around the world, there will be more focus on what each of us is doing to support ESG practices.
Adopting a greener stance
As a society, we all have a responsibility to do more to use less power and create less of a carbon footprint. This is not just a trend – the planet is dying because we’re doing bad things to it. It’ll be no surprise to readers to hear that in South Africa, both awareness and actions are somewhat behind the global curve. We have seen increased rainfall variability and extreme weather events becoming more frequent, whilst South Africa contributes more coal-based SO2 (Sulphur Dioxide) pollutants per annum than the US, China or the EU, according to analysis by the Centre for Research on Energy and Clean Air (CREA). With the COP26 summit recently taking place in the UK, there was more attention on what organisations and countries are doing to prevent global warming. This is a trend which will gain more attention in 2022 and beyond.
A lot of Pure’s customers have already embraced this approach: they are adopting energy efficient technology because it is important for them, as well as beneficial when there is instability in energy supply. In the last 12 months, big steps have been taken to enable third party independents to contribute to the energy grid and it’s a step in the right direction to see some of them embrace green sources of energy.
Data drives understanding of energy use
In the future we expect ESG to become a balance sheet item where companies must declare the amount of carbon they’re producing and whether they’re offsetting this sufficiently. Data will be key to this. If companies want to be more efficient, they will need to mine their data to identify patterns and trends, which will inform them of where they’re causing the most damage so they can get to work on fixing it.
But ironically, this ability to use data often relies on very ESG-unfriendly legacy data centres and data infrastructure used to host and analyse it. Various estimates place data centres as accounting for 2% of the world’s energy consumption – that’s roughly equivalent to the aviation industry. Many brands are already moving toward sustainable data centres and more energy efficient technology such as flash, but this trend will accelerate even more rapidly. Seemingly small changes, e.g. replacing spinning disk storage with modern flash, can make a huge impact on ESG commitments.
At present there are no incentives for companies operating in South Africa to adopt greener energy. However, the benefits are clear. We’ve tracked data over the last eight years and can demonstrate customer energy savings in the region of 4 billion kWh. Not only will it save organisations money, it is the right thing to do for the planet. 2022 will be the first nail in the coffin for all energy inefficient tech.
Social: skills and empowerment
Another vital part of ESG is social policies, and Corporate Social Responsibility has become a large part of broad-based economic empowerment in South Africa. Every big business is taking action to empower previously disadvantaged communities. This could include skills transfer, additional training opportunities, transacting on a more local level and giving shareholding to communities who might not have had the opportunity previously.
Since the Broad-Based Black Economic Empowerment (BBBEE) programme was created, there’s been a shift and increased awareness about becoming more socially responsible. It’s become a big focus for any business which operates at scale in South Africa and provides a valuable and essential social cohesion, which will continue to create employment.
Another important element of an ESG policy is retaining skills in the country. The pandemic triggered new ways of working and as a result, it’s now easier for employees to move between companies or leave South Africa altogether. Businesses need to offer dynamic ways of working as well as competitive packages to attract and retain talent.
Embrace ESG in 2022
As we move into 2022, organisations need to have a grasp of what they are doing to positively contribute to ESG. There are straightforward steps that can be taken to switch to greener technology which will make a big impact. In addition, doing the right thing by employees and communities will move more into focus next year. The myopic view of business success being based purely on measuring how much money comes in and goes out will become a thing of the past. In 2022, companies must be valued by their commitment to ESG.