Environmental responsibility has moved beyond the realm of hippies protesting the cutting down of large swathes of forest. These days, large corporations embrace the importance of “ESG”, recognising that if they do not focus on externalities, their future success may be negatively impacted.
What is ESG?
Simply put, ESG stands for:
- Environmental: Measuring a company’s impact on the environment through energy consumption, waste management, pollution control and climate change initiatives.
- Social: Focuses on a company’s relationships with people (employees, suppliers and communities) and covering labour practices, diversity and inclusion, and health and safety.
- Governance: Assesses a company’s leadership and business practices, including ethics, risk management, management structures and management compensation.
Why is ESG important to companies?
Externalities, such as greenhouse gas emissions, labour practices, health and safety, and diversity, equity and inclusion, and a company’s reactions to them, are becoming more heavily regulated globally.
Thousands of organisations are joining the “Race to Zero”, a global initiative rallying institutions to take immediate action to halve global emissions by 2030 resulting in a healthier, fairer world.
Increasing importance of ESG for South African companies
South Africa is experiencing a significant shift in ESG reporting regulations, reflecting both global trends and national priorities.
Mandatory ESG reporting was introduced for public and state-owned companies in South Africa in 2023 by the Companies and Intellectual Property Commission. Until last year, voluntary filing was possible, but for the financial year 2025/2026, disclosure of ESG data will be compulsory.
While it is mandatory for these entities to report on their ESG data, it will become increasingly common to see private companies following suit.
Further shifts in South Africa include Green Finance Taxonomy (a classification system for sustainable investments aiming to standardise what qualifies as “green” and supporting the transition to a low-carbon economy by guiding investors and financial institutions), and Mandated Climate-related Disclosures (the importance of climate-related disclosures emphasised by the South African Reserve Bank).
These changes are indicative of the increased focus businesses must place on ESG reporting, requiring them to allocate more time, resources and expertise to ensure they remain compliant and competitive.
The importance of ESG reporting
ESG compliance influences investors, who are increasingly aware that companies with established ESG practices are more sustainable and less risky. A company’s ESG performance is directly linked to its reputation and brand image, with consumers more likely to support companies that choose responsible practices.
Where should you start?
Forward-looking companies are approaching ESG strategically. It is important to realise that a company should not attempt to measure everything, but rather to measure what matters. Specific, measurable and achievable ESG strategies should be identified, with short-term goals prioritised. Assessing the company’s progress on the ESG strategy will be most effective if it is monitored on a regular basis, with robust data analytics capabilities being integral to this process. If a company understands where they stand from an ESG progress perspective, they are better positioned to make the necessary changes quickly and efficiently.
Beware of ‘greenwashing’
False claims about ESG reporting should be avoided. Numbers and accuracy really do matter. Deceptive claims can have serious consequences for a company’s reputation and financial success with ESG fraud emerging as a form of economic crime. Data governance plays a crucial role in managing ESG fraud risk.
Role of technology in ESG data collection and reporting
Reliable data is crucial for accurately assessing and communicating a company’s ESG performance to regulatory, customer and investor communities. Many organisations face challenges in gathering comprehensive and verifiable data from diverse sources, which can hinder their ability to make informed decisions, track progress and meet regulatory requirements.
Advanced technology plays a key role in facilitating comprehensive ESG reporting. Companies are leveraging artificial intelligence, big data and machine learning to monitor, measure and report ESG metrics accurately. Blockchain technology is being explored to create tamperproof ESG reports, ensuring data integrity.
Such technology solutions not only help streamline the data collection process but also improve accuracy and compliance with emerging ESG standards, addressing the need for reliable, real-time insights for investors and stakeholders.
Future outlook
Businesses in South Africa should anticipate the near-mandatory adoption of globally recognised ESG standards and prepare to integrate these into their reporting processes. Staying updated on regulatory changes and embedding ESG considerations into core strategies will be essential for sustainable growth and regulatory compliance.
This transformation underscores a broader shift where ESG is no longer a voluntary or peripheral concern but a central business imperative.
Understanding your organisation’s current ESG data and reporting capabilities is not just about compliance – it’s about preparing for a future where transparent and accurate ESG reporting is fundamental to operational success and investor confidence.
Calybre’s ESG Data Readiness Assessment is designed to provide a structured evaluation across the key areas of leadership, strategy and reporting. This comprehensive approach empowers organisations to navigate the changing ESG landscape confidently while enhancing their overall resilience and competitiveness.
Calybre is an AI and data consulting company based in South Africa and the UK. To find out more about how Calybre can help you unlock the story in your data, visit us at www.calybre.global.
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