SUSTAINABILITY TLDR NEWSLETTER: EDITION 10

This newsletter gives you highlights of selected sustainability insights that were, perhaps, too long (you) didn’t read (TLDR) or there’s just too much out there to read. The highlights presented cover insights gleaned from a global, regional (African), and national (Kenyan) perspective. Happy reading!

GLOBAL: 2023 Edelman Trust Barometer

Edelman PR published their 23^rd annual Trust Barometer which assesses societies’ trust in its institutions – government, business, the media, and NGOs. The survey covers 28 countries giving a global perspective.

The survey highlights that 2023 is steeped in polarization resulting from:

• Economic anxiety – majority of countries believe their families will be worse off in 5 years from now
• Institutional imbalance – business is now seen as the only ethical and competent institution
• Mass class divide – income inequality is creating different realities in trusting institutions
• Battle for truth – media institutions are not trusted, and trust in social media is particularly low

Globally, peoples’ personal anxieties e.g. job loss, inflation now include existential fears – climate change, nuclear war, food and energy shortages.

Across the board, government and media are increasingly being seen as fueling distrust and as sources of misleading information, while business and NGO leaders and teachers are seen as more trustworthy.

Citizens of Argentina, Colombia, the US, South Africa, Spain, and Sweden believe their countries are extremely divided and doubt these divisions can be overcome. Citizens in Nigeria, Thailand, The Netherlands, Kenya, Canada, Australia and Ireland believe their countries have deep divisions yet hope this can be overcome.

Polarisation is being inflamed by distrust in government and media, lack of shared identity, systemic unfairness, economic pessimism, and societal fears. As a result, lack of civility and mutual respect is at the worst levels people have ever seen.

The report highlights that societies globally expect business to lead, and people want business to:

• Engage more in solving societal challengesg. climate change, income inequality, energy shortages, healthcare access, skilling, etc.
• Advocate for truth and be a unifier of societyg. through their brands; especially as employers are now the most trustworthy source of information
• Collaborate with government on policies and standards for a more just, secure and thriving society

My two cents: This is a perception survey, so one can question the results – although it is often said that perception is reality. It’s clear that the opportunity is there for business leadership that focuses on uplifting society. After all, a fragile, fragmented society means a fragile, fragmented business reality – employees, customers. Business is wholly dependent on society.

UN Global Compact-Accenture CEO Study

This 12^th CEO study draws insights from +2500 CEOs with +130 in-depth interviews, across 18 industries and 128 countries. In the study CEOs land the points that:

• The world is completely off track in meeting the SDGs and Paris Agreement by 2030 – this will be cataclysmic. Yet today,
• CEOs are already dealing with 10 or more global challenges in the business (e.g. inflation, price instability, talent scarcity, public health, climate change, warfare and conflict, etc.) so business as usual no more.
• The role of CEOs is changing as expectations change and the S (social) in ESG is redefining business’ role.
• Like it or not, global challenges are interlinked and are exacerbating one another e.g. food-water-energy nexus, biodiversity loss and health, etc

Sustainability is now the only way to build a truly resilient company, and 98% of CEOs believe it’s their role to make their business more sustainable.

Customers, governments, investors and employees are the top influencing stakeholders for CEOs over the next 5 years; while raw materials and supply chain disruptions are the top business impacts from the global challenges. On an optimistic note, the global challenges are accelerating the green transition and industries are transitioning albeit at different rates led by energy and automotive industries.

The Study presented 4 key ingredients for building resilience: strategy, workforce, supply chains, and ecosystems management (see diagram above). CEOs also highlighted that policy makers had to do their part too, in establishing a transparent, equitable and actionable playing field; and without this collaboration and involvement of civil society/NGOs there is no hope for meaningful progress.

The report then provides industry specific insights spotlighting each industries: 1) most pressing challenges 2) current landscape 3) where the industry is going. Industries covered in these insights are: agriculture, automotive, chemicals, communications & media, materials & construction, energy, financial services, health & life sciences, high tech, industrial, natural resources, software & platforms, support services, travel, and utilities.

My two-cents: We are off track and business leaders need to set up (they said it themselves!). If your industry is covered in the specific insights take a look, they may give you clarity on what to prioritise – there’s no need to reinvent the wheel…just yet.

AFRICA: AU Summit 2023

This year’s African Union Summit focused on accelerating the Africa Continental Free Trade Agreement (AfCFTA) operationalization – the world’s largest free trade area in participating countries. The Agreement entered into force on 30 May 2019 and trading started on 1st January 2021.

Intra-African trade stands at about 14% and the AfCFTA could boost this to 33% and cut the continent’s trade deficit by 51% (UNCTAD, 2021). The EU is Africa’s largest trade partner, and Africa-Asia trade is at +21%. The AfCTA will eliminate 90% of tariffs on goods and reduce trade barriers in services.

44 African member states are parties to the ratified agreement, and key areas to be operationalized are:

• Finalising the legal basis for implementing the agreement’s phases 1 and 2
• Guided Trade Initiative – connect business and products for import/export between interested states
• Adjustment Fund – support member states and private sector to participate in the new Agreement’s trade environment

• Pan African Payments System – centralized Financial Markets Instruments to allow the follow of money across borders
• Private sector strategy – engaging private sector for an inclusive approach in implementation
• e-Tariff book – launched in late 2022, providing easily accessible concessions to trade and customs authorities
• Regulatory audits on Trade in Services – audit countries on restrictions affecting supply chain services
• Automotive Fund – investment for local content development in the automotive value chain
• Dispute Settlement Mechanism – a body to handle disputes
• SME Financing Facility – catalyse access to finance for SMEs, women and young Africa to trade
• Trade & Industry Development Advisory Council – establish a council to advise the AfCFTA secretariat on trade and industrialization
• Non-Tariff Barriers (NTBs) mechanism – eliminate NTBs

My two cents: The AfCFTA may seem far-fetched, but probably so did the European Union’s Single Market, when it was first established in the late 1950s, and finally came to into being as a complete single market in the early 1990s. The rest – you can gauge for yourself. The AfCFTA is a bold, much needed vision coming to life for the continent’s +40 countries that are a part of the Agreement. An African community and marketplace! (download the AfCFTA fact sheet).

KENYA: Kenya’s 2023 Budget Policy Statement (BPS)

The 2023 BPS falls, timely so, into the final plans of the government’s 4^th Mid Term Plan 2023 – 2027 of Kenya’s Vision 2030.

In 2021, the country’s GDP growth rate was 7.5% through public investment in infrastructure. However, momentum slowed with global challenges e.g. Russia’s war in Ukraine, and local challenges e.g. declined manufacturing, skewed access to finance, weak governance, rigid business regulatory approach, payment arrears, high debt services, etc. are hindering economic growth. In 2022 growth was 5.5%. The interventions in the BPS aim to stimulate economic recovery in 2023 to 6.1%.

As part of the economic plan, the government will:

• Increase revenue collection via KRA from Ksh 3 trillion in 2023/2024, to Ksh 4 trillion in the mid term
• Undertake tax and administrative policy reform
• Reduce VAT from 38.9% to 19.8%, and corporate tax from 32.2% to 30%
• Integrate KRA tax system with Telco companies
• Implement tax measures for rental properties
• Roll out customs & border control measuring using technology
• Upskill and staff KRA’s capacity

The government has committed to increase investment in 5 core sectors (thematic areas):

• Agricultural transformation – the focus will be on food supply particularly in N. Kenya, fertilizer availability, reinstalling the dairy milk coolers programme and milk cooler distribution. In the mid-term provide affordable working capital, deploy agricultural risk management frameworks, input financing and agricultural extension support, raise productivity in maize, beef and dairy value chains, decrease food import dependence by 30%, revamp export crops (coffee, cashew nuts, pyrethrum, avocado, macadamia nuts), boost the tea value chain and increase cotton productivity

• MSME economy – the government introduced the Hustler Fund to boost personal finance – savings, credit access, insurance and investment. Additionally, enact a right to work law entitling every citizen access to trading licenses, provide one-street trading location for every 50 residents per county. Review and rationalize business licenses capping licenses at 1.5% of turnover. Provide access to Ksh 50 billion per year accessible through SACCOs, venture capital, equity funds and long-term debt for startups and SMEs. Establish an SME business development centre per ward and an industrial park and incubation centre at every TVET institution.

• Housing & Settlement – deliver 250,000 houses per year through lower construction costs and affordable housing financing. Restructure affordable long term housing finance schemes e.g. National Housing Fund, Cooperative Social Housing schemes, to help expand low-cost mortgage opportunities. Strengthen the Jua Kali sector with linkages to TVET institutions. Establish a settlement fund (like in colonial times) to acquire land and stop land fragmentation to support rural housing and settlement.

• Healthcare – continue implementation of the Universal Health Care plan – revitalising primary healthcare. Reform NHIF from an individual contributory scheme to a household contribution model. Expand existing healthcare infrastructure and improve medical procurement. Establish Kenya as a regional pharma manufacturing hub, leverage ICT in healthcare services and build a centralized human resource for healthcare (like the exists for teachers).

• Digital Superhighway – over the next 5 years expand national fibre optic network laying out an additional 100,000kms. Digitise and automate key government processes, revamp Huduma Centres, reduce costs of calls and data. Establish a Presidential Advisory Council on Science & Technology policy, and promote investment in Konza Technopolis.

• Creative Economy – expand the creative space, freedom of expression and protect intellectual property rights. Mainstream arts and culture infrastructure. Work with stakeholders to scale cultural production, creative economy, and mainstream the creative economy in Brand Kenya and commercial diplomacy.

The 5 thematic areas will be supported by the following enablers: infrastructure, water, roads, electricity, petroleum and e-mobility, manufacturing sector (leather, building and construction, textile/garments, dairy, edible oils and crops e.g. tea), blue economy, services (financial services, tourism, aviation), environment and climate change, education and training, women, social protection, sports & culture, governance, foreign policy and regional integration, economic and commercial diplomacy, and global citizenship – including diaspora.

Here’s a summarised overview of the Treasury’s sector priorities and % budgetary allocation 2023 – 2027 (p.49):

Source: National Treasury. (only percentage data is provided, full detail available in the 2023 BPS)

My two-cents: A colleague recently said, if you want to know what the government’s priorities are, take a look at the financial policy and where the money is allocated. So I did. For 2023 – 2027, the 3 key priorities for the government will be: 1) Education, 2) Energy, Infrastructure & ICT, 3) Public administration & International Relations.