SUSTAINABILITY TLDR NEWSLETTER: EDITION 16

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: Landmark UN Biodiversity Agreement

In December 2022, the world reached an historic agreement to protect our nature. I thought I would highlight this here because global momentum is rapidly building towards protecting our global biodiversity; and importantly, so is the private sector’s integral role in conserving and protecting biodiversity.

Biodiversity is the variety of life on Earth and the natural patterns it forms. The key biodiversity/nature SDGs are SDG 14 (life below water), SDG 15 (life on land) (UNEP).

The landmark Biodiversity Agreement adopted four goals and 23 targets to address biodiversity loss and restore natural ecosystems. Here are some key targets by 2030 I’d like to highlight:

• Require large and transnational companies and financial institutions to monitor, assess and transparently disclose their risks, dependencies and impacts of biodiversity on their operations, supply and value chains and portfolios
• Conserve and manage at least 30% of the world’s lands, inland waters, coastal areas and oceans. Today only 17% of terrestrial areas and 10% of marine areas are under protection.
• Restore 30% of degraded terrestrial and marine ecosystems
• Reduce loss of high biodiversity important areas to nearly zero
• Cut global food waste by half, significantly reduce overconsumption and waste generation
• Reduce by half excess nutrients and risks posed by pesticides and highly hazardous chemicals
• By 2030, phase out or reform subsidies that harm biodiversity by min. $500 billion per year; and scale incentives for biodiversity conservation

Broadly the four overarching goals of the UN Biodiversity Agreement address:

• Maintaining and increasing the area of natural ecosystems; halting and reducing human-induced extinction of species, and maintaining and safeguard genetic diversity of wild and domesticated species
• Biodiversity is sustainably used and managed, including ecosystem functions and services and restoring ecosystems in decline
• Fair and equitable sharing of monetary and non-monetary benefits with indigenous and local communities of genetic resources, digital sequencing from genetic resources, traditional knowledge associated genetic resources, and protecting traditional knowledge associated with genetic resources
• Ensuring adequate means of implementation – finance, capacity building, technical and scientific cooperation, access to and transfer of technology

This agreement impacts land and water use, farming practices, waste management practices, use of ecosystems functions, nature-related financial and non-financial disclosures, environmental and social impact assessments, equity and social justice, and more.

My two cents: Business accountabilities and responsibilities are expanding – protecting nature will require fundamental business model change, transparency, disclosure and investment. We are headed into a new world where people, planet, peace, prosperity and partnership have to go hand in hand. If may be you are wondering why/how nature is key to human life, and that we are at a dangerous tipping point: WWF Living Planet Report 2022.

EU De-forestation Free Regulation

In May 2023, the EU adopted its de-forestation free regulation – I want to draw to your attention to this in case you missed it.

This EU regulation is part of the EU Green Deal to protect the world’s forests, and focuses on commodities into the EU. Imports to the EU are one of the biggest drivers of global deforestation. It is another landmark international approach that is reinforcing the urgency to protect nature e.g. forests, ecosystems like wetlands, grasslands, etc.

This EU deforestation free regulation currently tackles seven commodities – cocoa, coffee, soy, palm oil, wood, rubber, and cattle – and their derivatives and products e.g. chocolate, cosmetics, leather, furniture etc. Over the next few years’ additional products may be added to this list. The regulation requires that any company placing these commodities, derivatives and products into the EU market conduct due diligence to ensure they are deforestation-free as of 31^st Dec 2020 i.e. the goods were not produced on land that resulted in deforestation or forest degradation after 31^st Dec 2020.

Large and medium-sized companies importing/exporting to the EU (non-EU based and EU-based) have 18 months after this regulation enters into law to implement the rules.

My two-cents: It was inevitable that supply chains will take a bigger role in reducing negative social and environmental impacts; and instead (finally) be expected to make concerted effort to have positive impacts. Whether supply chains can adapt will come with a high price…in transforming operations, or perhaps continuing business as usual to push our environment beyond its limits.

AFRICA: Nairobi Declaration on Climate Change

The African continent’s first-ever climate summit took place in Nairobi in early September bringing together African and global stakeholders to discuss climate action from the African continent’s perspective.

The Nairobi Declaration on Climate Change and Call to Action by African leaders, was the key output of the Africa Climate Summit, and it is Africa’s joint position on climate action for the 30 Nov – 12 Dec 2023 COP 28 in Dubai and beyond. There were many other discussions and outcomes from the Summit, Africa.com gives a summary: Africa Climate Summit: Wrapping Up a Milestone Event.

Here are what Africa’s leaders committed to:

• Putting in place an enabling environment to attract investment in green growth and inclusive economies
• Driving Africa’s economic growth and job creation while limiting Africa’s emissions, leapfrogging traditional industrial development fostering green production and supply chains on a global scale
• Focusing economic development plans on climate-positive growth, just energy transitions, renewable energy generation for industry, restorative and climate aware agriculture, and essential protection and improvement of nature and biodiversity
• Strengthening continental (intra-African) collaboration, grid connectivity and accelerating operationalization of the AfCFTA agreement
• Advancing green industrialization prioritizing energy intensive industries to trigger renewable energy growth and adding value to Africa’s natural resources
• Boosting agricultural yield through sustainable practices to enhance food security and reduce negative environmental impacts
• Lead in developing global standards, metrics and mechanisms to value and compensate for protection of nature, biodiversity, socio-economic co-benefits and provision of climate services
• Finalise and implement Africa Union Biodiversity Strategy and Action Plan
• Supporting smallholder farmers, indigenous peoples, local communities in the green economic transition given their vital role in ecosystem services
• Integrate adaptation into development policy-making and planning in national plans and the NDCs
• Effective partnerships between Africa and other regions in financial, technical and technological support and knowledge for climate change adaptation
• Investments in urban infrastructure – upgrading informal settlements, slum areas to building climate resilient cities and urban centres
• Strengthen early warning systems and climate information services – embracing the importance of indigenous knowledge and citizen science in adaptation and early warning systems
• Mobilise USD 30 Billion per year by 2030 to close the Africa’s Water Investment gap under the Africa Investment Programme (AIP)
• Accelerate implementation of the AU Climate Change and Resilient Strategy and Action Plan 2022-2032

Nearly USD 26 billion in investment was announced and/or committed from public, private sector, and various financing partner and stakeholders for climate action in Africa and beyond.

My two cents: There are many views on whether the Summit was a success or not. Getting everyone to the table, discussion, collaboration, agreement across so many different countries, peoples, needs, challenges, opportunities; and varied international and stakeholder interests will never be easy or let alone a clear ‘win’. To me, the Summit and the Nairobi Declaration are a very important step, on a very important life-defining journey: that demonstrates shared commitment from over 50 developing countries, 1 billion (+/-) people from over 3,000 diverse cultures and languages; that are saying here’s what we will bring to the global table on climate action, is this something we can work towards together…

KENYA: Sustainability Disclosure in Financial Reporting Takes Root in Kenya

In early September, Institute of Certified Public Accountants of Kenya (ICPAK), launched the International Financial Reporting Standards – IFRS S1 & S2 global sustainability-related and climate-related standards. IFRS S1 & S2 set new standards for capital markets worldwide on sustainability and climate related disclosure. These standards now require that companies provide sustainability related information alongside financial information – in the same package.

Importantly, the IFRS S1 & S2 standards are a common global language for investors on sustainability and climate-related risks and opportunities of a company.

Kenya’s Nairobi Securities Exchange (NSE) introduced ESG disclosure for listed companies in late November 2021 and mandatory reporting for NSE companies began as of November 2022. The Central Bank of Kenya (CBK) issued climate-related risk management guidelines to the banking industry with mandatory reporting to CBK kicking off in September 2022.

According to IFRS:

• IFRS S1 requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term (collectively referred to as ‘sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects’).
• IFRS S2 requires an entity to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term (collectively referred to as ‘climate-related risks and opportunities that could reasonably be expected to affect the entity’s prospects’).

Both IFRS S1 & S2 will take effect for annual reporting beginning 1^st January 2024.

My two-cents: Sustainability disclosure (required and mandatory) is here! Sustainability practitioners and leads in their organization are probably wondering – what am I or my organization supposed to do and use now? First off, upskill and learn-on-the-job. The IFRS standards are for your finance teams, but you will likely be critical contributor into their new reporting standards. As always, sustainability disclosure is also dependent on who (stakeholder/audience) you are communicating/disclosing to. Today, investors are not your only critical stakeholders who expect to know your sustainability strategy and performance. Be sure, to work together across your organization to be consistent and disclose/report as one organization!