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
Mandatory Sustainability Reporting for Listed Chinese Companies
China’s stock exchanges – Shanghai, Shenzhen and Beijing – released mandatory sustainability reporting guidelines for major Chinese companies listed in China and overseas to start analyzing and reporting on sustainability-related aspects at a governance, strategy, risk management and metrics and targets perspective. The mainland China stock exchanges are keen to get their companies practicing sustainability concepts and raising the caliber of listed companies for ESG-related investment. Medium and small sized companies are encouraged by the guidelines to report on a voluntary basis.
The reporting guidelines also include topics on biodiversity, circular economy and governance (e.g. anti-bribery, anti-corruption), of course among others – going beyond climate, and great to see social aspects, nature, and governance practices included. Additionally, the guidelines will require companies to report on how they are taking action to support China’s development strategy e.g. rural revitalization, innovation, etc.
The guidelines will come into effect for the reporting year 2025, giving Chinese companies time to prepare for double materiality reporting – risks and impact of sustainability on the company; as well as the company’s impact on environment and society.
My two-cents: First off, I think it’s pretty cool that China created the Beijing Stock Exchange in 2021, specifically to serve SMEs in China. Next, it’s great that their national development agenda and private sector action towards China’s own sustainable development is required as part of the reporting. A key focus for ensuring their own development agenda for their citizens, their economy, their environment. As a global powerhouse, China is already taking a global leadership role in renewable energy, emissions reduction, and now reporting, and this will influence business practices in many other countries.
EU Bans Misleading Product Sustainability Claims
The EU Parliament signed off to ban misleading and false sustainability claims by products/brands. This aims to protect consumers from false advertising and misleading marketing practices, and to help consumers make more informed purchasing choices and make product labelling clearer and more trustworthy banning the use of general environmental claims like “environmentally friendly” – without proof. Additionally, products that use off-setting to reduce emissions, can no longer claim to have a reduced, positive or neutral impact on the environment.
The new law also has rules on product durability e.g. guarantee information has to be more visible, products can no longer claim specific durability if there is no proof e.g. lasts up to 20 times longer; encouraging consumers to replace consumables earlier than strictly necessary; claiming a product is repairable which in reality it is not.
When passed into law, EU member states will have 2 years to integrate the law and its rules into national law. Also in the pipeline is the EU Commission’s directive on Green Claims, which will aim to give greater detail and structure to green claims in the EU.
My two-cents: It’s disheartening in some way that we need laws to stop us from proactively making false claims; and uplifting that (thanks goodness) there are laws to stop us from proactively making false claims!
AFRICA
Foresight Africa 2024 report
The Brookings Institution has published its annual Foresight Africa report, which highlights key priorities for the year. Which one would hope African policy makers are attentive to for better outcomes for the continent.
The report presents 5 key themes: development finance, climate change, digital economy, entrepreneurship, and trade and regional integration. These themes are support by cross-cutting topics: gender, governance and youth. The report also provides insightful perspectives from leading experts on these themes and topics.
Here are some highlights to share with you:
- The Economic Intelligence Unit Africa outlook report for this year anticipates that Africa will be the 2nd fastest growing region in the world. This will be primarily driven by the services sector and East African countries. But it’s worth being cautiously optimistic as the continent will still face challenges with debt distress, inflation, security, elections, etc. as the global economy will remain uncertain, weak and abound with volatility, according to the World Economic Forum’s global outlook.
- Development finance – mobilizing domestic resources to strengthen national financial systems, and using development funds for what they are intended will be key. Traditional sources of finance won’t be sufficient to bridge the gap; and private finance needs to come to the table at scale. African policy makers need their own home-grown solutions, even while they continue to push for global financial systems to change.
- Climate change – the continent is at the heart of it: bearing the burnt, conserving the carbon sinks (the world’s lungs) and other vital ecosystems, and home to critical minerals needed for Africa and the world’s energy transition. So rich a continent, yet so poor e.g. energy-access poor, yet renewable energy is everywhere. Policy-makers need to pay attention to adaptation and mitigation – an inclusive low-carbon growth agenda, is the continent’s hope for its future. Missing the mark, isn’t an option.
- Entrepreneurship – SMEs are the lifeblood and engine of Africa’s continental economy and they create about 80% of jobs on the continent. Across the continent, 12M young people move from work from school, into markets that have only about 3M jobs available on the continent. Policy makers need to focus on establishing more enabling environments for SMEs to grow and create jobs; as well as opportunities within climate and sustainability to establish domestic SMEs that create employment opportunities. It’s unrealistic to imagine that self-employment is the only answer.
- African Continental Free Trade Agreement (AfCFTA) – member states, private sector can do more to accelerate this milestone agreement that promotes trade, integration and connectivity within the continent. It will take time (the EU took about 25+ years to establish a single market – from the 1960s to the early 1990s) to create the world’s largest trading block – and there will be plenty of obstacles e.g. existing trade barriers, lack of awareness and knowledge, conflicting and/or competing interests, etc. but it is the only way Africa can achieve its own development goals. It will take leadership willing to choose a bigger vision, choosing to support their neighbours and putting their action behind it.
- Digital Economy – improving digital infrastructure and access, developing digital skills in line with demand and demand, and digital financial inclusion; are key areas to prioritise for and inclusive and digital economy. This will also include embedding digital skills into education – at all levels.
- Governance – a lack of governance plagues the continent; in leaders, institutions, the workforce, citizens. Africans prefer democracy, but how it has been, is being practiced by leaders has citizens losing trust in it e.g. mismanaged opportunities, corruption, human rights abuses, manipulating constitutions, etc. According to an Afrobarometer survey (2021/2022), Africa’s youth are the least likely demographic to participate in elections; which is disconcerting considering they are the majority, and 2024 will be quite an election year across the continent. There needs to be more conditionality in international finances to the continent that promotes democracy, governance and human rights, and more intra-African pressure e.g. AU and regional blocks, for constitutional coups by leaders.
- Gender – In all the themes already highlighted, policy makers need to ensure girls and women are included and participating in all the themes i.e. the other 50% of the continent’s population. Prosperity cannot be achieved when half of the population is left behind.
My two-cents: It’s a big election year for many countries on the continent and it’s important to remember that we reap what we sow. ‘Wherever a man goes to dwell, his character goes with him’ – African proverb.
KENYA
Kenyan CEOs Express Improved Optimism for 2024
The Central Bank of Kenya regularly surveys Kenyan CEOs to gauge their pulse on the market to support CBK’s monetary policy decision-making.
This January 2024 survey’s major respondents were: 65% domestically-owned companies, nearly 50% of respondents having a turnover of Ksh 1 Billion in 2022; and about 40% of respondents employed less than 100 people. The CEOs surveyed were drawn primarily from private sector including key industry associations – Kenya Private Sector Alliance (KEPSA), Kenya National Chamber of Commerce and Industry (KNCCI), and Kenya Association of Manufacturers (KAM), with financial services, manufacturing, agriculture, professional services, and healthcare and pharmaceuticals and tourism, hotels and restaurants being the top 6 industries responding to the survey.
Overall, the CEO’s were slighter more optimistic about growth for their company, their sector, the country and even globally compared to November 2023 for the next 12 months! Some more insights were:
- The agricultural sector was particularly optimistic on their industry’s growth and demand for their products; services industry felt only a little more optimistic than late 2023, but manufacturer not much optimism or demand for their industry’s opportunities in 2024.
- Agriculture were very optimistic on higher and increased production this year compared to services and manufacturing industries. But strangely agriculture, also expressed the most difficulty in meeting increased demand and/or sales. All key industries – agriculture, services, manufacturing – highlight significantly higher input costs for this year.
- CEO’s expressed that the top 3 drivers of growth for their companies would be:
- talent management/reward strategy – having talented people was considered the 2nd top strength by companies
- customer centricity – as having a trusted product/brand was the no.1 company strength
- expanding into new markets, re-evaluating business models and technological innovation (all came in 3rd)
- In terms of growth constraints, the top 3 concerns were:
- Cost of doing business, Inflation and taxation, Exchange rates
- From a global perspective, Kenyan CEOs highlighted energy prices, macroeconomic volatility, and geopolitical tensions as their key concerns.
Across the board, Kenyan companies will be prioritizing managing costs/risks to address growth constraints. Additionally, the agricultural sector will also prioritise lobbying key stakeholders; and manufacturing and services will also focus on diversification. For the next three years: efficiency, sustainable business growth, cost optimization and diversification, will be the priorities for Kenyan CEOs.
My two-cents: Costs are top of mind for Kenya’s CEOs – it’s likely to be a tough year for Kenyan business leaders and their teams as costs e.g. overheads, receive greater scrutiny in 2024. My sense is that growth opportunities will be found in diversification, innovation and sustainable business growth – it’s not the same way of doing things that will grow Kenya’s private sector, economy and development agenda.