Environmental, social and governance (ESG) considerations have become crucial to business strategies, driving efficiency and maintaining customer loyalty.
ESG is no longer sidelined but has entered the boardroom, with few executives overlooking its importance as an integral part of the business, says Liesl de Wet , Chairperson of the Road Freight Association (RFA) Green Transport Group.
The Covid-19 pandemic has played a significant role in redefining the agenda by highlighting the human impact on the planet and spurring the build back better movement, which continues to have a lasting impact. There is no doubt that businesses understand the importance of ESG and the long-term value it adds, she says.
Research by consulting firm Ernst Young (EY) corroborates this finding, indicating that the post-pandemic investment landscape will put greater focus on ESG disclosures. According to EY, investors believe that companies excelling in ESG are less risky, better positioned for longevity, and more prepared to handle uncertainty.
Pressure is mounting from governments as the shift to zero-carbon economies gains momentum. This is also the case in South Africa, says De Wet. Weather incidents, such as the major flooding in Durban, underscore the reality of climate change and the need to transition to greener solutions.
One of the major challenges in the logistics and transport industry is delivering low-carbon results without making the business unprofitable. Margins are very tight, and it's a highly competitive industry, so achieving sustainability is not cheap, she says.
This issue was highlighted recently at the RFA's annual convention. More than 150 transporters were asked about introducing electric vehicles into their operations. It was agreed that they would all prefer this greener alternative, but it was simply unaffordable.
The importance of ESG is no longer questioned. Executives know that it benefits their business, but financing remains a hurdle. The question now is how do we transcend from boardroom discussions and reporting to integrating it into every part of the business affordably, says De Wet.
Companies must align financing strategies with sustainability ambitions. Businesses are choosing green bonds or sustainability-linked loans to implement their strategy, reflecting a broader shift towards integrating environmental and social considerations into financial decision-making, says De Wet.
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