ESG revolution key in boosting our country's climate resilience

Tree planting exercise at Kaptagat forest, Eldoret, on June 19, 2022. [Ivy Choge, Standard]

The Environmental, Social and Governance (ESG) revolution is here, and more consumers, investors, policymakers and governments are expecting organisations to embrace circular business models. Kenya has positioned itself as a regional leader in sustainable development.

It is one of the 180 countries that signed the Paris Agreement to reduce greenhouse gas emissions and limit global temperature increases to two degrees Celsius.

It has also equipped itself with a National Climate Change Action Plan to guide its overall strategy.

Kenya has made deliberate efforts to improve climate resilience and lower greenhouse gas emissions. It is one of the few nations that generate more than 92 per cent of its electricity from renewable sources.

Further, it is one of the first countries on the continent to ban the use of plastic bags used for commercial and household packaging. 

In November 2021, with the support of Global Reporting Initiative (GRI) and following a consultative process, the Nairobi Securities Exchange (NSE) launched the ESG Disclosures Guidance Manual which was aimed at improving and standardising the information that listed companies report on an annual basis.

All NSE-listed businesses will be required to publicly report their ESG performance annually, with mandatory reporting beginning November 2022.

It is evident that as a nation, we have made great strides in co-creating regulations, systems, and policies that will guide the nation toward a net-positive future. However, the question that lingers is are we ready for the ESG revolution?

There is still a low level of awareness on the importance of the ESG proposition and its contribution to building a more climate-resilient and sustainable country.

Additionally, the shift from business as usual to sustainable business practice is an expensive venture, which many organisations shy away from. And it’s not that a corporation doesn’t want to do ESG reporting - it’s that such reporting can be an onerous task.

There is therefore a need for capacity building on integrating ESG into business strategies and disclosing ESG performance in a consistent, transparent and principle-based manner that satisfies stakeholder expectations.

One of the main challenges faced by organisations on ESG reporting is identifying reporting standards that are relevant to their business. In Kenya, the GRI Standards are the most extensively utilised framework for sustainability reporting, according to the 2020 Global Survey on Sustainability Reporting by KPMG.

As we continue to navigate the ESG proposition, it will be important to develop sector-focused examples that will help organisations in their ESG reporting and identify potential opportunities for impact and investment.

James Finlay (Kenya) Limited is one of the organisations that have developed an elaborate framework to identify ESG risks and opportunities in the tea sector and has provided reports on its carbon emissions, gender balance, inclusion and impact on communities.

ESG reporting has enabled us to identify cost-saving opportunities and provide transparency to all our stakeholders in how we manage our business.

As part of our sustainability strategy, we partnered with the Initiative for Sustainable Landscapes in a broader effort to conserve and improve 60,000 hectares of the South West Mau Forest by 2030.

Since illegal encroachment by livestock is one of the main risks to the forest’s survival, we have been partners in a project designed to teach forest adjacent farmers the benefits of zero grazing.

Additionally, over 10,000 smallholder farmers have benefited from training on sustainable agricultural methods, environmental protection, crop diversification and earned Rainforest Alliance and Fairtrade certifications through the Fintea Growers Cooperative Union, a partnership between Finlays and smallholder farmers in the region.

Through our commitment to working closely with communities, we launched the Finlays Community Trust to empower local communities and nurture sustainable growth in Kericho and Bomet Counties.

The Trust has provided scholarships to 20 secondary students, 28 undergraduate students and two Masters’ students in the past year. The Trust has also invested in over 13 education infrastructure projects with an investment of Sh47.7million in the past year.

As businesses continue to navigate through ESG risks and identify potential opportunities, it is important, now more than ever, to identify and realise new sources of value creation through continuing to be led by purpose and creating sustainable impact in the areas they operate.

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