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Companies need to ditch outdated CSR and switch to ESG to attract investment

The deal announced today between the Governments of Kenya and the United Kingdom to boost investment into Nairobi, is an opportunity to showcase African world leading investment opportunities that provide strong financial, social, and environmental returns.

When it comes to having a purpose, African companies are way ahead of global businesses and brands outside the continent, who are only now finding their inner Samaritan and talking about their purpose in life.

Long before having a purpose other than making money was in vogue, African businesses and brands were highly aware of the importance of their social as well as commercial purpose, and their power to transform lives and entire economies. 

Products and services can change people’s lives in the continent, in ways they don’t elsewhere.  For example, affordable digital payment products can mean the difference between surviving and thriving for a smallholder farmer; off grid low-cost solar energy could mean a family more than doubles its income as it can extend the working day; or a child can study into the evening leading to better qualifications.  Keeping mobile networks operating throughout political turmoil or natural disasters can support the democratic process or even save lives during climate change triggered crises such as floods, fires, or famine.

However, despite being ahead in having a purpose, African companies are behind when it comes to telling investors about positive corporate actions.  Businesses still talk in terms of Corporate Social Responsibility (CSR), something separate and additional rather than the core purpose of what a business does and how it behaves.  This continues across the continent, long after CSR has been dropped as an outdated an inadequate model by companies in the US and Europe.

The continent’s companies need to stop talking about CSR and instead look at the world through the lens of ESG (Environmental, Social, and Governance.  Not only is this a more contemporary and authentic way to manage your business, but investors and consumers now judge and reward companies on their ESG rating, rather than their CSR “good works”, which rarely were recognised anyway.

Investors are extremely focused on how businesses are managing ESG.  ESG ratings can move a share price and attract investors, which is why it has become a priority for CEOs globally.  Africa’s CEOs and Boards are slowly waking up to the new ESG agenda, but too many still cling to the world of CSR, a simpler and cosier world but one which delivers poor return on investment for a business.

Having a clear ESG strategy also gives a brand or company a motivating and inspiring purpose.  African companies have always had a clear purpose which has helped to build emotional connection with customers and employees, as well as impressing governments with how businesses can transform economies and raise standards of living.

This global rise of business as a force for good is good news for Africa, which bears the brunt disproportionately of so many global challenges.  For example, a recent study by the global safety charity Lloyd’s Register Foundation showed that not only was agriculture one of the most dangerous jobs in the world, but that Africa had the highest rates of deaths and serious injuries from agriculture globally. 

Much of what is grown here is used by multinational businesses selling food and drink products around the world. These deaths and injury rates in the supply chain are an ESG timebomb that companies are now far more likely to diffuse, making life safer for millions across the continent.

Another example is climate change, where the boom in green finance initiatives for the continent will boost economic development but also build resilience and mitigation measures to avoid and withstand future climate change driven shocks. 

Those companies that communicate their ESG credentials effectively will attract much of the new investment into Kenya that will be created as Nairobi becomes Africa’s new financial hub.

Written by Chris Genasi

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