ESG adoption and strategic integration in leading JSE listed firms
Insights from interviews with executives and board members
This research report is the result of 15 in-depth interviews conducted with senior business leaders – board members and executives – of leading South African JSE listed companies during the second half of 2022. The analysis has placed the insights obtained from the interviews in the context of some current debates on ESG.
Introductory Thoughts: ESG
The ESG concept is interpreted in several ways within and across companies as well as by different external stakeholders. The difficulty of developing a shared meaning of ESG and how it should be interpreted has implications for how companies strategise and operationalise ESG in a way that responds to the various interpretations held by stakeholders, including investors. ESG is variously interpreted as ‘a set of risk factors that impact strategy’, a ‘licence to operate’, a ‘source of competitive advantage’, ‘an opportunity to drive business efficiency’, and ‘values and part of business identity’. As a result of these diverse interpretations, ESG is being applied by business leaders in a very contextual and firm-specific manner.
Companies are feeling the pressure for ESG adoption and integration from numerous stakeholders, such as shareholders, regulators, government, clients, and consumers, as well as community groups and activist organisations. However, there is growing pressure from clients to keep up with competition. ESG is now being enshrined in tenders and contracts and becoming a de facto competitive requirement. Boards of directors are focusing on increasing their diversity and independence to be best equipped to handle the different challenges emanating from ESG considerations. Boards are creating specialised committees, such as ‘social and ethics’ or ‘environmental’ committees, to provide oversight over corresponding ESG challenges, creating reporting structures from the executive right into the board – as required by Companies Act No. 71 of 2008 (Republic of South Africa, 2009). How this is achieved varies greatly, with some committees reporting to the office of the chief financial officer (CFO), others to the chief executive officer (CEO), and others to a strategy committee. All these reporting structures then report to the board or to different committees, depending on the nature of the issues.
The Research Team
Dr Filipe Morais - Lead researcher
Dr Henriette Malherbe - Researcher
Dr Mélani Prinsloo - Researcher
Mrs Shamima Vawda - Researcher
Mrs Vickey de Villiers - Research assistant