Going beyond sustainability reporting: the time for climate action is now
Zimasa Vazi
As a country we are a highly carbon-intensive economy as most electricity and liquid fuels are derived from fossil fuels. This exposes business to global trade barriers and will increasingly factor into investment decisions. Climate Change is an important issue for South African companies. Not only is South Africa seen as a leading country within international negotiations, but it is also a country extremely vulnerable to impacts brought about by climate change.
The 3rd Report of Independent High-Level Expert Group on Climate Finance, which is a group that advises COP (Conference of Parties) on the climate finance agenda, estimates that $2.4 trillion (R45trl) per annum by 2030 is needed for investment for climate action in emerging markets and developing countries (EMDCs) other than China.
However, at the recent COP29 in Azerbaijan, developed countries only agreed to contribute climate finance of $300 billion per annum by 2035 to EMDCs. This is a staggering 87.5% short fall of the required amount annually in investment before 2030 will place added pressure on the years that follow, creating a steeper and potentially more costly path to climate stability. It equally presents an opportunity for the private sector to play a larger role, as currently private climate finance is growing in EMDCs, but far too slowly to address our climate challenges.
However, fossil fuels in our economy can also be seen in the opportunities to be found in a low-carbon economy, which is where the greatest potential for exponential returns on investment off a low base lie. Investors are increasingly alert to low-carbon growth opportunities and the risks of stranded assets in the face of a coming carbon bubble.
Then there are businesses that are directly affected by the physical impacts of climate change and will need to change ‑ like agriculture, tourism and insurance industries and heavy water users - which means every company would do well to re-examine its business model and to decarbonise and climate-proof its assets, operations, products and services.
Sustainability reporting and climate action
Creating sustainable value is a common theme in the United Nations (UN) Sustainable Development Goals (SDGs) and South Africa’s National Development Plan (NDP), the content of which was influenced by fundamental changes in business and society.
To be impactful in addressing the climate crisis Sustainability reporting plays a crucial role in the fight against climate change. It provides a framework for companies to measure and report not only their environmental impact also, social and governance and take necessary actions to reduce their greenhouse gas (GHG) emissions.
Sustainability disclosure standards, integrated in a meaningful way with financial reporting is necessary in driving transparency, decision-making in support of long-term sustainable value creation and positive organisational change.
Internationally, companies are leading the charge with the adoption of sustainability standards such as the GRI (Global Reporting Initiative) used for reporting on ESG impacts and ISSB (International Sustainability Standards Board) for sustainability-related financial reporting standards to meet investors’ needs for sustainability reporting. By collecting and analysing data on GHG emissions, energy consumption, water usage, and waste generation, companies can gain insights into their environmental performance and identify areas for improvement and action.
At present South Africa does not have any mandatory ESG (Environment, Social and Governance) standards such as the ISSB or GRI, nor are there regulations. In October 2024, the Intellectual Property Commission (CIPC) introduced a sustainability disclosures module for companies, which is aligned with the ISSB. This allows companies to voluntarily report sustainability data using the internationally recognised ISSB framework, integrated into their current financial reporting system.
The Johannesburg Stock Exchange (JSE) also requires JSE-listed companies to adhere to its Sustainability Disclosure Guidance, including a Climate Change Disclosure Guidance, specifically tailored to the South African context to help companies understand the climate crisis, identify risks and opportunities, and link sustainability disclosures to value creation. However, both of these measures do not go enough to foster sustainability reporting and most importantly spur climate action. The government needs to urgently make sustainability reporting mandatory for both large and small businesses at different scales based on their capabilities.
The imperative of investment in procedural justice in the transition
South Africa’s transition to a low-carbon, inclusive economy depends heavily on corporate accountability and transparency. Sustainability reporting should not only be a regulatory requirement—it is a business imperative that aligns with the nation’s just transition goals.
As the world moves towards more rigorous sustainability reporting requirements, South African companies that invest in robust, transparent, and forward-thinking reporting frameworks will be better positioned to attract investment, manage risks, respond to consumers need for increased environmental consciousness and contribute meaningfully to the country’s sustainable development.
True leadership lies in embedding sustainability into the fabric of corporate operations, championing innovative solutions, and ensuring that no community is left behind in the transition.
Zimasa Vazi is a Senior Manager, Stakeholder Relations, Presidential Climate Commission
BUSINESS REPORT