In today’s rapidly evolving business landscape, Environmental, Social, and Governance (ESG) reporting has become critical for companies aiming to attract investments, mitigate risks, and foster stakeholder trust. Therefore, African companies need to consider ESG reporting more in their agendas, similar to financial reporting.
With South Africa leading the way with mandatory ESG reporting starting in 2025, this guide provides actionable steps and real-world examples to help companies enhance their ESG initiatives.
How to build a modern ESG reporting framework
Key Metrics for ESG Reporting
African companies should prioritize ESG metrics that balance global standards with local realities. Based on current trends and regulations, here’s a breakdown of key metrics across environmental, social, and governance categories.
Environmental Metrics
Environmental reporting in Africa, especially in carbon-heavy industries, is evolving. Companies should monitor:
Carbon Emissions and Energy
- Direct emissions (Scope 1 and 2) and value chain emissions (Scope 3)
- Energy consumption and the use of renewable energy sources
Exxaro sets an example by providing detailed Scope 3 emissions data, focusing on the downstream effects of coal use in power generation. Companies can emulate this by mapping their value chains to identify and report downstream emissions.
Resource Management
- Water usage and efficiency
- Waste management and recycling rates
- Land rehabilitation efforts, such as restoring mining areas or agricultural lands
Social Metrics
In Africa, social metrics must address the needs of local communities and workforce dynamics, particularly in areas with informal economies. Focus areas include:
| Metric Category | Key Performance Indicators |
|---|---|
| Workforce Development | – Employee development and retention rates – Investments in skills training |
| Community Impact | – Local employment statistics – Impact measurements of social programs |
| Health & Safety | – Detailed safety and health performance indicators |
Recent research highlights that 19.7% of African CEOs prioritize these metrics to boost corporate reputation and strengthen stakeholder relationships.
Governance Metrics
Governance metrics are essential for African companies, with frameworks like the King IV Code and IFC Performance Standards offering guidance that blends global best practices with local needs. Key metrics include:
Board Composition and Ethics
- Diversity statistics for board members
- Percentage of independent directors
- Reports board key decisions similar to Strategic report of UK
Best Practices for ESG Reporting in Africa
Selecting a Reporting Framework
Learning about the established frameworks offers clear guidance for companies new to ESG reporting. Companies may sometimes focus on one framework or combine multiple frameworks. Below gives an overview of three frameworks:
| Framework | Ideal For |
|---|---|
| GRI | Large corporations that needs globally recognized and detailed reporting |
| SASB | Businesses focusing on industry-specific metrics and investor priorities |
| TCFD | Organizations emphasizing climate-related risk management and transparency |
These frameworks can help African enterprises align with international standards while tackling challenges like limited resources and varying regulations.
Involving Stakeholders in ESG Reporting
Engaging stakeholders effectively can strengthen ESG efforts. Companies can achieve this by:
- Setting up regular feedback sessions with local communities.
- Conducting materiality assessments to pinpoint key focus areas.
- Establishing dedicated channels for addressing ESG-related concerns.
Using Technology for Reporting
Technology has become a game-changer for ESG reporting in Africa, boosting efficiency and accuracy. Tools like Risk Insight’s ESG GPS streamline the process by organizing voluntary and mandatory disclosure data.
Businesses can enhance their reporting processes with:
- Cloud-based platforms for data collection.
- Automated tools that integrate multiple reporting frameworks.
- Real-time systems for tracking environmental metrics.
Overcoming Challenges in ESG Reporting
Handling Diverse Regulatory Environments
African companies face the challenge of aligning with varying regulatory requirements while adhering to international standards. The rules differ widely across the continent:
| Country | Regulatory Framework | Key Requirements |
|---|---|---|
| South Africa | King IV Report & Companies Act | Mandatory sustainability disclosures under Section 29 amendments [5] |
| Nigeria | NSE Guidelines | Sustainability disclosure requirements for listed companies [4] |
| Other regions | GRI/SASB Standards | Voluntary reporting aligned with international standards [1] |
South Africa is a regional leader, with the Companies and Intellectual Property Commission (CIPC) incorporating ISSB S1 and S2 standards into its sustainability reporting framework [5].
Addressing Data Gaps and Quality Issues
Although South African companies have improved climate-related disclosures by 35% over the past five years, only 12 report emissions from sold products. This highlights significant gaps in value chain reporting. These challenges are even more pronounced in areas with limited infrastructure and informal economies.
To improve data quality and availability, companies can:
- Develop strong internal processes that combine structured data collection with staff training.
- Collaborate with reputable auditing firms for accurate data verification.
- Tailor international frameworks to local contexts without compromising reporting integrity.
Managing Resource Constraints
Limited resources make comprehensive ESG reporting difficult for many African companies. Despite this, 19.7% of African CEOs report improved corporate reputation after adopting ESG practices [4].
Companies can make better use of their resources by adopting strategies like:
| Strategy | Implementation Approach |
|---|---|
| Technology Integration | Use digital tools to streamline data collection efforts. |
| Phased Implementation | Start with the most relevant and impactful ESG metrics. |
| Stakeholder Partnerships | Collaborate with industry peers to share costs and expertise. |
Companies can establish effective ESG reporting systems that promote sustainable growth and meet local and international expectations by tackling these challenges.
“The integration of ISSB S1 and S2 standards into CIPC’s digital taxonomy sets a new benchmark for regulatory frameworks worldwide, demonstrating that even resource-constrained environments can achieve high reporting standards.” [5]
Conclusion: Driving Growth through ESG Reporting
Key Takeaways
South Africa has made progress in ESG reporting, with a 35% increase in public climate disclosures over the past five years, thanks partly to the adoption of ISSB standards through the CIPC. Despite challenges like limited resources and varying regulations, African companies are advancing in ESG efforts, paving the way for further development.
Moving Forward
To keep up with changing ESG demands and encourage sustainable growth, companies can focus on specific actions:
| Priority | Focus Areas |
|---|---|
| Framework Adoption | Align with ISSB standards for global credibility |
| Data Quality | Use digital tools to enhance reporting accuracy |
| Stakeholder Engagement | Foster partnerships for shared progress |
By committing to strong ESG practices and leveraging Africa’s unique position, companies can meet global requirements while driving sustainable development and resilience across the region.
