In January 2025, the Johannesburg Stock Exchange (JSE) updated its Sustainability Disclosure Guidance to align with the recently finalised IFRS S1 and IFRS S2 standards. These introduce notable changes aimed at simplifying the sustainability reporting process for corporations and ensuring compliance with local and international regulations. Around the same time, the Department of Trade, Industry and Competition (DTIC) gave notice about its public consultation process with the Companies and Intellectual Property Commission (CIPC) to consider implementing mandatory sustainability reporting obligations.

ESG is having an increasing influence on boardroom discussions, making this the ideal time for boards to make it a core component of their decision-making. When it is no longer regarded as an exercise in compliance or a soft topic, sustainability can become a strategic priority reinforced by a strong focus on accountability and good governance. Although there has been some pushback from the Trump administration on ESG and sustainability in the USA, most South African companies are holding firm on their commitment to ESG and sustainability.

Greenwashing and other pathways to failure

Prioritising sustainability doesn’t simply involve painting the boardroom green. As organisations worldwide face growing demands to identify and address ESG-related challenges, they risk negative consequences from stakeholders, including investors, if their efforts fall short. Many companies have been found guilty of ‘greenwashing’ or manipulating ESG data and metrics to falsely demonstrate compliance or for personal shareholder gain. Caught red-handed, the result can be severe financial penalties, litigation and reputational harm, blemishing the company and any promises it may make in the future.

Many ESG-related risks are the result of inadequacies or breakdowns in governance. Ethical culture and leadership set the example in how the topic is approached and are critical for maintaining ESG practices and processes. These effectively support long-term viability and adaptability. Easy-to-make mistakes for boards when it comes to ESG include excessive attention to industry ratings, lack of supervision and evaluation, inconsistencies in strategy, and a disconnect between ESG goals and the overall business strategy. To put it bluntly, if boards in South Africa want to achieve long-term success with their ESG strategies, they need to take them seriously.

The path to integration

Embracing ESG is not an overnight process. With so much at stake, companies need to adopt a consistent long-term approach that integrates the many facets of ESG as well as proves that it can be practised at an enterprise-wide scale. As part of an effective integration strategy, boards need to consider the following elements:

  • Goals: Boards need to be clear on what they’re trying to achieve and what resonates with stakeholders. By doing so, they can make meaningful progress in relevant areas.
  • Financial materiality: Shareholders and investors care about the bottom line, so any ESG goals must reflect their likelihood of a return on investment.
  • Data: ESG strategies rely significantly on data, so boards need systems in place for reliable data collection and analysis.
  • Policies: Boards need to demonstrate they can put ideas into practice. The development of clear policies reflects that, as well as a commitment to follow through on them.

There is also the vital question of reporting. Boards need clear structures in place that offer stakeholders the transparency and accountability they expect from any integration strategy. They should incorporate continuous monitoring, reporting and improvement into their strategy and consistently review frameworks, policies and procedures to ensure they remain up to date and relevant to achieving set goals. Many companies also go so far as to tie ESG metrics directly to executive incentives, meaning a good ESG record equals better compensation and an explicit reason to integrate it at a boardroom level.

Closing the gap between reporting and reality

The measure of any ESG effort is in its implementation, going from proposal to execution. Many boards will set out with the right ideas, but a failure to apply governance practices can bring them to a dead halt or result in damaging consequences. Governance must be applied to all ESG risks and opportunities, leading to companies being able to publish their sustainability reports with confidence and integrity.

Companies don’t have to do this alone. Today’s company secretaries and governance professionals are equipped to assist boards and companies with their ESG integration plans, deploying frameworks, discussion guides and toolkits that help them identify risks and priorities and embed policies and procedures into their reporting and decision-making. The result is that ESG becomes less of a vague commitment and more of a company policy, complete with structured governance and mechanisms for long-term sustainability.

No matter their size, industry or scope, companies across Southern Africa have the potential to make sustainability a priority. However, that priority needs to be accompanied by the right controls and governance practices that promote responsibility, transparency and accountability. It all starts with the right kind of commitment.

Issued by the Chartered Governance Institute of Southern Africa