ENVIRONMENTAL, social and governance concerns (ESG) has become a handy slogan in company boardrooms and marketing departments. Critics say corporates pay mere lip service to ESG and deceive shareholders and the broader public about their green credentials – a practice called greenwashing.
Tracey Davies, founder of the non-profit shareholder activist group Just Share, says amid all the hype about ESG, it boils down to responsible business practices. “Greenwashing can be as nuanced and complex as ESG itself. The fact that a company is guilty of greenwashing doesn’t necessarily mean it is doing nothing right – it could just be overstating its efforts and progress.”
Just Share was the brainchild of Davies and team members of the corporate accountability team at the Centre for Environmental Rights, a group of activist lawyers who work with communities and civil society organisations to help promote a healthy environment.
“The rationale for its founding was the recognition that corporate South Africa faces far too little scrutiny from civil society, and that it is not held accountable for many of the negative impacts it imposes on the most vulnerable members of our society,” she says.
“Business is not removed from the society in which it operates: it requires a stable, democratic basis on which to thrive, and part of achieving that stable environment should be operating in a responsible manner that does not exacerbate existing injustices.”
Greenwashing or ignorance?
When a company’s adherence to and progress with ESG are measured, it has to be able to demonstrate that things are changing for the better in the real world, not just on the pages of its sustainability report, Davies says.
“The fact that the avalanche of sustainability talk from corporates does not come close to being matched by any changes in the real world is an easy way to establish the extent of greenwashing.”
Just Share was one of the most vocal critics when Anglo American unbundled its coal assets and sold them in 2021 to the then newly founded Thungela Resources. According to Davies, Anglo made a strategic decision to sell off its coal assets after it had identified the poor long-term outlook for the mineral. “Anglo passed off a multitude of environmental liabilities and climate and financial risks to Thungela.”
There is a “greenwashing aspect” to this unbundling, she says: “Anglo marketed this transaction as a responsible practice and a contribution to the just transition, when it’s quite clearly the opposite action of what they claimed.”
In the weeks leading up to the 2021 COP26 climate talks in Glasgow, South Africa updated its targets to lower carbon emissions. Despite this more ambitious target, President Cyril Ramaphosa and mines and energy minister Gwede Mantashe frequently emphasised on public platforms that South Africa and other counterparts should be given the space to develop and grow, even if it means exploring for fossil fuels; any transition away from coal must happen in a realistic and sustainable way.
Davies says the concept of a ‘just transition’ originated in the labour movement and aspires to “decent work for all, social inclusion and the eradication of poverty”.
“The industry bodies and elements of government with vested interests in the continuation of the fossil fuel economy have co-opted the term to argue that the fact that we are so reliant on fossil fuels means that our transition must be extremely slow and prolonged.
“What these interests fail to recognise is that the just transition is fundamentally concerned with reimagining our economy and society. It’s about building systems that stimulate new jobs, improve energy access and food security, decreasing inequality and preventing harmful environmental impacts.”
Historically, South Africa has failed to convert fossil fuel-based development into a decent quality of life and provision of basic needs for the vast majority of our society, and there is no reason to suppose that doing more of the same will produce a different result.
According to Davies, the benefits of fossil fuel-based industrialisation in South Africa have always been disproportionately enjoyed by a privileged few, while the harms have accrued to the underprivileged many.
“Historically, South Africa has failed to convert fossil fuel-based development into a decent quality of life and provision of basic needs for the vast majority of our society, and there is no reason to suppose that doing more of the same will produce a different result. Breaking the historical link between fossil fuels and development is key to tackling increasing inequality and to combating dangerous climate change.”
To continue with a fossil fuel-based economy would lock Africa into a new kind of unsustainable development pathway: “A pathway which will entrench existing social and environmental injustices and keep the continent at a strategic disadvantage when the Global North has transitioned to a low-carbon economy.”
While Davies believes mining companies have, with the onset of ESG, become better at “talking the talk regardless of walking the walk”, there are companies that take ESG seriously.
“Anglo American Platinum [Amplats], for example. The company demonstrates a real willingness to understand the systemic ESG risks it faces and a willingness and commitment to manage and mitigate these risks.”
Amplats also provides a rare example of a company that is honest about the difficulties it faces in this regard – and where it is falling short, Davies says.
“The only way to know whether a mining company is serious about ESG is to establish whether the claims and commitments it is making are translating into real-world differences.”
Making a tangible difference starts with setting measurable, meaningful short-, medium-, and long-term targets and then reporting transparently about how it intends to achieve its targets.
“We will know that the sector is really serious about adhering to ESG principles and actively reducing its carbon emissions when we see evidence of change on the ground.”
A state of flux
Davies points out that the relationship between industry and ESG issues is fluid. “The recent resurgence in the coal price has seen coal mining companies start to jettison even the pretence that they are concerned about climate change and climate action. They recognise clearly that, when their product is delivering massive returns to shareholders, there is less likely to be much scrutiny of their ESG performance.”
The responsibility also rests with the financial sector, in particular institutional investors and large asset managers, which are often not willing to sacrifice returns in turn for doing good.
In the meantime, Just Share will continue to do detailed research to support its advocacy campaigns, and to scrutinise the reporting and targets of companies to establish the extent to which words meet actions.
We are seeing glimmers of hope, but it is a very difficult battle to fight.
“There is no doubt that we will see an increase in shareholder-filed resolutions at local companies [by both Just Share and other responsible, activist investors],” says Davies.
She believes there will also be growing levels of opposition to the re-election of directors at companies that are failing to demonstrate sufficient commitment and progress, and, mirroring the rest of the world, increasing levels of litigation to drive the urgent system-wide change needed to achieve any of the sustainable development goals – the very goals all mining companies claim to be committed to achieving.
“As we can see at a global level, it is very difficult to shift the focus of the financial sector away from its myopic, short-term profit obsession, but if it genuinely and proactively embraces responsible business practices – whatever the acronym by which we decide to describe them – it has real power to drive positive change that can spread to every sphere of our country.
“We are seeing glimmers of hope, but it is a very difficult battle to fight.”