Building the sustainability profile
The pressure to publish performance information on sustainability has been mounting since the dark days of the 1980s, 90s and early 2000s, when multinational companies were caught in a string of social and environmental disasters, ranging from the Bhopal gas explosion in India to the environmental degradation in the Niger Delta. The recent collapse of a garment factory in Rana Plaza, Bangladesh, shows that issues of corporate impact and governance are far from resolved. In South Africa, Lonmin’s decision to pay the education costs for the children of mine workers killed the Marikana shootings last year points to the sustained impacts of governance disasters on a company’s bottom line.
Reviewing the annual reports of more than 1,000 companies listed on the continent, the Africa Sustainability Barometer found that data on sustainability metrics were scattered, rarely found in the singular location of the annual report, and had a scale bias: the smaller the company, the less information was available. Outside of the continent’s established stock market – the Johannesburg Stock Exchange – there was a significant reporting drop-off.
To gauge a company’s full sustainability profile, one must go beyond annual reports and look to submissions to stock exchanges (if they are listed), specific health, safety and impact reports, financial reporting, and membership to voluntary initiatives and guidelines. The current lack of consistent, integrated reporting in a single place makes it harder for stakeholders to understand the scale and scope of a company’s operations. But it also suggests that sustainability itself, as an issue, is scattered within organisations. A 2013 report by Ernst and Young phrases this problem succinctly: “Integrated reporting leads to integrated thinking.”
But who decides where companies start and end their sustainability agenda? Much pressure to report has come from outside of business. In child labour, for instance, NGOs have pushed companies in certain sectors to spend meaningful effort auditing their supply chains. And the Africa Sustainability Barometer found that some of the largest companies in Africa now have policies covering this issue.
There may be some sectoral skew in this reporting. A number of the companies reporting on the issue stem from the mining, retail, and food and beverage sectors, including BHP Billiton, SABMiller, Massmart and Anglo American. “If you are a company operating in an industry that has been highlighted for child labour - cocoa, cottonsugar - you are much more aware and concerned than if you are in other retail or commerce sectors,” says Constance Thomas, director of the International Labour Organisation’s International Programme on the Elimination of Child Labour (IPEC). “Where there has been pressure by NGOs, by campaigns, there is a little bit more action.”
But pressure does not just come from NGOs. CEOs are also a major driver of the sustainability agenda, and the ‘C-suite’ needs to be on board to raise the issue to a strategic, managerial level. For that to happen, companies need to view sustainability reporting, and corporate governance generally, as a core business issue that can promote their productivity. Ms Thomas cites Coca Cola and Mars as “deeply engaged” in child labour issues especially compared to 10 years ago.
Despite this, the barometer found that the vast majority of companies have no clear child labour policy, even in the more established JSE. That is not to say those companies have child labour in their supply chains, but it may indicate they do not know and have not audited. Ms Thomas points out that ignorance would be no excuse were underage workers to be found.
The problem is harder to monitor amongst smaller businesses. Ally Samaje, Tanzania’s acting commissioner for minerals, admits that his country is still grappling with issues of child labour in local gold supply chains, but argues that for the most part licensed miners are not the perpetrators. “The government is always making sure that there is no child labour in mining activities, but artisanal mining is the area where there is a chance there is child labour,” he says. “They know that when the government is not present there is no monitoring, and to control it government would need to be there all the time.” The way to fix the problem, he argues, is to formalise artisanal miners. “By formalising those workers you put in a system whereby you can control such activities because you can penalise them using the license that they have.”
Reporting on other areas of non-environmental sustainability also remains patchy. However, a meaningful minority of companies have gone beyond the most basic rights issues like child labour, to begin looking at issues such as employee health in a more comprehensive way.
Tens of businesses surveyed in the sustainability barometer, particularly South African and Nigerian groups, now offer their employees HIV/Aids testing and treatment. Again, those efforts are led by the largest multinationals on the continent, including the likes of mining groups BHP Billiton, Anglo American, Kumba Iron Ore and Lonmin; food and beverage players such as SABMiller, Tiger Brands and Guinness Nigeria (owned by Diageo); the retailers Massmart and Woolworths; and a handful of banks such as Standard Bank and Investec. Other South African giants including Naspers, the media group, and Aspen Pharmacare also feature on this list.
Anglo American was a trailblazer here, creating its HIV support programme over a decade ago. The company’s move was prompted when it recognised the link between the HIV/Aids and tuberculosis – a disease for which it had a long history of providing treatment, given the prevalence of lung disease amongst miners.
“Anglo American was the first major employer to offer HIV counselling and testing coupled with free anti-retroviral therapy (ART) for HIV infected employees, and extended this free treatment to employees’ dependents with HIV in 2008. This marked the important integration of the HIV/Aids and TB prevention and treatment programmes,” says Dr Brian Brink, chief medical officer with the group.
In southern Africa, where HIV rates are still the highest in the world, the group tested over 95,000 employees last year, and says that over 90 percent of its employees in the region check their status every year.
In TB, incidents amongst employees are also on a downward trajectory, and are, at 958 per 100,000 employees, lower than both the national and industry averages. “With the escalating TB epidemic in South Africa – a direct result of the high burden of HIV in the country – we are focusing on earlier diagnosis and treatment,” Dr Brink explains.
The reasons are not only moral: companies have realised that running such initiatives, though costly, makes financial sense. “There is no doubt that HIV/Aids represents a significant cost to the business in sub-Saharan Africa,” he says. Without antiretroviral therapy, the total cost of HIV to Anglo American in South Africa is on average 6.4 percent of company payroll per year. But a 10-year study commissioned by the group showed that its prevention and treatment programmes had reduced the overall cost of HIV/Aids to the business by 9 percent.
“These savings are achieved through reduced death and disability benefits paid, reduced absenteeism, savings on inpatient and outpatient HIV-related medical costs and reduced recruitment and training costs. These findings led the researchers to conclude that company – provided ART has been cost-saving to the business,” Dr Brink says.
A mounting tally of corruption scandals in emerging markets has also pushed corruption and bribery issues into the broader sustainability agenda. Driven by activists, civil society groups and governments, more is being done to report on these problems. A number of companies assessed in the Africa Sustainability Barometer are making efforts to limit corporate gifts, while others are putting safeguards in place to ensure their suppliers enforce their anti-corruption policies.
For instance, Massmart, the Walmart-owned South African retailer, says that its formal trading agreements detail the ethical practices that suppliers are expected to uphold. The company states that it “regularly communicates its ethical standards to suppliers and service providers, and attempts to ensure that they comply with these standards”. But the moderate language is a clue to the difficulty of upholding those standards amongst distant elements of a supply chain.
More significant, perhaps, is the development of specialised anti-corruption offices within listed businesses themselves, pointing to a more systemic, integrated handling of ethical issues.
But those efforts are still limited. Taken from annual reports, only just over a dozen companies featured in the barometer appear to have developed such units. Again, the continent’s biggest groups – including BHP Billiton, Standard Bank, Sasol and Nigeria’s Access Bank – feature on that list. Massmart, too, runs its own ethics office, which takes calls and reports on corruption issues, and distributes communications on problems including bribery, profiteering and whistle-blowing to employees.