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Send  Share  RSS  Twitter  27 Jun 2011

ENVIRONMENT: Green Champions Wanted … But Not Urgently Yet in SA


Recent Gauteng Business News

‘Going green’ is on the strategic agenda of many South African corporates, but are they going far enough? In at least one area – senior executive accountability – the answer is a resounding NO!

Green may be fashionable, but has yet to become an integral part of the responsibilities of senior executives. To be fair, a small number of local companies have appointed a Green Champion or Enviro-Supremo with a slot somewhere in the organisation with a mandate to integrate green initiatives into a coherent strategy, but who actively monitors his or her progress?

This is difficult to say.

International developments highlight the slow rate of progress locally.

The appointment of ‘chief sustainability officers’ was already a major US trend back in 2009. Companies with a CSO or vice-president for sustainability include SAP, Sun Microsystems, Du Pont, Kraft and Ford.

At Ford, the Sustainability VP not only has to stay on top of compliance, health, safety and corporate disclosure but engineering developments and the interface between the environment, technology and product development.

Locally, the need for integrated responsibilities and overall executive accountability appears to be under-estimated.

How many Human Resources directors are mandated to define key responsibilities in the action plans of executives concerned with sustainability issues? Where do responsibilities start and finish? Does anyone care what happens to the company’s waste once the waste removal company has removed it from the premises?

Responsibilities tend to vest in committees rather than senior managers.

The 2010 Carbon Disclosure Project report on South Africa noted that 68 of 74 corporate respondents had board committees or an executive body with responsibility for climate change issues.

Some businesses are also aware that risk committees also need to consider environmental factors. Sustainability, environmental or climate risk was a novelty years ago, but when a tsunami can push Japan into recession its importance is obvious.

Faced with such challenges, it becomes increasingly vital that a high level corporate officer be appointed to manage risk and maximise opportunities, supported by senior executive colleagues with clearly defined environmental and sustainability responsibilities – all monitored by the relevant board committee.

Sustainability focus would then cease to be a ‘soft’ area. Tangible benefits could be pursued – electricity cost savings, for instance.

Mining Group Exxaro’s power bill was reportedly set to rise from R358 million in 2007 to R1,3 billion in 2011 as a consequence of new Eskom tariffs. Energy efficiency is therefore becoming key. But efficiencies extend beyond cost savings.

Companies that apply the green mantra ‘reduce, reuse, recycle’ do well out of it.

Internationally, Cisco’s value recovery team cuts the company’s recycling costs and by 2008 was turning a $100 million a year profit.

Local opportunities also beckon.

The IDC recently announced a five-year plan to invest R25 billion in South Africa's green economy while government policy is solidly in favour of companies that support the transition to a low-carbon economy.

Companies can now claim tax breaks on income derived from the sale of carbon credits (section 12K of the Income Tax Act).

Green perspectives also drive profitable product development. (GE’s Ecomagination initiative to pioneer energy-efficient products was producing revenues of $17 billion by 2008-09).

Regulatory issues are also material.

Our National Waste Management Act creates penalties of up to R10 million for industrial polluters. Government also plans waste water discharge and waste stream levies, pollution charges and a landfills tax. Interventions at municipal level create a further challenge.

Corporate reporting trends also suggest corporates could benefit by integrating sustainability responsibilities into a single executive portfolio.

The King 3 report makes the integration of financial and sustainability reporting mandatory from this year. Governance, strategy and sustainability become one. The implication is that suitably qualified directors and top managers have to be in place to drive integrated strategy.

Another implication is that sustainability should be part of performance measurement. Thirty-six corporate contributors to South Africa’s 2010 Carbon Disclosure Project said they incentivise management to reach climate change targets, though I’ve yet to see environmental benchmarking included in a top performer’s incentive package.

Yet changes to the incentivisation model would certainly have an impact. The performance bonuses of group chief executive officers could be closely linked to deliverables that are measurable in relation to eco-environmental sustainability at every operational location and all company offices. This would ensure focus from the top.

Green momentum is building, however. Awareness is growing and strategies are being developed, but questions still have to be raised about how effectively these strategies are implemented, monitored, measured and policed.

Sustainability management on this model is … well … unsustainable. To quote Barack Obama, “Delay is no longer an option. Denial is no longer an acceptable response.” Hopefully, this message will soon get through.

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