Assessing the interconnection of ESG factors in South African company reports

Abstract

South African companies face increased pressure from stakeholders and investors regarding their environmental, social, and economic/business activities. Most companies are still approaching reporting on these factors in a tick-box manner, and a systems approach to reporting on these factors may aid in creating value for companies through risk management refinement. This study aimed to assess the level of interconnection in company reports between environmental, social, and economic/business factors compared to connections found in the literature. To achieve this, a mixed methods approach was used by conducting keyword searches and thematic content analyses to create interconnectedness maps of sustainability factors discussed in both peer-reviewed literature and company reports, with a key focus on environmental factors. Interviews with ESG analysts/sustainability managers were also conducted to determine where and why gaps between connections existed in company reports. The literature review indicated that the most prevalent connections between environmental, social, and economic/business factors are linked to five key environmental factors. Strong connections existed for ‘climate change’, ‘water availability’, ‘land degradation’, ‘energy/natural resources’ and ‘biodiversity loss’. Within company reports these five key environmental factors were considered, however, with varying and lower strength of connections. From the interviews, it was found that gaps existing are data-driven challenges and the perception that connections are being made for most companies. Companies are considering connections that are valuable for risk management, however, many critical connections are still lacking. Making use of a systems approach to reporting by connecting various factors can lead to better risk management and increased sustainability within a company’s value chain.