For generations, our environment – that intricate web of land, air, and water – has suffered from a collective neglect. From government policies to everyday industrial practices, the health of our planet has been consistently pushed aside. This disregard isn’t some recent oversight; it’s a deeply ingrained pattern, a legacy of prioritising short-term gains over the long-term well-being of the very world that sustains us.
A practical example demonstrating environmental degradation in Nigeria is the Niger Delta saga in the South-South region, which has dominated public discussion for nearly half a century. This issue of environmental degradation essentially means the willful neglect or abandonment of our cherished environment without efforts to restore it to its original state. It has been widely reported in our literature that environmental degradation has led to serious civil unrest in the country. The issues of kidnapping, hostage-taking, militancy, armed robbery, bloodshed, and armed struggle in this region are well-known and unforgettable. These vices have largely erupted due to the long-term neglect of the environment.
Driven by a shared concern for the impending collapse or further degradation of our environment – land, air, and water – we, as a society, sought solutions. This collective desire led to the emergence of “sustainability reporting” as a key tool among many. This reporting aims to meaningfully address the myriad environmental problems plaguing our planet.
What is Sustainability Reporting we may wish to ask?
Sustainability Reporting can be defined as a comprehensive communication process that documents an entity’s environmental, social, and governance (ESG) goals, objectives, and aspirations. It also includes written reports on the progress and efforts made towards achieving these goals.
It is important to note that sustainability reporting primarily focuses on three key issues known as ESG—environment, social, and governance.
The ESG model can be described as a set of practices (rules, policies, procedures, metrics, etc.) that an organisation implements to limit its negative impact or enhance its positive impact on the environment, society, and governance bodies.
Furthermore, the ESG framework seeks to address environmental concerns, with a focus on land, air, and water. It also considers societal issues, emphasising a company’s relationship with its workforce and the host community where the business operates. Lastly, the governance aspect focuses on how the corporate entity is controlled and directed by those responsible for its governance.
I wish to reiterate that a company’s stakeholders—including shareholders, vendors, customers, the government, financial institutions, employees, regulators, donor agencies, multilateral institutions, and the general public—have diverse interests and expectations from the company. These stakeholders’ needs revolve around caring for the environment through the implementation of corporate social responsibility (CSR) principles. This includes addressing employees’ welfare and giving back to the communities where the business operates. Additionally, effective and efficient governance is essential, ensuring that those responsible for managing the company do so responsibly and transparently.
To assess how well a corporation is addressing the tripartite issues of environment, social, and governance (ESG), we must implement the principles of ESG investing.
ESG investing evaluates how effectively a company performs in these three responsibility areas and uses these benchmarks for potential investment decisions.
I would like to commend the laudable initiatives of various organisations and notable professional associations that have taken significant steps to promote sustainability reporting and actively engage in ESG ratings over the years.
Notably, the Institute for Policy and Management Consulting (IPMC) and the Institute of Chartered Accountants of Nigeria (ICAN) have made remarkable contributions.
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Recently, IPMC conducted ESG ratings with a focus on financial institutions, specifically banks and insurance companies. Their latest ratings revealed the top five banks and insurance companies:
The top five banks are: Zenith Bank Plc, Access Bank Plc, Stanbic IBTC Bank, Fidelity Bank Plc, and UBA Plc.
In the same vein, the top five insurance companies are: AXA Mansard, Custodian and Allied Insurance Company, Allianz Nigeria Assurance, Coronation Life Assurance, and Custodian Life Assurance.
Additionally, the recently organised “ICAN/NGX Corporate Reporting Award for Year 2024” took place at the NGX Conference Hall in Lagos. Three award winners emerged from the event:
Seplat Energy stole the show as the Best in Sustainability Reporting, also winning a Silver Award in Sustainability Practices for its contributions to promoting environmental responsibility, social, and governance practices.
Airtel Africa won the Best in Financial Reporting and a Gold Award for showcasing high levels of financial transparency and integrity through clear and comprehensive financial disclosures.
Dangote Cement won the Best in Financial Reporting and a Platinum Award in Corporate Reporting Practices for demonstrating dedication to accountability, accuracy, and clarity in financial records.
Despite the origin of sustainability reporting dating back to the mid-2000s, its benefits are significant and include facilitating easier access to capital, ensuring compliance with corporate rules and regulations, acting as an efficient risk management tool, promoting good corporate governance ideals that address social responsibility and stakeholder interests, optimising production capacity, and greatly minimising the discharge of toxic waste that poses health risks. Additionally, it fosters healthy collaboration between the company, government, and non-governmental agencies on environmental matters.
Furthermore, the principle of sustainability reporting goes beyond promoting an organisation’s long-term viability. It fosters transparency and accountability, allowing stakeholders – from investors and customers to communities and regulators – to understand an organisation’s environmental and social impact. This transparency facilitates collaboration and drives innovation in sustainable practices. By actively engaging with stakeholder needs as highlighted in sustainability reports, companies can build trust, mitigate risks, and ultimately, achieve a more sustainable future for all.
Kingsley Ndubueze Ayozie MSc (Finance) Lagos, MBA, KJW, ACSI (UK), FCTI, FCA – a Public Affairs Analyst cum Chartered Accountant by profession, writes from Lagos.
