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Improving the Health of the Planet- One Community at a Time in ESG

The Good Governance Academy based in Johannesburg held a conclave on 27 January 2022, inviting a number of 'influencers' on corporate governance, integrated thinking and integrated reporting to express themselves on priorities for 2022.

A core theme at the conclave, as in many of the recent discussions around the Value Reporting Foundation("VRF") and Environment, Social and Governance ("ESG") metrics being developed with the IFRS Foundation, was the risks for the planet of climate change.

The VRF is a body formed in June 2021 from a merger of the International Integrated Reporting Council ("IIRC") and the Sustainability Accounting Standards Board ("SASB") to create, with the International Financial Reporting System("IFRS") Foundation, a global framework for integrated sustainability reporting encompassing all six capitals.

Various participants supported the core priority for 2022 to be "Improve the Health of the Planet". This of course talks to the much-debated themes relating to climate change impacts at the recent COP 26 Summit in Glasgow and at previous COP Summits, and to reports as far back as Brundtland Commission report in 1987 on "The Degradation of the Planet".

By far the greatest emphasis in the 'ESG movement', as in discussions and pledges at COP 26, is on the planetary 'E' dimension and on global climate metrics to reverse what is generally assumed to be anthropomorphic in nature. The human race is consequently committing to reduce carbon and other emissions contributing to this climate change and planetary degradation across all geographies, no matter the diversity of these geographies. Most countries are committing to global climate metrics like 'Zero Emission Targets' and there is even talk of legislating such metrics in some countries.
There are broad correlations between level of development and population densities on the one hand and deleterious emissions and degradation of the environment on the other. The USA, Europe and China rank highly on the first factor, namely development while China and India do so in respect of population densities and effects thereof. In the southern African segment of the planet, South Africa is relatively high on both factors, development and population, and with a very high proportion of energy generation from hydrocarbons, it is the 12-highest carbon emitting nation on the planet.

Namibia, by contrast, with a low development level and the second lowest population density on the planet, is a carbon sink. We therefore absorb more carbon than we emit. In any equitable system of global carbon accounting, Namibia should be recognized for this. This could take the form of compensation through carbon credits, carbon offsets or exchanges with high emission countries, or preferential access to climate- or green funding, especially from high-emission countries. There are elements of all of these forms of recognition being advanced.

Namibia has in fact looked after its part of the planet extremely well by comparison with most nations. This is both by design of good policies since independence and by the fortune of being a sparsely populated country without significant industrial development or hydrocarbon based energy reliance. Namibia's deliberate allocation of almost half the land to environmentally sustainable, community based conservation through the global best-practice programmes, should place the country at the top of these 'recognition' measures.

The climate metrics committed to by many nations, including Namibia, and being discussed in ESG scorecards currently devised by the VRF and the IFRS Foundation in the 'six capital' frameworks to be finalized by mid 2022, suggest global standards to be applied across all geographies and to all the enterprises which operate within these diverse jurisdictions.

Commitment to such global metrics by countries which have not contributed in any significant way to the problem and, given their low emission baselines, and which cannot reasonably meet such commitments to carbon emission targets without major unintended consequences to their economies and communities, seems to in itself be an unintended consequence of globalization of such issues.

A commitment to a carbon emission reduction of 92% by 2030 by Namibia appears to have little scientific merit and questionable net benefit to the country and its people. There will no doubt be some recognition of such bold commitments through carbon credits, green funding advantages and the like, which may or may not reach the entities and communities making these sacrifices. The question which must be asked is how realistic these commitments are and at what cost do they come for businesses and people?

The Chamber of Mines of Namibia strategy session in late November indicated that most mines had not been consulted on these emission reduction targets. A rough calculation suggests that to reduce Namibia's carbon emissions by 92% the two cement operations would need to close down and all the mines would need to shift their energy inputs to renewable sources including potentially to green hydrogen. None of them saw this as feasible by 2030 and of course shutting the two cement plants would take us back to the lamentable position of having no domestic production of one of the fundamental ingredients of industrial development we suffered until our third decade of independence.

The global climate metrics being formulated and recommended as universal targets and measurements towards achieving zero carbon emissions by agreed deadlines, need to be moderated and contextualised for local conditions. Context is king and the local dimensions of the 'E' factor need to be considered by each 'community', whether this is a mine, a factory, a conservancy, a sector or a country. The same goes for the 'S' factor where local social impacts need to be carefully assessed and prioritized for redress, especially in countries with stark social inequity like Namibia.

One of the participants to the Good Governance Academy conclave in fact suggested that the now prevalent 'ESG' acronym be transformed to 'G of EES' to emphasize that it is the Governance of the Environment, the Economy and the Social fabric which should form the basis of the new sustainability- and integrated reporting frameworks currently enjoying the attention of the Value Reporting Foundation and the IFRS Foundation. This hits the nail on the head and needs to be applied first at local level, namely mine, factory, conservancy, sector or country, and only then at global level.

Few disagree that it is in everyone's best interest "To Improve the Health of the Planet" but let us do so "one community at a time".Steve Galloway