The state of ESG strategic integration in JSE listed companies

This second report, titled The state of ESG integration in JSE listed companies, is based on the results of an extensive survey of Johannesburg Stock Exchange (JSE) listed firms. The survey was divided into several sections, including demographics, motivations for environmental, social, and governance (ESG) adoptions, stakeholder pressure and engagement, materiality approaches, board involvement and governance of ESG, ESG strategy implementation and barriers, and ESG reporting and frameworks. The survey was distributed to JSE listed companies through several means, including a market research agency. In total, there were 63 complete and valid responses to the survey, which served as the basis of the results documented in this report. Respondents who completed the survey on behalf of their companies included chief operating officers (31), ESG/sustainability heads/senior management (21), company secretaries (four), chief executives (three), non-executive directors (three), and a chairperson (one). Majority of companies were large or very large, with 30% employing over 10 000 employees, 22% between 5 000 and 10 000 employees, and 21% between 1 000 and 5 000 employees. In terms of sales, 70% of the sample companies reported annual revenues of R90 billion. Most companies were from the consumer discretionary industry (18), followed by the financial (14), industrial (10), consumer staples (eight), basic materials (six), technology (three), real estate (two), and energy (two) industries. The Henley-Risk Insights survey revealed that corporate South Africa has made significant efforts towards the adoption and integration of ESG factors on their businesses. Nevertheless, there is still much to be done. Corporate South Africa needs to continue to work on the purpose and rationale for sustainability that makes ESG an integral part of the corporate strategy. Competitive motives and marketplace stakeholders remain low in terms of motivations, pressure, and engagement for ESG adoption and integration. Significant ESG-driven strategic moves, such as asset divestment, mergers and acquisitions, change of distribution channels, and joint ventures, are not so common. Until ESG becomes an integral part of the competitive game, the progress will be incremental at best and often illusive. Most barriers to ESG strategic execution remain internal and within corporate control, depicting significant tensions between business and ESG rationales. There is a clear prioritisation of social factors vis-à-vis environmental and even governance factors. However, corporates must recognise that social and environmental factors are often intertwined, and failure to keep up on the environmental side may cost corporates and South Africa the ability to create jobs that are desperately needed