Beyond-compliance sustainability strategy in Africa

While beyond-compliance strategies designed to meet international standards do not always appear to make commercial sense, increasingly companies have trouble justifying a business-as-usual approach. With globalisation and the financial crisis, business is recognising the strategy’s benefits, and the need to manage risk more proactively, particularly in Africa.

At Cornell University, Professor Stuart Hart’s research shows that beyond-compliance sustainability activities offer financial and other payoffs. Particularly, innovation, internal change management and skills development, new product and market development, stakeholder collaboration and corporate social responsibility trump traditional measures of resource efficiency, pollution prevention and product stewardship.

Based on our project experiences in Africa, SRK shares this perspective. Despite competent environmental legislation in some countries, African environmental and social governance is weak; government and civil society often cannot hold companies to account. Combining this with social complexity, political uncertainty, financial and reputational risk, more developers are applying a beyond-compliance approach, to encourage project financing, or facilitate mergers and acquisitions.

If stakeholders do not fully understand the business benefits, while corporate decision makers settle on meeting minimum requirements, they can miss the opportunity to begin projects on a solid footing, using proactive risk management and ‘future-proofing’ their developments.

However, some companies are committed to moving beyond compliance. SRK’s work with such a West African company revealed numerous reasons for this decision.

First, shareholders are pressuring the company to improve management to lower capital costs, cement their positive reputation and manage risk proactively. Second, they faced significant risks and uncertainty, including legacy rehabilitation and closure liabilities, while civil war and human rights abuses produced neighbouring community activism and engagement. A beyond-compliance approach helped manage these risks. They plan to expand operations, rehabilitating ecosystems, and developing supporting infrastructure and services to improve their complex operating environment.

Pursuing a beyond-compliance approach makes good business sense because it reduces risks and costs, builds collaborative partnerships with stakeholders, encourages innovation and skills development, and achieves company success.

Donald Gibson: dgibson@srk.co.za


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