A dispatch from the frontline of ESG management.
The global pandemic has intensified the need for positive investor engagement. Long-term, risk-adjusted returns must be accompanied by social and environmental impact to finally drive down inequality and build resilience to future shocks. ESG compliance frameworks are an important mechanism for achieving and assessing impact, but implementing them on the ground can be fraught with challenges. Karijn de Bok, Maris ESG Officer, shares her experience in high-risk sectors across sub-Saharan Africa.
In the buzz of growing consensus around the benefits of sound ESG management to drive business which creates value for all stakeholders, we mustn’t forget the reality on the ground in much of sub Saharan Africa. Many countries lack strong legislation and compliance requirements upon which to build an ESG framework. Add to this long traditions of exploitation and high rates of poverty and operators are handed a carte blanche to, at best, cut corners. It’s up to companies like us to be the exception - not only to prove it is possible to mitigate ESG risk in these environments, in accordance with international best-practice, but to harness ESG opportunities for the long-term good of the community with sustainable, profitable business.
Since Maris’ first investments in South Sudan in 2009, we have been guided by material ESG factors, short- and long-term. As a permanent capital vehicle, sustainability and resilience are critical to our success, amplified by the inherent nature of doing business in turbulent, poorly-regulated markets where communities suffer high levels of poverty. ESG is in our blood, but formalising ESG processes on the ground is a complex, ongoing challenge.
When I was hired to establish a dedicated ESG function to support all our portfolio companies my first step was to develop an Environmental and Social Management System (ESMS) to IFC Performance standards. Too many ESG guidelines and frameworks are impossibly long and burdensome so we spent a lot of time developing a lean, practical framework in-keeping with our SME reality. Our operating companies are in
some of the world’s most high-risk operating environments where management teams are often consumed with day-to-day operating challenges. They are, understandably, inclined to push back against anything they perceive as mere additional paperwork so demonstrating that we’ve thought hard about the practicalities of implementation is key.
Slow and steady wins the race
Agriculture & Forestry and Mining sectors are especially high-risk. Illegal activities, looting, corruption and political interest are common, on top of the potential dangers associated with heavy machinery, hazardous materials and working underground. The local workforce may not have experience of basic concepts like Occupational Health & Safety or Labour Laws, but bulldozing into a new company with huge lists of new rules is futile.
We start implementation gently by explaining the purpose and benefits of better ESG practices in terms that are relevant to specific team members. Then we address elements of the framework that are easiest to understand and embrace, such as how to use Personal Protective Equipment. At our forestry operation in South Sudan for example, we recruit more than 90% of the workforce from local communities. New employees walk in on their first day wearing jeans and flip-flops, keen to start logging trees immediately. We have to explain why this is dangerous and how proper PPE will prevent them getting injured, then show them how to wear PPE correctly.
Step-by-step we introduce policies and procedures that are completely new to an operation. For example at Wakulima Tea Company in Tanzania trucks drive though our local communities to collect the day’s tea harvest. We give our drivers additional safety training, and impress upon them that our responsibility for safety does not begin and end at the factory gate. We have to explain that if they caused an accident our social license to operate would be at risk, in addition to the unthinkable impact on the injured party.
Getting management to fully commit to doing the basics well - such as PPE and safe driving - can take longer than you’d think. Lessons on subjects like PPE and safe driving are simple, but they open the door to more complex issues such as environmental sustainability and gender equality. Once buy-in is there across the workforce, it’s there for the long-term and benefits the culture on a deeper level. This is the point at which we move beyond managing ESG risk, to realising the opportunities positive ESG management presents. The whole suddenly becomes greater than the sum of its parts.
At our new herb farm, Evergreen Herbs, on the edge of Nairobi, we’ve provided new employees with training on the HR manual, in the local language, to make sure everyone understands their rights and obligations. A Welfare Committee of workers’ representatives has been established with members elected by their peers. Representatives receive training on the HR manual, industrial relations and grievance management so they are well equipped to represent and advise their colleagues. Only a few months in and we’ve seen an increase in workers’ initiatives that are boosting efficiency and productivity.
The point at which positive practices are habitual, effective risk-management is second nature and ESG improvements are having a positive impact on our bottom line, is not the point at which my work is done. As COVID19 has demonstrated we never know what is around the corner. ESG is a constant, evolving process, so across the Maris portfolio we are constantly developing and strengthening in-house E&S capacity with regular training and continuous dialogue.
Giving communities a loud voice in shaping how we support them is critical to positive impact. Listening to their needs when crisis strikes is also key. When Cyclone Kenneth hit Mucojo, Northern Mozambique, in April this year, we responded to calls from a local charitable foundation, Nema, who have been operating in the area for more than 15 years. Our resources and a grant from the Dutch development bank FMO helped rebuild schools, which allowed women to get back to work quicker. Using local building contractors provided a boost to the local economy.
Within the workplace we focus on creating an environment where everyone is encouraged and feels safe to speak up and raise matters of concern. Engagement takes place on different levels, from daily toolbox talks to weekly operations meetings and tailored training sessions. Employees are actively encouraged to ask questions, make suggestions and raise any concerns. If these problems cannot be addressed locally, we have a central grievance mechanism open to every employee. Effective ESG management should be a continuous conversation that encourages employees to take ownership and responsibility for their actions and be proud of what they achieve every day.