PIETER SCHOLTZ Sustainable impact through social expenditure is almost unachievable without the right intentions, and investing in the right projects and people with the right skills and capacity
While large investments are made in ensuring compliance with environment, social and governance (ESG) reporting standards, more attention needs to be paid towards the social element, especially in Africa, notes professional services firm KPMG partner and Africa ESG lead Pieter Scholtz.
Africa stands to benefit as ESG compliance and initiatives gain traction and tools addressing these matters are implemented by more developed nations, he notes.
“While many of the learnings in the developed world can be applied as is regarding ESG compliance, the biggest difference for Africa will be on the social side,” affirms Scholtz.
While considerations such as diversity, equity, inclusion, prevention of gender-based violence, and eliminating human rights abuses from the supply chain remain global challenges, in Africa an additional component concerns how the continent ensures its host communities benefit from operations on their doorstep, he highlights.
Scholtz says that, especially in Africa, the social element of addressing ESG is, however, still more elusive than the factors of the environment and governance.
A couple of the more common reasons behind this difficulty in addressing the social elements include wrong intent, capital allocation to beneficiaries and collaboration.
In terms of intent, he explains that, for example, if a company’s intent is only to be legislatively compliant with ESG, or merely to reduce its risk of community backlash, then it will be “almost impossible to achieve sustainable impact through social expenditure”.
In terms of capital allocation, Scholtz says mines need to go beyond identifying the right projects and beneficiaries, and further than simply bringing funded projects to fruition, as implementing these measures will not necessarily guarantee sustainability of the overall project, says Scholtz.
“Most beneficiaries still need continued support with business and financial planning. They need training and coaching for many years until they understand their tax, maintenance and managerial duties, and have grown their businesses to be financially sustainable and independent from the mine,” he states.
To get this right, Scholtz says there needs to be money and effort put into capitalised businesses after the compliance “boxes have been ticked”.
As for collaboration, he says mines need to better understand what nearby communities want versus what they need – which are often not aligned.
“If your intent is to make the [social aspect of ESG] sustainable, then the best way is to follow a cocreation approach where you bridge the gaps between what your communities want and what they actually need,” states Scholtz.
He also urges mining companies to better collaborate with governments to understand their objectives and constraints, as well as enabling impact funds or other financiers to come on board to scale the impact.
In addition, he says it is essential to ensure beneficiaries of social investment have access to financial, managerial and business strategy support services, so they are not reliant on the mine for the long-term sustainability of their business.
“We have enough success stories to know that long-term sustainability of social upliftment projects is achievable
,” concludes Scholtz.