ESG: between corporate implementation and educational conceptualization

Environmental, social and corporate governance (ESG) ratings do have positive market and financial effects.

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From achieving eco-friendly manufacturing to implementing gender equality and combating corruption, the environmental, social, and governance framework (ESG) has become a target for corporations to implement.

The environmental indicator measures how companies integrate environmental challenges into their working framework. The social variable looks at how corporations comply with gender equality, fair treatment, and discrimination among its employees, in addition to how engaged they are when it comes to social initiatives and reforms. Governance, on its part, evaluates how companies are being managed and operated.

By measuring risks and impact, among other financial factors, ESG helps corporations synthesize profitability, environmental concerns, and social engagement with corporate ethics. ESG has proven effective in attracting foreign direct investment (FDA) and improving return on assets (ROA) and investments (ROI) for companies, thus enticing stakeholders to partner with them. In a world where many consumers pay attention to environmental concerns, and where the voices of activists can threaten business leaders, ESG fosters the trust of both customers and potential employees.

By virtue of decrees no. 107 and 108, passed in 2021 and effective since the beginning of this year, the Financial Regulatory Authority (FRA) requires all registered Egyptian Stock Exchange Market-registered corporations to submit mandatory annual ESG reports for companies with EGP 100 million capital, and additional TCFD report for those with EGP 500 million capital, in line with Egypt’s 2030 vision and UN sustainable development goals.

ESG as implemented in Egyptian corporations

In the second half of the 2010s, companies in Egypt started to take into account environmental concerns and develop eco-friendly production techniques. Vodafone Egypt was one of the earliest companies to monitor, evaluate, and document its sustainability initiatives. The telecommunication giant published its first digital sustainability report earlier this year. The report highlighted that Vodafone Egypt reduced its greenhouse gas emissions from the equivalent of 285.799 metric tonnes of carbon dioxide in 2018 to 155.104 in 2020, cutting its emissions by 45 percent. The telecommunications company is also the first to launch the first eco-SIM card in Egypt, made from 100 percent recycled material.

Other examples include Tetrapack, a leading packaging company. Tetrapack Egypt had a notable presence during COP27, where the first Egyptian pact for used beverage cartons was signed in partnership with Uniboard, Beyti, and Juhayna. For Sherine Shahin, Tetrapack Egypt’s head of public affairs, the company works in “moving food and beverages packing forward in a sustainable manner”. Shahin added that the company has succeeded in saving energy consumption by 50 percent. She also indicated that the upcoming initiative for Tetrapack Egypt is to recycle materials so that they would be reused in fiber/plastic manufacturing.

Similarly, Coca-Cola Egypt has worked on implementing ESG. According to the Coca-Cola HBC Egypt website, the beverages company recycled 30.000+ tonnes of bottles, with a packaging collection rate of 43 percent in 2022. Not only does Coca-Cola take into account the environmental metric, but is also actively engages with the social, economic, and educational aspects. Creating new opportunities for youth in rural areas in Egypt, Coca-Cola Egypt, in cooperation with the Misr El Kheir Foundation, launched the “Your Bicycle, Your Revenue” campaign that would empower young people to start their small businesses. During the launching event, Hala Abdelwadood, director of public affairs, communications, and sustainability, asserted that Coca-Cola’s socioeconomic initiatives have already extended to providing “almost half a million people with clean water in rural Egypt” as well as “developing 70 villages”.

In addition, the company promotes gender equality, having collaborated with the Orman Cooperation to allow women in upper Egypt to start their own businesses by providing them with small kiosks of Coca-Cola coolers.

Making banks sustainable

In 2021, the Central Bank of Egypt set standard guidelines for the banking sector to increase sustainability. According to the climate risk regulation in Africa’s financial sector and related private sector initiatives study report, four banks signed the UN Principles for Responsible Banking (UN PRB). The report was jointly prepared by the African Development Bank, the Global Center on Adaptation, and the United Nations Environment Programme—Finance Initiative.

In 2022, the National Bank of Egypt (NBE) became a signatory to the UN PRB. To embrace sustainable finance, NBE worked on enhancing its staff’s awareness by developing a “sustainability awareness campaign” which served roughly 24,000 employees. “As a core challenge in ESG, our aim was to correct the [misconception] about how governance works in order to expand the horizon, in regards to this pillar, beyond mere donations and philanthropy,” said Maha Hasebo, head of strategic sustainability at NBE.

To spotlight the importance and action still needed to progress gender equality, the bank’s sustainability report for the fiscal year 2021-2022 highlighted that 22 percent of the bank’s board of directors are women.

Blending academic knowledge with expertise for effective ESG

While implementing ESG metrics can be gradually adopted in corporations, it is challenging to accurately assess the role of education in contributing to these goals. The Global Business Coalition for Education’s 2022 report shed light on the lack of collaboration between academic institutions and corporations, and how that undermines the latter’s opportunities in tackling different ESG pillars. In their study on the challenges of ESG data in investment, researchers Carolina Almeida Cruz and Florinda Matos argued that most companies usually dismiss the “S” in ESG, neglecting the social dimension.

Educational institutions can become proactive actors by constructing their buildings according to eco-friendly guidelines. However, a main input that would add value is how such institutions can instill ESG values is developing learning modules that enhance students’ awareness of the merits of ESG, and how they can carry them to the marketplace after they finish their studies.

Established in 2011, the AUC Office of Sustainability works in making its campus more eco-friendly while fostering evidence-based research and developing courses that convey the values of the ESG framework. The AUC new campus was ranked the number one sustainable campus across Africa, according to the 2021 UI Green Metric University Ranking.

Over the last three years, the university invested about $23.5 million in sustainability research.
But how could we evaluate good ESG training in general, and in impactful sustainability in particular? In other words, how could academic training become an effective tool that smoothly blends with the know-how within the corporate world?

Sonja Haut, head of impact valuation at Novartis and author of The Case for Impact, addressed this dilemma during an online webinar that was hosted by AUC John Gerhart Center for Philanthropy, Civic Engagement, and Responsible Business last March. “A good training [methodology] would be one whereby sustainability or CSR would not be separately taught as an afterthought through, for instance, having a course named sustainability.” Haut added that instead, effective training “would make strategic thinking go in parallel with working plans for corporations through a metric of analysis where every course module tackles one of the ESG pillars.”

Formal degrees that teach sustainability need to move beyond orthodox training in corporate social responsibility and/or philanthropy, Haut explained.

Between the urge to annually disclose their ESG reports and the confusion on how to adapt their work to ESG metrics, there must be a midway that can allow businesses to share their data with researchers without putting their confidentiality at stake. From their side, academics should build practical modules where research-driven methodologies would be designed to serve companies in given industries. With their unbiased insights, they could better indicate which pillar companies should intensify investment in.

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