Shining a spotlight on Africa in the climate change debate
When Vanessa Nakate, a Ugandan activist, was cropped out of a photo of young climate leaders that included the likes of Greta Thunberg, it sparked a debate about the discrimination experienced by many minority activists. Vanessa later said “a photo crop-out is an easy way to describe it but it’s really a metaphorical crop out from the narrative of climate science in general”
Africa is routinely excluded from global conversations about climate change and climate science. However, if you’re sitting on a board in Africa, expanding a business into the continent or part of your supply chain is in an African country, it’s important to understand the impact of, and risks associated with, climate change in what is for many businesses, a region of growing strategic importance.
How will climate change impact Africa?
Despite over 17% of the global population being on the African continent in 2020, its 54 countries were responsible for only 2.73% of global carbon emissions. There is, therefore, little urgency to cut the emissions of African countries, but there is a desperate need to improve resilience to the fallout of climate change. African countries are among the most vulnerable to weather changes caused by climate change according to a recent FT article.
- The latest IPCC report shows that Africa will warm faster than the rest of the world. When the earth warms by 2°C, northern and southern parts of Africa will warm by around 3.6°C.
- An increasing number of natural disasters is likely to have devastating impacts on the population across the continent. Issues will include but are not limited to:
- Extreme heat and cold waves
- Frequent extreme rainfall leading to flooding and the destruction of agriculture
- Changing monsoon seasons in the Sahel
- Rapid sea-level rise causing coastal flooding and erosion
- Cyclones and droughts
What does this mean for global businesses?
At a recent Transpire webinar, Trevor Matthews, Chair of the Australian State Insurance Regulatory Authority, highlighted that the globalisation of business comes with increased risks, which are only exaggerated by climate change. In fact, as far back as 2014, ASDA stated that 95% of their supply chain would be impacted by climate change.
It is, therefore, vital that Boards integrate climate risk into their strategic planning.
According to the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, there are two main risk areas:
These are direct risks such as extreme weather impacting the supply chain, putting infrastructure at risk or impacting agriculture.
These are more long-term changes to the business, such as requirements for reductions in carbon emissions and an associated shift to more renewable energy sources. Transition risks also involve changing consumer trends associated with greater climate awareness such as increasing demand for electric cars.
The World Business Council for Sustainable Development (WBCSD) highlights the importance of identifying risks early in order to mitigate the effects climate change might have. We have identified three key points to think about:
Implement ESG in line with the Sustainable Development Goals and Paris agreement
By using more renewable energy sources, updating governance and reporting structures or offsetting carbon emissions, firms can be ‘ahead of the game’ when it comes to policy changes.
This also includes undertaking market research and understanding how consumer trends might be impacted by climate change news as evidenced by the growing market for sustainably produced goods.
The climate emergency has sparked a “scramble to set standards for sustainable business” according to the Financial Times which has led to constant change and evolution in reporting standards and climate regulations. If your business is not prepared for or expecting policy changes, it could result in costly and time-consuming strategic and operational shifts.
Develop a robust infrastructure
Boards need to ask key questions about the ability of the business to withstand the effects of climate change such as extreme weather and natural disasters and also the ability of supply chains to withstand both physical and transitional climate risks.
The WBCSD and Opus Insights have plans to scale CocoaCloud, a business in the AgriTech industry which provides information about weather changes and patterns to West African farmers. The aim is to enable farmers to make climate-safe decisions when harvesting Cocoa and to reach one million users in Ghana and Cote D’Ivoire by 2024. This will not only protect and empower farmers, but will help maintain stronger supply chains for businesses reliant on their produce, such as Kellog Company and Mondelez International who have committed to investing in this scale-up.
Conduct anti-bribery and corruption due diligence
- Bribery and corruption are significant issues in many African countries and have the potential to undermine ESG strategy. The African Development Bank estimates that $148 billion is lost to corruption in Africa each year. These are funds that are filtered away from their intended target, into the hands of corrupt individuals and governments.
- Scientists have identified that a renewable energy project covering less than 1% of the Sahara Desert could meet all of Europe’s power needs with concentrated solar power. However, such projects might require up to $400 billion investment up to 2050 and fears about corruption and instability have detered investors from this and many other projects in African countries
If you are interested in knowing more about global NED opportunities, take a look at our recent webinar: 15th June: Global NED Opportunities – How NEDs can help companies build Global Opportunities
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