Bgs - Sustainability Reporting

INTRODUCTION

According to Heinberg (2007), the term sustainable means "that which can be maintained over time". Heinberg goes on to explain that unsustainability means that any society, or aspect of society, that is unsustainable cannot be maintained over a long period of time will cease to exist as some point or another.

South Africa faces many challenges, such as HIV aids, corruption, the gap between rich and poor, and most importantly, providing for the population that has grown by over 100% over the past century. Businesses globally, face similar problems, such as the fact that world population has grown by almost 100% since 1960

Considering these issues, businesses, globally and in South African, have a responsibility to ensure that their decision-making process considers these factors (population growth, etc.), measures the impact of such factors, evaluates the potential scenarios of risk from these factors, and works to creating a solution to the problems we may face.

King III, provides a baseline for listed companies to integrate sustainability into the Annual Reports and sets out suggested standards for businesses to follow. The King III report encourages transparency and governance in businesses and through this, listed companies are made aware of their impacts on the environment, society and the economy. With this transparency and governance, decision-makers are empowered to internalise responsibilities through objective settings and encouraged into a proactive role of business, rather than a reactive one.

The purpose of this essay is to assess the following:

1. The opportunities and risks that sustainable or unsustainable practices presents for key decision makers in business

2. The interconnectedness of nature, society and business, and whether businesses require a better understanding of this interconnectedness

3. The integrated reporting and what is its intended purpose for businesses

4. Whether decision makers need a fundamental shift in their approach to sustainability?

5. And finally, using the information provided in points 1 to 4 above, whether I agree with the statement made in the King Report III on sustainability

WHAT IS SUSTAINABILITY?

Before evaluating the risk and opportunities that South Africa will contend with through unsustainable practices and sustainable practices and what King III will deliver in terms of sustainability, it is important to have a clear understanding of what sustainability is.

John Hanks believes that sustainability is a straightforward concept, he states that "sustainable development is all about behaving in a manner in which current efforts to raise the quality of life of a society's citizens (i.e. "development") can be continued (or "sustained") into the future." (Hanks, n d, p. 1)

In addition to this, Goran Dragosavac believes that with sustainability comes sustainability management which he describes using 3 'P's', people, profit and planet (Dragosavac, 2010), which is equivalent to economy, environment and society (Hanks, n d). Building on this, the economy, environment and society can be broken down to 5 Capitals Model which encompasses the Natural Capital, Human Capital, Social Capital, Manufactured Capital and Financial Capital (Hanks, n d).

What is important to note here about the 5 Capitals Model is the interconnectedness of these elements in economy, environment and society (this will be covered later in the essay).

RISKS BUSINESSES MUST BE AWARE OF FROM UNSUSTAINABLE PRACTICES

John Hanks, in his paper on 'A Conceptual Framework for Sustainable Development', states that we are encountering a crisis in sustainability. This crisis is because businesses and people are depleting the availability of natural, human and social capital and that this is largely due to our failure to internalise these capital stocks in our decision-making process (Hanks, n d).

With resources diminishing and significant demand for resources increasing and taking into account the estimated South African population growth rate of 1.1% per annum (World Bank, World Development Indicators, 2009), and the estimated world population growth rate of 1.2 % ("World Population Growth Rate," 2009) and a major growth rate of the socio economic gap. South Africa currently has over 20% of the population living below the poverty line (Human Development Report, 2010), things are only going to get worse if unsustainable practices continue.

So what are these risks to business?

Firstly, there is risk that policy will be amended in the future from an 'encouraging' policy to a 'comply or penalise' policy. In the future, carbon tax and emission reduction policies will possibly be introduced, together with incentives like carbon emissions reduction subsidies. Businesses, that are aware of the possibility that these changes may occur, can be competitively placed to take advantage of these policy amendments.

Secondly, there are the physical impacts. Climate change is happening, and the debate of whether humans or nature, are the cause is irrelevant. Climate change is happening, and companies should be aware of their current impact on the environment and try to minimise and reverse the impact that was caused by them over the past century.

Climate change will affect many sectors, from breweries with water shortages, to agricultural sectors with droughts and floods. In addition to this, the scarcity problem will be and is a major risk to South Africa. Some of South Africa's largest industries are primarily based around rare resources like gold and platinum. Pollard and Stephen (2008) include the following when seeing the interconnectedness between the environment and the economy:

Table 1: Examples of climate change interconnected risks (Pollard & Stephen, 2008)

Regulatory compliance Transportation costs

Business reputation Food supply

Insurance cost Disaster preparedness and recovery

Supply chain disruption Decline in crop yields, forest and ocean resources

Natural resource costs Food plant, animal and human diseases

Water scarcity Droughts,