Nigerian businesses have treated sustainability as a dispensable philanthropic option
WHY BUSINESSES IN NIGERIA NEED TO TAKE SUSTAINABLE FINANCE SERIOUSLY
KENNETH AMAESHI Professor of Business and Sustainable Development , University of Edinburgh
Nigerian businesses have treated sustainability as a dispensable philanthropic option
Why sustainability is good for business
There ’ s significant evidence that sustainability is good for business . A recent study by Harvard and London business schools found that corporations that voluntarily adopt sustainability policies have better organisational processes . They thus perform better when compared to a matched sample of companies that adopted almost none of these policies .
It has also been found that if financial institutions “ integrate sustainability criteria in their risk assessment and decision making procedures , they will strengthen their financial soundness ”
Such institutions also “ improve systemic financial stability and contribute to a more ecologically sustainable , just and peaceful world .”
In sum , sustainability is a quest for effectiveness and efficiency . It ’ s first and foremost rooted in a commitment to reduce negative impacts and increase positive effects . Positive impacts include low carbon emission , fair employment practices , responsible product promotion and good corporate citizenship practices .
Corporate sustainability is therefore a form of self-regulation driven by the values and philosophy of a business .
But for a long time , Nigerian businesses have treated sustainability as a dispensable philanthropic option . The focus of most businesses has been on survival . As such , the pursuit of sustainability is seen as not necessarily good for business .
No longer an option for Nigeria
Nigerian businesses need to go beyond the piece meal approach of corporate social responsibility . There ’ s at least one green shoot that suggests this process might be underway .
The Nigerian government is committed to implementing a national sustainability roadmap for the financial sector . Backed by the United Nations Environment Programme Finance Initiative , it requires each member of Nigeria ’ s Financial Services Regulation Coordinating Committee to develop a sustainable development model . This model is for themselves - as organisations - and the industries they regulate .
The committee brings together all the regulatory agencies . These include banking , insurance , securities , pensions , commodities , taxation and fiscal policy sectors . These will be expected to address the integration of environmental and social risks in investment and lending decisions .
According to the UN programme , Nigeria is arguably the first country to adopt this approach to sustainable finance .
Nigeria , like most African countries , didn ’ t achieve many of the Millennium goals . This is due to poor governance and the inability of many governments to stimulate sustainable development . The sustainable goals present a new lease of life , which the government of President Buhari has committed to .
What should businesses in Nigeria do ?
The full spectrum of the Nigerian financial regulatory community is on board . This means that all sources of finance in Nigeria – borrowings and investments – will soon be required to respect and reflect sustainability principles .
At the moment , the Central Bank of Nigeria expects most large projects to meet these requirements . Agriculture , power , and oil and gas are especially in focus . These projects will be required to demonstrate that they do not cause social and environmental harms , in addition to being profitable .
Banks have been mandated to develop robust social and environmental management systems to guide their lending and investment decisions . In practice , the banks are expected to adopt social and environmental management systems similar to those found in the UK and the Global Alliance for Banking on Values .
Very soon , the sustainable finance approach could be extended to all projects , no matter how small . Finance is the lifeblood of any business . There ’ s a global appetite to incorporate environmental , social and governance risks in lending and investment decisions .
As long as Nigerian businesses want to thrive locally and globally , they cannot escape the current demands of sustainability . The earlier they understand and embrace it , the better for them .
2017 | Business Times Africa 55