Governance

Author: Sean Doel - Director, WSP Environment & Energy South Africa

( Article Type: Explanation )

Environmental governance is rapidly becoming a fundamental component in the management of corporations globally. For businesses, this includes issues of corporate social responsibility along with improved management of corporate social and environmental impacts and improved stakeholder engagement. Support is garnered for this new management style as it promises to create long-term shareholder value by embracing opportunities and managing risks derived from on-going economic, environmental and social developments.
In South Africa the release of the King Report on Governance for South Africa (2009) and the King Code of Governance Principles (2009), together referred to as King III, was incited by the new Companies Act of South Africa and changes in international governance trends. A key promoter of corporate sustainability, King III requires companies to move towards integrated reporting, defining an integrated report as “a holistic and integrated representation of the company’s performance in terms of both its finances and its sustainability.” Companies are now not only becoming more cognisant of the potential environmental impacts of their activities but are restructuring to ensure effective governance of all material environmental risks and opportunities. Guided by King III, the terms of reference of the traditional board risk and audit committees are being expanded to include the identification and management of environmental risks and opportunities as well as reporting on material environmental issues. Additionally, sustainability committees are being established at board level to ensure the integration of sustainability throughout the business and the effective management of all material environmental issues.

Reporting on sustainability performance is directed predominately by the Global Reporting Initiatives (GRI) Sustainability Reporting Guidelines. These guidelines form the most holistic and comprehensive sustainability reporting framework available to companies, a result of the GRI’s strategic partnerships with the OECD, UNEP and the Global Compact as well as synergies with the Earth Charter Initiative (The Global Compact), International Finance Corporation (Sustainability Framework for private sector investment), the International Organization for Standardization (ISO 26000 Guidance on Social Responsibility) and the United Nations Conference on Trade and Development. Guided by the GRI framework, environmental issues that require consideration by an organisation include:

• Resource use (use, recycling and reuse);
• Energy (use, conservation, efficiency, reduction and renewables);
• Water (use, recycling, reuse and impact);
• Biodiversity (conservation, rehabilitation, strategies and plans);
• Emissions (pollutants, greenhouse gasses, mitigation and management);
• Effluent (quantity, destination and quality);
• Waste (quantity, category and management);
• Compliance (monetary and non-monetary fines); and
• Environmental expenditure (compliance, management, mitigation and rehabilitation).

Importantly, the governance of, and reliable, and accurate reporting on, material environmental issues allows a company to effectively respond to shareholder and stakeholder concerns. This performance is not only documented in the annual integrated and sustainability reports but can be fed down further into other voluntary and non-voluntary disclosures, such as the JSE SRI (Socially Responsible Investment) index and the numerous CDP initiatives, all of which have been aligned to the GRI.