Global ESG standards compliance is now business-critical

South African exporters and importers of raw materials and beneficiated products operate in a global trade environment where ESG (environmental, social & governance) practices have become a condition of participation rather than a nice-to-have.

Intentional, holistic, good corporate citizenship and its role in the global movement of goods and the economic benefit that flows from it is now more important than ever before.

Revona Naidoo, Operations and Transformation executive at LexisNexis, says market access, buyer confidence and long-term competitiveness are influenced by how well companies can evidence responsible ESG practices. “In particular, sectors like mining, agriculture, forestry and mineral beneficiation are prone to additional pressure, given these sectors’ historical parallels with environmental impact, labour concerns and governance risk.”

Over the next decade, she adds, companies can expect regulations and oversight to tighten in South Africa. Legal frameworks are expected to accelerate in response to global demand.

Already, these principles are increasingly written into the operating and trading requirements of major markets. The European Union (EU) has taken a regulatory lead with instruments such as the Corporate Sustainability Reporting Directive (CSRD), which requires detailed ESG disclosure including supply chain impacts and Scope 3 emissions or indirect greenhouse gas emissions across a value chain.

Independent research indicates that about 90% of large European corporations now publish ESG reports aligned with recognised frameworks, reflecting how widely sustainability disclosure has been adopted among major buyers.

Beyond emissions there are considerations on water stewardship, biodiversity and waste management. Exporters must show responsible extraction and sustainable land use, while a social dimension covers labour standards, occupational safety, human rights and community impact – areas under sustained scrutiny in resource-linked industries. Governance provides the framework through ethical leadership, transparent decision-making, anti-corruption controls and oversight structures that make ESG commitments enforceable.

“Commercial realities further reinforce ESG adoption,” Naidoo says. “Credible sustainability credentials attract buyers, support access to finance and may secure premium pricing or longer term agreements. Businesses that fall behind or delay implementation face rising compliance costs and reputational exposure.”

Under CSRD, Member States may impose significant administrative penalties for non-compliance, including turnover-linked fines, exposing firms to potentially significant financial consequences. Non-compliance can also result in exclusion from procurement opportunities, legal risk and reputational damage that weakens a company’s standing with investors and partners.

ESG performance also functions as a signal of how risk is managed and whether a company can be trusted in long-term value chain relationships. Financial institutions increasingly take ESG into account when assessing creditworthiness, determining access to finance and favourable terms. Less compliant ESG companies may face higher borrowing costs or tighter conditions.

Traceability and origin visibility are critically important. Weak systems can result in shipment delays, rejected consignments and strained commercial relationships. Digital tracking tools and integrated data platforms are being used to support compliance efforts. “It also reduces the risk of superficial or unsupported sustainability claims,” Naidoo notes. “Weak governance fragments ESG efforts and reduces value.

“If a company markets its products or operations as environmentally responsible without credible evidence, that can expose it to legal risk under existing frameworks such as the Consumer Protection Act, financial market regulations and corporate disclosure rules.”

She adds that regulators globally are increasingly treating misleading ESG claims as a governance and compliance issue rather than just a reputational concern.

Presently, obligations apply directly to EU-based firms, yet the impact extends to suppliers globally. “South African exporters are increasingly required to supply verified ESG data to ensure downstream reporting duties are met,” says Naidoo. “This, at times, is due to commercial demands rather than regulatory.”

Pressure from the United States is somewhat different, but the outcome is measurably similar. Sector-specific rules such as the Food Safety Modernisation Act demand detailed traceability and risk controls. State-level supply chain transparency laws and investor expectations also push companies to show human rights and environmental due diligence across suppliers. Large buyers often build ESG expectations into contracts, linking continued trade to ethical sourcing and environmental benchmarks.

Global reporting frameworks including the Global Reporting Initiative and the International Sustainability Standards Board, which has incorporated Sustainability Accounting Standards serve as reference points for disclosure, giving buyers and financiers comparable information.

South Africa’s framework has traditionally relied on principles-based guidance, says Naidoo.

King V is anchored in the principle of Ubuntu-Botho, reinforcing the idea of double materiality. Organisations must now consider how sustainability issues affect financial performance and how their activities in turn affect society and the environment. This approach integrates financial return with social value, manifesting the ideal of a triple bottom line.

However, while King V promotes ethical leadership and sustainability, it is voluntary in nature and does not prescribe detailed ESG metrics. Emerging developments such as increased digital disclosure requirements through Companies and Intellectual Property Commission filings and Johannesburg Stock Exchange sustainability guidance now show greater alignment with global expectations.

But Naidoo says South Africa still relies heavily on softer laws and narrower requirements than those seen in the EU, for example. “This will change over the next decade. ESG has become part of the cost of doing business. It is not without significant challenges though, especially for smaller exporters facing substantial data demands and audit requirements.”

Small to medium enterprises often operate with limited budgets, leaner teams and little specialist expertise, making complex reporting and monitoring difficult. “Many small businesses delay ESG work until buyers or regulators insist on it, resulting in reactive compliance rather than structured planning.”

Naidoo notes that cost pressures and compliance fatigue are real concerns, particularly where businesses lacks internal capacity. “Many companies note the challenge is not willingness but readiness,” she says. “The starting point should be practical: Conduct a baseline ESG audit, map supply chains to understand exposure, invest in digital traceability where possible and formalise governance structures so responsibilities are clear.”

Naidoo notes that LexisNexis South Africa has embedded sustainability within its own operational governance framework through a series of environmental policies aimed at reducing resource consumption and improving accountability. The organisation’s internal sustainability plan focuses on measurable improvements in energy use, waste management, responsible procurement and employee engagement in environmental initiatives.

“Responsible governance begins inside the organisation,” she says. “Our sustainability framework is designed to ensure environmental considerations are integrated into operational decision-making rather than treated as a separate corporate initiative.”

The company has also adopted policies addressing carbon reduction, water management, recycling and responsible use of materials across its operations. These include measuring and reporting carbon emissions, promoting energy efficiency and renewable energy adoption, reducing plastic and paper consumption, and implementing structured recycling programmes across its buildings nationwide.

“The objective is practical accountability,” Naidoo concludes.