The role of companies in shaping Africa's sustainability and climate resilience

Sustainability and climate resilience are critical for Africa, a continent highly vulnerable to climate change despite contributing only 4 per cent of global greenhouse gas emissions.¹ According to the African Development Bank, climate change, caused by extreme weather events like droughts, floods, and cyclones, could cost the continent between 3 per cent and 5 per cent of GDP annually by 2030.² In this context, sustainability and resilience are essential to mitigate these effects and enable long-term economic growth.

The private sector in Africa is responsible for 80 per cent of the continent’s total economic output and employment, giving companies significant influence in addressing climate challenges. Businesses are increasingly adopting sustainability strategies, with a 2022 survey by PricewaterhouseCoopers (PwC) showing that 72 per cent of African CEOs view climate change as a threat to their growth prospects. This article explores the critical role that companies in Africa play in advancing sustainability and building climate resilience in the face of mounting environmental challenges.

Africa’s sustainability and climate resilience challenges

Africa faces unique sustainability and climate-related challenges that threaten its environmental and economic stability. The continent loses over 3.9 million hectares of forest annually, contributing to deforestation and biodiversity loss.³  Water scarcity is another critical issue, with the United Nations (UN) predicting that by 2025, 230 million Africans will face water shortages, and 460 million will live in water-stressed areas. Additionally, extreme weather events, such as droughts, floods, and storms, are increasing in frequency and intensity. The World Meteorological Organization (WMO) estimates that Africa experiences an average of USD7 billion annually in economic losses due to climate-related disasters.⁴  The agriculture sector, which employs over 50 per cent of Africa’s labour force, is particularly vulnerable. According to the World Bank, crop yields are projected to decline by up to 30 per cent by 2050 due to rising temperatures. These environmental impacts lead to increased operational risks for businesses, higher costs, and reduced profitability, making it crucial for companies to adopt sustainable practices to safeguard the environment.

The role of companies in driving sustainability

Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) frameworks increasingly shape how African companies operate, as stakeholders demand more accountability in addressing sustainability and social issues. According to a 2021, PwC Africa report, 68 per cent of African companies now see ESG as a critical component of their business strategy, reflecting growing recognition of the link between responsible business practices and long-term profitability.⁵  In particular, companies that adopt robust ESG frameworks tend to outperform their peers, with a 2020 study by McKinsey showing that businesses with high ESG scores reported 10-15 per cent higher returns on equity.⁶  Additionally, governments and regulatory bodies are enhancing ESG requirements which encourages companies to adopt sustainable practices. Furthermore, a KPMG report reveals that 81 per cent of African CEOs believe integrating CSR and ESG is essential for building trust with consumers and investors while ensuring their businesses are resilient in climate-related risks. These statistics highlight the importance of CSR and ESG frameworks in shaping corporate behavior and driving Africa’s sustainability agenda.

Companies in Africa are increasingly investing in renewable energy, sustainable agriculture, and other green technologies as part of their commitment to sustainability and climate resilience. According to the International Renewable Energy Agency (IRENA), Africa has the potential to generate 310 GW of renewable energy by 2030, and the private sector is a crucial driver of this shift.⁷  For instance, investments in solar energy have surged, with a report by the International Finance Corporation (IFC) highlighting that USD2.8 billion was invested in African solar projects between 2019 and 2021. In agriculture, companies are adopting climate-smart technologies, such as precision agriculture and drip irrigation systems, which are expected to increase food production by 17 per cent while reducing water usage by 25 per cent, according to the World Bank.⁸ Additionally, green technologies in industries like waste management and manufacturing are helping reduce carbon emissions. A 2022 report by the African Development Bank shows that businesses implementing green technologies have reduced their emissions by up to 30 per cent.⁹  These investments demonstrate the private sector’s growing role in driving the adoption of green technologies across Africa, leading to both economic and environmental benefits.

Challenges faced by companies in Africa’s sustainability journey

Despite the growing commitment of companies in Africa to sustainability, they face several significant obstacles in fully adopting sustainable practices. One major challenge is limited access to financing for green projects. According to the African Development Bank, only 10 per cent of African private sector businesses have access to affordable green financing, making it difficult for companies, especially SMEs, to invest in renewable energy and sustainable technologies.¹⁰ Inadequate infrastructure also poses a significant barrier because many African countries lack the necessary infrastructure, such as reliable energy grids and transportation networks, to support large-scale sustainable operations, with the World Bank estimating that Africa’s infrastructure gap requires USD170 billion annually to bridge. Additionally, regulatory hurdles further complicate the efforts, as inconsistent or weak enforcement of environmental regulations creates uncertainty for businesses trying to implement sustainability initiatives. For example, a report by the United Nations Environment Programme (UNEP) found that only 26 per cent of African countries have comprehensive environmental laws, and even fewer enforce them effectively.¹¹  These obstacles highlight the need for improved financing, infrastructure, and policy frameworks to support companies' sustainability efforts.

Opportunities for companies in Africa’s sustainability journey 

Opportunities for companies to lead in climate resilience in Africa are growing as businesses increasingly recognise the economic benefits of sustainability. According to the International Finance Corporation (IFC), the African market for climate-smart investments could be worth up to USD783 billion by 2030, driven by opportunities in renewable energy, sustainable agriculture, and green infrastructure.¹²  For example, investments in renewable energy are rapidly expanding, with the African Development Bank reporting that USD20 billion has been allocated to clean energy projects across the continent since 2016.¹³  According to the World Bank, climate-smart practices such as drought-resistant crops and precision farming are projected to increase yields by 15 per cent and reduce climate risks. Furthermore, the rise of green financing tools, such as green bonds and sustainability-linked loans, offers companies new ways to finance their climate resilience strategies. In 2021, Africa saw a 35 per cent increase in the issuance of green bonds, raising over USD2 billion, as noted by Moody’s ESG Solutions. These opportunities not only enable companies to enhance their competitiveness but also help them mitigate the risks posed by climate change, positioning them as leaders in Africa’s transition to a more sustainable and climate-resilient future.

Conclusion 

In conclusion, the private sector in Africa plays a pivotal role in driving the continent’s path to sustainability and climate resilience. As businesses increasingly integrate sustainable practices into their operations, they mitigate the adverse impacts of climate change and seize economic opportunities in renewable energy, sustainable agriculture, and green infrastructure. Companies can further lead Africa's transformation toward a greener future by overcoming limited access to green financing and regulatory challenges. Looking ahead, continued innovation, investment in green technologies, and strengthened partnerships between governments, companies, and international organizations will ensure that Africa’s economic growth is sustainable and resilient to climate change. The private sector's leadership will be vital in shaping the continent's more prosperous, climate-conscious future. It is important to note that, legal advisers play a crucial role in the efforts to sustainable investment including establishing entities, structuring of operations, financing, and the overall project support. 

_{¹ How much does Africa contribute to global carbon emissions?
²  Focus on Africa 
³  Loses and gains 
⁴  Africa faces disproportionate burden from climate change and adaptation costs
⁵  Taking action on your ESG strategy - Africa 
⁶  Does ESG really matter - and why?
⁷ The Investment Case for Energy Transition in Africa 
⁸ Climate-smart agriculture 
⁹ Climate Change and Green Growth - 2022 Annual Report 
¹⁰ Private sector financing for climate action and green growth in Africa 
¹¹ UNEP
 ¹² Climate Investment Opportunities in Emerging Markets 
 ¹³ African Development Bank invests $20 million in infrastructure fund to catalyze continental development}