Karin Ireton, director of group sustainability management at Africa’s Standard Bank, believes that the logic of sustainability and profitability are increasingly seen not as antagonistic but complementary. While there are still some people who say this is going to be at cost and at odds with straightforward ‘business as usual’, there is recognition now of the need to reduce energy costs and to increase investment in renewables. Read More
David Smith for the Guardian Professional Network (18 May 2012):
Africa’s Biggest Bank Takes a Sustainable Approach
Standard Bank’s sustainability head talks about the role her organisation plays in empowering the new South Africa
At 150 years of age, Standard Bank is one of South Africa’s oldest companies and no stranger to thinking in the long term. The group’s total assets of 1,497bn rand (£113bn) make it Africa’s biggest bank, a heavy burden of responsibility in the world’s poorest, least developed continent.
Standard Bank’s most recent sustainability report describes efforts to extend financial services, reduce environmental impact, support carbon trading schemes in Africa and, since 2007, help more than 300,000 South Africans on low incomes to buy homes.
Internally, in the past year the bank hosted a sustainability expo, ran awareness raising campaigns, offered discounts to staff to buy solar water heating systems and made its own offices greener.
The group says it is also playing a part in undoing the legacy of apartheid, which for decades systematically denied opportunities and wealth to South Africa’s black majority. It operates a community trust but admits that some of its black business beneficiaries have been forced into liquidation by the economic downturn.
Karin Ireton, director of group sustainability management, believes that the logic of sustainability and profitability are increasingly seen not as antagonistic but complementary. “There are still some people who say this is going to be at cost and at odds with straightforward ‘business as usual’,” she says at Standard Bank’s headquarters in downtown Johannesburg. “But I think what we are building in the organisation is a greater realisation that there is a new ‘business as usual’ and that for our clients, as well as for ourselves, the need to reduce energy costs and to increase renewables is significant.”
Eighteen years after the end of white minority rule, South Africa’s socio-economic problems remain deeply entrenched. An estimated one in three people is jobless while 44% of workers live on less than 10 rand (75p) a day, according to a 2010 report by the UN Development Programme. The economic bottom half of the population lives on 8% of national income, trade unions say, making this one of the world’s most unequal societies. Race is still a vital if slowly diminishing factor.
Ireton cites South Africa as an example of how business and government can work together to harness markets and deliver societal impact. “I think we have a slightly unique approach in this country; we are more collaborative than you get in most economies where there tends to be almost an ‘us and them’ approach. Maybe that’s born out of the absolute need that there was in South Africa to overcome some of these issues and get on with it.”
She adds: “There are a number of fundamental requirements. One is clarity around what are the rules, are they going to change, are they set, what is the framework within which you undertake these issues.
Second is some incentivisation to the private sector – and it doesn’t necessarily have to be financial incentives – to get involved and to be able to move quickly.
“I think the benefit from the government’s side has been that they have been able to move faster on some things than they would had it just been through state-owned enterprises. But there’s also an aspect of mutual recognition of the benefit of actually tackling some of these issues.”
This is illustrated by South Africa’s renewable energy programme, which had been hindered by the domination of a state-owned electricity provider focused on coal-fired and nuclear power stations. “In order to crack through into the renewable energy market we needed to bring on board some independent power production into the system,” Ireton says. “That was an obvious gap for the private sector.
“The way they’ve managed to unlock private sector funding is to create the rules framework. Of course there have been moments when there have been slanging matches on either side, but when we did finally find each other, what you’ve seen is a great surge of private sector funding.”
Standard Bank says its focus is on sub-Saharan Africa where it is on the ground in 17 countries including the Democratic Republic of the Congo, Ghana, Kenya, Nigeria and Zimbabwe. It invests in infrastructure development, finances and advises governments, helps trade between markets and partners with organisations that tackle social problems.
Ireton continues: “If you look at the African economies they’re very seriously linked to export of natural resources – whether those are crops or mining and oil or gas products – but all of them require water, require energy and, for us to project forward into a growth scenario, firstly the underlying economies need to grow, which means people need to start to see some benefits.
“You’ll see it in a social compact that we’ve crafted which basically says we’ll provide financial services and products responsibly, bearing in mind the needs of society and customers. That, I think, puts down on paper what we’ve known intuitively for a long time: if people are benefiting, they’ve got more to spend, more to save, and therefore you can offer them a diversity of banking products.
“But it’s also that wellbeing and [economic] growth are linked to our ability to grow. So for us it’s really important to get that through and start to recognise that it’s not just from our perspective as an operating entity but also, more importantly almost, from the perspective of clients. That could be individuals grappling with their first bank account, mobile services or whatever.”
One of the major hindrances to business development in Africa is the massive informal sector which offers little by way of credit history or securitisation. In response Standard Bank says it has launched an initiative to test entrepreneurial capability and likelihood of payback.
“Products like that help you to extend services and build small businesses which in Africa is absolutely crucial because a lot of the African economies are based on small businesses,” Ireton adds. “You look in any marketplace and people have put their kids into school and university on the back of informal market trading. But how do you lock those into a system where the money is more secure because it’s not in a shoe or in a box or under the bed but it is actually working for them, and then also enable them to access other financial services?”
One answer is banking via mobile phones, which has spread fast around Africa and transformed millions of lives. Another is a scheme of small “bank shops” in South Africa’s townships, which are often distant from major urban centres and bank branches. Standard Bank has opened roughly 9,000 such outlets so far. “So now instead of saying to people catch the taxi and go 10 rand’s of taxi ride to the local branch, this guy in your neighbourhood can provide you with some basic banking services.”
Ultimately, is it the job of business or government to heal the social and economic scars that persist in Africa? “It’s how you approach it,” Ireton replies. “Do I think it’s the primary role of business to stand on a street corner and hand out parcels? No. But by thinking through your business differently you can have a mature impact and a lasting impact by actually recognising that these are potential customers and, lifted out of poverty, they can do a lot more themselves and move from the downside of the balance sheet to the upside.”