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ISO weighs in on ESG principles as sugar demand rises – Industry experiences $3trn environmental damage yearly

Clara Nwachukwu

A major focus of the Sugar in Africa Focus Report 2021, released this month is evolving environmental, social and governance (ESG) standards for the continent’s industry

The new focus report produced by the Oxford Business Group (OBG), in partnership with the International Sugar Organization (ISO), charts the initiatives already under way in Africa supported by green-focused investment with sustainability at their core, to instil confidence in new investors keen to adhere to ESG principles in their decision-making. 

Sustainability issues became topical due to the increased international focus on ESG standards, more so as analysis by Trucost, an arm of S&P Global Market Intelligence estimated that industrialised farming practices cause an average of $3trillion yearly damage to the environment worldwide.

As a result, “Investors are turning to environmental, social and governance (ESG) standards to help stem or even reverse such damage by prioritising sustainability, social development and good governance in their investments,” the report said.

The report said ESG is particularly suitable for Africa, given the role of development finance institutions in core infrastructure and sector-focused programmes. Because many initiatives include a focus on sustainability – many electrification programmes have renewable energy targets, for example – players on the continent already have experience with green-focused investment.

“Moreover, ESG principles can help develop human resources by investing in training and sustainable careers, while at the same time improving transparency and governance.

“ESG standards can have a significant impact on Africa’s sugar industry, which is vulnerable to weather and price fluctuations. The use of chemicals in pesticides and unsustainable farming practices can have a negative effect on the environment – and farmers’ health – highlighting the importance of adopting ESG friendly operations.

 Several sustainability-focused players are already active in Africa’s agriculture sector, including UK-based impact investment firm SilverStreet Capital. In 2020 the firm invested in agricultural projects in Tanzania, Zambia, Namibia, South Africa and other countries.

According to SilverStreet’s “2020 Annual Impact and ESG Report: The Silverland Funds”, its investments had direct economic benefits for 386,000 people, and another 2.3million people received indirect benefits from its programmes, while reducing carbon emissions by increasing smallholder yields and thus removing the need for land clearing.

“By unlocking potential in the value chain, businesses will benefit from increased scale, and smallholder farmers will benefit from access to improved inputs, training and markets, among other advantages,” Luke Lowsley-Williams, ESG and impact analyst for SilverStreet, told international press in April 2021.

“This enables businesses to grow alongside the positive impact. Most of the world’s population growth will occur in Africa over the next three decades, and this presents a unique opportunity to meet demand, reduce poverty, and mitigate negative climate and environmental impacts. Building functioning agricultural value chains is integral to achieving this goal.”

Highlights:

Industrialised farming practices cause an average of $3trn per year in damage to the environment worldwide

ESG is particularly suitable for Africa, given the role of development finance institutions in core infrastructure and sector-focused programmes

ESG principles can help develop human resources, while at the same time improve transparency and governance

The standards can have a significant impact on Africa’s sugar industry, which is vulnerable to weather and price fluctuations

The Sugar report

Presented to ISO members during the Market Evaluation, Consumption and Statistics Committee (MECAS) meeting at the Organization’s 58th Council Session, on June 17th, the report explores the potential that Africa’s sugar industry holds for growth on the back of an anticipated rise in regional demand.

It also highlights the opportunities for investors to contribute to the industry’s development by helping to bridge infrastructure gaps in segments such as farming and refining and port facilities.

The report considers the benefits that the African Continental Free Trade Area (AfCFTA) could deliver by supporting fair intra-African sugar trade efforts and bringing regulatory frameworks under a common umbrella, which will be key to improving competitiveness.

Most of the world’s population growth will occur in Africa over the next three decades, and this presents a unique opportunity to meet demand, reduce poverty, and mitigate negative climate and environmental impacts. Building functioning agricultural value chains is integral to achieving this goal.

The report further spotlights sugar production in key markets across the continent, noting regional differences in terms of output and assessing individual countries’ roles as net exporters and importers.

ISO Executive Director, José Orive, said: “The region is well advanced in terms of sugar production overall, but several challenges still hinder its full potential,” he said. “It is not enough to just produce sugar; producers must be able to move it to buyers efficiently. When all negotiations related to the AfCFTA have concluded, we expect greater investment across the continent and a clearer regulatory framework.”

Also speaking, OBG’s Managing Director for Africa, Karine Loehman, said that while the challenges faced by Africa’s sugar producers shouldn’t be underestimated, the new report pointed to an industry primed for growth on the back of anticipated increased consumption across the continent and higher levels of output in sub-Saharan Africa.

“Regional demand for sugar is expected to rise in the coming years, driven up by Africa’s population growth and drawing a line under declines triggered by the Covid-19 pandemic,” she said. “With sub-Saharan Africa’s per capita sugar consumption currently standing at around half of the global average, the opportunities to help meet increasing domestic need by boosting production are considerable.”

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