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The role of Private Sector in Sustainability

Posted on 18 March, 2019 at 15:44

By Luxon Kalonga

 

Generally defined as the ability to utilise current resources without risking the enjoyment of the same in future, sustainability has been a topical issue globally. There has been a misconception that sustainability is the responsibility of non-profit organisations as their mandates are specifically on their non-profit motivated focus areas. However, planet earth is for us all – capitalists, socialists, environmentalists, politicians – all of us. Despite our differences in approach, we really work towards ensuring a better world for posterity. Research has shown that emerging generations favour corporates that work towards sustainability initiatives rather than those that only promise huge financial rewards whilst being indifferent about sustainable development. Corporate social responsibility has become mandatory for corporates to remain relevant to the communities. The inclusion of previously marginalised groups in development has become key in determining corporates’ commitment to communities. In this article, we discuss the millennials’ impact, corporate social investment, inclusive development and skills sharing as some of the ways in which the private sector should play a pivotal role in sustainabilityThe millennials (born between 1981 and 1996) and Generation Z (born between 1996 and 2011) are becoming a more and more influential consumer group and employee demographic. Research has shown that millennials will rally behind causes they care about (Richards, 2015) and these millennials will constitute 75% of the global workforce by 2025 (Dews, 2014). It has also been proved that the youth bulge will be an important demographic phenomenon in developing countries, particularly Sub-Saharan Africa where the relative population of those between 15 and 24 is still growing significantly (United Nations Department of Economic and Social Affairs, 2015).

It is no longer optional for corporates seeking to establish or maintain top brands to consider their role in ensuring global sustainability through being involved in socially enhancing activities.

 

The easiest model for corporates is to partner with non-profit organisations through various corporate social responsibility initiatives. However, mere contribution to charitable, environmental and societal causes is not enough in the modern world. Some companies create a facet of corporate responsibility but this is in fact financed by increased pricing of their goods and services. Such initiatives may work during the initial stages but the artificially good corporate image created soon withers as consumers realise the deceit in such initiatives. The private sector needs to realise that strict and exclusive adherence to the traditional “shareholder value maximisation” mantra is actually detrimental for long term growth. Companies actually make more money by focusing on creating value for society, people and nature as well as on shareholder value. Consumers, employees and investors are increasingly calling on companies to be good corporate citizens that embed sustainability in their corporate strategy and culture. A study that tracked 180 listed companies that voluntarily adopted sustainability policies by 1993 (Eccles, Ioannou, & Serafeim, 2014) showed that compared to businesses that did not adopt many sustainability policies, the more sustainable ones significantly outperformed over the following 18 years from both a stock market and accounting perspective.

 

The private sector also has a key role to play in inclusive development, which we define here as a development approach which seeks to ensure that resources are more equitably distributed among the members of society, including the vulnerable members. There is immense scope for private sector participation in inclusive development. Financial inclusion is one of the key measures therein. We have seen the efforts in place by organisations such as Zimbabwe Agricultural Development Trust (ZADT) in ensuring inclusion of smallholder farmers through provision of non-conventional credit facilities. Financial institutions can extend credit to other vulnerable groups such as people with disabilities, marginalised women, children and adolescents in exploitative situations. In Zimbabwe we have seen an encouraging trend of the financial inclusion of women, as indicated by the gradual increase in the number of women with bank accounts and the value of loans to women in the graph below (Reserve Bank of Zimbabwe, 2019).

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