Sustainability and climate resilience are critical for Africa, a continent that accounts for only 4% of global greenhouse gas emissions but is highly susceptible to the effects of climate change. ¹ According to the African Development Bank, climate change caused by extreme weather events such as droughts, floods and cyclones could cost the continent 3% to 5% of annual GDP by 2030. ² In this context, sustainability and resilience are essential to mitigating these. impact and enable long-term economic growth.
Africa’s private sector is responsible for 80% of the continent’s economic output and employment, giving businesses significant leverage in tackling climate change. Businesses are increasingly adopting sustainability strategies, with 2022 research showing PricewaterhouseCoopers (PwC found that 72% of African CEOs see climate change as a threat to their companies’ growth prospects. This article explores the important role African businesses play in driving sustainability and building resilience to climate change in the face of growing 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 more than 3.9 million hectares of forest each year, leading to deforestation and biodiversity loss.³ Water scarcity is also a critical issue, with the United Nations (UN) predicting that by 2025, 230 million Africans will face water scarcity and 460 million will live in water-scarce 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 annual economic loss of US$7 billion from climate-related disasters.⁴ The agricultural sector, which employs more than 50 percent of Africa’s workforce, is particularly vulnerable. According to the World Bank, rising temperatures are expected to reduce crop yields by up to 30% by 2050. These environmental impacts lead to increased operational risks, increased costs, and decreased profitability for companies, making it important for companies to adopt sustainable practices to protect the environment.
The role of business in promoting sustainability
Corporate social responsibility (CSR) and environmental, social and governance (ESG) frameworks are increasingly shaping the way African companies operate, as stakeholders demand more accountability in addressing sustainability and social issues. According to the 2021 PwC Africa Report, 68 per cent of African companies now consider ESG to be a key element of their business strategy, reflecting a growing awareness 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 companies with high ESG scores report 10-15% higher returns on equity.⁶ Additionally, governments and regulatory bodies are increasing ESG requirements to encourage companies to adopt sustainable practices. Furthermore, the KPMG report revealed that 81% of African CEOs believe that integrating CSR and ESG is essential to building trust with consumers and investors while ensuring their businesses are resilient to climate-related risks. These statistics highlight the importance of CSR and ESG frameworks in shaping corporate behavior and driving Africa’s sustainability agenda.
African businesses are increasing investments in renewable energy, sustainable agriculture and other green technologies as part of their commitment to sustainability and climate change. 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 key driver of this change.⁷ For example, investment in solar energy is rapidly increasing, with an International Finance Corporation (IFC) report highlighting that $2.8 billion was invested in solar power projects in Africa between 2019 and 2021. In agriculture, companies are deploying climate-smart technologies such as precision agriculture and drip irrigation systems, which are expected to increase food production by 17% and reduce water use by 25%, according to the World Bank.⁸ Additionally, green technologies in industries such as waste management and manufacturing are contributing to reducing carbon emissions. According to the African Development Bank’s 2022 report, companies implementing green technologies reduced emissions by up to 30%.⁹ These investments demonstrate the growing role of the private sector in driving the adoption of green technologies across Africa, benefiting both the economy and the environment.
Challenges facing businesses in addressing sustainability in Africa
Despite African businesses increasing their sustainability efforts, they face several significant obstacles to fully adopting sustainable practices. One of the major challenges is limited access to financing for green projects. According to the African Development Bank, only 10 percent of private businesses in Africa have access to affordable green financing, making it difficult for businesses, especially small and medium-sized enterprises, to invest in renewable energy and sustainable technologies.¹⁰ Lack of infrastructure is also a major barrier, as many African countries lack the infrastructure needed to support large-scale sustainable projects, such as reliable energy grids and transport networks, with the World Bank estimating that US$170 billion is needed annually to close Africa’s infrastructure gap. Additionally, regulatory hurdles further complicate efforts, as inconsistent or insufficient enforcement of environmental regulations creates uncertainty for companies seeking to implement sustainability initiatives. For example, a United Nations Environment Program (UNEP) report found that only 26% of African countries have comprehensive environmental laws, and even fewer effectively enforce them.¹¹ These obstacles highlight the need for improved financing, infrastructure and policy frameworks to support corporate sustainability efforts.
Opportunities for businesses in Africa’s sustainability efforts
As companies increasingly recognize the economic benefits of sustainability, the opportunities for them to take the lead in Africa’s climate resilience are growing. According to the International Finance Corporation (IFC), the African market for climate-smart investments could reach a value of up to USD 783 billion by 2030, driven by opportunities in renewable energy, sustainable agriculture and green infrastructure.¹² For example, investment in renewable energy is growing rapidly, with the African Development Bank reporting that $20 billion has been allocated to clean energy projects across Africa since 2016.¹³ According to the World Bank, climate-smart practices such as drought-tolerant crops and precision agriculture are projected to increase yields by 15% and reduce climate risks. Additionally, the rise of green financing tools, such as green bonds and sustainability-linked loans, is providing new ways for companies to finance climate resilient strategies. As Moody’s ESG Solutions noted, Africa saw a 35% increase in green bond issuance in 2021, raising more than US$2 billion. These opportunities not only strengthen the company’s competitiveness, but also help reduce the risks posed by climate change, positioning it as a leader in Africa’s transition to a more sustainable and climate-resilient future.
conclusion
In conclusion, Africa’s private sector has a vital role to play in driving the continent’s path to sustainability and climate resilience. Companies are increasingly incorporating sustainable practices into their operations, mitigating the negative impacts of climate change and seizing economic opportunities in renewable energy, sustainable agriculture, and green infrastructure. By overcoming limited access to green financing and regulatory challenges, businesses can further lead Africa’s transformation towards a greener future. Looking to the future, continued innovation, investment in green technologies and strengthened partnerships between governments, businesses and international organizations will ensure Africa’s economic growth is sustainable and climate resilient. Private sector leadership is essential to shaping a more prosperous and climate-friendly future for the continent. It is important to note that legal advisors play a critical role in sustainable investment efforts, including establishing the entity, structuring operations, raising capital, and supporting the overall project.
¹ How much does Africa contribute to global carbon emissions?
² focus on africa
³ loss and gain
⁴ Africa faces a disproportionate burden of climate change and adaptation costs
⁵ Taking action towards ESG strategy – Africa
⁶ Does ESG really matter? Why?
⁷ Examples of investments in 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 boost continental development
