The month of November was marked by the 27th United Nations Climate Change Conference, COP27, in search of an urgent international reaction against climate change. With the issue of sustainability on the table for years, the meeting, which brought together representatives from about 200 countries in Sharm El-Sheik, Egypt, awakened us to the idea of looking at Mozambique in this chapter. Are we designing a sustainable path in the various dimensions of the country, from the public to the private sector, in what is now the ESG?
Sustainability is the search for balance between meeting human needs and preserving natural resources, which are naturally finite, so as not to compromise the future of the next generations. Therefore, sustainability represents the balance between the (still very) necessary exploitation of natural resources and the inexorable preservation of the environment. Vicente Bento, partner & operations manager of Insite Mozambique, which provides consulting services in this area, begins by approaching the concept of sustainability from a more holistic perspective: ESG, which includes environmental, social and corporate governance, whose acronym encompasses the concepts of Environmental, Social, and Governance.
These three pillars should be absorbed in an integrated way by the institutions and suggest a harmonized action between companies, society and Government in the search for such sustainable development, either through an intervention at macro level (of the Country as a whole) or at micro level (individual, of the life of companies and society). But the complexity and dimension of what is, in fact, sustainability unfolds even more.
Each of its elements encompasses a considerable list of aspects ranging from good environmental practices to the adoption of renewable energies, respect for communities and even issues that seem “strange” to this cause, such as the adoption of anti-bribery and anti-corruption policies in the Governance area.
The world recognises the need to reduce CO2 emissions, but lacks attitude
“For example, a company that claims to be sustainable, to do so properly, has to comply not only with the environmental part, but contemplate all the other pillars of sustainability. Even from the investors’ point of view, there is a growing trend that those who want to invest in companies select those that meet sustainability standards. Therefore, nowadays, sustainability has become an imperative for the capacity to attract investment and for good business performance”, he explains.
With so many problems, apparently more urgent, do we have, as a country, conditions to… sustain sustainability? The answer can only be yes, because the concept of sustainability may hold the answer to the long awaited development of Mozambique.
COP27 looked at developing countries and Mozambique
Similarly to what happened in previous major climate meetings held since 1992, at COP27 the world was focused on the search for the so difficult consensus on the reduction of emissions of pollutants that cause global warming. The issue seems merely environmental in nature, but it ends up being linked to all the other pillars (economic and social), even because, at that meeting, the search for compliance with the financial compensation that rich countries should make available to developing countries to help them mitigate the effects of climate change was also at the centre of attention.
The developed countries have not kept their promise to mobilize 100 billion dollars a year by 2020, which has opened a gap of distrust regarding the new promises. And one of the observations made by scientists at the COP27 focused on the circumstance that the more the needs of the poorest nations grow, the higher the target to be set after 2025 will have to be. Mozambique is among the countries that most need the support of the rich nations, since it is one of the most affected by climate change in recent years, despite being one of the countries that emit less pollutants into the environment.
And this was exactly the point made by the President of the Republic, Filipe Nyusi, at this meeting: “we are ready to make our contribution, but… funding is needed. It may be through investments or through donations in the context of reducing global pollution, but funding is needed.”
Meanwhile, inland, away from the global sphere, the issue of sustainability has been raised for several years now, both from the point of view of the targets advocated in the United Nations’ 17 Sustainable Development Goals (SDGs) for 2030, and from the point of view of an increasing requirement for private companies and corporations to be aligned with good practices that best meet the challenges of sustainable development (that which seeks to meet the needs of the current generation without compromising the ability to meet the needs of future generations, i.e. development that does not deplete resources for the future).
Achieving SDGs by 2030?
What early on seemed, for many, a utopia, is now, seven years away from the goal, more evident. The possibility of removing the 17 obstacles to sustainable development (assumed in 2015) by 2030 is remote, although the Government remains firm, planning to spend more than 400 billion meticais in 2023, which corresponds to 6% of the total expenditure planned for support to this cause.
But what has fuelled the optimism about achieving such an ambition?
Jaime Comiche, a Mozambican official who works as secretary of UNIDO – United Nations body focused on sustainable development for industrial activity – explains that since the Industrial Revolution the world has witnessed an excessive consumption of raw materials and energy.
At Absa Bank’s business breakfast, Jaime Comiche, from UNIDO, admitted that the country will not be in time to fulfill the SDGs by 2030
Recently, in the face of the global threat caused by climate change, the search for solutions to rationalise consumption and increase energy efficiency has begun. Scientists and decision-makers are drawing attention to the risks that are not taken into account by society. There is no real change in attitude towards environmentally harmful habits. This was the principle that guided the UN agenda in 2015 for setting the MDG targets for 2030.
“At the beginning, it was hoped that in 15 years the situation would change because society was already aware of what was happening, but now it is becoming increasingly clear and evident that it will not be possible to achieve the sustainable development goals in the remaining seven years because of the enormity of the challenges,” Jaime Comiche admits.
In March this year, the international human resources consultancy Michael Page presented a report on talent and sustainability which shows the latter as one of the priorities of organisations with strategic importance for the development of their business. In other words, there is a significant trend towards an increase in the demand for professionals, mainly of specialised profiles, for management functions, despite being a recent area. Within the scope of corporate sustainability management, the profiles of head of ESG, sustainable development manager or head of diversity & inclusion stand out, in which salaries vary between 70 thousand and 100 thousand Euros in companies with turnover between 20 million Euros and 250 million Euros. In Mozambique, there is no specific training in this area. Everything works on the basis of, let’s say, improvisation. The professionals who have basic training in some areas such as economics, law and engineering seek some notions of sustainability and become sustainability managers in the companies.
For the UNIDO representative, Jaime Comiche, the lack of leadership and qualified staff on this issue is what often prevents simple solutions from being materialized due to the lack of institutional capacity characterized by numerous barriers, including tax barriers. Thus, in his view, it is necessary to show the Government all the barriers that exist at the ESG level in Mozambique and stimulate the entities that have the possibility to ensure sustainability, such as startups. In relation to SMEs, the fact that a significant part of them is informal places them in a “precarious” situation in the search for sustainability, so “the banks have to help them develop critical mass in terms of this issue,” he suggested.
Labour market: need is stronger than availability
Even with shortages at the level of training, in line with what happens on a global scale, the labour market in Mozambique has already started to guide the rules for hiring professionals based on sustainability skills. Sónia Silva, director of Contact, one of the most important recruitment companies in the market, reveals that “in 2014, we selected many sustainability technicians for the environmental and ecological areas in various provinces, because of a large project in the forestry area. In 2019 it was our peak: 20% of our job vacancies were for these areas and they were very linked to the environment and social responsibility, with most of them being filled in the oil & gas business and some NGOs,” he explained.
However, the covid-19 pandemic has broken the pace of demand for sustainability professionals, so that this year, vacancies for this area represent only between 8% and 10% of job vacancies made available.
“The trend for vacancies in sustainability has grown a lot, linked to the areas of industry and renewable energy, corporate sustainability, etc. Candidates seek employment in companies that are socially sustainable,” explained Sónia Silva. The contribution of Contact in sustainability (in this case, in the social pillar) begins with the concern to support young people to develop an attitude that puts them at an advantage in the search for job vacancies, such as the preparation of professional CVs.
Another Contact project is called “job vacancies cannot be bought”, which aims to educate and guide people to avoid fraud. “In my opinion, professionals with knowledge of sustainability have as much chance of making it in the job market as those in health and technology,” she says.
Gas at the service of sustainability
The E&M also heard Manuel Mota, consultant on renewable energy and climate change at Ernst & Young, who argues that the transformation towards sustainability will depend heavily on the ability to produce gas, hydropower or other sources with less carbon intensity than in other countries.
He considers this to be the formula for attracting more investment, because the entities that finance development are increasingly interested in knowing whether or not they are supporting environmentally friendly projects. Thus, Manuel Mota defends that the country should embark on the definition of investment priorities through the prism of energy transition in order to compete at an advantage with other countries in Africa and worldwide for international investment.
How can we get there? “Only with everyone’s involvement,” explains the consultant, referring to civil society organisations, communities and the Government. Manuel Mota suggests, in this strategy, the creation of a system of incentives or benefits that attract potential investors in the area of renewable energy. But he stresses that a part should be financed with the gas operation and, eventually, with foreign financing.
In addition, the official believes that much investment is needed in training. “We have to train people, technicians capable of executing the objectives outlined and all of this is a symbiosis of small programmes, projects and initiatives that have to happen in a parallel way, so that there is effectively the involvement of the local community, and not import everything that the Country needs,” he explained.
The good news is that Mozambique’s weak points are the object of attraction for knowledgeable organisations that want to help the nation in the transformation process. One of the most recent examples is the entry into the national market of the Portuguese consulting firm in sustainability, Stravillia, which opened here its first branch outside its country of origin. According to the founding partner of Stravillia, Francisco Neves, the intention is to support Mozambican companies in the perception of the most important ESG issues for their operations, so that they can include them in their growth strategies.
Manuel Mota, EY consultant, defends “greater focus” in attracting investment to the area of renewables
The company’s expansion to Mozambique is also an opportunity that comes from the fact that it already has national clients to whom it had been providing services. This is yet another sign that this issue has merited increasing attention from companies. “We feel that there is a will and a need to work on the issue of sustainability”, underlined Francisco Neves.
In Mozambique, Stravillia will provide the same services as in Portugal, based on areas such as Sustainability Agenda, Sustainability Roadmap, Carbon Services, Sustainability Reports and Sustainability Indexes and Rankings.
The company also projects to support companies in sectors including Oil & Gas, Coal, Agriculture, Aquaculture, Fisheries and financial institutions.
“We must train technicians capable of executing the objectives outlined,” points out Manuel Mota, sustainability specialist at EY
Green finance. What is the stance of the financial sector?
The world is also attacking the issue of sustainability through finance, in the sense that it is starting to prioritise requests for financing that will have positive effects on any of its three pillars (social, economic and environmental) – the so-called green finance. On 15 November, during the ESG Business Breakfast held in Maputo by Absa bank under the theme “A conversation around sustainability in the pan-African context”, Martha Humbane, business director for Corporate and Investment Banking of the bank, revealed that this institution is a signatory of the United Nations Global Compact since 2021 and is committed to supporting the development of an economy with solid sustainability indexes.
According to her, in this context, the bank acts in several ways, such as credit assessment in which it favours the concession of loans in favour of environmentally, economically and socially viable projects, for example, entities (individual or collective) that seek financing to develop any initiative that involves the reduction of energy or water consumption, the construction of ecological houses, etc. The world is also tackling the issue of sustainability through finance, in order to prioritise funding requests that have a positive impact in this context. Heidi Barends, the South African responsible for financial sustainability of the Corporate and Investment Banking of the Absa Group, revealed that Africa is experiencing an explosion of sustainable financing, which tends to consider projects that bring benefits to the planet.
Sustainable financing, according to this specialist, has grown a lot in countries such as South Africa, Namibia, Egypt, Kenya, Ghana and Nigeria. In Mozambique, the issue of green finance is not very developed. The rules of this component do not even exist, and the Central Bank is aware of this.
Ensuring quality in Education is one of the premises of sustainability
In a meeting held in December 2020 between the Bank of Mozambique (BoM) and the Alliance for Financial Inclusion to talk about green finance, Governor Rogério Zandamela assumed that the country needs to hasten the incorporation of sustainability and resilience into the domestic policy framework as urgently as possible. This is because “we are in the initial phase regarding inclusive green finance”, recent experiences show that Mozambique has several vulnerabilities to natural disasters.
World Bank defends a new model of sustainable development
One of the multilateral institutions that most supports sustainable and inclusive development in Mozambique, the World Bank, published in June this year a study that reveals the path that should be followed to achieve sustainability, but with a focus on macroeconomic objectives.
The world is also attacking the issue of sustainability through finance, in order to prioritise funding requests that have positive effects in this context
From an analysis of the trajectory of the Mozambican economy over time (from the prosperity that began in 1993, fuelled by the extractive industry, to the instability that began in 2016 with the discovery of undeclared debts, followed by a series of phenomena such as cyclones and the covid-19 pandemic), it concludes that the strategy in place for sustainable growth has had limited capacity to generate productive jobs and support accelerated poverty reduction.
It also notes that the recent discovery of some of the largest natural gas reserves (LNG) in the world could represent a unique opportunity for sustained and inclusive growth for Mozambique. However, to make the most of the resources expected from LNG and to reach the poorest will require a new and ambitious growth model that goes beyond the extractive industries.
For this, Mozambique will need to adopt an appropriate policy and institutional framework in advance of LNG revenues. A properly functioning fiscal framework (including clear fiscal rules and targets) for successful management of these volatile revenues in the future. For the World Bank, a well-managed sovereign wealth fund can help achieve short-term stabilisation and long-term savings for future generations. Prudent macroeconomic management would also involve a gradual increase in investment that takes into account limited absorptive capacity, while improving the quality of public investments. “In addition to maximising LNG revenues, it is essential to encourage growth in non-extractive sectors such as agriculture and services to promote broad-based economic growth. In the first instance, policies should be geared towards maximising the benefits of resource-driven growth,” it recommends.
At COP27, the EU announced that it would support the creation of a fund to support poor countries, provided that emerging high-carbon countries, such as China, also help?
“In addition to maximising LNG revenues, it is essential to encourage growth in non-extractive sectors for broad-based economic growth…”
Around the world… the same problem
Those who think that sustainability is a problem only in African countries or the poorest are mistaken. In Portugal, for example, the report of the Sustainable Development Goals Observatory, published in October by the Católica Lisbon School of Business & Economics, concludes that most Portuguese companies do not know how to implement the SDGs, although they are increasingly aligned with sustainability. The media, chemicals and technology sectors are the most lagging behind.
According to the report, 95% of large companies and 77.7% of SMEs see sustainability as a strategic opportunity, but for both universes the lack of knowledge of how to operationalize it is the main barrier to the adoption of the objectives of the United Nations Agenda 2030. However, this is more expressive in SMEs (49.4%) than for large companies (21.7%) that, for reasons of compliance with legislation and competition, are already, in practice, implementing some SDGs.
“The main difficulty that companies have in implementing the Sustainable Development Goals is to understand how they can operationalise this agenda, because it is very broad, there are many goals and sometimes it is not the language that companies are used to using.
This barrier is common to small and medium companies, and also to large ones”, explained Filipa Pires de Almeida, responsible for the report and sub-director of the Centre for Responsible Business and Leadership of the Católica Lisbon School of Business & Economics, which carried out the study in partnership with the BPI “la Caixa” Foundation and the Francisco Manuel dos Santos Foundation. Many situations like this happen in all countries.
At COP27, the EU announced that it would support the creation of a fund to help poor countries, provided that emerging countries with high carbon emissions, such as China, also helped…
COP27: another attempt to compensate poor countries
Until a day after the end of COP27, there was only a draft of the practical results that were intended from the meeting, and the draft version of the final declaration brought the possibility of creating a fund to compensate the developing countries most affected by climate change, among which Mozambique.
The EU announced a day before the end of the meeting (17 November) that it would support the creation of a fund only if emerging high-carbon countries like China also helped fund the new initiative. The result? Small progress!