The private sector is of vital importance to adaptation in Africa. Many businesses in Africa take resilience and adaptation action that help them manage climate risks and positively impact productivity and profitability. The benefits of such actions extend along the supply chains and sometimes also to surrounding communities. In this series of GCA Insights, we feature leading businesses and their adaptation and resilience-related efforts across Africa.

National Business Initiative (NBI), South Africa

Based on the interview conducted in collaboration with the World Business Council for Sustainable Development (WBCSD) on August 11th, 2021 with Mr. Steve Nicholls, Head of Environmental Sustainability, NBI and Ms. Reitumetse Molotsoane, Programme Manager, Climate and Energy, NBI.

Introduction

The National Business Initiative (NBI) is a voluntary group of leading national and multi-national companies[1], working together towards sustainable growth and development in South Africa through partnerships, practical programmes and policy engagement. It is a registered Public Benefit Organisation in South Africa addressing issues of Economic Transition and Social Transformation through Thought Leadership, Capacity Building and Collective Action programmes and projects. Their member companies include businesses headquartered in and with operations in South Africa. Since its establishment in 1995, the NBI has been an advocate for the collective role of business in support of a stable democracy, growing economy and healthy natural environment. The NBI is a global network partner of the World Business Council for Sustainable Development (WBCSD) and an implementation partner of the CEO Water Mandate, We Mean Business and the CDP. NBI core workstreams include strategic projects, environmental sustainability and social transformation.

Climate risks assessment

The NBI refers to adaptation as response to already locked-in climate change impacts. They refer to two types of adaptive responses namely to physical and transitional risks. Physical risks require adaptive responses for the physical infrastructure and transitional risks require economic response as well as adaptation to the change in physical parameters of climate. NBI prepared the report New Climate of Risk: How South African Businesses are Adapting to Climate Change[2] where it has listed climate risks faced by its member companies and adaptation measures undertaken by them for building business resilience. NBI highlights that though businesses might not use adaptation-specific terminology in their routine risk assessment and risk response, they are actively incorporating climate change impacts into their long-term strategies, making informed decisions and building resilience to climate risks. While NBI doesn’t have individual sectoral expertise on climate adaptation, they have built adaptation expertise within the team to facilitate conversation with member companies and

“It's true to say that companies are also not as informed about adaptation as they are about mitigation. Our team tries to keep those companies better informed and then build a community of practice that understands these issues and can present adaptation project ideas.”

Climate risks

Given NBI’s diverse membership, climate risks faced by companies are varied and many. For instance, in the power sector it includes adapting to increased transmission and distribution loss due to increased temperatures, power-line disruptions, etc. For the fishing industry, changing migration patterns lead to increased operating costs due to mismatch in commercial fishing locations and processing sites. Similarly, agriculture and forestry-related sectors are impacted by changing land-use patterns and are integrating climate-resilient agricultural practices. South Africa also has severe water scarcity challenges as well as flooding issues. NBI is currently investigating the possibilities to incorporate private finance instruments and approaches to the water sector. Recent experience related to water disruptions in the country have led to greater awareness among companies on climate change impacts. NBI membership therefore proactively engages in climate change adaptation even though the initial entry point is not from an adaptation perspective.

“And perhaps the framing hasn't been explicitly around adaptation but because it's something that we've experienced quite profoundly over the past few years. We've had massive droughts and economic hubs like the city of Cape Town are also facing challenges, severe water disruptions, we think that has alerted companies to greater understanding of what climate change Impacts could look like, even if the initial entry point wasn't from an adaptation perspective.”

Current actions undertaken

NBI is a partner to the South Africa Contextual Water Target Setting Pilots, a collaboration to help companies set water stewardship targets to address their business-related water challenges as well as build resilience of the broader catchments. The NBI’s SDGs programme has created an effective methodology for companies to integrate the most relevant SDGs into their strategy that has been successfully applied in over two sectors and in numerous companies. It is currently working with the agro-processing sector to prioritise a set of SDGs and associated targets that will form the basis of a sector-level collective action programme. Their TAMDEV initiative aims for capacity building and good governance in local governments and has led to the signing of a Memorandum of Understanding with the Department of Cooperative Governance and Traditional Affairs that establishes the programme as a key partner in the roll out of government’s District Development Model.

Support provided

The NBI has prepared a series of videos and other resources to help companies better understand climate adaptation. NBI has been working with civil society organisations to raise awareness on climate adaptation and particularly with the financial sector to capture investments from large international actors for water, biodiversity and ecosystem related adaptation projects. Project pipelines are a prominent challenge that hinders private sector involvement in climate adaptation due to the difficulty in structuring and financing of adaptation projects. NBI is trying to create a project pipeline of adaptation projects for investment in collaboration with South Africa National Biodiversity Institute (SANBI). This project will have three distinct phases which are: Phase I for capacity building of companies and other stakeholders. Phase II for building a community of practice of numerous stakeholders to identify and scale projects and Phase III for project implementation. NBI provides support for members and other stakeholders throughout the project development cycle. NBI also encourages corporate reporting and disclosure by its member through CDP, TCFD frameworks, etc.

“The hope is that by identifying these projects, because we're identifying them with this community of practice, that we'll have a whole bunch of multistakeholder buy in to implement the projects, and to the next phase will be to take those projects to international financiers and try to encourage some kind of blended finance approach to making these projects work.”

Important messages

Project pipelines are a major hurdle for private sector engagement in adaptation due to the difficulty in structuring adaptation projects. NBI has established a community of practice with a few pilot projects that will represent the need to scale up adaptation specific investments. NBI engages with international financiers and non-private sector partners over years to develop systemic adaptation projects and eventually invite the private sector members to join when required in these projects. NBI highlights that traditional project funding methods are inadequate for adaptation projects given the unique and still largely uncertain parameters in a non-cash generative context for capturing adaptation benefits. Moreover, systemic interventions require funding and collaboration with multiple entities. Therefore, it is necessary to create systemic programs through a blend of instruments and multiplicity of actors.

“Funding mitigation is easier because it fits into a generally understood model of how finance works. And so, you're funding cash flows in reality. Whereas in adaptation particularly you're not really funding cash flow, you're funding some kind of deferred costs. And so, your traditional project modelling, your projects’ finance just doesn't work.”

“Trying to translate that project into a cash flow is that first step but there's also a whole suite of assets that you can't do that. For it would be counterproductive to do that. And in those cases, you have to emphasize things like, ecosystem services even though you're not necessarily going to pay a fee and there is no taxable way to structure their fee. We've started to look at things like alternate currencies but only in a sort of experimental way.”

[1] NBI South Africa members include: ABB Group, Absa Bank, Adcorp Group, AECI, African Bank, AngloAmerican, Barloworld, Proudly Bidvest, BMW, burson cohn & wolfe (bcw), BCG, Carbon Calculated, Concor , Clicks Group Limited, Climate Neutral Group, COVA Advisory, De Beers Group of Companies, Deloitte, Discovery, Distell, Dolphin Bay, Engen, ERM, Eskom, Exxaro, First National Bank (FNB), FirstRand, Famous Brands Limited, Global Change Institute, Grindrod, Growth Point Properties, Harmony, Hill+ Knowlton Strategies, Hollard, IBIS, Industrial Development Corporation (IDC), Sugar Illovo Africa, Imperial Logistics, Investec, IMS, Jonsson Workwear, KPMG, Liberty, MAC Consulting, Momentum Metropolitan, Mabasa, mondi, Motus, Nedbank, Norton Rose Fulbright, Oceana Group, Old Mutual, Pareto, Pick n Pay, Philip Morris South Africa, PPC Cement, Promethium, PWC, RMB, Royal Bafokeng Platinum, The South African Breweries (SAB), Sanlam Wealthsmiths, Santam, Sappi, South African Institute of Chartered Accountants (SAICA), SASOL, Sea Harvest, South32, SPAR, Shell, Standard Bank, Sun International, Tiger Brands, Thungela, Tongaat Hulett, Toyota, Transnet, University of the Witwatersrand, University of Stellenbosch Business School (USB), University of Pretoria, Vodacom, Woolworths

[2] NBI. 2017. A New Climate of Risk: How South African businesses are adapting to climate change.

P. Sainath