Public contracts, PRAZ wants ESG compliance

Tapiwa Mangwiro Senior Business Reporter

THE Procurement Regulatory Authority of Zimbabwe (PRAZ) has developed a framework that compels businesses to make environmental, social and governance (ESG) issues an integral part of their business strategies.

As part of the key conditions for the public procurement process, PRAZ now requires companies and individuals seeking to do business with the Government, and all its arms to satisfy PRAZ requirements on ESGs.

The new mandate of the Authority is to supervise public procurement procedures to ensure transparency, fairness, honesty, cost-effectiveness and competition as required by Section 315 of the Zimbabwean Constitution.

Zimbabwe has been a participant in the world climate change mitigation efforts and locally experts have applauded the efforts being put through various government and private sector initiatives in dealing with the phenomenon.

Speaking at the Business Weekly and Financial Markets Indaba Climate Change Adaptation Conference on Thursday, various stakeholders said ESG awareness was the future and had become critical globally.

Investors and companies across the world now want to deal with climate-aware entities.

Critically for Zimbabwean firms, PRAZ, as part of its preconditions for public procurements, now requires suppliers to the Government to have frameworks detailing their ESG strategy or implementation plans.

The move was applauded by experts at the Climate Change and Adaptation Conference, as a step in the right direction to mitigate a number of critical issues among them child labour, and pollution and promote gender equity.

Issues around ESG and circular economy have lately become of central importance within global companies and are used to enhance brand visibility to investors, who use ESG benchmark of suitability for funding.

Companies that adopt ESG in their broad visions early are likely better placed to unlock and obtain capacity building and support for their entities and country, with the accounting profession already preparing for ESG implementation.

African Sustainability Consultants chief sustainability consultant Tawanda Muzamwese said there was need to ditch the traditional ways of production and consumption, which promoted the use of inputs detrimental to the longevity of the natural state of the earth.

“We are used to what we call a linear economy, which is an economy that is used to extract natural resources, (take, make, dispose of) and this has been the main cause of our problems.

“So, when we begin to talk about the circular economy we are now talking about how we can reuse certain products, where we bring some of these products back into the cycle instead of making disposal,” said Mr Muzamwese.

Mr Muzamwese also said times had changed and investors were now keener than before to scrutinise the environmental, social, and governance issues in an entity, particularly those they had intentions to invest in.

“Traditionally, businesses have been focused on profitability (only), but now it has shifted, financiers right now are no longer looking at the financial plausibility of your business only, whether Government or private sector, one of the conditions for funding is that the project should be environmentally and socially compliant,” added Mr Muzamwese.

He also bemoaned companies and sections of the Government that have not taken measures to curb issues around child laboUr and modern slavery.

“On the social side, many African countries have neglected the social aspect of projects, some of the emerging issues include child labour, if our projects are using child labour it is difficult to get finance, when we talk of ESG it means we are not going to allow child labor throughout our value chain, it also means we are also going to promote gender mainstreaming”.

Simbarashe Mafukidze, a sustainability officer at Econet Wireless Zimbabwe, one of the companies already practising sustainable reporting said it was  important for people to understand that ESG was more than a catchphrase.

“At Econet we have always practised sustainability, but as the Sustainable Development Goals (SDGs) came into play, we merged the SDGs and our practice. We do not have ESG but we have social and governance.

“We take care of our environment and operate responsibly, and on our social aspect we separate it to human and social capital issues. 

In human capital social we look at diversity and inclusion within the organisation and in social capital we look at the customer experience and pollution,” he said.

Mr Mafukidze added that in terms of governance they look at the economic part of things such as business model and innovation and sustainable supply chain models. Citing examples, one of the world’s luxury car producers, Porsche in 2021 warned its suppliers to produce parts with a sustainable energy mix or risk being removed from the suppliers list.

Welcome Mavingire, the managing consultant of Intellego Investment Consultants lauded the decision to extend the initiative to the private sector and widen it from being majorly a Government programme.

He said the ESG concept was almost similar to the way companies operate in relation to securities where the quality of operations by companies is closely interrogated.

“In capital markets, we have been talking about the quality of earnings of any company. It’s still the same issue but putting the private sector at the forefront of this whole thing changes the whole dimension.

“This previously used to be a government commitment but we now see it shift to say the private sector must be at the forefront. I think it changes the mindset across the whole investment arena because when everyone starts seeing that this is where the money is going they start taking all those issues seriously,” said Mr Mavingire.

Economist Takudzwa Haparari, weighing on the issue in an interview, said that there were high chances to involve the local capital markets in the initiative given that local securities have been lately chaining out a string of products.

“It is an exciting time for our local capital markets especially given the ESG conversation going on , we should be reasonably confident of products that will come on stream to harness capital so that we can steer this conversation and scale whatever is happening on the ground,” said Mr. Haparari.

There have been growing initiatives designed to monitor value chain processes to curb malpractices like modern-day slavery, the latest key concept on the social side of ESG, where individuals who work barefooted, getting slave wages and other similar malpractices have all been classified as “modern slavery”.

Numerous institutions, such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD) are working to form standards and define materiality to facilitate incorporation of these factors into the investment process.