Understanding The Significance Of ESG For Corporate Directors In Namibia

• Published date: 14 July 2023
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Corporate Governance, Shareholders
• Law Firm: ENS
• Author: Ms Karin Malherbe, Amarachukwu Odo and Nicole Tjitendero

Corporate entities in Namibia are progressively adopting policies that address environmental, social and governance ("ESG") factors affecting their corporate operations. These may involve their ESG objectives or ESG sustainability and integrated reporting obligations. Historically, ESG risks, or non-financial risks, were not always considered alongside financial risks, and the impact they may have on a company's ongoing financial success has oftentimes been overlooked. Notwithstanding the growing awareness of these factors, some corporate leaders remain sceptical, deterred by the additional expense associated with ESG reporting and concerns that these developments represent a passing fad. Whatever your view of the recent hype around ESG, it is worth recognising that, unknown perhaps to most, ESG principles have long been entrenched in the Corporate Governance Code for Namibia ("NamCode") and serves as a recognition of the long-term benefits for corporates in addressing these factors.

ESG Principles and the NamCode

The NamCode is founded on international best practices and the King Code of Governance in South Africa, 2009 ("King III"). NamCode's intention is not to force companies to comply with recommended practices, but rather for companies to "apply or explain". Directors may choose to apply the recommended practices contained in the NamCode. Should directors opt not to apply the international best practice guidelines provided for in the NamCode, they are to explain their reasoning and motivations for not doing so to their shareholders, to whom they remain accountable in respect of matters relating to general corporate governance.

The NamCode is a benchmark against which directors must measure themselves at the behest of their shareholders and other stakeholders.

Although the NamCode makes no specific reference to the concept of ESG itself, it includes various guidance exemplifying the principles underpinning ESG. For example, Principle C1-1 provides that "the board should provide effective leadership based on an ethical foundation", which includes "[building] sustainable businesses by having regard to the company's economic, social and environmental impact on the community in which it operates". Principle C1-2 also requires that "the board should ensure that the company is and is seen to be a responsible corporate citizen." According to the NamCode, responsible corporate citizenship implies an ethical relationship of responsibility between the company...