The public and civil society taking action to ensure compliance with environmental sustainability local and international laws and treaties is likely to gather momentum. (Waldo Swiegers/Bloomberg via Getty Images)
In the next few years, South Africa could experience increased activity by the public and civil society challenging state or private actors they perceive to be infringing on their constitutional right to a healthy environment that is protected for future generations.
An important aspect of our Constitution and Bill of Rights is that they have horizontal application. This opens the development of the law so that filling the gaps is not left to state actors and legislators. A citizen can challenge a corporation, or an activist can challenge the state, to demand that this right be given more meaningful substance rather than being paid lip service. Put differently, while the principle is clear, the details may be up for grabs.
We are likely to see a lot of development in this space, largely because of the wealth of international jurisprudence and development around the right to a healthy environment that is protected for future generations. This includes successful consumer litigation against energy companies, pension funds and governments.
When international law is accommodated into our law by treaty, as is the case with the 2015 Paris Agreement under COP21, it is law in South Africa. The country is legally bound to meet the obligations under the agreement, in the form of nationally determined contributions, to reduce greenhouse gas emissions.
This makes the recent signing of the Climate Change Act, which will regulate greenhouse gas-emitting sectors, among others, all the more significant. The president has not yet set a date for the commencement of the Act, but once it is in force, it will further strengthen the arm of citizens or private bodies seeking to hold private and public entities to account for the right to a healthy environment that protects future generations.
Smart businesses and funders will note a shift from the current emphasis on voluntary adoption of some sustainability guidelines to a more compliance-driven approach. The treasury released the Green Finance Taxonomy (GFT) for South Africa in April 2022, but it has not been legislated. It provides a “national working draft” for the classification of assets, projects, initiatives and sectors as “green”. Given the global nature of the green economy, it seems likely there will be a big push in the next two to three years towards legislating compliance with the GFT or using it as the go-to semi-official taxonomy for sectoral legislative measures.
While the European Union’s green taxonomy is arguably the best known, it is not the only important South African trading partner setting the bar. This year China began trialling its transition finance taxonomy, and Hong Kong its local green finance taxonomy. Several of South Africa’s developmental peers in South America and Asia are in advanced stages of developing green taxonomies, following Colombia’s launch in 2022.
The implications for South Africa are significant. The sustainability footprint of products we supply into the global market will be compared with those of our global competitors, by the standards of several global supply chain regulators, and manufacturers, retailers and consumers applying their domestic input and consumption standards. While this is not new from a strict compliance perspective, South African companies seem slow in perceiving the standards as opportunities to get ahead of the wave from a competitiveness perspective.
Other developments to watch
The European Corporate Sustainability Due Diligence Directive and Reporting Directive, although not directly applicable to most South African enterprises, could apply to companies that fall within the directives’ mandate if they supply goods or services to EU companies or have a significant direct EU footprint.
Such companies must identify the negative and positive effects of their operations and value chains on people and the environment and disclose all sustainability issues likely to significantly impact their financial health and operational performance.
In South Africa, new regulatory developments in sustainability may also be on the horizon for the financial services sector, where the Financial Sector Conduct Authority (FSCA) has unveiled its Regulatory Plan for 2024 to 2026.
An annual risk assessment is invaluable in pinpointing where a company has the most negative effect in terms of sustainability concerns and what opportunities there are to take the most positive adaptation and mitigation steps towards ensuring that a healthy environment is guaranteed for future generations.
There are five years left for the National Development Plan (NDP) 2030 to meet its targets. The NDP is a plan for South Africa to eliminate poverty and reduce inequality by 2030, and laws such as the Climate Change Act are aligned with national developmental priorities.
The NDP and our GFT provide evidence-based, clear and locally relevant indicators for addressing the United Nations’ sustainable development goals, which are the common frame for most global taxonomies. First movers in South Africa could gain a competitive advantage by using the NDP and GFT metrics to move sustainability beyond compliance to relevant and sustainable impact.
David Geral is a partner at law firm Bowmans South Africa.