South African companies involved in global trade may need to prepare for tougher environmental, social and governance (ESG) requirements, as international standards increasingly dictate who can access major markets and capital.
ESG, a framework used to assess a company’s sustainability, ethical conduct and risk management beyond financial results, is no longer optional for exporters and importers but is becoming a core condition for doing business, particularly in industries linked to natural resources.
Dire consequences
This is according to Revona Naidoo, operations and transformation executive at LexisNexis. She said firms that fail to demonstrate responsible practices risk losing market access and investor confidence, highlighting that sectors such as mining, agriculture and forestry are under heightened scrutiny due to their environmental and labour track records.
She said the shift is already visible in major export markets as the European Union has taken a leading role through measures such as the Corporate Sustainability Reporting Directive, which requires detailed disclosures on environmental impact, including supply chain emissions.
Most large European companies, she said, now publish ESG reports aligned with recognised standards, signalling how deeply embedded these requirements have become among major buyers.
For South African exporters, this means proving more than just product quality but companies must now show how they manage water use, protect biodiversity and handle waste, while also meeting expectations on labour rights, workplace safety and community impact.
Governance standards critical
Governance standards, including transparency and anti-corruption controls, are equally critical.
“Credible sustainability credentials attract buyers, support access to finance and may secure premium pricing or longer-term agreements. Businesses that fall behind or delay implementation face rising compliance costs and reputational exposure,” said Naidoo.
Companies are expected to track the origin of their materials and demonstrate full supply chain visibility. Weak systems can lead to shipment delays or rejected goods, while stronger digital tracking tools are helping firms meet rising compliance demands.
Naidoo cautioned that companies making unsupported environmental claims could face legal consequences.
“If a company markets its products or operations as environmentally responsible without credible evidence, that can expose it to legal risk under existing frameworks such as the Consumer Protection Act, financial market regulations and corporate disclosure rules,” said Naidoo.
Warning on misleading ESG claims
She said regulators are increasingly treating misleading ESG claims as a compliance issue, not just a reputational one.
The United States is applying pressure in a different way, through sector-specific laws and investor expectations that demand supply chain transparency and due diligence on environmental and human rights risks.
Globally recognised reporting frameworks, including those developed by the Global Reporting Initiative and the International Sustainability Standards Board, are helping to standardise disclosures and make company performance easier to compare.
South Africa has traditionally relied on principles-based guidance rather than strict regulation. Frameworks such as King V promote ethical leadership and sustainability but are largely voluntary. However, recent developments, including enhanced disclosure requirements and stock exchange guidance, suggest a gradual shift towards closer alignment with global standards.
“ESG has become part of the cost of doing business. It is not without significant challenges though, especially for smaller exporters facing substantial data demands and audit requirements,” said Naidoo.
Smaller firms face difficulties due to limited resources and expertise. Many only respond when buyers or regulators demand compliance, leading to reactive rather than strategic approaches.
Naidoo said companies should begin with practical steps, including conducting baseline ESG assessments, mapping supply chains and investing in digital tools to improve traceability. Strengthening internal governance structures is also essential to ensure accountability.
As global expectations continue to rise, South African businesses are likely to face a more regulated environment, with ESG performance increasingly shaping competitiveness in international trade.
- South African companies involved in global trade may need to prepare for tougher environmental, social and governance (ESG) requirements, as international standards increasingly dictate who can access major markets and capital.
- ESG, a framework used to assess a company’s sustainability, ethical conduct and risk management beyond financial results, is no longer optional for exporters and importers but is becoming a core condition for doing business, particularly in industries linked to natural resources.
- Dire consequences This is according to Revona Naidoo, operations and transformation executive at LexisNexis.
- She said firms that fail to demonstrate responsible practices risk losing market access and investor confidence, highlighting that sectors such as mining, agriculture and forestry are under heightened scrutiny due to their environmental and labour track records.
- She said the shift is already visible in major export markets as the European Union has taken a leading role through measures such as the Corporate Sustainability Reporting Directive, which requires detailed disclosures on environmental impact, including supply chain emissions.
