ESG as a competitive strategy in bridging connectivity divide by Zim’s telcos

In recent times, there has been an increasing demand for environmental, social and governance (ESG) compliance especially if businesses are to expand their services to new markets, transact with multinationals and seek investment to grow. The recent pronouncement by the Zimbabwe Stock Exchange regarding mandatory ESG disclosures further justifies the need to escalate the discussion on this particular subject at national, boardroom and strategic level.

Zimbabwe has developed National Developmental Strategy (NDS1 and 2) which seek to create wealth and expand horizons of economic opportunities for all with none being left behind. Currently rural communities in Zimbabwe are marginalised as the development and access to technologies in Zimbabwe follows economic corridors resulting in telecommunications network operators being largely concentrated in urban areas.

Furthermore, this is also necessitated by the desire to seek quick returns on investment for their businesses. Internet penetration has been on the upward trend from 65,3% (2022) to 75,36% (2024) according to the Potraz report for the first quarter of 2024.

The 3G network coverage in Zimbabwe is estimated to amount to 87,75% in 2024 while active data subscribers are growing at an average of 2,78%.  According to the Rural Electrification Fund statistics, a total of almost 11 000 electrified points are not connected to internet yet form a fertile addressable market. ESG issues have also increasingly become high-priority matters for leaders across industries and the globe. 

Let us demystify ESG, its meaning and how it has been unpacked by various scholars. ESG stands for environmental, social and governance and has become the new sustainable business concept in the international business space. These are called pillars in ESG frameworks and represent the three main topical areas that companies are now expected to report on.

Kam Tai Kamsuo Wong (2017) described ESG as a term that is commonly employed in corporate social responsibility (CSR) and ESG information is becoming everybody’s concern because of the possible long-term impact given to the investment community and also to other stakeholders at large”.

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This view captures the main goal of ESG as to capture all the non-financial risks and opportunities inherent to a company's day-to-day activities and companies implementing this concept stand a chance of attracting investment for sustainability initiatives.

It is also believed that firms that embraced the purpose and values of ESG deliver tangible results more successfully and are likely to win more work on the market than those that ignore them. It is largely because of increased customer confidence as they are treated as responsible “citizens”. Despite the rapid climate and business’s environmental changes, it is believed that there is slow adoption of this new model as a leading competitive advantage by telecommunications in order to survive.

Many researchers found out that “socially responsibility” has to be positively related to an organisation’s financial and social performance. Russo and Fouts identified CSR as a source of competitive advantage from which a firm can create a sustainable competitive advantage. Therefore, engaging in corporate social responsibility issues is a worthwhile consideration for a firm’s management. Bernardi and Stark 2020, found evidence of a strengthened relationship between ESG, environmental and governance disclosure levels and forecast accuracy following the introduction of integrated reporting for both financial services firms and those from the other sectors.

Numerous positive benefits are asserted including better internal resource allocation decisions; external market benefits such as meeting the needs of mainstream investors who want ESG information. Lembani et al. (2020) emphasised the increasing acknowledgment of CSR as a strategic approach for companies to support sustainable development goals and generate shared value for both the business and society. They assert that by aligning their CSR programmes with societal needs and sustainable development priorities, companies can improve their reputation, establish trust with stakeholders and promote long-term business sustainability.

Kormos and Wisdom (2021), highlighted the importance of long-term dedication and careful strategising to make a lasting impact and foster sustainable change in marginalised communities. It is argued that temporary initiatives or short-term projects are often inadequate in tackling the intricate and deeply ingrained issues related to digital exclusion. Instead, it is emphasised that sustained dedication, ongoing investment and flexibility in response to evolving circumstances are essential for promoting significant and lasting transformation.

It is prudent to acknowledge the various views of other researchers regarding the same subject. Some researchers found that there is a short-term negative impact on financial performance when firms apply the sustainability strategies which are officially required, some argue that socially responsible initiatives create additional costs that may have negative impact on companies’ financial performance and hence become less competitive than those less socially responsible organisations. Lamberton (2016) said corporate impacts on the environment could be changed by the provision of relevant information to stakeholders such as businesses pass environmental taxes on to consumers to partially offset the underpricing of economic goods and services from the failure to include environmental and social costs in market prices. Kalinowski found that there is no clear correlation between sustainability support variables and stock market size variables. Adams & González argue that further research engaging with organisations is needed in order to identify how these two relate.

Other renowned scholars advocate that ESG reporting remains inadequate for financial analysis, even as the quantity of publicly available ESG information has grown exponentially. They explain that the deficiencies of public ESG information are a side-effect of the flexibility the current mix of voluntary and mandatory ESG reporting provides.

While all those views hold water to some degree, ESG reporting remains a measure to achieve transparency about the respective performance of a firm and a means of communication to stakeholders including shareholders and investors, employees, clients and the committees to which such reports are useful tools for both the reporting firm and stakeholders and are clearly an indicator of the importance of ESG issues in a firm.

It is also crucial that businesses seek a deeper understanding of the ESG model and how this can become a competitive strategy both locally and globally.

 An effective ESG model can be significant in bridging the rural digital divide especially by Zimbabwe telecommunications companies. This concept builds upon various insights that have been undertaken by various researchers in the business and information technology field aimed at finding sustainable solutions towards bridging the rural digital divide.

Several studies have concluded strategies around what telecommunication, especially internet access providers, should do to survive in Zimbabwe especially in targeting high return markets which are shrinking already but they have also left out rural communities with growth potential although very low disposable incomes. The impact of digital technology is unreservedly visible in transforming and improving business processes and ESG is no exception. A major solution to reducing the digital divide is to increase connectivity in all communities. Providing widespread internet access can help previously unconnected users take advantage of economic, learning opportunities, improvement in healthy access as well as economic performance.

A national assessment carried out on the level of broadband connectedness of the rural communities, indicated that most of the electrified rural communities have no access to broadband services. These already form part of the easily addressable market by telecommunications operators. About 75% (4 920) of primary schools and 43% (1 691) secondary schools have no broadband connectivity. The land reform programme spearheaded by the government of Zimbabwe further established more settlements, schools and developmental communities which require broadband and ICT connectivity. In line with SDG 4 and SDG 9, the world over is working on investing in access to ICTs and quality education to promote lasting peace.

On the other hand, the business world is battling climate change and the telecommunications sector plays a pivotal role in mitigating the effects as they conduct their business. ESG factors encompass a wide range of considerations, such as carbon emissions, resource usage, employee well-being, diversity and inclusion, among others.

It is clear that more scholars and researchers agree that it is important to bridge the rural divide by telecommunications operators through development of an effective ESG model as a competitive advantage. I must acknowledge that many still hold that the true competitive advantages for telecommunications companies is their performance, infrastructure and brand efforts.

In conclusion, based on these differing views on the relationship between ESG and financial performance of a company, there is no outright conclusion regarding the impact of ESG as a competitive strategy but there is good evidence that companies that effectively leverage on it grow, attract investment, compete effectively and sustain their operations from generation to generation.

• Prosper Mutswiri (PhD Candidate) is a passionate Marketing and Commercial Executive. He has over 17 years of experience in both fixed and mobile telecommunications sector, International Marketing Consultancy and Energy sector in particular the Electricity Industry. He has both technical and commercial certifications. He is a writer, researcher and a motivational speaker. He writes this article on his own capacity and he can be contacted on mutswiriprosper@gmail.com.