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Is the cart before the ox?

A panel discussion on ‘Driving the Sustainability Agenda Among SEM-Listed Companies’ was the key feature of the ESG partnership launch between the Stock Exchange of Mauritius and Risk Insights last Friday. The moderator of the discussion was Mehul Bhatt, Head of International Development at Rogers, with the participation of the blue chip captains of the private sector. They were Thierry Hebraud, Chief Executive Officer, MCB Ltd, Phillipe Espitalier-Noël, Chief Executive Officer, Rogers Group, Guillaume Dalais, Deputy Chief Executive, CIEL Group, Raoul Gufflet, Chief Executive Officer, SBM Holdings Ltd, and Evita Fakun, Chief Sustainability Officer, The Lux Collective Ltd. We bring you the main highlights of an enriching panel discussion.

“‘Le nerf de la guerre’ is to report the financed emission”

MEHUL BHATT, Head of International Development at Rogers (moderator of the panel discussion) – Thierry and Raoul, you represent banks, and it is quite complicated to report on the emissions. What specific challenges does your company face in reporting Scope 3 emissions, and what steps are being taken to overcome these obstacles? How do your actions impact the activities on the ground positively?

Thierry Hebraud, Chief Executive Officer, MCB Ltd

Thierry Hebraud, Chief Executive Officer, MCB Ltd –  We already report for years on the Scope 1 and Scope 2, and we have  started to report on the Scope 3. We are already reporting the part concerning our own staff community, our business travel, and we will soon be able to report on the downstream and upstream of our suppliers, but ‘le nerf de la guerre’, where we are struggling, is to report the financed emission.

We are at the very beginning of it, let’s put it this way. Our governor was introducing the guidelines which were issued, and it was a little bit put on hold due to the capacity of the banks to report details into data. What we are missing is data. Data collection, data estimation, data valuation… We need consistent rules to be able to collect, analyze and evaluate these data. We do not agree on what units we are using, we do not agree on the standards we are using, we do not agree on the completeness of these data.

As a bank, we are targeting to implement the PCAF, the Partnership for Carbon Accounting Financials, which will allow us certainly to develop more capacity on data. This is a key challenge we have right now.

The good news is that there is Scope 3 for us, and Scope 1 and Scope 2 for our clients. This is where, effectively, we need to engage, we need to communicate, we need to understand, we need to trust our clients in their capacity, on their side, to analyze and to report on Scope 1 and Scope 2. This is key for us, and this is the way we are looking at how our capacities to report will evolve. And it will evolve with more and more corporates, be it small, medium, or large corporates, being able to analyze, to report.

In a near or later future, we will, as a bank, request not only your financial audit, but your footprint analysis and reporting on a yearly basis. That will be part of the banking sector and we will have to do that.

To answer this question, I think that instead of being imposed rules, it’s better for us – and Mauritius, I think, has to start doing that – to work together and to agree on how we measure our impact, our clients, our suppliers, and us as a bank being in between them.

“‘It’s for the regulators to promote the sustainable practices in a congruent way”

Raoul Gufflet, Chief Executive Officer, SBM Holdings Ltd – I would tend to say the same thing as Thierry. I like what Thierry just said about the fact that Scope 3 for banks is in the Scopes 1 and 2 of the clients, but I will add something that will ease my own position because I am the chief executive of a holding entity who is a shareholder of 4 banks. So, my S3 is not the S3 of the bank, my S1 and S2 are going to be the S3 of the bank. I actually am the shareholder. 

Raoul Gufflet, Chief Executive Officer, SBM Holdings Ltd

There are indeed three challenges for us. It’s about limited data accessibility, the complex value chain, especially when you are a holding structure which has investment in various jurisdictions. We have banks in Kenya, Madagascar, India and Mauritius. It’s not the same standards, there are so many acronyms, lack of standardization, and to potentially overcome those challenges, it’s about the data collection. I understand that this is where Risk Insight is going to push banks and listed companies to actually improve the way they collect the data or how they ask their customers to collect and disclose the proper data. 


This will only be achievable if there is the promotion of sustainable practices, and again, it’s not for the listed entity to do that, it’s for the regulators to actually align as to how to promote the sustainable practices in a congruent way. The most important thing is how these will facilitate decision taking, and access to information for investors to make the right investment decision on those listed entities. As a listed entity, this is for me the most important. The more transparent I will be, the more information I will disclose to my shareholders, the more willing they will be to invest in my stock.

“We need guidance in terms of what the priorities are…”

Mehul Bhatt Phillipe, apart from your role as the CEO of Rogers, you have also been the chair of the Sustainability and Inclusiveness Committee at Business Mauritius. ‘SigneNatir’ is one of the initiatives for the private sector. How does this initiative and ‘SigneNatir’ complement each other?


Phillipe Espitalier-Noël, Chief Executive Officer, Rogers Group – To have a bit of context, I’ll try to get back to Sunil’s earlier question about the ox and the cart (Editor’s note: see the article on Sunil Benimadhu, the Chief Executive Officer of the Stock Exchange of Mauritius, published in this same issue). Looking at it from a practitioner’s point of view, and then as chairperson of Business Mauritius, we started the agenda in 2017. By the time we talked to the members of Business Mauritius, we realized that measurement was not yet their biggest preoccupation because they didn’t have a strategy. They didn’t know what to focus on. The only background which our members could actually visit was the 17 SDGs of the UN, and again, this is a recipe for failure because it’s too broad for one organization. What Business Mauritius tried to do is not to create a measurement philosophy or a measurement tool, but more to try and articulate the actual priority areas for the country, for which companies could actually help make a difference. We identified five of those, and basically, we’ve shared and we’ve developed those with 70 different volunteers from the various corporations. They are meant to be a guideline of focus with the hope that as many small and big businesses as possible can refer to those priorities and see how they can adopt a couple, or all in some cases, in order to make a difference. So much so that the convergence of the energy would therefore create a collective sum of efforts that would provide progress. Within the context of what we tried to do, which is supporting our organizations and the members of business bursaries towards implementation and operationalization, we’ve done it a bit in a vacuum, because there is no articulated strategy and clear vision for the country. 

Phillipe Espitalier-Noël, Chief Executive Officer, Rogers Group
Phillipe Espitalier-Noël, Chief Executive Officer, Rogers Group

We are trying to have the cart before the ox on the setting up of the priority areas and the measurement mechanisms, because we are lacking a clear national strategy.  


Sunil started earlier by saying that there is no reporting standard and measurement framework for the country either, and now we have got the SEMSI, which is the progression and articulation of something new. But somewhere, somehow, I think we are operating a bit in a vacuum. What we’re doing is complementary to each other. We need guidance in terms of what the priorities are. We tried to elaborate those on our own. There was quite a lot of work done with the United Nations, the EDB and Business Mauritius to articulate what emerged as an investment more than a year ago, which is, I think, as close as it gets to a national strategy. 


But, beyond that level of clarity, we don’t have something to refer to. Somewhere, somehow, we are trying to have the cart before the ox on the setting up of the priority areas and the measurement mechanisms, because we are lacking a clear national strategy.  Focusing on the actual commitments that we have towards 2030 for dirty energy reduction, these are targets, but they are not embedded in a clear list of focus and priorities for the country. I think it’s high time that, somewhere, somehow, all the forces rally behind the dynamic, which actually helps us set a strategy for the country whereby both the SigneNatir initiative at Business Mauritius and the measurement initiatives of the SEMSI, for example, in this case, can actually support green goals.

“Data is key in this process of sustainability reporting and measurement”

Mehul Bhatt Guillaume, in what ways does your company measure and report the impact of its ESG initiatives? How do you ensure that these measures are meaningful and reflect true sustainability progress across the different business lines of CIEL?  

Guillaume Dalais, Deputy Chief Executive, CIEL Group
Guillaume Dalais, Deputy Chief Executive, CIEL Group

Guillaume Dalais, Deputy Chief Executive, CIEL GroupIf you want to do good reporting, you need to measure well. So, it all starts with the measurement. At CIEL, we started in 2015 with a very robust governance framework on the sustainability, but as we went on our journey, we realized in 2020 that without clear KPIs, measurements and objectives, it would have been very difficult to make the group progress. We are a very large group with more than 30,000 employees. In 2020, we decided to go for a 10-year strategy, the 2030 sustainability strategy, with clear objectives, clear targets, but we realized that data is key in this process of sustainability reporting and measurement, having the data to make sure that all the clusters moved in the same direction… This is where we decided to invest in a sustainable digital tool, which is software, run by professionals. We started to standardize all the information coming from all the clusters, firstly for monitoring, but also for decision-making. Once this was done, we went for our carbon accounting, across clusters. This year, we’re going for climate risk assessment across clusters. What was interesting is as you get the data and you monitor it, you’re able to define your strategy and set more aggressive targets, more clear targets, which is great because now our roadmap is pretty clear until 2030. 

Coming to the reporting, we’ve been, since 2020, in a very transparent way, reporting on our sustainability report. Obviously, it’s a journey, we need to start somewhere, and now we are doing our annual integrated report with a sustainability dashboard in it. For two of our clusters, which are our main clusters – CIEL Textile and Sunlife – we go into more details and then produce our own sustainability reports. 

“We want to hear the truth, and be very aware of what’s happening around the resort”

Mehul BhattEvita, you represent a premium hospitality group. How does top leadership within your organization utilize ESG metrics in strategic decision-making? Can you provide an example where ESG considerations directly influenced a major business decision? 


Evita Fakun, Chief Sustainability Officer, The Lux Collective LtdRight at the onset in 2011, when they designed the brand Lux Resorts and Hotels, it was to rethink luxury tourism. To move away from that classic understanding of abundance to the point of waste into more enriching experiences, so that when the guests would leave, they would remain emotionally attached to the brand and to the destination. The Lux Resorts brand is today not just in Mauritius. It’s in Maldives, Reunion Island, China, Zanzibar, etc. We are very ambitious and we take this philosophy everywhere. Lux is home-grown. It’s very much Mauritian at heart.


In 2013, the group launched its flagship environmental project called ‘Tread Lightly’, and the goal behind that was not to make money out of it, because it cost us money, but to really show care towards the planet, and to involve as many stakeholders as possible in that project. ‘Tread Lightly’ doesn’t like to use complicated and complex standards and codes, like GRIs, TCFDs. It’s a project that aligns with it, but it’s branded and communicated on in a way that will create engagement with our guests, with our team members.


Its mission is twofold. It starts with carbon accounting so as to obviously reduce CO2 emissions, and then to also invest in biodiversity, that is land and marine projects. For the carbon reducing part, I can give you a very basic example, which is bottling our own water in-house, in our mission to reduce emissions from transport and plastic waste. We were the first hotel group to do that with that philosophy of providing a luxury experience with a sustainability aspect, and that was back in 2013. We estimate that for Mauritius, it reduces about one million plastic bottles of waste per year. That’s one very basic metric that everyone can start measuring in their hotels.


With regards to biodiversity, integrated reporting is taking a sustainability report and attaching that to a financial report, and with that, we have to show that we have a stakeholder inclusiveness model. With biodiversity, we never claim to be experts in it. So, what we do is we reach out to the people who probably are very controversial in the country. It’s an NGO called EcoSUD. They actually formed and structured their organization because they were protesting a Lux development project. That was way back. It was a grassroots movement. Today, we are friends. We fight like friends. We’ve got an MOU together. We learn from them, and that’s demonstrating stakeholder inclusiveness. We don’t want to work with NGOs who will negotiate with us and reduce their standards. We want to hear the truth, and we want to be very aware of what’s happening around the resort.

Evita Fakun, Chief Sustainability Officer, The Lux Collective Ltd
Evita Fakun, Chief Sustainability Officer, The Lux Collective Ltd

I also want to talk about the development of the salt brand. So that was in 2011-2013, doing GRI, being the first hotel group listed on SEMSI because they were already prepared, and then evolving in 2018 with all of this. The Luxe Collective was created as a management company with a purpose. We care about what matters. So it had to be a purpose that would unite all the stakeholders, internal and external, and garner interest, and be very aware of any changes that would happen through time.


Obviously, with a purpose like that, we developed the salt brand, which is all about sourcing from locals. 95% local. We won’t say 100%, that’s not possible, we are in Mauritius. But it’s luxury. It’s in the premium segment. It’s all about local. You walk in, there’s no TV in the room. That’s quite bold for a luxury brand, but it encourages the people to leave the room and go out and explore Mauritius and be more with the locals.


So, these are aligned with all of these complicated codes, but we don’t have to use that code and bore everyone with it. Sometimes these look really unattractive, and they are. SBTI overcomplicates with a lot of jargons, complicated jargons, but we, as businesses, need to appropriate this language and make it more human.

Mehul BhattGuillaume, looking ahead, what developments or innovations in ESG reporting are you most excited and scared about, and how do you plan to incorporate these into your company’s ESG strategy? How can SEM and RI help in this?

Mehul Bhatt, Head of International Development at Rogers
Mehul Bhatt, Head of International Development at Rogers

Guillaume Dalais – Globally, from a textile perspective, traceability is a big thing which is coming very strongly. Across the board, we talk of Scope 3, Scopes 1 and 2, but traceability is something which is very strong from an ESG perspective, and there are many innovations which are coming through. 


The evaluation of nature is something that I’m looking at very carefully, because it’s a very exciting and complex topic. We don’t have the data yet to assess how nature impacts, what’s the risk, and what’s the contribution to our businesses. There’s a lot of nature tech coming in. 


We are developing at Ferney, where nature-based solutions are really an integral part of the product that we are offering in real estate, sustainable farming and ecotourism. Conservation, biodiversity and reforestation are at the heart of the project. Obviously, there’s a lot of investment and additional investment. 


There’s also a lot of innovation on how we approach the authorities for the permits, but it will be quite interesting to see how the value of nature comes through into that process, and how we connect all of this. 


Now, regarding the SEM and Risk Insight, I think we have to have a harmonized framework, where all the stakeholders can be provided with comparable information, comparable data, where we have reliable data and benchmarks. I think it will push us to do better, and it will also help us assess the companies on non-financial indicators, and what impact they’re making in the world.

“Too much monitoring where there is not even a national strategy is not very productive”

Mehul BhattPhilippe, have you observed a correlation between your company’s ESG ratings and its cost of capital? How do ESG ratings influence investor perceptions and financial outcomes for your company? 

Phillipe Espitalier-Noël – I think it’s a bit early days for us right now in Mauritius. What is obvious is that the investor community looking at us, whether it be through partnership eyes or private equity eyes or performance on the stock market, all those interested parties are being more and more inquisitive about the way we do things. We get a lot more questions than before, and in some instances, providers of private equity capital have been very insistent in terms of the norms and the expectations that they have, having taken stock of current state situations for specific targets, but also in terms of expressing their expectation for the evolution that we should bring to the party. 


We have accelerated quite a number of initiatives within context to try and make sure that we tick all the boxes, not only immediately, but long term, in terms of the accompanying reputation.  For specific ESG-type related projects from within Rogers, we face more in terms of capital outlay, and none of those have required any specific benefit from rating agencies that would provide us with 0.5% less on our cost of capital. 

I think it’s going to come, but right now, I cannot say that our efforts over the last 8 to 10 years have made us benefit from cheaper capital because of good ratings. For the very reason that that rating is not really there and given that there is such variety around us in terms of ratings, it’s difficult, right now, for any foreign entity looking at a merchant company as a target to be able to have a reliable rating from a third party, independently of what the body is. It’s important that institutions become more credible, and I think the initiative is welcome. 


Maybe one caveat in terms of precaution is that as a practitioner, these issues are already very demanding and very costly, and the number of people we have to put to it, and the amount of training that we need to put to bear to get some change and to get some improvement, is huge.


As we get many institutions waking up to the urgency of reporting, we end up being submerged by requests coming from everywhere, and we don’t always feel that the requests that are made are fully legitimate or are fully rehearsed or fully home-worked properly to justify the time that is imposed upon us. If we don’t collaborate, we are seen as being against it or being difficult. 


To those who are here (Editor’s note: in the audience last Friday) from institutions, please think about us as practitioners. We are not in administration, we are not in filling boxes for compliance reasons. We have a business to manage, and we have many other tasks to perform. Undertaking us with these kinds of requests doesn’t always help. Sequencing, I think, is important. Too much monitoring where there is not even a national strategy, I don’t think is very productive.

“(…) no clear national policies on biodiversity conservation”

Mehul BhattEvita, from your perspective, what are the critical gaps in current ESG reporting and measurement practices that could be addressed by advanced analytics and AI technologies like those developed by Risk Insights?

Evita Fakun – From what I understand from the speech of the Governor of the Bank of Mauritius this morning (Editor’s note: last Friday), and the feedback from the panellists, we are each, on our respective sides, waiting for one another to bridge that gap. Sustainability reporting, ESG reporting, integrated reporting, is still a good way of bridging that communication gap. If we think about CSR in Mauritius – 2% of taxable profit – we are all very proud of the projects that we come up with with local organisations, or through our own foundations. It’s possible because of a National Policy.


Exchange of information is vital, and I’m very happy that this is coming with AI as well. Who has time to read all of these long reports? It’s not humanly possible, and it is coming at a time where things are very urgent for Mauritius. We are an island, surrounded by the ocean, but we are surrounded by an ocean which is dying and suffering because of intense human activity and no clear goals, no clear national policies on biodiversity conservation.


(…) Biodiversity is one aspect. It is one of 17 SDGs. Number one is ‘No Poverty’, and the government is handling that, and that’s awesome. But what about the 16 others? It cannot be only on the private sector to make things happen, and then to spend more time reporting more complex reports that are not, at the end of the day, creating more return for us. We don’t have the time. We don’t have the resources in businesses. Writing a sustainability report is tedious, painful and annoying. Data collection is tricky, that’s the reality.


(…) Integrated reporting during COVID was vital for us because there was a lot of speculation about the resilience of tourism. People were writing all over social media and we also had what people were saying in Mauritius, that it’s time to close the hotels and to invest in something else. What else do we have? We have our beaches, our nature, and less than 2% of our endemic forests left. Are we really tracking biodiversity loss? That would be a vital metric for us as a country.


(…) Carbon footprint, that’s the responsibility of France, it’s the responsibility of the big producers. You have to bring in consultants if you don’t have experts in-house to measure your carbon emissions, and it requires a budget. Let’s say we do it once, or we do it every other year, just to keep the consistency and know where we are going in terms of emissions. But as it has been pointed out, it’s only 1%. Maybe we need to look at TNFD, which is the Taskforce on Nature-related Financial Disclosures, and GRI Biodiversity Standards, and start a conversation from there, because all we are talking about is how much we care, how much we are not heard, how much this is not becoming the National Policy that we want, and this is all we want.

Mauritius can be a voice in international forums to bring our own agenda to the table

Mehul BhattThierry, as a bank which derives a lot of its profitability from the rest of Africa, what do you take into account as you make very long-term investments? We talked about the Mauritius IFC benefiting from this whole focus on ESG. How do you see that? 

Thierry Hebraud – This is one of the key topics for banks like us, which we discussed last year with the Africa Forum. Many countries in Africa have renewable energy projects right now. This is true, and it is genuinely declared by political authorities. There are financing, and funds are available for financing these projects. It is the same situation for Mauritius, where there has been a clear statement on the energy transition for the country. When do we start to have a certain number of difficulties? The application with State Bodies is more complicated. Is it bankable? Can banks support the structures which are proposed by the operators? This is true in many other countries in Africa as well. It’s not only a question of Mauritius. This is one of the points.


The second one is how you find long-term funding when you are an African bank. We are the only investment-grade rated bank in Africa, but the access to long-term funding for us is costly. These projects need to be financed in the long-term with very thin margins, because the profitability requires low interest rates. So, we need to find solutions. There are international funds available, but these international funds will come only if this is effectively bankable, and in each of our countries, part of the agenda is to finance, long-term, in our own currency. And we have the same question, how can it be bankable? We are ready for that, we have capacities, but there is a little bit of struggling to put that in concrete. I’m joining a little bit what Philippe was saying just before. What is the agenda of the country? To which extent do we have clarity of where we want to go and where the country wants to go? This was to answer your first question.


The second one was about how can we be part of Africa as Mauritius IFC. We need to be careful on that. Yes, with the Mauritius IFC, we have expertise that you do not find in every country in Africa, but some countries are well developed. You take Kenya, you take South Africa, and there is nothing that we have to teach to these countries. They are perfectly capable. I would say that the role of countries like us, emerging countries, is with what voice, and where we express our voice in the international forums, to defend who we are, and say what our constraints are. Today, 600 million Africans have no access to electricity. Should we follow instructions to stop financing fossil fuels in Africa? This is impossible. More than 50% of energy in Africa is coming from fossil fuels. So, we cannot follow these instructions as African banks, but we are part of the transition. We have to continue to work in Africa for the transition of Africa, the development of Africa, to accept that part of this development is based on fossil fuels, and the increasing needs we have effectively to put in our agenda for the renewable energy as well.


Let’s not make, in Africa, the mistakes made in the North. If we were to reach zero emission, it would mean that every African would have to be able to multiply by three his level of emission, when every American would have to divide it by eight.


So the agenda cannot be the same. This is where I believe a country like Mauritius can be a voice in international forums to bring our own agenda to the table. Unfortunately, when you look at COP 25, 26, 27 – and the next ones will probably be the same – where do we go with this? We have not reached one agreement to really integrate the transition in the South part of the world compared to what should be supported or done by the North part of the world. So that’s where I consider that we can lead and we can have an action in the international forums.

Mehul BhattRaoul, can you discuss how your company leverages its ESG performance as a competitive advantage in the market? And how does it allow the good firms with strong ESG metrics to win the market place compared to others? 

Raoul Gufflet – Collectively, we have a responsibility to work towards attracting sustainable investment, and this is where the Mauritius IFC has to play a role. This is where the depth of the capital market is going to play a role to build trust with the stakeholders. All of this is going to help us be more innovative and create more products. You mentioned societal bonds. I’m not too sure that this has been on the agenda of all of the banks. Innovation is going to be impacting all of us, not just the banks, and obviously brand loyalty and customer loyalty. The competitive advantage of one company is not going to be the key.

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