A cobalt exporter in the Democratic Republic of Congo (DRC) is working to meet rising global demands for critical minerals vital to the energy transition. To tap into international markets, the company adheres to the OECD Due Diligence Guidance, reports under the Global Reporting Initiative (GRI), discloses climate risks via the Carbon Disclosure Project (CDP), and prepares for new International Sustainability Standards Board (ISSB) requirements to attract future investment.

However, it faces allegations of community displacement and unsustainable practices. The issue isn’t the absence of environmental, social, and governance (ESG) standards, but rather an oversaturation of frameworks that lead to confusion, duplication, and escalated costs, undermining sustainability objectives.

Designed to promote responsible business conduct, ESG standards are meant to guide sustainability in global supply chains. In Africa’s critical minerals sector, numerous overlapping and conflicting ESG frameworks have created a bureaucratic maze.

Key frameworks include the GRI for stakeholder-oriented reporting, the Sustainability Accounting Standards Board (SASB) focusing on financially material issues, and the Task Force on Climate-related Financial Disclosures (TCFD) for climate risk disclosures.

Additional standards include CDP for environmental data, the ISSB’s IFRS S1 and S2 for sustainability disclosures, and the OECD Guidelines for Multinational Enterprises, which set expectations for responsible sourcing in high-risk areas. The Equator Principles aid in managing social and environmental risk in project finance, while the EU Taxonomy for Sustainable Activities and Corporate Sustainability Reporting Directive (CSRD) impose binding sustainability requirements on companies operating in or exporting to the EU.

According to Monica Gichuhi, Minerals Governance Consultant at Quadz Consulting, this multitude of frameworks presents significant challenges for extractive companies in Africa.

“The standards are crafted in the global north yet are implemented in the global south,” Gichuhi states, emphasizing that the metrics and analysis methods may not be suitable for the African context.

While GRI prioritizes stakeholder impacts such as labor rights and displacement, SASB and ISSB focus on how ESG issues may affect financial performance, creating a divergence in priorities. A mining company could comply with SASB or ISSB while neglecting significant social issues highlighted by GRI.

Companies often report emissions and biodiversity impacts to multiple frameworks, each requiring distinct methodologies, leading to duplication of effort and higher costs.

The landscape suffers from inconsistencies in enforcement and credibility. The OECD Due Diligence Guidance mandates rigorous audits for supply chains in conflict regions like the DRC, yet companies may remain signatories to the UN Global Compact without external reviews, creating disparities in accountability.

Meanwhile, EU frameworks redefine what qualifies as a sustainable investment. For example, excluding natural gas from the green category clashes with the operational realities in Africa, where gas often powers processing facilities. Projects aligning with African environmental laws may still be deemed unsustainable based on EU standards.

Ismet Soyocak, ESG and Critical Minerals lead at SFA, notes that large multinationals can navigate compliance more effectively than micro, small, and medium enterprises (MSMEs), including many African-owned firms which often lack the resources to manage multiple overlapping standards.

This situation creates hurdles to accessing ESG-sensitive markets and financing. Many frameworks overlook local social and environmental risks. Artisanal and small-scale mining (ASM), employing about 14 million people in Africa, is frequently excluded from ESG frameworks structured for larger operations. Issues like gender-based violence and land tenure security are often unquantified or underreported, according to Ezekiel Opoku, Lead Environmental Consultant at Wiseoak Limited in Ghana.

Reliable data is another constraint. ESG initiatives like the Science Based Targets initiative (SBTi) and CSRD demand detailed emissions inventories, which many African companies find difficult to assemble due to data scarcity and lack of digital tools.

Jennifer Hinton, Group Manager on ESG with Jervois, echoes this sentiment, stating that small firms spend more time on ESG reporting than delivering actual improvements, as many frameworks are misaligned with ground realities.

Efforts to harmonize ESG frameworks are in progress. The ISSB, established by the IFRS Foundation in 2021, aims to consolidate standards like TCFD and SASB into a global baseline. While this is encouraging, it requires contextual adaptation to be effective, especially given Africa’s unique challenges like infrastructure deficits and complex land governance.

Ignoring these realities may further entrench exclusion and greenwashing. There’s a rising demand for African-owned ESG frameworks that are aligned with regional initiatives or established by entities like the African Union (AU) to properly address social risks and local participation.

ESG standards are vital for fostering sustainable practices and ensuring long-term investor confidence. Without proper harmonization and adaptation, these standards may transform into barriers instead of facilitators for African extractive companies that are crucial to the global energy transition.

* Christopher Burke is a senior advisor at WMC Africa, a communications and advisory agency located in Kampala, Uganda.