New EU regulation may leave African countries behind in violation of the SDGs

It has been estimated that the African continent needs investments of $200 billion annually by 2030 if the UN Sustainable Development Goals are to be achieved. Other studies have estimated an investment need in climate change adaptation in Africa alone of approximately $440 billion by 2030. A prerequisite for this is an unprecedented need for economic reforms in partner countries, in world trade, in development aid, and in upgrading hedging instruments to scale investment flows. Finally, a decisive factor is the hitherto insufficient regulation of companies' negative impacts on sustainability factors, i.e. in relation to people, the environment, climate and society.

For this to happen, it's crucial to ensure:

• Full integrity in developing and implementing the new sustainability requirements.
• A partnership-based approach at the highest political level with African countries.
• A significantly strengthened Danish effort in capacity building in Africa under the auspices of the upcoming Africa strategy and the upcoming development policy strategy in 2024.

Regulation is essential to achieve the SDGs and the Paris Agreement

Let's be clear: The new EU Directive on Sustainability Reporting (CSRD), together with the corresponding Regulation on Sustainable Disclosure Requirements for Investors (SFDR) and the upcoming Directive on Responsible Business Conduct in Value Chains (CSDDD) are ambitious and timely. The overall contribution of regulation to the green transition at home and abroad cannot be underestimated, and we will not achieve the SDGs or the Paris Agreement without such regulation.

However, a prerequisite for timely and effective implementation is ensuring that companies and investors have the support they need to report on their sustainability in the value chain. The task is extensive, and many initiatives have been launched in the EU to support the efforts of companies and investors.

But when it comes to countries in the Global South - often the outermost links in the value chain, and Africa in particular - the new regulation could have the exact opposite result: leaving African economies behind , in contradiction to the fundamental principle of the SDGs to "leave no-one behind" in our global sustainable development efforts.

Funding risks bypassing countries with the greatest needs

The fundamental challenge is threefold. The drafting of the new EU regulatory requirements has not sufficiently involved actors and perspectives from Africa, among others, which is highly critical, as the regulation - written in the global north - will undoubtedly affect the development opportunities for the global south. In this context, supporting efforts in Africa have not been considered, allowing  these countries to organize their own preparation for the new EU requirements. Finally, there is a widespread risk that the European private sector will divest and avoid sourcing from countries and areas that they perceive as risky to ensure compliance with sustainability regulation.

As actors in the EU have a strong incentive to increase their sustainable activities, their focus will be on projects, actors and areas that they believe can already meet the requirements for sustainability and documentation or are close to doing so. The result is that funding risks being diverted even more away from the countries that need sustainable investments and economic and social development the most.

At a time when African governments are working to rebuild and stabilize their economies as they emerge from a devastating and severely destabilizing polycrisis, and when Europe must simultaneously establish an already challenged relationship of trust with our great neighbor to the south, it is imperative that scaled support and cooperation with these countries is put in place timely, to adequately addressing growing sustainability requirements related to value chains and investments.

Creating equal relationships is crucial

There is a need for equal partnerships and efforts at the highest political level to articulate a common desire to shift the behavior of businesses and investors in a more sustainable direction. Broad collaborations are needed, and implementation strategies must be designed to ensure that the EU regulatory wave does not become a de-facto trade barrier for African countries. This requires building capacities and competencies to ensure the infrastructure for responsible and data-driven value chains that can accommodate new sustainability regulations.

The whole issue of transparency in value chains will thus be crucial to the integrity and thus the impact of the new regulation - and equal trading relationships and collaborations across public, private and civil actors in both the global North and South are a prerequisite for this.

As it stands, the new requirements only add fuel to the fire of the narrative of an EU that only cares about itself and once again acts without regard for the consequences for the African continent.

English adaptation of an article published in Altinget Verdensmål on november 2nd 2023. 

 Forfattere:

 

   Sofia Said Birch, ESG manager, AP Pension.

   Jarl Krausing, Deputy CEO and International Director, CONCITO

   Sofia Said Birch, ESG manager, AP Pension.