Sustainable banking in Nigeria: a strategy or a mindset?

 

The Nigerian Sustainable Banking Principles are a major step forward, but if sustainability is just a strategy - they may be easily abandoned

                                                                                                                                                                                                                                                                                                        

 A man works at an oil refinery site in Nigeria. The country's sustainable banking principles demand that banks consider environmental and social risks. Photograph: Akintunde Akinleye/REUTERS


On 24 September 24 2012, the Central Bank of Nigeria launched the Nigerian Sustainable Banking Principles. The adoption and implementation of these principles are compulsory and require Nigerian "banks, discount houses and development finance institutions to develop a management approach that balances the environmental and social risks identified with the opportunities to be exploited through their business activities".

This move by the Central Bank of Nigeria, spearheaded by the current governor, Mallam Sanusi Lamido Sanusi – which has been internationally applauded – appears to be the first of its kind globally. In its approach to promoting commitment to sustainability, it is an unusual mix of soft and hard governance.

Since its launch, there have been a series of initiatives and dynamism towards embedding sustainability in the Nigerian banking sector. The launch of the principles has created a new market for sustainability services (for example, training and consultancy) for both local and foreign players.

While the banks are warming up to embrace this new way of doing business, there is a seeming apprehension and scepticism about the sustainability of the principles themselves when the current governor leaves office. The main source of uncertainty, given the peculiarities of the Nigerian business environment, is a possible reversal of the principles if they are not pursued by subsequent Central Bank governors. In other words, sustainable banking in Nigeria could be abandoned. This uncertainty adds to the already narrow portrayal of the principles as principally risk management measures. Framed as such, commitment to sustainability becomes a risk management strategy, which becomes meaningless in the absence of risks.

In addition, there is a view, albeit marginal, that the sustainability agenda is a subtle ploy by western institutions to make emerging market firms (Nigerian banks included) uncompetitive. These views, no matter how far-fetched, tend to position commitment to sustainability as a strategy that could be dropped when the enabling conditions are no longer feasible. This is in sharp contrast to banks – eg the Global Alliance for Banking on Values and the B-corporation firms – that see commitment to sustainability primarily as a business philosophy, rather than merely a strategy to adapt to the spirit of the moment.

The attitude of the Nigerian banks towards the adoption of the principles is not new. The business community often speaks of commitment to sustainability as a strategy, a practice, or sets of activities. This view of sustainability is visually powerful and attractive. As a strategy, it can offer opportunities to manage risks, explore opportunities, and adapt to changing business contexts and expectations for long-term success. Appending strategy to sustainability, and the exploration of sustainability as a strategy, moves it away from being a fluffy business issue to a strategic objective.

However, what is often missing is the view that corporate commitment to sustainability is more than a strategy. It is first and foremost an organisational orientation committed to reducing its negative impacts and increasing its positive impacts on its different stakeholder groups (customers, shareholders, employees, regulators, the government, unions, local communities). It is about creating shared value – win-win outcomes for business and society. Framed as such, commitment to sustainability is a way of life – the how of "how we do business" – guided by the following principles:

• Sense of connectedness: the ability to see the whole picture and systems thinking

• Sense of fairness, justice and otherness: the ability to consciously and voluntarily minimise negative impacts and enhance positive impacts on others

• Innovation, creativity and change: the ability to discover and adapt to new ways

• Sense of transparency and accountability: the ability to minimise information asymmetry through openness and good governance.

In that regard, commitment to sustainability is not primarily a strategy, but a lens through which strategy is crafted and implemented. It is first a mindset before being a strategy; otherwise, a sustainability strategy is, at best, hollow and unsustainable.

However, for genuine commitment to sustainability to be successful, the larger society has to provide the enabling environment for it to thrive. For example, if a firm tries to reduce negative impacts, these efforts can be sustained only under certain conditions where there is a market for such improvements, NGOs help make standards visible, and governments have disclosure rules that make it uncompetitive for competitors to behave otherwise. In such an enabling environment, commitment to sustainability affords firms and managers the opportunity to adjust their practices for competitive advantage and long-term sustainability.

Unfortunately, the Nigerian business environment, like most developing country markets, is particularly characterised by poor governance and weak consumer voice, which will in turn have implications for the success or failure of the longevity of the Nigerian Sustainable Banking Principles. The launch of the principles is a major step forward. Even though more needs to be done to create an enabling environment for sustainability to thrive and bear meaningful fruit, the banks that are truly committed to sustainability will seek to create the change they desire, and not play victims of weak institutional context.

Dr Kenneth Amaeshi is the director of the Sustainable Business Initiative, and an associate professor in strategy and international business, at the Edinburgh University. Dr Chris Ogbechie is the director of the Etisalat Center for Corporate Social Responsibility, and a senior fellow in strategy and corporate governance, at the Lagos Business School.