BLOG: Bridging the Gap Between Climate Risk Recognition and Action in South Africa’s Agro-Food Sector

Opinion piece by Koaile Monaheng

Climate action failure has ranked as one of the most pressing global risks over the last decade in the World Economic Forum’s (WEF) annual Global Risk Report. In 2023, it rose to the top of the list. Despite this, some of the world’s largest companies are still under-preparing for and under-reporting climate risks, particularly the magnitude of physical climate risks, which are underestimated compared to transition risks, reported at nearly double the rate.

As someone deeply invested in addressing climate change, I acknowledge that Africa is one of the most vulnerable regions to extreme weather events and climate-driven disasters. Businesses in Africa are not immune to these shocks, as profit margins and assets are impacted by hazards such as floods, which cause property damage, and heatwaves and droughts, which affect agricultural yields, water availability, and commodity prices.

With the growing focus on Environmental, Social, and Governance (ESG) principles, companies are increasingly required to evaluate their non-financial impacts on society and the environment. This is not only to improve their long-term sustainability but also to mitigate the risks associated with climate change. Integrated reporting encourages businesses to disclose non-financial information related to sustainability and socio-environmental performance, promoting ethical and sustainable practices. In South Africa, ESG-related regulations position sustainability as a prerequisite for value creation and legitimacy. However, while carbon-intensive sectors such as mining and energy have been scrutinised for corporate climate accountability, climate-risk-dependent sectors like agriculture and food are often overlooked.

The South African Context

According to the IPCC Special Report on the impacts of global warming of 1.5°C, Southern Africa is identified as a global climate hotspot, projected to warm at about twice the global rate. Over the last four decades, 36% of Africa’s natural disasters occurred in Southern Africa. In South Africa, natural disasters like droughts, floods, and storms have caused approximately US$4.5 billion in losses over the last century. The agricultural and food sectors are especially climate-risk-prone, given the region’s water scarcity, reliance on rain-fed agriculture, and vulnerability to extreme weather.

Despite 70% of the region’s population depending on rain-fed agriculture, the agro-food sector’s climate risks often go underreported, especially in South Africa, where the focus tends to be on high-emitting sectors. Agriculture plays a vital role in South Africa’s economy, contributing to food security, employment, and foreign income. Yet, the relationship between climate change and food security remains under-researched, leading to an underestimation of the magnitude of the threat. Voluntary climate change disclosure is crucial for sectors like agriculture to align with both transition and physical risks, ensuring resilience and sustainability.

I’ve been exploring how South African agro-food companies incorporate climate risks into their strategies, and it’s clear that there’s still a long way to go. Using international frameworks like the Carbon Disclosure Project (CDP) and the Task Force on Climate-Related Financial Disclosures (TCFD) as benchmarks, I developed a blended climate risk disclosure framework to assess how well these companies are reporting their climate risks, particularly physical risks. I compared South African companies’ practices against global leaders in the agro-food sector to see where we stand.

Key Findings

Through my research, I discovered that climate risk reporting in South Africa's agro-food sector is still emerging, with no company achieving perfect climate risk disclosure. The companies that ranked highest were the closest to aligning with international standards. At the same time, I found that most South African companies I analysed performed on par with their global counterparts in climate risk recognition. However, the main concern that diminishes global recognition is their actions to mitigate these risks, which are lagging. Although local regulations are followed, and the transition to a low-carbon economy is acknowledged, most companies are not meeting global emissions reduction targets, particularly the 1.5°C trajectory of the Paris Agreement.

Another positive takeaway was that physical risk reporting was notably strong, but there remains room for improvement, especially in differentiating between chronic and acute risks to better build resilience. The findings underscore the need for stronger corporate climate accountability and the adoption of science-based targets, moving beyond mere compliance with regulations.

Significance of the Findings

These findings highlight the progress and gaps in how South African agro-food companies integrate climate risks into their strategies. While it’s encouraging to observe local companies meeting international standards in recognising climate risks, there is a significant gap between risk recognition and tangible actions to mitigate those risks. This disconnect is especially concerning in meeting the global 1.5°C emissions reduction targets, emphasising the need for more ambitious climate action.

The study contributes to a growing body of literature on integrated reporting, ESG, and corporate climate accountability. By recognising both transition and physical climate risks, companies can offer a more holistic view of how climate change impacts their operations, financial stability, and long-term viability. The agro-food sector’s focus on physical risk reporting is a critical component in building resilience, although there is a need to improve the understanding of both chronic and acute risks to better safeguard supply chains.

Conclusion and Future Research

My research highlighted the need for South African agro-food companies to close the gap between climate risk recognition and action, aligning with global climate goals such as the Paris Agreement. While progress in voluntary climate risk disclosures is evident, the lack of ambitious action calls for stronger corporate accountability and the adoption of science-based targets.

Moving forward, future research could explore why companies struggle to translate climate risk recognition into action. Are the barriers financial, regulatory, or strategic? And how can these be overcome? In addition, it would be useful to investigate the effectiveness of policy frameworks in encouraging meaningful corporate climate action, particularly in sectors heavily impacted by climate change, like agriculture and food.

As corporate accountability for climate risks grows in importance, it will be crucial to see how businesses in different sectors and regions approach voluntary climate disclosures and resilience-building. Policymakers, regulators, and industry leaders can use these insights to enhance climate governance and ensure that corporate disclosures lead to measurable progress in mitigating climate change.

The views and opinions expressed in this blog post are those of the author and do not necessarily reflect the official policy or position of the African Climate & Development Initiative (ACDI), the University of Cape Town, or any affiliated institutions. Any conclusions, recommendations, or interpretations presented are solely the responsibility of the author.