In 2025, Kenyan companies are incorporating Environmental, Social and Governance (ESG) principles into their operations due to investor expectations, legal changes and sustainable growth. With an emphasis on strategic imperatives and noteworthy trends, this report analyzes the alignment of ESG compliance across Kenyan industries.
Introduction and Background
The three pillars of environmental (E), social (S) and governance (G) are the core of the framework known as ESG compliance, which encourages ethical business practices. Social focuses on stakeholder connections, environmental focuses on minimizing ecological imprint and governance focuses on ethical behavior, business structure and transparency.
The importance of this research is that it will show the advantages of ESG compliance for Kenyan businesses, which include: greater investment, improved brand reputation, decreased operational risks and long-term resilience.
Data and Analysis
Regulatory Frame-work:
– The Central Bank of Kenya has mandated voluntary climate finance risk disclosure for banks as of January 2025, aligning Kenya’s financial sector with global sustainability standards, before it makes them mandatory in January 2027.
– The Nairobi Securities Exchange (NSE) raises governance standards by encouraging companies listed in NSE to reveal their ESG practices.
– The Capital Markets Authority (CMA) has issued guidelines requiring boards and senior management to actively develop and execute ESG strategies, policies and reporting requirements.
Examples of Companies aligning with ESG compliance
a) Environmental Responsibility: Under Project Kifaru, Kenya Airways has put sustainability measures into place, such as a water bottling plant and a pyro-diesel plant, to lower carbon emissions, lower procurement costs and promote job creation in the community.
b) Social Responsibility: With the inception of the Tujiamini initiative, Sportpesa strengthens communities, brings in Kenya Premier League clubs and international scouts and gives young athletes a national platform to display their abilities.
c) Governance & Social Responsibility: With a separate Risk and ESG Committee, Safaricom boasts a strong governance structure. Safaricom incorporates child safety measures into their products and upholds and advocates for human rights.
Key Findings
Obstacles and Capacity Building
Despite advancements, challenges still exist:
– Technical Proficiency: The technical know-how to apply ESG principles is lacking in many Kenyan companies.
– Conformity to Global Guidelines: It’s still difficult to match local sustainability goals with international ESG criteria.
In order to solve these issues and promote sustainable development in Kenya’s private sector, groups such as the Kenya Private Sector Alliance (KEPSA) are offering assistance and training to businesses who implement the ESG Manual.
Recommendations
a) Adopt renewable energy and recycling.
b) Establish goals for reducing greenhouse gas emissions.
c) Make use of locally sourced, environmentally friendly raw materials.
f) Invest in CSR projects.
g) Adhere to moral employment principles.
h) Ensure the well-being of employees, equitable pay and gender equality.
i) Offer secure workplace conditions and full healthcare benefits.
j) Implement water conservation and rainwater harvesting.
k) Make sure that product labeling, price and promotion are transparent.
References
ESG Compliance in Kenya: What Businesses Should Prioritize in 2025
Business sustainability trends to watch in 2025
Compliance Requirements by CBK and CMA
