INTRODUCTION.
Sustainability as regards to financial institutions can be defined as being resilient and value driven by considering the needs of the current generations and society in which they operate without compromising the needs of the future generations. Sustainability Standards were developed by the European Organisation for Sustainable Development (EOSD). According to Mr. Arshad Rab[1], Sustainability standards are the business imperative for any financial institution that is thriving to survive and thrive in this new world which is characterised by frequent shocks and high uncertainties.
The standards were developed to be ever evolving so they can always deliver solutions to the Sustainability Certified Financial Institutions throughout the changing and increasingly challenging times.
For Sustainability to be realised, it must be embedded in the financial Institution’s Corporate Strategy. So, an institution has to develop a purpose statement and High-Level Goals. The Purpose statement shows why an entity exists/ what drives it and the High Level Goals are derived from
[1]CEO, European Organisation for Sustainable Development (EOSD), and Chairman, International Sustainability Council,
the purpose statement, they ( high level gaols) speak to how the purpose statement will be achieved).
BACKGROUND.
Based in Germany, the European Organization for Sustainable Development (EOSD), is a globally recognized body that has in its unique charter the purpose of developing strategies, programs and initiatives and undertaking projects that contribute to implementing the European Union’s (EU’s) Strategy for Sustainable Development. It is one of the oldest global players in sustainable banking and finance, delivering highly impactful targeted initiatives for creating a sustainable economy.[1]
The history of EOSD dates back to 2007, while its Europe-wide activities started in 2010 when institutional partners from Belgium, England, France, Germany, Ireland, and the Netherlands united under an EU-funded initiative to stimulate the innovation capacity of SMEs and to support the transition to a low-carbon and sustainable economy.
Since 2011, the EOSD has had various milestones including the launch of the Sustainability Standards and Certification Initiative (SSCI) for Value-Driven Financial Institutions.
It is the first and only initiative worldwide enabling financial institutions to embrace sustainability holistically, across the board in their organizations. SSCI delivers a holistic, robust, evolving, and locally sensitive set of standards to make value-driven financial institutions resilient and profitable.[2]
[1] ICSA (Student Member), LLM (MAK), DIMA(UMI), CM(ICMC), LLB(UCU), PGD.LP(LDC). The first version of this paper was published on the New vision & Daily monitor Newspaper online platforms. It is also available on my SSRN Author page at https://ssrn.com/author=3197028.
SSCI was developed based on the conviction that financial institutions are uniquely positioned to lead the process of sustainable economic transformation in their respective countries. SSCI, therefore, delivers cutting-edge sustainability standards for creating strong, value-driven and profitable financial institutions.[1]
Many Banks world over have been certified by EOSD and in Uganda, Uganda Development Bank (UDB) and Pride Microfinance Ltd[2] have received the Sustainability Certification. In pursuit of this very important certification is the regulator of financial institutions in Uganda i.e. Bank of Uganda, PostBank (U) Limited[3] and Housing Finance Bank Limited[4].
To note is that all the above banks have been accepted to the Sustainability Standards and Certification Initiative (SSCI) and they thus been granted Certificates of acceptance by the International Council of Sustainability Standards and certification.
It is worth noting that only reputable financial institutions around the globe are pre-qualified for the SSCI certification program and are required to have demonstrated a strong commitment to sustainability.
ASSESSMENT PARAMETERS FOR SSCI.
Financial Institutions that apply for SSCI are assessed on eight (8) principles referred to as the Octagon Value Creation Model. These eight principles cover areas of Governance, Management, Technology, Business Models, Operations, Products, Stakeholders’ Relations, and Human Capital.
[1]CEO, European Organisation for Sustainable Development (EOSD), and Chairman, International Sustainability Council,
VERSIONS UNDER SUSTAINABILITY (SSCI).
The first version that was used to measure sustainability was version 2.0, and this was developed before the outbreak of Covid-19. The current version is 2.2 which emphasises crisis readiness and has also included aspects of risk management. This was a reaction to the Covid breakdown which was not expected.
ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) Vs SUSTAINABILITY
Both ESG (Environmental, Social & Governance) & SSCI are platforms/vehicles used to achieve sustainability. ,ESG refers to a set of criteria used to assess a company’s environmental, social, and governance impact while sustainability is the capacity to maintain or endure, focusing on the interplay of environmental, social, and economic factors.
WHY SSCI.
The Sustainability Standards & Certification Initiative (SSCI) is of great importance to financial institutions and will definitely turn their current and emerging challenges into historic long-term success.
- Sustainability Certification enables institutions to be highly competitive in an increasingly crowded financial sector and clearly distinguishes them from those institutions that have not fully embraced sustainability or are practicing (quite often unintentionally) green and social “washing”[1].
- SSCI promotes institutional sustainability[2], which is, the proper working/functioning of an entity and this leads to Building a strong & profitable institution.
- When a financial institution is strong and resilient, it makes the country’s economy strong while at the same time protecting its natural environment and promoting inclusivity within the workplace. The sustainability standards make social sustainability a part of the innovation strategy and thus provides the certified financial institutions a competitive advantage in the increasingly unpredictable market environment.
- SSCI is a major enabler for accelerating impact investments and moving sustainability centric investments from niche to mainstream and closing the funding gap for achieving the Sustainable Development Goals (SDGs). Impact Investing is a type of sustainable investing strategy where an investor seeks financial returns alongside a measurable positive impact on society or the environment. As such, with sustainability, it enables Financial Institutions to finance investments that have a positive impact on society and the environment.
- SSCI enables financial institutions to seize the market opportunities arising from disruptive technologies. It makes the technological transformation a major source of success and makes certified institutions some of the most relevant players in the market. This thus compels financial institutions to become sustainability certified. Technologies for sustainability are today considered critically important for addressing social, environmental and economic challenges. The financial Institution will be able to create new income streams and thrive for the long-term in an ever more volatile world.
- SSCI is designed to be highly responsive and adaptable, and it promotes organizational agility and resilience to crises such as the current coronavirus crisis which requires a targeted response to ensure business continuity. Unlike the common crisis management procedures, systems or mechanisms, SSCI deals with crisis management holistically, in line with its core philosophy. This lays the very foundation for creating robust institutions, which are crisis-resilient and crisis-ready.
CONCLUSION.
Sustainability Standards establish an emotional bond between financial institutions and their customers and other stakeholders, and the society at large. SSCI therefore is an enabler for growth and achieving the UN Sustainable Development Goals (SDGS) and Uganda’s Vision 2040 monitored by the Uganda Planning Authority. Suffice to note is that all these can only be achieved through proper financing hence the need for all financial institutions to enlist for Sustainability Standards and Certification Initiative (SSCI).
SSCI is designed to be highly responsive and adaptable, and it promotes organizational agility and resilience to crises such as the current coronavirus crisis which requires a targeted response to ensure business continuity. Unlike the common crisis management procedures, systems or mechanisms, SSCI deals with crisis management holistically, in
[1] Supra Note 2
[2] https://wfdfi.org/sustainability-standards-for-value-driven-financial-institutions/
[3] https://future-business.org/the-significance-of-the-eosd/ [Accessed on 19th June 2023]
[4] Ibid
[5] https://wfdfi.org/sustainability-standards-for-value-driven-financial-institutions/
[6] https://www.newvision.co.ug/category/news/uganda-banks-urged-to-embrace-sustainability-143260
[7] https://www.linkedin.com/pulse/postbank-uganda-enlisted-sustainability-standards/
[8] https://www.housingfinance.co.ug/housing-finance-embarks-on-journey-towards-becoming-a-sustainability-certified-bank/
[9] Supra Note 2
[10] https://wfdfi.org/sustainability-standards-for-value-driven-financial-institutions/
