ESG issues more than supply chain challenges
This expansion drive by global brands into new African markets has attracted international headlines. Many of these stories have focussed on the long queues that new outlets have attracted and the aspirational dimension of demand for international brands. Some articles have considered the supply chain challenges that international companies have faced in finding reliable, high-quality sources of ingredients. However, the environmental, social and corporate governance (ESG) issues facing the QSR and casual dining sector in sub-Saharan Africa, as in the sector's more traditional markets, go further than this. In the USA and Europe, shareholder resolutions, activist pressure and consumer demands have led QSR and casual dining companies to address issues ranging from animal welfare to unsustainable packaging material, from sustainable sourcing to waste management and from working conditions to obesity and nutrition.
Double-standards will raise reputational risk
Many of these concerns are equally relevant in the QSR and casual dining sector in sub-Saharan Africa. In fact, given the relatively poor state of physical and social infrastructure, it could be argued that some issues, such as waste generated from packaging and used cooking oil, are even more important in the developing world context due to their far greater potential for causing negative effects. Furthermore, while investors might assume that consumers in Nigeria, Kenya or Ghana will be more focussed on issues such as price and value than animal welfare or sustainable sourcing, multinational brands should be particularly aware of accusations of double-standards that could lead to further reputational damage in their home markets. If international brands do not subscribe to the sort of initiatives they have adopted in developed markets to address health concerns, reputational issues can arise particularly given the high levels of malnutrition in many sub-Saharan countries.
Best practice required to support sustainable growth
QSR and casual dining companies need to address the various ESG issues to ensure that they are meeting industry best practice and supporting long-term, sustainable growth. This will reduce the risk of reputational damage that can arise when companies act, or are perceived to be acting irresponsibly, while improving operational efficiencies and building more resilient supply chains. By failing to address these issues, companies are vulnerable to reputational damage, regulation and litigation. And, as recently highlighted by the decline in sales at KFC in China after a November 2012 report that some of its chicken suppliers were using excessive amounts of antibiotics, the financial consequences can be severe.
Kigoda Consulting has released a report on the environmental, social and corporate governance issues facing the QSR and casual dining sector in sub-Saharan Africa, analysing the key ESG issues and how multinational brands such as Yum Brand’s KFC and McDonald’s and regional companies such as Famous Brands, Taste Holdings and Spur Corporation are addressing them.
Topics covered include: climate change, energy and emissions; waste management; obesity and nutrition; sustainable sourcing; animal welfare; and board structure including independence of non-executive directors and board diversity.
For more information and pricing contact: enquiries[at]kigoda.com