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ESG : The New Wave

Emanating from CSR (Corporate Social Responsibility) that was initiated by the UN for sustainable and multidimensional development aimed at transforming the entrepreneurial world, the ESG (Environment – Sustainability – Governance) sets the perimeters and milestones of the areas of intervention ranging from the human side, to the preservation of the planet through world peace and prosperity.

More than a quality label, the ESG is a white paper that all companies in this interconnected world must use to build commercial relations, export, import and aspire to shine outside their borders.

The ESG is defined as the quintessence of the 3 major axes that every company must respect, namely environmental preservation with the arsenal of protection measures as well as support for the use of natural resources, social development with all its humanitarian dimension covering respect for human rights and working conditions and finally good governance through transparency mechanisms reporting and good financial management.

Without contradicting the profitability that is the DNA of any company, the ESG is the humanist screen and the link of each company with its direct and indirect environment made up of employees, customers, suppliers, partners, managers, administration, public bodies, civil society and nature.

In this interconnected world, all Companies will have to subscribe to ESG to claim progress and expansion and Tunisians must anticipate especially since our first customers are on the other side of the Mediterranean and that they are increasingly concerned about compliance with ESG criteria as a label of acceptability in their ecosystem.

Through the ESG, the global ecosystem is marking the contours of a global approach and Tunisian companies will be required to adopt the inclusion of several aspects such as the environment such as controlling CO2 emissions, pollution control and climate protection. Then the societal component with the consolidation of employees’ rights, the defense of minorities, the prioritization of people to specific needs and finally the governance component, culminating in transparency in management, cordiality in relations with organizations and the establishment of decision-making control mechanisms.

Contrary to what some claim, ESG standards are not intended to gag companies and reduce profitability but to lay the foundations for a circular economy based on better wealth sharing accompanied by environmental and human aspects.

For example, to recover CO2 from the air, funds must be found to invest them in this process, which aims to reduce greenhouse gas emissions. The recovery of this gas will generate Carbon tickets that will be sold on the global carbon market (ETS) and the sums collected from these sales will be used to repay the funds invested, Just like the sorting, recovery and treatment of waste whose recycling will produce clean energy that will in turn be sold to power plants and thus generate dividends that will be used to repay the credits allocated to

The ESG is not limited to consolidating this circular economy, the culmination of sustainable development, it marks the contours of the energy transition with the formula I called the 2 E1W (Energy-Environment-Water). A comprehensive and inclusive approach that aims to demonstrate that, despite the obstacles, it is possible to produce energy while respecting the environment and preserving this vital resource of water.

The global and gradual approach is a real challenge because permanently banning hydrocarbons is utopia. The energy transition can be accompanied by the use of natural gas, which also serves as a basis for renewable energies, as evidenced by the involvement of Multinationals (Shell-ENI-Total- BP) in this progressive approach, which despite the high price of oil and gas products do not skimp on financial and research efforts to be permanently part of the energy transition and subscribe to ESG

With climate change threatening Man and Planet, it is not time for trials of intent but for diagnosis and foresight and we note that wind and solar energies remain intermittent and random energies in the absence of a sustainable supply and storage chain. They are supplemental energies to green hydrogen, which despite its high cost, is essential to this energy transition.

A forward-looking and inventive vision that will be based on support mechanisms such as the Holiday Tax until investments in renewable energy production and storage circuits are amortized or the application of CCS (Carbon Capture Sequestration), a carbon tax that will support this energy and ecological transition aimed at gradually reducing greenhouse gases.

But what about the ESG in Tunisia?

Aware of the importance of the standards of this solidarity and circular economy, Tunisia has begun the applicability of CSR with a distribution approach devoid of the values of sustainable development and work. Thus, all CSR contributions benefited environmental companies especially in the South whose vocation was only to distribute wages without compensation or wealth creation. CSR mechanisms at a cost of 300 Million Dinars / year whose sole objective was to monetize social peace with a perverse effect encouraging fictitious work and the emergence of a new generation of life rentiers.

The failure of CSR policy in Tunisia is crushing and regardless of its high financial cost, it has not contributed to social and human development or regional balance and even less to conversion to new jobs. And faced with this perverse and inert approach, I advocate the approach developed by Mike Polter, Harvard professor who substitutes CSR for SVI (Shared Value Initiative) which is based not on rent distribution but on wealth creation and work-sharing to ensure sustainable, fair and equitable development.

The awakening of Tunisians is brutal in the face of the new ESG standards, especially since any Company will have to subscribe to these criteria to claim foreign financing and markets. Europe has already prepared for ESG standards and according to a study by Capital Group, 66% of European companies have registered for these standards and have made ESG a central and essential investment.

By 2025, ESG investments are estimated at 53 Trillion Dollars or 30% of total investments estimated at 140 Trillion Dollars.

Thus, the CBAM (Carbon Borders Adjustment Mechanisms) is considered the ogre that threatens Tunisian industrialists because it predicts that by 2026, all exporting industries to Europe will be subject to the CBAM tax and avail themselves of compliance with ESG standards proving that they have reduced the Carbon footprint in the manufacturing process of their exportable products.

This is a stage of evangelization that is looming for our industrialists who will have to tame these ESG standards and respect them to claim to keep, consolidate and develop their market shares in Europe and the world.

Taming ESG standards and preparing for them properly cannot be done by manufacturers alone but by a comprehensive approach that includes all stakeholders with the marking of a legislative and legal framework encouraging and encouraging economic operators to adopt these new standards.

Support for the subscription to these standards will also be through the creation of a common Carbon Fund between Tunisia and industrialized countries to support economic operators in their ecological transition efforts by creating new manufacturing processes that comply with environmental and societal standards.

The other incentive to subscribe to these standards is the creation of “Green Bonds” to facilitate decarbonization mechanisms and to initiate discussions with Europe on the tracing of green hydrogen corridors to Europe.

It is time for pragmatism and “real economic” with more flexibility for the benefit of STEG, which must have the latitude to study and carry out PPA projects with more flexibility to forge lasting and profitable partnerships for all stakeholders in the ecosystem. It will be important for the State, as a facilitator of the energy transition and support for ESG standards, to define the transfer price of green hydrogen, which must in turn be accepted by STEG as to facilitate this transition STEG to accept green hydrogen in its gas mix.

The observation is unequivocal with an inevitable ecological transition because we are facing a generational shock between on the one hand industrialists and oil companies who have lived and developed their business thanks to fossil fuels and on the other hand a civil society, consumers and financiers who think green, who drive electric, who care about the planet, who advocate the solidarity economy and who fear climate change that threaten

The antagonism of visions is palpable but the common objective of preserving the planet will lead to a convergence of approach and moreover ESG standards are part of this logic of rapprochement of point of view between financial objectives and environmental needs for a healthy and better life while preserving the thresholds of profitability as an entrepreneurial quintessence.


Imed Derouiche

International Energy Expert