Emerging economies, or emerging markets, as some prefer, is an imprecise term without a generally accepted definition. As the International Monetary Fund (IMF) has noted, it is a ‘diverse universe’ that ‘defies a uniform narrative’ given that some of the countries under this broad group are at a much more advanced stage of economic development than others. And not only are these economies dissimilar, the distinction between them and other developing economies are sometimes hard to make. For example, many emerging economies at the bottom rung of the ladder are largely marked by low-income and standard of living, limited economic resources, poor infrastructure, high poverty rate, weak institutional capacity and high vulnerability to external shocks, among others.
However, broad metrics of emerging economies as the World Bank and others have noted include sustained market access, rapid industrialization, expansion of trade and investment flows, faster GDP growth, growing per capita income, entrenched financial system infrastructure and greater economic relevance, among others. Brazil, Russia, India and China (the original BRICS countries), along with South Africa, are considered the top dogs among emerging economies, with their GDPs growing steadily since the year 2000. Investors usually find emerging market economies attractive due to the business opportunities they offer even as they also pose risks due to factors like political instability, including policy inconsistencies, and currency fluctuations, sometimes as a result of global economic downturns.
As expected, emerging economies bring with them increased pace of industrialization, urbanization and consumer demand, which sometimes results in, even if unwittingly, problems like social inequalities and injustice, environmental degradation and crass exploitation of natural resources, among others. These challenges have given rise to the concept of sustainable business practices, which relate to integrating environmental, social and economic considerations into business operations. The critical need to protect the environment and foster social justice while ensuring economic prosperity was pioneered by the likes of John Elkington, a serial entrepreneur and global authority on corporate social responsibility and sustainable development.
In a 1987 report titled “Our Common Future,” the United Nations World Commission on Environment and Development, under the leadership of the revered Norwegian stateswoman, Gro Harlem Brundtland, succinctly defined sustainable development as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” This definition underscores a very important aspect of sustainability as it emphasizes the need for economic, social and environmental development that is equitable and lasting. In the context of emerging economies, therefore, sustainability privileges a development model which balances economic growth with social and environmental considerations and as such requires a shift from the traditional growth-focused approach to a more balanced and inclusive paradigm that considers the long-term impacts of economic activities on the environment and, by extension, peoples.
In a global economy long driven by fossil fuels, sustainable business practices speak to the need to, among other things, adopt environmentally friendly programmes by all, in this specific context, businesses, to reduce greenhouse gas emissions which pose a grave threat to humanity. In the business sector, this paradigm shift, a key goal of which is to achieve zero net emission by 2050, is increasingly encapsulated in the acronym ESG, Environmental, Social and Governance. While Environmental speaks to an organization’s impact on the planet, Social refers to the organization’s impact on people (i.e. staff, customers and the broad community. Governance embodies how the company is administered not just with respect to the two above but also as an overall good corporate citizen.What distinguishes the good old corporate social responsibility (CSR) from the emergent ESG is that while the former focusses broadly on an organization’s ethical conduct in its operations, the latter underscores criteria to evaluate its sustainability, especially in the light of climate change. Folks in Futurelearn.com have identified People, Planet and Profit as the triple bottom line of sustainability. Balancing these conflicting elements in business remains a major challenge to businesses.
Nigeria as an emerging economy: Challenge of sustainable business practices
In about the past two decades, Nigeria has jostled with South Africa for the position of the largest and top emerging economy in Africa. Although South Africa currently occupies the top position, Nigeria is not too far off. Even with its globally acclaimed endowment, the Nigerian economy suffers from such challenges as slow growth, rising inflation and high unemployment. It’s over-reliance on oil exports, inadequate infrastructure and unsustainable business practices have hindered its ability to achieve inclusive and sustainable development. As the global economy shifts towards sustainability and environmental responsibility, it is my argument that Nigeria, as an emerging economy, must adapt its economic strategies to remain globally competitive and relevant. As Africa’s largest economy with a population estimated by the World Bank to be 218.5 million, Nigeria faces significant challenges in its quest for sustainable economic growth. This is despite an abundance of natural resources, which creates the platform for extractive activities that have negative impacts on the environment. As a large population, any unsustainable business practice in Nigeria could have severe consequences on a global scale.
Nigeria’s economy is heavily dependent on oil exports. Oil accounts for approximately 90 percent of the Nigeria’s foreign exchange earnings. This is reason enough for the country’s vulnerability because, as global price of oil fluctuates, Nigeria’s economy follows suit. This has been seen in the pump price of petrol, which has risen, officially, to over N1,000 per litre (NNPC, 2024) creating price differentials that peak at about N1,300 in some parts of the country. This has also created price fluctuations for sundry commodities in the market and exposed the country’s economy to shocks created by global events. These and more have resulted in sluggish and inconsistent economic growth for the country. The National Bureau of Statistics (NBS) puts the annual growth rate for Q1 2024 at 2.98%. According to NBS “This growth rate is higher than the 2.31% recorded in the first quarter of 2023 and lower than the fourth quarter of 2023 growth of 3.46%. The performance of the GDP in the first quarter of 2024 was driven mainly by the services sector, which recorded a growth of 4.32% and contributed 58.04% to the aggregate GDP.”
Permit me to briefly review Nigeria’s economy from five key sectors: Agriculture, Oil and Gas, Manufacturing, Services and Construction.
Check this story for Part 2
Sustainable business practices in emerging economies (2)