Lack of clear goals on value creation

Overall, there seems to be a lack of the private companies’ clear goals on how they wish to create value. The involved players have different set of goals, related to environmental, financial and social performance. Some are primarily driven by the environmental perspective, others by profitability. Creating employment are driving other companies. What is unclear is the balance between operating for profitability or operating primarily for other development concerns.

Many companies are aiming for performance along several dimensions, and it can become unclear what the actual aim of the company is. Some are mainly focused on doing good for the communities, or for the country, which is great, as long as the main goal is clearly communicated. However, being impact driven can also affect how the company deal with low productivity or poor results. Nevertheless, some companies might seem to accept low levels of profitability in doing good for the society. One could argue that some companies could perform better or be more profitable if they did not excuse bad performance in doing good for the environment or social purposes. It is a risk of goal ambiguity, and in order for the companies to operate in the best possible way, clear communication on goals is vital.

The lack of clear goals might also affect investors and other relevant stakeholder. When the goals are unclear, it can result in a principal-agent-problem where the leaders (agent) goals are not necessarily aligned with the owners (principal) long-term goals. Furthermore, a problem with moral hazard, since the leadership (agents) are often working for short-term value creation to benefit the short-term profits, while the investors are often aiming for long-term value creation. The government should therefore for instance set a regulatory framework that enhance long-term thinking and sustainable investments. This could for instance be done by reducing the investment barriers for such investments or benefit these companies with tax-reductions or less expensive land space. (Andersen & Idsø, 2020) (Laffont & Martimort, 2009).

However, there is also a lack of clear goals on a governmental level, where short-term successes are beneficial for future re-elections. Today, governmental decisions on financial support seem not to reflect or consider companies environmental or social efforts in some

parts of the region. Jekora is currently seeking government support but emphasised that the social and environmental good their provide to the communities is not necessarily considered in the decision regarding who gets support and not. She emphasised that: “The country is corrupt, it is difficult, but we are hopeful” (Annan M, Interview with Jekora Ventures, 31.03.2020).

Sustainability or profitability

Several of the companies emphasise that they are losing money on activities they do that makes them especially sustainable. This problem exists because there are different ways of approaching waste management. It is a balance between doing business in the right way or in the most profitable way. Sustainable innovation was described as a solution to wicked problems, and a solution to the waste challenge (Hautamäki & Oksanen, 2016).

Nevertheless, being sustainable and working towards success on three-dimensions in the industry seems to be a challenge and impair competitiveness.

In underfinanced societies like in SSA, private sector companies get little recognition for providing positive externalities for their community, country or region. If there are no incentives for companies to act sustainably, there is a possibility that the companies that do survive are the most effective but doing little social and environmental good. It is, therefore, vital that governments make it easier to do what is best for most people. Governments should play a role in incentivise sustainable behaviour so that the private companies that are doing good to the communities get compensated for it (Thaler & Sunstein, 2008). By doing so, the government are internalizing the positive externality the companies create.

In South Africa, the government's policies for companies to handle waste is driving the waste management and recycling industry. The government has introduced legislation including fees on non-compliance on waste management in the commercial sector. This means that big waste generators demand a waste management and recycling industry that manages waste responsibly to make them legally compliant (Waste plan). The demand for compliance can incentivise sustainable practices in the industry, without eroding income levels. A lot of the multinationals that are big waste generators must further comply with a set of rules around the world and must report on sustainability in their value chain. The increased global focus on sustainability might eventually give waste management companies handling waste sustainably a competitive advantage in SSA.

Further, there are valuable aspects of running sustainably, that might benefit the companies in the long run. The reputation sustainable led companies get in the local communities are valuable for the companies. Jekora argued that their current success is based on the mentality of their staff, that they all want to do the right thing, and are mentally inclined. Waste plan argued that their success was based on their market reputation and the formal caring environment they were building.

Running sustainably could be beneficial especially in terms of funding from international investors. Globally there are growing environmental concerns, along several dimensions (Waste Plan). Many foreign companies in all sorts of industries that operate in SSA are therefore giving more attention to environmental and social improvement to the region (Coba). However, several of the respondents are under the impression that the motivation for a majority of the big international companies is more for the image of it, to have content on webpages and in sustainability reports. Yet, many local companies are running sustainability and contributing to social aspects because they have to, and they urgently see the needs of their populations (Coba).

The growing “sustainability”-concerns can be an opportunity for private companies in SSA both related to more funding towards sustainable projects, and increased demand for recycled products globally. There are also international investors in SSA, NGOs and companies wanting to support waste management companies in order to show their customers that they care about their end-products. Internationally, especially in Europe, there is also an increased understanding of sustainable solutions as a competitive advantage. Being a sustainable company in many developed countries is also a legal compliance aspect and are, in most cases, making companies more profitable (Eccles et al., 2014). Therefore, one could argue that international investors would rather invest in companies being sustainably run also in Africa, despite possible lower margins.

There is a need for the private sector companies to have clearer goals on value creation.

Moreover, for governments to incentivize value creation along several dimensions, which can enable aligned motivations for companies despite the way in which they are owned and the goals of their investors.