ESG offers GCC firms new business opportunities
09 June, 2022
This article was first published in Arab News
Middle Eastern nations have taken decisive steps toward embracing a full environmental, social and governance agenda over the last year.
Bold commitments and actions have been taken to transform the region and create opportunities for its youthful population. Three countries — the UAE, Saudi Arabia and Bahrain – now have net-zero carbon emission goals. Furthermore, the ESG values of sustainability and fairness underpin the economic diversification and development strategies of most countries in the region, such as KSA’s Vision 2030, Qatar’s National Vision 2030 and the UAE’s Energy Strategy 2050.
PwC wanted to understand how companies in the Middle East are responding to these new national priorities — to know how they were dealing with ESG issues within their own organizations, their priorities for action, barriers to implementation, and how these can be overcome. Our April report, “Reimagining our region through ESG”, is a first of its kind — a holistic assessment of business attitudes and priorities toward ESG for the Middle East from top-level executives.
The survey shows that firms have a clear sense of the relevance of ESG to their business. The pandemic, and the urgency to act against climate change, has clearly repositioned ESG from a niche to a mainstream concern. Our survey found a growing appreciation for the business opportunities that are opening up as a result of ESG policies. In interviews conducted with senior executives, many were keen to talk about new technologies that lower the environmental emissions of oil and gas industries, and the opportunities for financing sustainable investments with innovative instruments such as green and blue bonds.
However, national agendas also need the private sector to bring them to life. More than ever before, private investment, innovation, management capabilities and expertise will be needed to realize national ambitions and accelerate transformation over the coming years.
Yet the responses to our survey revealed there is still some misalignment between corporate ESG strategies and national ESG priorities. For example, only 34 percent of companies had net-zero commitments in early 2022, which leaves a majority of the business community out of sync with national goals. Attitudes toward water use and conservation also lag behind national priorities. In our survey, only 27 percent of executives listed water security as a priority for their organization, despite national programs to protect this increasingly scarce resource in one of the most water-stressed regions in the world.
For companies in Gulf Cooperation Council states, the adoption of integrated ESG strategies is an opportunity to create world-leading, competitive advantages that will help propel the region onto the global stage
Firms also expressed a need for better and clearer government policies and regulations to guide them on ESG issues — for example, a common standard for measuring carbon emissions and other environmental impacts. Clear guidelines, a country roadmap for decarbonization and a level playing field for all industries are all required to allow companies to advance their ESG strategies. But companies can also maximize their opportunities by getting ahead of the game.
From an organizational point of view, there are clear steps companies can take to embed an ESG strategy. It begins with defining priorities that are aligned with a company’s business rationale and national goals. This means firms should define roles and responsibilities to deliver the strategy, set measurable targets to chart progress and decide on their level of accountability — from internal reports to full external audits. Also, establishing clear ESG accountability and capability in terms of strategy development, systems, processes and teams in an organization are critical to embedding these policies.
For companies in Gulf Cooperation Council states, the adoption of integrated ESG strategies is an opportunity to create world-leading, competitive advantages that will help propel the region onto the global stage. Additionally, firms will not only be better prepared to address the physical and regulatory risks of climate change, they will also be better positioned to identify new business services and products that are likely to emerge within national ESG-inspired economic transformations.
The adoption of ESG strategies in the private sector will allow organizations to deliver more sustainably while creating value that will extend into the communities they operate in. As a result, governments, businesses and communities will benefit from, and contribute to, sustainable development in a mutually beneficial way.
Adopting an ESG strategy is not just about doing good, it is about ensuring a business is sustainable over the long term. Our research indicates that businesses across the region want to take on a greater role to achieve national ESG commitments. Organizations that act fast and access these opportunities will ensure their economic relevance in the future. With Conference of the Parties, or COP, 27 and 28 climate change meetings set to take place in the region — in Egypt in November and the UAE in November 2023 — the eyes of the world will be focused on the Middle East over the next two years. This presents a great opportunity for businesses to showcase their ESG credentials. That is why businesses in the GCC should start planning an ESG strategy today.
AbdelKhaleq Ahmad is a partner, economics and sustainability at PwC Middle East
