Our region is undergoing a rapid transformation, with this change driving economic growth, diversifying economies, creating jobs and improving overall quality of life. Reflected in national visions set out by individual countries, this transformation is threaded through every aspect of Middle Eastern society.
As a firm, we believe that embedding Environmental, Social and Governance (ESG) principles across all areas of economic and social evolution is essential to realising the ambitions of our region, enabling it to become a leader on the global sustainability stage. But what does this mean, in practical terms, for organisations and governments at the forefront of this transformation?
This year, for the first time, PwC Middle East conducted a survey of top level executives with responsibility for ESG in their organisations to better understand the level of ESG maturity in the region and to explore the main ESG issues facing businesses today.
“We have an ESG strategy because it’s the right thing to do; because it will become our licence to operate down the line; and because we need to support our customers from a business perspective. It is the future.”
Explore the 3 key themes from the findings
ESG priorities are in transition
A ‘startup’ mentality when it comes to ESG
A call for clearer direction from governments
There is some lack of alignment between corporate and government ESG priorities. For example, water scarcity and biodiversity rank a low fourth and fifth place among the top environmental priorities for companies, despite national policies to protect both.
Bridging this gap is critical for greater alignment between corporate and national ESG strategies, meaning businesses and governments need to work together on key priorities or there is a risk of counter productive actions.
More positively, climate change, diversity & equality do rank highly which shows some synergies.
ESG is clearly on the corporate radar, but our findings show that companies in the region are still in the early stages of developing ESG strategies. While nearly 60% of respondents said they had a formal ESG strategy in place, further questioning showed this may be an overly optimistic claim.
What we can see is that the majority of companies are still in “start-up” mode when it comes to ESG strategy and implementation, with only 18% of respondents saying their companies had teams and systems in place to cover the full remit of ESG functions.
For ESG transformation to make an impact, a two-pronged approach is required. First, businesses must do everything in their power to deliver on ESG issues. Second, government bodies and regulators must develop clear policies and regulations to assist businesses in their transformations.
Businesses told us that they want clearer government policies and regulations to support ESG efforts. In our survey, 86% of large companies said increased ESG regulation would strengthen and accelerate the implementation of their own ESG strategies.
“Clear guidelines, a country roadmap for decarbonisation and a level playing field for industries are all required to enable Middle Eastern companies to advance in their ESG strategies. But companies can also maximise the opportunities of ESG-driven transformations by getting ahead of the game.”
Critical next steps for sustained ESG outcomes
Ensure you properly embed your ESG strategy with clear governance
From an organisational point of view, embedding an ESG strategy begins with defining ambition and priorities that are aligned with a company’s business rationale and with national goals. Ideally, there should be clear responsibilities and mandates within an organisation to oversee and coordinate the full suite of ESG functions, which is backed up by people with the right skills and capacity to be able to deliver the strategy.
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