What should be the 3 main ESG focus areas of MENA businesses:

Gulf Cooperation Council

What should be the 3 main ESG focus areas of MENA businesses:

1. The Middle East is currently behind the west on ESG ratings and reporting

If companies want to attract foreign investment and meet government environmental pledges, they must establish recognized ESG reporting standards and ensure their company is properly aligned with ESG targets.

2. Mena Business Boardrooms are in planning mode

A lot of companies are still at the discussion and planning phases of defining their ESG strategy. For there to be further progress, then there should be more accountability at the senior management level. Some companies in the west encourage this by Linking executive pay with ESG achievements.

3. Human capital management (HCM) topics take priority over environmental issues

Whether it’s Emiratization or Saudization, encouraging nationals to join private sector has and will always be a priority, of GCC companies. Many already have long established policies in place due to federal regulations. Businesses are more committed and invested in HCM initiatives, like diversity, equity and inclusion, as opposed to climatefocused ESG strategies.

 

Why ESG is gaining traction in the Middle East

The United Arab Emirates Securities and Commodities Authority (SCA) expects public joint stock companies listed in the UAE to disclose their ESG credentials. This affects over 130 companies and requires they comply. The rest of the GCC are also catching up; the Saudi exchange has published ESG guidelines which enforces listed companies to report their progress.

GCC countries will be expected to take bigger steps if they want to attract foreign investment as ESG credentials rank higher than ever when major investment decisions are taken.

GCC have traditionally lagged behind other regions in the global movement towards better ESG governance, as a result they are to catch up fast, as they tackle gender diversity, board independence and corporate disclosures all at once.

What affects will Cop28 make to ESG in MENA?

Because GCC countries are dependent on fossil fuels for energy, they are seen by some as more vulnerable to the effects of climate change with environment impacts such as desertification, water scarcity and uninhabitable living temperatures. For many years governments in the GCC have begun addressing these concerns by diversifying their economies away from fossil fuels, investing heavily in renewables introducing, water repurposing and recycling and even rain enhancement programmes (Cloud Seeding). The UAE have a goal to achieve net zero emissions by 2050, along with Saudi Arabia’s sovereign wealth fund which is also targeting net-zero emissions within the same time frame. Policymakers now need to double down on their efforts to draft policies highlighting their ESG goals and commitments.

ESG reporting mechanisms in the GCC

What gets measured, and how it gets measured is what counts in achieving meaningful change. By committing to a recognized reporting structure is the only way forward. For example following the GRI (global reporting initiative) framework of ESG reporting. Adopting policies and procedures from the Chairman/CEO down is the only way to make it happen. In the wake of Cop28 hosted in UAE in November 2023 it’s expected more businesses will move from talking and discussing phase to moving into action with sustainability objectives, reporting and publishing their own SDG’s within a reporting framework in 2024.


Diversity, Equity and Inclusion Are on the Agenda

Diversity, equity and inclusion for board members and management roles, will be top of 2024 business agendas. Having a key ESG strategy with emphasis on ‘social’ and a dedicated team to drive implementation, GCC companies need to keep up with their peers and best international practices. While a lot there’s been a lot of progress around nationalisation and the growth of women in leadership, there has to be further strides made to keep pace with the western business workplaces.

 

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