Riyadh Al Najjar (PwC): 'ESG can drive transformation' in GCC countries

A strategy of setting ambitious Environmental, Social and Governance (ESG) targets and shifting away from oil to renewable energy has the potential to massively transform Middle Eastern countries. That is according to Riyadh Al Najjar, Riyadh-based Middle East Chairman of the Board and Saudi Arabia Senior Partner at PwC.

Economic growth in sectors other than the oil industry is being aggressively pushed in GCC countries. In order to further diversify their economies, countries in the Middle East have prioritized massive investments in tourism, the financial sector, and even novel initiatives like the metaverse.

“Regional business leaders are focused on transforming their businesses to ensure resilience in the face of global economic and geopolitical volatility and concerns around longer-term viability,” said Al Najjar in comments to business news website Zawya.

Further adoption of ESG imperatives should play a major role in the transformation of the Gulf Cooperation Council (GCC) countries’ economies, according to Riyadh.

“Through the strategic role the region plays in the energy transition, pioneering hydrogen and circular economies, developing sustainable destinations, localizing supply chains, generating employment, expanding social inclusion and good governance, ESG can both drive the transformation and create opportunities to develop world leading, competitive advantages,” he said.

ESG is a framework used to evaluate a company's performance and impact in the areas of sustainability, social responsibility, and corporate governance. The topic has gained significant importance as investors and stakeholders increasingly prioritize sustainable and responsible investments.

Companies that actively embrace and take meaningful steps towards achieving ESG targets are viewed as more future-proof and ultimately more profitable.

Renewables

Riyadh notes that new economic strategies in GCC countries will focus on technology and a shift towards renewable energy. Saudi Arabia, UAE, and Qatar are among the Middle Eastern countries that have set ambitious climate goals in line with the Paris Agreement, though major shifts need to be made as soon as possible for these goals to be met.

One example is Saudi Arabia’s Vision 2030 roadmap, which would represent fundamental, sweeping changes to the way both the country’s public and private sectors operate. Saudi Vision 2030 aims to reduce oil dependence, diversify the economy, and develop public sectors, with goals including economic growth, more non-oil trade, and boosting military spending and arms manufacturing.

According to a past report from PwC, big opportunities for the fossil fuel-based GCC economies will be found in designing strategies to use oil windfalls to accelerate the transition to renewable energy. The price of fuel is at a relatively high point due to a cut in production by OPEC member states as well as geopolitical instabilities like the war in Ukraine.

Greater integration between the countries in the region, which have historically maintained closer trade relations with countries in Asia and Europe, could also be a potentially enormous driver of growth, according to a report by Majid Al Futtaim, McKinsey & Company, and the World Economic Forum.