GCC advancing on ESG, but much work still needs to be done

01 December 2023 Consultancy-me.com 5 min. read
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Around 80% of companies in the Gulf Cooperation Council (GCC) have an ESG strategy in place in 2023, up more than 15% on five years ago. A report from First Abu Dhabi Bank (FAB) and Sustainable Square sheds light on the state of ESG in the GCC countries and the challenges ahead.

Recognising the need for increased transparency and data availability in the GCC, the report aims to provide insight into the current state of ESG practices. This initiative aligns with the UAE’s ‘Year of Sustainability’ and comes at the sidelines of the COP28 event, creating a timely narrative on corporate sustainability in the GCC.

“Here in the Gulf region, sustainability-related developments have evolved rapidly in the last five years. There has been a lot of great work taking place in every country across the region and it’s necessary that best practices and experiences are in full view,” said Shargiil Bashir, Chief Sustainability Officer at FAB.

GCC advancing on ESG, but much work still needs to be done

Source: Sustainable Square

“There is also an obvious reason for this: Without a full picture into how companies are managing climate change effects or portfolio net-zero alignment, we have no way to accurately understand the financial and business impact of a warming planet,” Bashir continued.

The report’s survey of companies in the GCC countries – with 44% of respondents being UAE companies – shows that just under half (49%) said that they are following a mixed strategy. That is opposed to other respondents that said they are following a strategy focused more on sustainability, mostly on the environment, on net-zero, or on CSR. 20% of respondents said they have no strategy currently in place.

When it comes to pushing for net-zero emissions, the UAE is in the lead among the GCC countries. In second and third are Saudi Arabia and Oman, respectively. Among the different initiatives that companies are pursuing, most (65%) said they are prioritising the adoption of innovative technologies.

Among the applications for those new technologies, hydrogen energy is a major source of optimism and could see a big boost in the Middle East in the near future. A previous report showed that a majority of energy executives in the region are optimistic about the potential of hydrogen, with green hydrogen specifically showing potential to become the green fuel of the future, if emerging tech can make production cost effective.

GCC advancing on ESG, but much work still needs to be done

Source: Sustainable Square

It should be encouraging that 17% of companies that report prioritising net-zero goals are in the oil and gas industry, certainly one of the top contributors to greenhouse gas emissions in the region. At 21%, the tech, media, and telecom industry is the next industry that most prioritises net-zero targets.

When it comes to government policy, most of the GCC countries already have national net-zero goals, like for example Saudi Arabia’s Vision 2030. This Saudi government initiative seeks to eliminate greenhouse gas emissions completely by 2030. The UAE has a similar goal, to be met by 2050.

GCC advancing on ESG, but much work still needs to be done

Source: Sustainable Square

The challenges

Despite progress, challenges persist, with a lack of standardisation (42%) and understanding of return on investment (38%) identified as the primary obstacles to picking up the pace with ESG integration. Another often-cited issue is the lack of regulation in place around ESG standards.

Different companies reported using an array of different frameworks to measure emissions and apply ESG initiatives. Most preferred the UN Sustainable Development Goals framework, with 72% of respondents saying this is the framework they align their strategies to.

The next leading frameworks were UN Global Compact and GHG protocol, both similar, yet distinct standards for corporate accountability and emissions reporting, each with their own comprehensive sets of principles and tools.

GCC advancing on ESG, but much work still needs to be done

Source: Sustainable Square

Whichever framework public and private organisations choose to follow, one point is constant and should be well understood by any leaders implementing ESG initiatives: The dangers of so-called ‘greenwashing’ can easily derail any such plans and so initiatives must remain transparent, with a commitment to excellent documentation and reporting.

“It’s a widely accepted fact that to get to net zero, corporate entities must prioritise sustainability as an essential part of their business. But of equal importance, this journey must be open and transparent – and it must demonstrate impact with compelling evidence,” said Bashir of FAB.

Monaem Ben Lellahom, CEO of Sustainable Square, said: “As organisational sustainability becomes imperative for responsible business across the world, companies in the GCC region are compelled to enhance their sustainability performance. Companies now realise that decarbonisation strategies must be integrated into business, with leadership from the board and executive being critical.”