ESG trends in the Middle East
Great progress on ‘E’ by the government sector leaves ample room for impactful private initiatives on ‘S’
The volume of high-level government-led, sustainability-driven initiatives being rolled out in the Middle East is simply staggering and their potential impact is even more impressive. Regional leaders seem to be putting the money behind their commitments, turning rhetoric and pledges into tangible actions designed to reduce their carbon footprint, and promote social and governance reforms.
The United Arab Emirates (UAE) has launched the region’s first independent Climate Change Accelerators as a vehicle to drive its commitment towards net zero by 2050. This comes on the back of an earlier announcement about the launch of the world’s first regulated carbon credit trading exchange and clearing house.
Saudi Arabia plans to increase renewable energy production to 50% of grid by 2030, with significant changes and restructuring within some of the regulatory bodies responsible for enforcing environmental laws, regulations and permitting systems. The world’s biggest oil producer has also unveiled its Green Initiative, endorsing a circular carbon economy and a commitment to plant 50 billion trees in the Middle East.
And Kuwait has outlined its plans to join the UAE and Saudi Arabia in committing to carbon neutrality by 2050.
Intraregional cooperation is gathering steam too. Egypt has recently announced plans to construct a US$11bn wind farm to provide electricity to Saudi Arabia and other countries. And a private company from the Kingdom has signed an MoU with the Egyptian government to build a $3.5 billion green hydrogen project in the land of the Pharaohs.
Increasing international pressure stemming from the climate crisis side effects, combined with the need to diversify energy sources due to the gradual depletion of oil and gas resources, are the major forces behind the speed and scale of the region’s energy transformation drive. And the Middle East has been a focus thanks to COP27 at Sharm El Sheikh and COP28 in Dubai 2023.
There’s no doubt that the E in ESG is being embraced fully by the region.
Social, however, has potential to deliver diversified revenue streams by attracting a new client base. It can show the way for the private sector in the Middle East to adopt a more systematic and streamlined approach to ESG.
After all, environmental initiatives in the energy transformation sector are already the focus of governments and require action on a huge scale to have any impact on the path to 1.5 degrees. Instead, by focusing on their social footprint, companies of all sizes can really help communities and social groups benefit and prosper through targeted initiatives that provide localised solutions to challenges.
There is a long list of social challenges Middle Eastern companies can choose from to channel their efforts and resources. Youth unemployment is a major issue and the private sector holds the key to unlocking people’s potential through skilling and upskilling initiatives. They also have an important role to play in addressing Diversity and Inclusion, women’s empowerment and gender equality, financial literacy and access to technology.
The UAE is on the right trajectory with its new data protection laws, regulations on ethical use of technologies like AI, and government initiatives related to human rights, diversity and inclusion. And the new Emirates’ Human Rights Institute shows the way for other countries in the region to introduce similar reforms by mandating government ministers and officials to draft a national human rights plan.
This is important both for the region’s reputation globally and for businesses of all sizes with commercial interests in the Middle East. In fact, a recent PwC study showed that ESG and sustainability factors affect Middle East consumers’ decisions more than global consumers (31% in the Middle East, compared with 18% globally). Also, 63% of Middle East consumers say that data protection is an important factor in trusting a brand, compared with 58% globally. And 65% of Gen X respondents in the same survey said that social considerations influence whether they would recommend a company or brand.
Given the complex social fabric of the Middle East, the different stages of socioeconomic development between countries in the region, and the legacies woven into sensitive Arab cultural norms and political establishments, the S of ESG needs to be addressed with care. But it mut be addressed.
The proactive adoption of pertinent and respectful ESG strategies can help elevate social change in the consciousness of local communities and encourage them to embrace it.
To effectively introduce social-focused ESG strategies, companies in the Middle East should:
- Take into account the different regional norms. Each country is very different in the way social issues are perceived, meaning companies with a regionwide footprint need to address multiple issues. And to do that, they should conduct microscopic research to identify social issues that require reform and enjoy the support of most of the population in the relevant community.
- Cross check a selection of issues with local cultural and religious forms to ensure the values are coherent and consistent with the ESG strategy’s vision and overarching purpose.
- Develop at least one partnership with a local/regional NGO which is championing the specific social cause to garner some useful insights and tap into its networks.
- Launch a series of reform-driven initiatives designed to help achieve social transformation regarding the chosen issues.
- Develop a bespoke messaging architecture in English and Arabic for each of the selected social issues. These messages need to resonate emotionally with the target communities and also hold water on a rational level with other stakeholders, such as governments, customers and partners.
- Create an integrated PR and Social Media plan, backed up by a high-quality bilingual narrative, tactical content pieces and engaging digital assets to communicate the initiatives.
- Leverage initiatives for internal communication purposes and seek to engage employees who support the initiatives by appointing them as ambassadors.
- Communicate initiatives directly to your supply chain, B2B partners and so on, to garner further support.
- Announce the impact of initiatives on an appropriate milestone depending on relevance of social issue, such Arab Youth Day or International Women’s Day.
- Seek recognition for your great work via various award schemes.
With seven years remaining of the UN’s ‘Decade of Action’, the Middle East is well placed to make some significant progress on the energy transformation and environmental protection fronts. And by holistically embracing ‘S’ in regional ESG strategies, the private sector can play a pivotal role in helping the region ‘build back better’ and flourish for the decades to come.