Businesses in the GCC face a critical imperative - prioritize environmental sustainability, social considerations, and governance practices.
Neglecting these integral dimensions hampers sustainability efforts and undermines long-term success. As the urgency to address climate change intensifies and the UAE prepares to host COP28, seamlessly integrating social and governance considerations into sustainability strategies is paramount.
Fostering comprehensive sustainability
The Gulf’s rapid development has also given rise to significant environmental and social challenges. For organizations in the GCC, three core elements - environmental, social, and governance - are interlocked to ensure effective implementation. For example, managing your environmental impacts (GHG, resource management, etc.) need robust governance and reporting systems, while ensuring the social aspects of supplier management are key.
Stakeholder engagement
In the GCC, businesses operate within a complex web of stakeholders, making it essential to prioritize social and governance considerations. Neglecting social aspects, including fair labour practices, diversity and inclusion, and community engagement, can have detrimental effects on reputation and relationships.
However, actively addressing these aspects fosters trust, loyalty, and a positive reputation. By doing so, businesses enhance the effectiveness of sustainability efforts and strengthen their relationships with stakeholders.
Access to capital
At COP28, integrating social and governance factors into sustainability strategies boosts financial performance and attracts investors in the GCC. Sustainable investment funds in the region saw a notable 40 per cent increase in 2020.
Strong ESG performance lowers capital costs, as it reduces perceived risk and enhances resilience. The GCC markets are witnessing a growing interest in sustainable finance and green bonds, exemplified by the UAE’s issuance of a $600 million green bond in 2020.
Prioritizing energy efficiency and renewable energy shields companies from energy price fluctuations and regulatory changes. By aligning with these expectations, businesses drive innovation, meet market demands, and gain a competitive advantage, attracting capital and investment opportunities.
Consumer demand and Innovation
Consumer surveys indicate that 66 per cent of consumers in the GCC are willing to pay more for products and services from environmentally responsible companies. By aligning with these consumer expectations, businesses can drive innovation, meet market demands, and achieve a competitive advantage.
Integrating social and governance considerations into sustainability strategies fosters innovation and enables businesses to tap into the growing demand for sustainable products and services.
Contributing to Net Zero targets
Businesses in the GCC have a significant opportunity to achieve net zero targets and decarbonization goals. The region has the potential to generate 164GW of solar energy by 2030, leading to a substantial reduction in carbon emissions, according to IRENA.
Saudi Arabia aims to derive 50 per cent of its power from renewables by 2030, while the UAE has increased its greenhouse gas emissions reduction targets to 31 per cent by 2030. To seize this potential, businesses must incorporate social and governance factors to strengthen their overall Net Zero strategies.
Businesses need to set ambitious emission reduction targets, implement transparent reporting, and adopt responsible supply chain practices. These governance factors ensure effective management and accountability in the decarbonization process.
Ahead of COP28, embracing a holistic approach to sustainability is imperative for organizations striving to build a resilient and sustainable future. By prioritizing social and governance aspects alongside environmental concerns, businesses can navigate the challenges and seize the opportunities presented by the global transition to a low-carbon economy.
