Stock - ESG Investing
What needs to be done on the 'E' part of ESG is clear. It is with the S that businesses need to better fine-tune their approaches. Image Credit: Shutterstock

The volume of government-led sustainability initiatives rolled out in the Middle East is staggering - their potential impact might be even more impressive.

The UAE launched the region’s first independent Climate Change Accelerators to drive its commitment towards Net Zero by 2050 on the back of an earlier announcement about creating the world’s first regulated carbon credit trading exchange and clearing house. Saudi Arabia plans to increase renewable energy production to 50 per cent of its grid needs by 2030. The world’s biggest oil producer, Aramco. unveiled a green initiative endorsing a circular carbon economy and commitment to plant 50 billion trees in the Middle East. And Kuwait outlined its plans to commit to carbon neutrality by 2050.

Egypt’s plans include a $11 billion wind farm to provide electricity to Saudi Arabia and other countries. A private company from the Kingdom has signed an MoU with the Egyptian government for a $3.5 billion green hydrogen project.

Increasing international pressure stemming from the climate crisis side effects, combined with the need to diversify energy sources, are the major forces behind the speed and scale of the region’s energy transformation.

There’s no doubt the ‘E’ in the ESG - Environmental Social Governance - is embraced fully by the region. However, progress related to the S can do with more action.

The UAE is on target with issuance of data protection laws, regulations on ethical use of technologies like AI, and government initiatives related to human rights, diversity and inclusion. The launch of the Emirates’ Human Rights Institute mandating enhanced accountability of officials to draft a national human rights plan shows the way to other countries to introduce similar reforms.

A PwC study showed that ESG and sustainability factors affect Middle East consumers’ decisions more than global consumers (31 per cent in the region compared with 18 per cent globally). Also 63 per cent of regional consumers say data protection is an important factor in trusting a brand (compared with 58 per cent globally). And 65 per cent of Gen X respondents in the same survey say social considerations influence whether they would recommend a company or brand.

Environmental initiatives in the energy transformation sector are already the focus of governments and require action on a mega-scale to have any impact on the path to 1.5-degree celsius. By focusing on their social footprint improvement, companies can help local communities and social groups benefit and prosper through targeted initiatives.

Youth unemployment is a huge one and the private sector holds the key to unlock workforce potential through skill and upskill initiatives. A proactive adoption of ESG strategies can help overcome an ‘invisible’ wall of reluctance by elevating certain social impediments into the consciousness of local communities. And encourage them to embrace change.

Conduct research to identify social issues that require reform. Many different issues may need to be tackled by companies with a region-wide footprint.

Cross check selection of issues locally to ensure the set of values are coherent and consistent with the ESG strategy’s vision and overarching purpose.

Develop at least one partnership with a local/regional NGO championing the specific social cause to garner some useful insights and tap into their networks.

Launch a series of reform-driven initiatives to help achieve social transformation with regard to the chosen issues.

Develop a bespoke messaging architecture, for each of the selected social issues. They need to predominantly resonate emotionally with targeted communities and also hold up with other stakeholders, such as governments, customers, etc.

Create an integrated social media plan backed up by quality bilingual narrative, tactical content pieces, and easy-to-engage digital assets to communicate.

Leverage initiatives for internal communication purposes and seek to engage employees.

Communicate initiatives directly to the supply chain, B2B partners, etc., to garner further support.

With seven years remaining in the ‘Decade of Action’ to achieve the UN’s SGDs, the Middle East is well placed to demonstrate significant progress on energy transformation and environment protection. By holistically embracing ’S’ in ESG strategies, the private sector can play a pivotal role to help the region ‘build back better’.