Four actions your business needs to take to unlock its ESG potential

The past year has seen more concerted efforts in the Middle East to advance the ESG agenda, with Saudi Arabia, the UAE and Bahrain all making net zero pledges. As these commitments trickle down to businesses, current discussions revolve around creating sustainable roadmaps that will enable national targets to be achieved. To better understand the current state of maturity of ESG in the region, earlier this year PwC launched its first ever ESG survey in the Middle East of business leaders across the region and their ESG business practices. In this article we highlight the key challenges and opportunities that business leaders anticipate, and what businesses should do now to accelerate progress on their ESG journey.

Aligning government and private sector priorities

There is a disconnect between the priorities of national governments and businesses. For example, while addressing water scarcity is a top priority for all governments in the region, with billions of dollars invested each year in building new desalination capacity to compensate for dwindling freshwater reserves, only 27% of business respondents mentioned water security as a priority. A similar gap exists for concerns over the accelerating loss of natural habitats and plant and animal species, with only 16% of respondents prioritising biodiversity preservation. Bridging this gap is critical for greater alignment between corporate and national ESG strategies, otherwise there is a risk of counter-productive actions.

This suggests that there is an untapped opportunity for businesses to anticipate and meet demand for new services and products that are aligned to national priorities and the ensuing economic transformation. While not all industries have direct impact on say water conservation and biodiversity preservation, companies can take steps to reduce resource use and increase resource efficiency across their value chain by sourcing from ESG-compliant providers.

A call for clearer policy direction

Businesses also value clearer direction from the public sector. 86% of larger organizations want regulatory and enabling policies to accelerate the implementation of ESG strategies, especially on sustainable procurement, impact measurement, and disclosure standards.

A good example is the region’s continued dependence on fossil fuels as a source of energy, which is a barrier to industrial decarbonisation. Governments should focus on developing these policies that will enable energy efficiency measures, renewable energy investments, directives on how to measure carbon emissions, circular economy initiatives, and policies to save and reuse water. These measures would give companies more direction in shaping their own tangible ESG roadmaps that are better aligned to national goals. 

Actions businesses should consider

While businesses may be at different stages of their ESG journey, there is a set of enabling actions that should be established from the outset and embedded within the organisation. 

1. Embed your ESG strategy:
   In order to successfully embed their ESG Strategy, businesses should define ambitions and priorities that are aligned with their business rationales and national goals. Businesses should have an ESG lead in charge of overseeing and coordinating the full suite of ESG functions. This person will require access to people with the right skills and capacity to deliver the ESG strategy.
   

2. Define KPIs and Establish Data Systems
   KPIs must be set to measure progress and will be enabled through robust data collection and reporting systems. Companies should invest in obtaining the capabilities to align with global standards and that capacity is built to collect and report on non-financial ESG metrics for internal and auditing purposes alike.
   

3. Understand the business context for ESG
   Businesses should identify existing opportunities and understand how they align with the company’s priorities as well as those of governments’. Early adopters will define the creation of new business services and products that could create real value and wider benefits for society. An effective ESG strategy will also help anticipate and manage risks in a proactive manner
   

4. Integrate the three ESG pillars
   The three pillars of ESG are complex and interconnected subjects. While the environmental pillar has been at the forefront of ESG conversations, an integrated approach including social and governance issues is critical for sustainable outcomes. In this system, traditional financial measures of success are complemented by new considerations that create value, including environmental sustainability, employee engagement, external partnerships, and broader societal wellbeing.