While the hubbub around COP28 might have simmered down, sustainability remains a focal point in policy regionally, and at the beginning of this month, the UAE announced the extension of the ‘Year of Sustainability,’ with the aim of keeping climate action front and centre.
Indeed, action on sustainability within business is crucial to realising climate goals, and with a global shift towards sustainability and ESG reporting standardisation and regulation, businesses are moving towards greater ESG adoption and disclosure.
Dubai Chamber of Commerce recently polled the local business community to gain insight into how the landscape is evolving. ESG Mena takes a look at what they found.
Push towards ESG disclosure & standardisation in the MENA
Despite the politicisation of ESG, backlash in the US bubbling into Europe and beyond, and subsequent backsliding on sustainability, company awareness of the imperative to operate more responsibly is growing.
This is accompanied by growing greenwashing regulation and sustainability legislation. For example, the EU recently gave the green light to greenwashing rules, while in the US, California has legislated on climate reporting.
Movement toward standardisation is also being made, with the addition of more regulation in the ESG space too, including in the Middle East. This has been seen in the introduction of the GCC Unified Sustainability Disclosure Metrics and mandatory ESG reporting for listed companies in the UAE.
Reflecting this regional regulatory push toward sustainability and ESG, last year, research from PwC on business leaders in the Middle East found that business leaders are increasingly integrating ESG into company operations.
For example, 64 per cent of the companies polled from across different industries were found to have adopted a formal ESG strategy, while the number of companies with no ESG strategy was found to have halved.
Seventy per cent of those polled reported on their ESG impact, and 59 per cent had their reporting formally audited or assured.
Assessing how the situation is evolving in Dubai specifically, the Dubai Chamber of Commerce’s research revealed similar results.
Understanding the key drivers for ESG adoption
Dubai Chamber of Commerce, one of the three chambers operating under the umbrella of Dubai Chambers, through its ‘ESG Pulse Survey,’ assessed the adoption of ESG practices among family businesses, multinational companies, and private companies across four performance levels.
Here, ‘Comprehensive’ referred to the adoption of an integrated approach to ESG in all key areas; ‘solid’ indicated a systematic focus on some practices; ‘limited’ applied to using unsystematic methods to adopt certain practices; and ‘absent’ indicated the absence of a programme for ESG practices.
Conducted in the second half of 2023 by the Centre for Responsible Business, the report found that 26 per cent of companies had adopted a comprehensive approach, and 36 per cent had adopted ESG practices at a solid level. The same percentage of respondents had a limited adoption of ESG practices, and 8 per cent had not yet adopted a programme for ESG practices.
Interestingly, it found that companies are motivated to pursue ESG practices voluntarily based on the recognition that this is the right choice to “achieve the desired benefits.”
However, it was also highlighted that the publication of ESG reports remains in its infancy, with a lack of adequate data cited as a key driver here.
Indeed, globally, inadequate data has been highlighted as the “biggest obstacle” to ESG progress, and when it comes to data management, a recent report found that many companies still rely on manual ESG data collection and use spreadsheets.
Likewise, Dubai Chambers found that while many companies have commenced ESG reporting, almost a third do not have a dedicated department or team responsible for overseeing the implementation of ESG practices.
This is reflective of global trends, too, with a Thomson Reuters report finding that while 40 per cent of UK-based respondents have a dedicated ESG department or team, in North America, this drops to 24 per cent.
The green and ESG skills gap and a slowdown in ESG staff hiring in some regions are likely to be factors here.
The Dubai Chambers report also noted that some of the drivers and constraints of these practices affect SMEs more than large companies. Impact was also noted to vary according to the type of ownership.
Driving forward further action
Ultimately, the report concluded that there’s no one-size-fits-all approach and highlighted the importance of tailored measures. That said, it noted the adoption of standardised practices and the outsourcing of ESG reporting could be of huge benefit to companies struggling to navigate the ESG landscape.
It also stressed the importance of companies acquiring the appropriate ESG knowledge, validating the credibility of their sources, and developing systematic frameworks to measure the maturity of ESG practices.
Further, institutional frameworks and incentives from key stakeholders were noted as having the potential to accelerate ESG adoption among the Dubai business community.
This, it shared, also has a role in highlighting ways in which organisations could enhance their ESG data capabilities, including investing in technological solutions, training programmes, and data governance frameworks.
Speaking on the survey results to ESG Mena, His Excellency Mohammad Ali Rashed Lootah, President and CEO of Dubai Chambers, commented: “The ESG Pulse Survey has yielded valuable insights into the maturity of ESG within the Dubai business community, as well as the key drivers that motivate companies in the adoption of ESG practices. The highly encouraging results will help shape initiatives and tools aimed at further advancing the ESG agenda, including our comprehensive ESG Label programme.”
This program, it was shared, has been developed in line with leading global frameworks to enable companies in Dubai to measure, benchmark, and report their goals, achievements, and activities.
His Excellency added: “Dubai Chambers remains committed to accelerating the adoption of responsible business practices throughout the private sector to drive positive impact and further strengthen the emirate’s position as a global leader in the field of ESG.”