Middle East companies call for a new green deal ahead of COP28, PwC ESG report shows
The latest PwC ESG Middle East report reveals that companies are transitioning from an ESG "start-up" mode to a more sustainable "scale-up" mode, driven by climate risk awareness and regulatory compliance. The survey, which polled business leaders from various industries, highlights that 64 percent of companies have adopted a formal ESG strategy in the last year, and the number of companies with no ESG strategy has halved.
"ESG transformation requires a joint effort between businesses and government bodies. To accelerate progress, companies must prioritise ESG imperatives, while policymakers should continue to develop clear policies and regulations to support their ambitions," says Stephen Anderson, PwC Middle East's Strategy and Markets Leader. "Green standards, improved circular infrastructure and tangible incentives for green growth are becoming increasingly important for companies in the region. The three most desired ESG-related government policies are clear policies and regulations, certification mechanisms, and tangible incentives for green growth, which businesses hope to see announced at COP28."
Businesses are increasingly transparent about their environmental impact, with 70 percent reporting on their ESG impact and 59 percent having their reporting formally audited or assured. The survey reflects the region's growing emphasis on sustainability and accountability.
Organisations are taking practical steps towards ESG, with 60 percent of survey respondents calling for increased time allocation by leaders to address ESG-related issues such as risk management, compliance, and circular economy. The Middle East has also witnessed a growing sustainability mandate at the executive level, with over a quarter of respondents stating they now have a Chief Sustainability Officer (CSO), and responsibility for ESG shifting from CEOs to CSOs.
Dr Yahya Anouti, PwC Middle East’s ESG Leader, said, "In last year’s survey, companies in the Middle East were in the early stages of their ESG journeys with many only just starting to think about developing their ESG strategies. This year, our survey finds that companies have taken concrete steps in progressing their ESG actions while highlighting significant gaps, notably within sustainability skills and green funding. Alongside an increased appetite and progress seen on ESG in the region, companies are developing a stronger sense of what is needed to further progress on their ESG agenda. Businesses expect governments in the region to step up and develop policy frameworks similar to the Green New Deal in Europe for the Middle East region ahead of COP28. We strongly believe that with the right coordinated response from governments, 2023 could be the region’s most environmentally transformative year yet."
A lack of internal skills and expertise in sustainability is the top barrier to advancing the ESG agenda, according to 41 percent of companies surveyed. In addition, despite the region's active participation in raising green finance, finance is a significant gap, with almost one-third of respondents citing funding constraints as a major barrier to ESG implementation. The report highlights a lack of awareness and access to green finance, with nearly half of the organisations surveyed relying on self-funding for ESG activities and only 13 percent accessing sustainable finance.
The report details four critical areas that need to be addressed to further drive ESG transformation in the region - Ensuring policy coherence, integrating ESG thinking throughout the organisation's operations and strategy, building sustainability skills and boosting access and clarity on green financing.