Gulf Region Sustainability and CSR Trends in 2017

Nikos Avlonas

Founder and President -CSE

Adjunct Professor Sustainability, DePaul University (Chicago)

Over the last few years we’ve seen sustainability and corporate responsibility climb the corporate ladder, to the point where many companies have put it at the heart of their business strategy.

Here are several global sustainability trends to watch out for in 2017 for Gulf Countries:

1. Gulf region pledges to COP21

Climate change has been on the agenda for many decades, with awareness steadily growing but with no significant commitments. Yet in 2015 a bold new agreement was signed in Paris, which sets out a global action plan to put the world on track to avoid dangerous climate change by limiting global warming to well below 2°C. Paris agreement (COP21) was adopted and signed by 195 countries, including USA and China – the world’s biggest polluters and two countries traditionally reluctant to make commitments on the climate change front. Six Gulf countries (Qatar, Kuweit, UAE, Oman, Saudi Arabia, Bahrain) are among the world’s top 10 per capita emitters. 16 MENA countries have submitted their pledges. Most countries have two targets: an unconditional target (to be reached by a country on its own with domestic resources) and a conditional target (contingent on outside financial and technological assistance). For example, UAE has pledged a 24% clean energy by 2021, Oman has pledged a 2% decrease unconditionally by 2030, and Saudi Arabia a decrease of 130MtCO2 annual by 2030.

2. Sustainability Reporting in the Gulf Region

As the importance of sustainability continues to rise for companies around the world, demands for accountability are growing stronger.  According to a survey by KPMG (2015), in UAE about 30% of the largest 100 companies produce sustainability report, an increase of more than 10% in the last two years. In Oman about 35% of the 100 largest companies produce an annual sustainability report. The Global Reporting Initiative (GRI) has published an analysis paper titled ‘Sustainability and Reporting Trends in 2025: Preparing for the Future’.  The paper, which is the first to be published as part of GRI’s 2025 Reporting Project, examines future trends in sustainability and corporate reporting and disclosure. GRI’s Reporting 2025 paper identifies several trends that indicate how disclosure will evolve in the next decade. Some of these trends include:

• Companies will be held accountable, more than ever before
• Business decision makers will take sustainability issues into account more profoundly
• Stakeholders will have more access to data, which will require organizations to align real-time decision-making processes with their communication on issues such as climate change
• New data technology will lead to greater transparency with corporate reporting moving fully into the digital realm and occurring in real-time instead of annually. etc

3. The rise of CFO’s role in sustainability

Historically, Chief Financial Officers (CFOs) were not deeply or directly engaged in sustainability efforts, viewing them as too soft or not in their purview. In a survey conducted by Ernst&Young and GreenBiz Group, 65 % of companies stated their CFO has become involved in sustainability. One key reason for growing CFO involvement is the growing scrutiny of company sustainability issues by equity analysts. The growth of integrated corporate reports, in which sustainability data is reported alongside traditional financial reporting data emerging trend in business, will further engage CFOs in sustainability.

4. Measuring Sustainability and Corporate Responsibility

The member countries of the Gulf Co-operation Council (GCC) are expected to post robust growth over the next decade both in terms of population and GDP. Although the economic forecast is positive, it carries a risk: that un managed growth will bring negative side-effects such as power shortages and soaring prices, in particular for food. Therefore the key measures for ensuring long-term sustainable growth are:

• Introducing energy-efficiency measures
• Investing in clean fuel and renewable energy supplies
• Improving energy efficiency
• Investing in new water desalination capacity
• Buying or leasing agricultural land abroad

5. Green Buildings

GCC countries spend more than $35 billion in green real estate projects that are free from all the polluting elements and based on the rationalization of electricity consumption and water with maximum use of renewable energy sources as well as low cost of construction and operating works. Dubai acquires 40% of the total green buildings in addition to implementing all the green building requirements by Dubai Municipality on all government buildings and private enterprises after being optional. The Saudi Green Building Forum pointed out the Kingdom now owns 15% of the total green buildings in the Middle East, where their budget reached $26 billion distributed among 76 projects.

6. Energy

The GCC counties approximately have 40% of the world’s oil reserves and 22%% of the world’s gas reserves. Thus in the past decade a 74% increase in energy consumption has been observed, with a projected further increase until 2020 of 10-15%. At the same time, GCC countries have made a general commitment to reduce GHG emissions, embracing the UN Framework Convention on Climate Change (UNFCCC). In Qatar, the Qatar Solar Energy was inaugurated in 2014 as one of the vertically integrated photovoltaic module production facilities in the region (300MW). Also, since 2008 a joint clean energy investment fund of $400 million was established between Qatar and the UK in order to attract investments. In UAE, the fastest rate of photovoltaic electricity generation can be observed including large and small scale production units. Abu Dhabi plans to produce 7% of its energy from renewable energy resources by 2020 and Dubai is committed to producing 5% of its energy from renewable resources by 2030.

7. Legislation – Government Strategy

Governments around the Gulf region have taken significant steps towards sustainability. For example, The Government of the UAE, both at a federal and Emirate level, intends to become “sustainable” from a social, environmental and economic perspective and these perspectives all overlap and impact the other. Efforts focus on the sustainable use of its resources (such as water and agricultural land), to diversify its economy (such as moving away from reliance on oil) and protect the quality of life of its inhabitants. This has included making sustainable development one of the key goals of UAE Vision 2021, the introduction of new green building legislation and new sustainable policies.

 Sustainability was an influential topic of the past few decades and it remains so today.

The trends will only increase over the coming years, with more companies taking their own path when it comes to sustainability and, increasingly, using sustainability as a way to differentiate themselves from their competitors.