Environmental, social, and governance (ESG) has been under intense scrutiny over the last 12 months. With geopolitical tensions, economic weaknesses and cost of living increases in some parts of the world, the investment needed and costs associated with a global transition to net zero carbon emissions have put businesses under pressure.
Here in the UAE, the fourth edition of SEC Newgate’s annual ESG Monitor report found there is a strong understanding of ESG amongst residents and high expectations for businesses to improve their performance and prioritise setting and meeting ESG goals.
Respondents in the UAE are very familiar with the term ‘ESG’, being the third most likely to say they had a good understanding of it (39 per cent), behind only Singapore (41 per cent) and Hong Kong (43 per cent). A core of about 6 in 10 people in the UAE remains very highly interested in ESG issues, slightly up on 2023.
This greater understanding could be in part due to Cop28, the 28th annual UN climate meeting that was held in Dubai less than 12 months ago, which put the UAE and its climate ambitions in front of a global audience.
With the UAE firmly positioned as a global hub and growth engine for sustainability (along with technology, business, commerce and tourism), the country is uniquely positioned to accelerate inclusive climate progress. In addition, the UAE has committed to reducing carbon emissions as part of its Net Zero 2050 strategy, with some industries early leaders, adopting policies and regulations to support the government in reaching this target.
Of those asked, 90 per cent of UAE participants gave an importance rating of 7 or more out of 10 for large corporations to conduct business responsibly, and a similar rating (88 per cent) for small to medium businesses. Globally, perceived importance is lower with only 81 per cent saying the same for large businesses and 75 per cent for small to medium businesses.
More than four in five people (82 per cent) in the UAE said that companies should play a more active role in society. A similar percentage of people (83 per cent) hold a strong belief that performing well on ESG responsibilities doesn’t have to come at the expense of profitability.
When asked their opinion on top performing industries in the UAE, airlines came out on top, with 89 per cent giving a performance rating of between 7 and 10 out of 10 for conducting business responsibly. Performance ratings are relatively strong across the board in the UAE, with four industries following closely behind, all receiving an 88 per cent performance rating: banking and financial services, transportation, supermarkets and grocery stores, and tourism.
People in the UAE care a lot about broader social and environmental issues, with 97 per cent saying the UAE is on the right track (putting the UAE in first place and much higher than the global average of 47 per cent), showing optimism is high across the country.
The UAE report also showed that 67 per cent of those asked think companies should act in the best interests of all stakeholders, rather than prioritising shareholders – with the majority of investors (64 per cent) also believing this.
There is confidence in the UAE, with people having a comprehensive understanding of what ESG means, and the positive role that the government is playing in supporting corporations to be more accountable.
Despite other pressing concerns of the public in their day-to-day lives, most still see ESG issues as important to address.
This is both a communication and operational challenge for businesses and governments, so there is still more work to be done when it comes to ESG.
Companies are under intense scrutiny on ESG issues, but failing to act ambitiously and failing to be transparent about their plans and achievements on ESG issues poses a significant reputational risk.
By Elena Gramatica, Founder and CEO, SEC Newgate Middle East
