In the Middle East, there is a growing maturity and understanding of Corporate Social Responsibility as encompassing economic aspects of an organisation, as well as environmental and social.
National initiatives like the ‘Year of Giving’ and the ‘Year of Tolerance’ in the UAE, organisations are starting to think about the wider context and implications of social responsibility. More than a potential ‘nice-to-have marketing stunt’, it is recognised as a responsibility monitored by regulatory authority. Environmental, social and governance (ESG) may have played a big part in enabling this shift in perspective.
In January 2004, then UN Secretary-General Kofi Annan wrote to the CEOs of significant financial institutions to take part in an initiative to integrate ESG into capital markets. Since then, ESG has evolved and moved from the sidelines to the forefront of decision-making.
In the last decade, various governments worldwide, including those of Switzerland, France, the UK, Italy and Germany, have enacted over 500 new measures to promote this approach, and players from governments and regulators to capital markets, from businesses to consumers are becoming involved.
ESG disclosures gain momentum
Direct and indirect pressure on corporates and other types of enterprises to make more detailed ESG-related disclosures are increasing, and companies are acting now to establish these.
With ESG, organisations are subject to a set of non-financial reporting. Coupled with increasing investor demands, these new rules could have a profound social and economic impact on companies.
Regulatory authorities, for example, are establishing standards and frameworks to ensure mandatory sustainability reporting. Abu Dhabi Financial Services Regulatory Authority (FSRA) plans to introduce ESG criteria for entities at Abu Dhabi Global Market (ADGM).
Furthermore, as stakeholder expectations increase, companies may be faced with growing pressure to manage risks and are expected to be more responsive. Many of these issues are also partly driven by consumer and market demand, such as the need for energy efficiency.
Engagement with stakeholders is therefore central to an organisation’s sustainability, whether shareholders, customers, employees, the community or non-governmental organisations (NGOs).
Many companies only think about human stakeholders, but they have to consider representing the rights and interests of non-human entities as well, including our natural habitat, which is facing unprecedented risks today.
ESG in the wake of crisis
According to the Global Risks Report 2020, which offers a ten-year outlook of some of the biggest challenges facing us, the top five global risks in terms of likelihood are all related to environmental concerns (the report was published before the COVID-19 pandemic).
The publication sounds the alarm on extreme weather events with major damage to property, infrastructure and loss of human life, failure of climate-change mitigation by governments and businesses, and major biodiversity loss and ecosystem collapse.
These may result in irreversible consequences for the environment and severely depleted resources for humankind, as well as industries.
There could also be several interlinked consequences, as witnessed with COVID-19, which has far-reaching social, economic and environmental impacts. The stock markets have taken a hit, and as productions units are shut down, business activity has slowed tremendously.
Now is the time for organisations to listen to what stakeholders want and to implement relevant policies that will safeguard their interests.
Leading banks such as Emirates NBD, Dubai Islamic Bank, Mashreq Bank, Emirates Islamic and Commercial Bank of Dubai announced relief measures for their individual and corporate customers to deal with the impact of the outbreak .
Food delivery platform Talabat announced contactless delivery to safeguard its customers and prevent the spread of the virus. The UAE government has also announced an AED 126bn stimulus package to reduce the impact on both individuals and businesses in the country.
The emirates of Dubai and Abu Dhabi are also implementing a number of measures to counter the economic impact of COVID-19. These actions aim to reduce the cost of doing business and simplifying business procedures, especially in the commercial, retail, external trade, tourism, and energy sectors.
Al Futtaim Group has said it will make substantial contributions to ease the financial burden of its retail tenants by offering a fund of AED 100m to help affected retail businesses as a result of the slowdown.
Meanwhile, Majid Al Futtaim-owned Carrefour has seen a spike in online grocery orders, which has prompted the company to transform many of its supermarkets and hypermarkets into fulfillment centres to cope with the demand.
Sound leadership can make a big difference at times like this, by giving stakeholders confidence that the company will be resilient through crisis. Regionally, many CEOs have conducted virtual sessions with their employees to convey messages of strength and resilience during this difficult time.
These challenging times prompt societies to better understand organisations’ social responsibility towards employees, customers, and other key stakeholders, based on how well they engage and help them cope in such situations.
In the unprecedented times we live in, ESG is perhaps more relevant than ever. While the regulatory developments in the region are a positive step, there is still room for organisations to better understand and recognise the all-round advantages of environmental and social governance.