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The Challenges Of ESG Practices In The MENA Region In 2023

Author: Jimmy Barron
Published:March 26, 2023
3 mins 50 secs

ESG (Environmental, Social, and Governance) factors have risen in importance for companies around the world, including in the MENA (Middle East and North Africa) region.

While important for organizations to put in place, there are significant challenges to implementing ESG policies. 

What Are ESG Practices And Why Are They Important?

ESG represents a set of standards for a company’s behavior across three primary sectors: environment, social, and governance.

Environmental criteria display how organizations interact with the planet. Environmental business practices include using renewable energy sources to become a net zero company

The social element focuses on how relationships are managed with employees, suppliers, and communities.

For example, issues about workers’ rights and inclusion fall under this category.

Governance concerns leadership primarily issues such as internal management, executive pay, and shareholder rights. 

ESG is important as it helps identify many risks and opportunities that could affect an organisation’s growth, share prices, and long-term sustainability.

It also ensures that investment is only being put into responsible businesses – those that are energy conscious, look after their employees, and use fair management practices. 

What Are The Challenges Of ESG Practices In The MENA Region?

There has been a shift towards ESG in recent years and this has created new developments for the MENA business landscape.

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Many organizations want to start managing their own ESG ratings but they face several challenges in doing so:

Environmental 

According to RSM specialists, environmental issues vary across the sector but some of the most common are “tied to matters such as grid electricity, water, and the consumption and recycling of certain resources”.

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There is a growing interest in addressing these problems, however, the biggest obstacle for MENA regions will be in “playing catch-up” as assessment and reporting are not as developed as in other areas. 

Social 

Social issues can be put into three distinct categories: workplace, marketplace, and community.

The first two are concerned with how employees and customers are treated within organizations.

Community engagement is about community initiatives and sponsorships, and whether companies are making an “overall positive impact on the surrounding community”.

Governance 

This involves “the overall management of business practices and operations” and this includes everything from risk management to demographic diversity in management.

MENA businesses also experience some unique challenges such as corruption and fraud amongst others.

What Are Steps That Companies In The MENA Region Can Take To Implement ESG Policies?

Environmental, social, and governance (ESG) policies have become increasingly important for companies worldwide, including those in the Middle East and North Africa (MENA) region.

Here are some steps that companies in the MENA region can take to implement ESG policies:

Establish ESG Goals 

Companies in the MENA region should establish clear and measurable ESG goals that align with their business strategy and values.

This will help them identify areas where they can make a positive impact on the environment, society, and governance.

Conduct ESG Risk Assessment

Companies should conduct a thorough ESG risk assessment to identify the environmental, social, and governance risks and opportunities within their operations and supply chains. This will help them to prioritize their ESG initiatives.

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Create ESG Policies

Once the ESG goals and risks have been identified, companies should create ESG policies that outline their commitment to sustainability and responsible business practices. These policies should be communicated to all employees, stakeholders, and suppliers.

Develop ESG Metrics And Reporting

Companies should develop ESG metrics and reporting mechanisms to track their progress against their ESG goals.

These metrics should be communicated to stakeholders through regular reports and other communication channels.

Engage With Stakeholders

Companies should engage with their stakeholders, including customers, employees, investors, and suppliers, to understand their expectations and concerns regarding ESG. This will help them to identify areas where they can improve their ESG performance.

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Integrate ESG Into Business Operations

Companies should integrate ESG considerations into their business operations and decision-making processes.

This includes incorporating sustainability criteria into procurement processes, supply chain management, and product design and development.

Implement ESG Training

There should be training programs for employees to build awareness and capacity around sustainable business practices. This will help to embed ESG considerations into the company culture.

Monitor And Review

Finally, it’s important for companies to monitor and review their ESG performance regularly to ensure that they are making progress towards their goals.

This will help them to identify areas for improvement and adjust their ESG policies and practices accordingly.

Conclusion 

Challenges are everywhere but eventually strategies are going to win. By taking these steps, companies in the MENA region can effectively implement ESG policies and demonstrate their commitment to sustainability and responsible business practices.