Environmental, social and governance (ESG) is rapidly becoming a core pillar of long-term growth and sustainability for organisations globally. The United Arab Emirates is advancing one of the most ambitious ESG roadmaps in the Gulf region, aligning economic diversification with large-scale decarbonization and governance reforms. Announced at COP26 in 2021, the UAE Net Zero 2050 Strategic Initiative creates framework expectations for ESG compliance UAE even where explicit mandates don’t exist. The initiative aims to achieve net-zero emissions by 2050, invest AED 600 billion in clean and renewable energy, create sustainable economic growth decoupled from emissions, and position UAE as regional climate action leader.
Now, more than ever, investors believe that companies that prioritise ESG investment and action represent better long-term returns. At the same time, financial institutions and asset managers are evaluating ESG practices, which are directly impacting organisational risk profiles and resulting costs of capital.
As a result, senior leaders are investing in ESG programs, initiatives and reporting today.
After factoring in these driving forces, climate change and environmental risks have moved from the bottom of senior leaders’ risk agendas to near the top, as they believe ESG efforts will be critical for long-term growth.
Not only are they committed to prioritising ESG risks and opportunities, but they are holding themselves accountable by linking their direct compensation to ESG performance. To enable ESG programs, senior leaders are increasing their spending on ESG programs to set strategies, establish targets and commitments and create meaningful impact.
Part of the challenge for many organisations is understanding where to start. BDO's roadmap is not meant to be linear and the adoption and execution of sustainability will not be the same in any two businesses. In some cases, a company may leapfrog several steps or be forced to join in at the ‘compliant' stage. It is important to keep in mind that this is a journey that will continue to grow in value and importance.
BDO has identified a five-stage maturity roadmap that helps illustrate the sustainability integration journey. It aims to help simplify the complexities of sustainability and promote the value that sustainability integration can create for a business.
Original content provided by BDO Canada
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Investors increasingly prioritise ESG performance
Now, more than ever, investors believe that companies that prioritise ESG investment and action represent better long-term returns. At the same time, financial institutions and asset managers are evaluating ESG practices, which are directly impacting organisational risk profiles and resulting costs of capital.
Talent expectations are changing
- Organisations of all sizes are combating the “war on talent” and the “great resignation” era.
- Focusing on ESG has become an excellent defense to retain talent and a great offence to attract new talent.
- Organisations are focused on maturing equity, diversity and inclusion practices, enhancing employee health and wellness programs and taking environmental action.
- Today, younger generations are considering an organisation's ESG actions with similar priority to financial compensation.
As a result, senior leaders are investing in ESG programs, initiatives and reporting today.
After factoring in these driving forces, climate change and environmental risks have moved from the bottom of senior leaders’ risk agendas to near the top, as they believe ESG efforts will be critical for long-term growth.
Not only are they committed to prioritising ESG risks and opportunities, but they are holding themselves accountable by linking their direct compensation to ESG performance. To enable ESG programs, senior leaders are increasing their spending on ESG programs to set strategies, establish targets and commitments and create meaningful impact.
Benefits of enabling sustainability programs
- Builds organisational image and reputation
- Defines an innovative vision and purpose of an organisation by identifying non-financial drivers
- Improves access to credit and the ability to attract investment
- Systematically reports the link between strategy and financial performance, including impacts of ESG factors
- Identifies, monitors and manages non-financial risks correctly
- Improves data quality for more effective information management and decision making
How to get started
Part of the challenge for many organisations is understanding where to start. BDO's roadmap is not meant to be linear and the adoption and execution of sustainability will not be the same in any two businesses. In some cases, a company may leapfrog several steps or be forced to join in at the ‘compliant' stage. It is important to keep in mind that this is a journey that will continue to grow in value and importance.BDO has identified a five-stage maturity roadmap that helps illustrate the sustainability integration journey. It aims to help simplify the complexities of sustainability and promote the value that sustainability integration can create for a business.
BDO's sustainability integration roadmap
- Activating
A business at this stage is looking to activate its sustainability agenda by assessing and prioritising its materiality risks and opportunities through the lens of various stakeholders. The process involves education, training and a review of the business operations and governance. - Compliant
A business at this stage has elements of a sustainability program in place, albeit on an ad hoc basis because of being reactive and narrowly focusing on responding to regulatory and stakeholder requirements. - Proactive
A business at this stage has adopted a systematic, whole-of-business approach to its sustainability program and is looking to boost value creation opportunities internally and externally. - Strategic
A business at this stage has embedded sustainability across most parts of the company. It is developing products and services, focusing on circularity and technology and ensuring they positively impact the markets where they operate. - Purpose-driven
A business at this stage has embedded sustainability across all parts of its business. It is using social, economic and environmental criteria beyond what is required by law to positively impact those in its value chain.
Original content provided by BDO Canada
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