Corporate climate action in MENA has long way to go – report

While countries across the Middle East and North Africa have shown growing commitment to climate action with net-zero targets, business adoption is lagging global peers.

Just 12% of the region’s largest 200 companies have a net zero target, and only 6% have a roadmap on how to achieve these targets.

That’s according to a newly released report by the World Economic Forum and Bain & Company, unveiled on the side-lines of the WEF’s Annual Meeting of the Global Future Councils 2023 – which took place in Dubai last week.

Titled ‘Closing the Climate Action Gap: Accelerating Decarbonization and the Energy Transition in MENA’, the report calls on businesses and policymakers to take “swift, ambitious, and collaborative action”.

This urgent call to action comes as the MENA region is projected to experience warming at twice the global rate, bringing severe impact on food and water, as well as jobs and livelihoods, security and human health.

“500 million people live in this part of the region, and [unfortunately], the private sector still lags in corporate action [compared to] where the public sectors’ ambitions lie,” Gim Huay Neo, Managing Director for the WEF’s Centre for Nature Climate said.

In the public sector, Saudi has taken significant steps by committing to achieve net-zero carbon emissions by 2060 and to securing 50% of its electricity from renewable sources by 2030. While the UAE has pledged to achieve net-zero emissions by 2050, the fist in the MENA region to do so.

Corporates are not only lagging public-sector ambitions but trailing global corporate peers in the setting of net-zero goals and delivery of clear roadmaps, the report finds, with a staggering 78% of the 200 largest companies in MENA yet to set net-zero targets.

UAE’s Majid Al Futtaim leading the sustainable charge

Among the companies leading the charge on sustainability in the region, the report highlights energy major Aramco, chemicals giant SABIC, ACWA Power in Saudi, and the UAE’s retail conglomerate Majid Al Futtaim (MAF).

“MAF has been one of the first movers in terms of announcing a very commitment to achieving net positive on carbon and water by 2040,” says Ahmed Galal Ismail, CEO of MAF Holding, and one of the leading executives behind the report.

Since announcing its 2040 target, MAF has since committed to science-based targets, which “would allow us to align our own outputs and trajectory with keeping the 1.5 degrees target alive”, Ismail explains.

“That has required us to make significant disclosures and investments over time. The biggest learning throughout the journey is that [everyone] at MAF – including at board and leadership level – has now started to understand that investments in sustainability is not a trade-off for businesses, but it’s actually a trade-on.”

Ismail argues that taking concrete climate action is all about having a green mindset – it’s about “how you shift your perspective on sustainability, from being a trade-off to actually being a trade-on for how business is run here in the MENA”.

“You do not have to trade off your ability to finance a company for the long term to stay competitive. Investments in sustainability allow you to stay more competitive and more relevant in the long term.”

Taking corporate climate action

The report argues that taking bold measures on climate action would strengthen economic diversification, exports and employment across the region.

“The challenge is how can we actually connect the dots between sustainability, economic diversification, and job creation to provide that next leap of growth, as well as improve the quality of life for the people here,” says Neo.

So, what action is required?

In short, the report advocates for the adoption of global best practices, decarbonisation of operations, raising consumer awareness, mobilisation of sustainable financial resources, and collaboration with policymakers.

Raja Atoui, a partner at Bain Middle East, highlights the necessity for targeted measures in key emitting sectors, such as utilities, heavy industry, oil and gas, and transportation – with recommendations for efficiency improvements, the utilisation of renewable energy, and adoption of cutting-edge technologies such as CCUS and clean hydrogen.

Maroun Kairouz, head of the MENA at the WEF, highlights key objectives, which include clear regulations, access to financing, technology, and training – and further emphasises the importance of adopting science-based targets, extending influence along value chains, and fostering public-private partnerships. 

Majid Al Futtaim’s CEO Ismail agrees, believing collaboration and transparency to be critical.

“No one company can achieve this alone; it requires collaboration beyond our four walls,” he said. “And that means extreme transparency. It is an issue, as the report highlights, that only 20% of listed companies in MENA have a quantitative sustainability disclosure in their annual reports.

“Disclosing the successes – as well as the setbacks – is very important to raise awareness and to recruit others to join us on this journey.”

Ismail points to what he calls the ‘five shades of green’.

He says the region needs more green financing (more financing to smaller companies,), more investment in green talent, more green regulation, such as taxes and other fiscal instruments that are mature in this part of the world, green frameworks to provide the right incentives for the private sector to continue to invest in sustainability, and a lot of green tech and climate tech.

Akram Alami, Partner, Bain & Company says “raising consumer awareness is another pressing priority” – especially given the numbers that point to youth in the Middle East and North Africa being among the least concerned about sustainability in the world.

Read the full report here