How MENA businesses can link doing good to value creation

Developing corporate sustainability habits can drive insights into long-term value creation and growth.

In brief

• Most businesses strive to embed sustainable habits in everyday operations, despite publicly stated aspirations.
• Senior executives can foster the right habits by actively championing the sustainability goals, setting accountability for sustainability strategy implementation, devising clear metrics for it, and using digital technology to monitor it.
• Truly sustainable businesses also scrutinize their supply chain to ensure compliant practices and empower their employees to act sustainably outside the workplace.

There is no lack of public commitment among businesses in the MENA region in pursuing sustainable development. Declarations of net-zero decarbonization goals are a recent and commendable example.1 The long history of Islamic finance and more recent growth of environmental, social and governance (ESG) linked debt issuance in the region2 also attest to high levels of corporate awareness of the virtues of sustainable business practices.

Yet, as elsewhere in the world, most companies in MENA find it difficult to ingrain sustainable habits in everyday operations. As a result, high aspirations for corporate sustainability rarely translate into business reality.

External pressure is certainly growing on MENA businesses to operate more sustainably. Climate-conscious investors are one source; consumers are another. The EY Future Consumer Index (FCI), for example, showed that 63% of MENA consumers are more likely to buy from companies that actively seek to generate a positive impact on society.3 Consumers are also employees, and those belonging to Gen Z are increasingly scrutinizing the sustainability credentials of the companies they work for.

Why don’t sustainable practices filter down into organizations from the executive suite and permeate operations? All too often, it results from a view that the sole beneficiary of such practices is society, not the business. Instead, managers of MENA businesses at all levels need to ask themselves, how do we drive innovation and transformation through sustainability, while realizing value for all stakeholders?

The answer, they find, will be that incorporating sustainability aims into the very purpose of the business. Therein lies long-term value creation.

Sustainability through a business lens

The business benefits of such an approach are manifold: 

• Generating better returns: Sustainable practices often lead to greater operational efficiency. EY research shows that companies in which decision-making fully incorporates ESG criteria outperform their peers on various measures of profitability.4
• Attracting finance: Governments in MENA are making public funding available to companies for renewable energy and other sustainability initiatives.5 And, local and international IPO opportunities — for which ESG credentials are essential — are growing.6
• Reducing risk: Embedding ESG standards into the fabric of the business minimize reputation and brand risks. This is partly because ESG-aware companies ensure that they deal with suppliers and other stakeholders that pursue similar practices.
• Increasing employee engagement: Purpose-driven companies tend to have more engaged and motivated employees. The more involved they are in purposeful activities, the more likely that employees will innovate for the business and remain with it.

Getting the business in order

Ingraining sustainability habits in the business is to transform it, and is thus not an easy road to travel. The starting point is to develop an integrated, enterprise-wide sustainability strategy. Once that is set, MENA business leaders can foster the right habits in a variety of ways, among which a handful are essential.

Communicate and evangelize

Chief executives and their C-level colleagues, as well as all business unit and department heads reporting to them, must regularly articulate and remind employees of the purpose of the business. They must be vocal champions of the sustainability goals. ESG and other related initiatives should be on the agenda at every major meeting.

Establish accountability

Ultimate responsibility for the success of the sustainability strategy rests with the chief executive and board, but another senior executive is needed to drive its implementation. Leading organizations have a Director of Sustainability or Director of ESG, who may report to the chief financial officer (CFO) or even directly to the CEO. This role should bear responsibility not just for meeting targets, but for driving a value-centered sustainability culture throughout the organization.

Set metrics

Like other aspects of the business, sustainability performance is best measured against specific targets. ESG reporting provides a quantitative foundation for this, and its metrics can be extended to the broader sustainability goals. Any metrics used, however, should be outcome-oriented, meaning that they are explicitly tied to the strategic goals of broader organization.

Scrutinize the supply chain

In many industries, regulatory compliance or investment standards require companies to vouch for the sustainable practices of their suppliers. MENA businesses must get their suppliers to understand and buy into the same sustainability goals. Companies should not only scrutinize suppliers’ carbon footprint but also their labor practices to ensure, at a minimum, that human rights are not being dishonered.

Digitize sustainability

As with all other aspects of business, the digitization strategy needs to align with the sustainability strategy. At the very least, companies should put digital technology to work to measure progress against the targets. But digital can do so much more, such as assisting decarbonization efforts,7 verifying supply chain sustainability, and helping reduce waste in packaging, among other uses.

Encourage sustainability behaviors

Sustainable businesses empower their employees to extend those practices beyond the workplace. This should mean more than assisting local charities. Senior management should encourage employees to, for example, transfer their knowledge about good environmental and social practices to students, or help budding entrepreneurs in their efforts to develop or market sustainable products.8

In want of leaders

Few corporate leaders in MENA today question the benefits that embedding sustainability habits can have to deliver to the business, not to mention wider society. Most realize that it is no longer a nice-to-have. They cannot, however, expect a culture that embraces such habits to develop organically from the bottom. Sustainability requires concerted and consistent action from the top. In a word, it demands leadership. Senior executives who exhibit it in the cause of sustainability will almost certainly find their employees more than willing to follow.