UAE’s commitment to net zero is a game changer

The UAE’s pledge to achieve net-zero emissions by 2050 looks set to supercharge the transformation of the economy in the coming years. However, this game-changing commitment will only succeed if private sector companies are prepared to step up and become key enablers of the country’s transition to a more sustainable future. 

As the UAE prepares to host COP28 in November 2023, the government is already unveiling new strategies and initiatives to mobilise the private sector in support of the  net-zero target.  

In August, a cross section of 21 major local and international organisations signed up to the Ministry of Climate Change and Environment’s (MoCCAE) UAE Climate-Responsible Companies Pledge, vowing to work together to drive the decarbonisation of the economy. 

Signatories have pledged to intensify efforts to combat climate change
by measuring and reporting their greenhouse gas (GHG) emissions and developing science-based plans to reduce their carbon footprint, among other actions.

This just the latest sign that the UAE is very serious about its sustainability drive. While the country has for many years sought to embed sustainability in national strategies, this shift gained momentum in 2015 when the UAE signed the Paris Agreement on Climate Change and the UN Sustainable Development Goals (SDGs).    

Increasing transparency

In line with this agenda, more and more UAE companies are choosing to disclose their performance on environmental, social, and governance (ESG) factors in the form of a sustainability report. In fact, since 2021 all companies listed on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM) have been required to publish these reports.

Material ESG topics typically cover environmental factors, such as GHG emissions, water consumption and waste management, in addition to social factors pertaining to employee, customer, and community wellbeing, as well as governance factors that cover the policies and processes which ensure an organisation’s accountability and transparency. 

Disclosing sustainability performance does not automatically lead to positive outcomes. To achieve meaningful impact, companies must adopt a strategic approach to sustainability, by setting targets and goals to improve performance over time, and implementing the processes needed to deliver results.  

Investors, customers, employees and suppliers are increasingly scrutinising companies for this behaviour and gravitating towards those that place environmental and social considerations at the forefront of their businesses.  

Incorporating a sustainability strategy

By developing a sustainability strategy, companies will be better positioned to evaluate and manage ESG-related risks, attract new investors, customers, and talent, lower their cost of capital and enhance operational performance, among other benefits.  

On the other hand, companies that are slow to adapt risk becoming out of step with the values of their stakeholders and falling behind their competitors as a result.  

Given the growing emphasis on sustainability in the UAE, companies should also be prepared for the possibility that the government could introduce new legislation, compelling companies to take stronger action on certain issues, particularly those related to climate change.  

It is imperative that business leaders anticipate these transitional risks and act now to navigate a fast-changing world and build more resilient, future-ready businesses.    

Ultimately, for companies to mitigate risks and maximise impact, they must move beyond making vague statements in support of sustainability and be able to demonstrate genuine progress. Their future prospects, and the ability of the UAE to achieve its goals, could depend on it. 

Imad Alfadel is the managing partner of advisory firm, ESG Integrate