Navigating the ESG reporting landscape
Ibrahim Al-Zu'bi
Board Chair I Group Chief Sustainability & ESG Officer I Author I Board Member I Sustainable Investment I Philanthropy
In today’s online and interconnected world, businesses relationship with transparency has the potential to significantly impact their success. Although once thought of as a taboo concept, companies are discovering that being honest and open about their operations and performance, including their shortcomings, can translate into serious benefits including employee engagement, public trust, reputation and productivity. One of the areas we can see this happening so strongly in is companies’ impact on people and the planet. With growing public interest in environmental, social and governance (ESG) business practices, there is an increasingly greater expectation on companies to disclose more than just a sustainability strategy and report beyond emissions and energy data to include how they are addressing other material issues such as human rights, risk management and climate adaptation.
In recent years, sustainability reporting has transitioned from a voluntary exercise amongst a handful of companies, to a common language to measure and report progress on our societal and environmental impacts. As the focus on sustainability reporting has continued to grow, so too has the landscape of reporting standards and frameworks, which at times can feel fragmented. Today, one of the main challenges for companies is how to keep up with evolving best practice and requirements and identify which are most relevant for them in this busy, and sometimes complex, landscape.
Over the last five years, the number of sustainability regulations, both government mandated provisions and voluntary guidelines, has nearly doubled and there are now over 600 ESG reporting standards globally, which provide many interpretations of what sustainability means[1] . The “Group of Five” standard setting organisations sit aligned at the helm of sustainability reporting: CDP (formerly Carbon Disclosure Project) and the Climate Disclosure Standards Board (CDSB), that predominantly focus on the reporting of environmental factors, and the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) that compliment these by covering principles across diverse ESG topics. Of these organisations, the GRI standards are the most widely reported globally[2] ; these standards hold companies accountable for their impacts on economies, the environment and society and allows participating companies to measure their progress against each other. To bring clarity and encourage alignment, in September 2021, the “Group of Five” published a report outlining the elements necessary for a single, coherent global set of reporting standards2. This could potentially eliminate the burden of reporting felt by companies and provide a universal way to consistently and transparently measure and report against ESG material areas.
In the Middle East and North Africa (MENA) region, we are seeing investment in sustainability grow massively, which has led to a greater need for transparency and disclosure. In 2020, a survey by KPMG of 5,200 companies across 52 countries showed that North America had the highest regional sustainability reporting rate at 90% of the top companies while the rate was only 59% for the MENA region.[3] This is largely due to the strong history and reliance on fossil fuels in the region and the maturity of sustainability reporting in regions like Europe, including mandatory requirements. However, there have been significant recent strides in this space that have made me increasingly hopeful that the ESG reporting landscape in the UAE and MENA region is fast improving.
The Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) have made a formal commitment to encourage and promote sustainability in financial markets by joining the Sustainable Stock Exchange (SSE) initiative, which is led by the United Nations. To support this, the ADX has also issued a voluntary ESG disclosure guide that outlines essential ESG indicators for its listed companies to align with these recommendations[4] . In April 2021, the UAE Securities and Commodities Authority (SCA) stated that all listed companies will be required to publish an annual sustainability report as well as comply with the GRI standards and any other requirements issued by the relevant stock market. The introduction of these guidelines signals a change in the tide and all companies, not just listed, should consider this as standard practice in the way they approach sustainability reporting.
At Majid Al Futtaim, sustainability and ESG reporting is an important part of telling our story and allows us to share our performance with our investors and stakeholders and demonstrate how we manage our risks. We have pioneered sustainability reporting in the region, publishing our sustainability performance since 2012 for our Properties’ operations and our first Company-wide report in 2018. Each year, we strive to improve our transparency and grow our disclosures aligned with best practice and the needs of our stakeholders.
We respond and report to several ESG reporting frameworks and standards. In 2013, we committed to incorporating the Ten Principles of the UN Global Compact (UNGC) in human rights, labour, environment and anti-corruption into our strategies, policies, and procedures and reporting our progress on the UN Sustainable Development Goals (SDGs) and their supporting principles annually. We have also been embedding and referencing the GRI standards within our sustainability reporting since 2012 to ensure we continue to follow international best practice. Beyond these standards, we also participate in reporting benchmarks such as GRESB and in 2021, for the 8th consecutive year, Majid Al Futtaim maintained “Green Star” status, recognising our implementation of sustainability practices across our business. To build credibility in our approach to reducing our carbon emissions, we were one of the first three signatories to the World Green Building Council’s Net Zero Carbon Buildings Commitment, and we report our progress annually. In addition, as we continue the process of developing and validating our science-based targets (SBTs), we will publicly demonstrate our performance against our annual targets in our sustainability report. This year, we have become early adopters for both the new GRI and UNGC Communication on Progress standards to play a role in shaping and improving reporting and disclosures.
We understand the importance and requirements from investors of reporting consistently against environmental, social and governance risks and opportunities. We also recognise that consistent and transparent ESG reporting improves our ESG risk rating, which we have maintained at “low risk”. Our Sustainability-Linked Loan (SLL), which is the first in the region, is dependent on our measurable improvements on specific annual targets that seek to have a positive impact on society and the planet, including a gender diversity target for women to constitute 30% of board members and senior management roles. We also listed the world’s first benchmark corporate Green Sukuk in early 2019 and a second Green Sukuk later that year making a combined total of $2.7 trillion, which we use to finance and refinance existing and future green projects. As part of this we are required to report the energy and emissions performance of this portfolio annually, which is assured by a third-party auditor.
In 2021, I was incredibly proud that Majid Al Futtaim became one of the first in the MENA region to respond to the Task Force on Climate-related Financial Disclosures (TCFD). TCFD allows us to communicate to our stakeholders the steps we’ve taken to understand and manage our climate risk. Though not mandatory in the MENA region specifically, we want to lead by example and use our platform to promote climate risk reporting given our region’s particular vulnerability and stimulate climate action within the private sector.
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My hope is that the industry continues to build on their conversations regarding streamlined sustainability and ESG reporting, that businesses are held accountable and that these standards are accessible to those at all stages of their sustainability reporting journey. Promisingly, in November 2021 at COP26 in Scotland, the International Sustainability Standards Board (IFRS) Foundation launched the International Sustainability Standards Board (ISSB). Expanding and building on the frameworks of the Group of Five, the World Economic Forum International Business Council (WEF IBC) and the International Organization of Securities Commissions (IOSCO), the ISSB aims to develop and maintain the most relevant global sustainability reporting standards to consolidate and ease reporting fatigue of the growing list of frameworks. Ahead of its launch, the G7 Finance Ministers also expressed support for the inclusion of mandatory climate-related financial disclosures to the ISSB in line with TCFD, which is another encouraging move.[5]
For those at the beginning of their reporting journey, the time to start is now. Though your data may not be perfect, and you may feel like you have a long way to go, reporting is a journey that can build trust with your stakeholders, helps you to avoid greenwashing and be transparent about what you could do better, identify gaps where you should be focusing and drive positive action to constantly improve. As a first step, I recommend aligning your data collection to the GRI framework, used by many as best practice. This will help you to identify your material topics and measure your performance.
We look forward to supporting the evolving world of sustainability reporting, to continue to be a leader in our region and to work with our peers to increase transparency and mitigate the risks to our society and environment.
Consciously disrupting with strategy, sustainability and communication
2 年Remember that wonderful day when I joined you all!
Head of Human Capital | Top 50 Future of Work Influencers
2 年this post comes timely Ibrahim as I continue to focus thru my work on raising awareness of the importance of creating sustainable human capital, sustainable human capital management, and reporting, and the interrelationship with building sustainable competitive advantage. Would love to catch up to hear your perspective on this specific component of #sustainability #ESG #sustainablebusiness #sustainablehumancapital #humancapital