Original content provided by BDO Canada

Environmental, social and governance (ESG) is rapidly becoming a core pillar of long-term growth and sustainability for organisations globally. Sustainability is becoming a central pillar of economic transformation in Saudi Arabia as ESG considerations increasingly shape investment decisions, regulatory frameworks, and corporate strategy. This shift is strongly aligned with Saudi Vision 2030, which places environmental protection, economic diversification and responsible governance at the core of the Kingdom’s long-term development agenda.

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.

At BDO in Saudi Arabia, we support organisations in transforming ESG from a compliance requirement into a strategic driver of long-term value creation. Our ESG specialists work with clients to develop and implement tailored sustainability strategies, conduct materiality and climate risk assessments, strengthen governance frameworks and prepare ESG disclosures aligned with evolving requirements such as IFRS Sustainability Disclosure Standards and national regulatory expectations. Leveraging both deep local market insight and the expertise of BDO’s global sustainability network, we help businesses integrate ESG into core decision-making, enhance transparency and investor confidence and build resilient organisations aligned with Saudi Vision 2030.

SPEAK TO AN EXPERT