Earlier this year, when Tesla was booted off the S&P 500 ESG Index—an index that ranks companies based on environmental, social, and governance data—Elon Musk responded by tweeting that ESG was a “scam”.
In a post, the S&P explained that Tesla was cut in part because, despite making electric cars, it didn’t have a low-carbon strategy.
It’s important to understand what ESG investing means: it’s the impact a company has on the environment or society, including its employees.
And as ESG investing keeps growing—with assets that could reach $41 trillion by the end of 2022—it’s worth questioning if it’s measuring the right things.
ESG is driving the Middle East’s auto industry, especially with the region hosting COP27 and COP28.
The UAE, betting big on ESG, is accelerating its pace in the transition toward EVs. The country has successfully converted 20% of its fleet of cars belonging to governmental agencies to EVs. The government aims to have over 40,000 EVs on its roads by 2030 and increase hybrid and electric taxis in its fleet.
In March, Dubai welcomed its first EV production facility to fulfill the need for green mobility. The facility is anticipated to produce 55,000 units annually.
Not just the UAE, Saudi Arabia has already pledged that by 2030, 30% of automobiles in Riyadh will be EVS, and by 2060, 100% of vehicles will be electric. It is one of the major investors of Lucid Motors, which is establishing the first EV manufacturing plant in the kingdom.
Egypt has also announced plans to locally manufacture affordable EVs. Governments across the region are now encouraging EV adoption in the private sector.
Switching to EVs helps to create a circular economy with sustainability at its core. Electric cars will also likely be used as batteries, helping store extra power from renewable energy, and sending it back into the grid when it’s needed. And interestingly, this switch isn’t limited to just private organizations. According to a survey, 40% of UAE citizens care about ESG and are interested in buying electric cars, with environmental concerns serving as the primary driving force.
“Organizations that care about ESG goals consider electrifying their vehicles or implementing these technologies in their daily operations. This change in view among the Middle Eastern people reflects the region’s success in diversifying its energy supplies,” says Samer Kaissi, Country Manager Dubai and the Northern Emirates at DHL Global Forwarding.
“The EV market in the MENA region is anticipated to expand by 15% between 2022-2027, reaching a value of $93.10 million. And by 2040, EV sales are expected to account for more than half of all new car sales,” Kaissi adds.
A NOTICEABLE EMPLOYMENT ADVANTAGE
With substantial progress toward fulfilling ESG goals through the electrification of cars, regional businesses no longer rely on government regulations to align their ESG agendas. The 2022 PWC survey revealed that while around 58% of companies believe implementing ESG strategy enhances their brand reputation, 40% of respondents believe it increases their customer competitive advantage.
Additionally, building a strong employer brand is crucial for businesses if they want to recruit and retain fine talent. Employees are demanding that companies be held accountable for their actions.
According to HSBC’s future of work report, sustainability credentials and ethos can be an employment advantage, especially in tech industries. Hiring motivated staff or incurring expensive churn may depend on the company’s ESG culture.
ESG certifications are essential as customers expect brands, and their workplaces, to be socially engaged. In a study conducted by Gartner of more than 3,500 employees worldwide, 65% of respondents reported that the pandemic had caused them to reconsider the role that work should play in their lives. Employees believe business purpose is important and look for a renewed sense of purpose in their professional lives.
However, this is not it. The ability of a firm to achieve ESG objectives can be significantly influenced by its innovative employees. According to experts, when organizations invest in raising the ESG IQ of their staff, employees may be motivated to consider ways the company may run more effectively, which encourages business innovation and boosts employee morale.
“As more and more companies in the Middle East develop their ESG strategies, we must look to unique and varied components that comprise a truly effective and impactful ESG strategy. Ensuring employees are fully engaged in the company’s ESG vision is mission critical because they are the voices and advocates driving much of what a business is seeking to achieve,” says Jessica Robinson, ESG expert and a former advisor of ESG and sustainability at Deloitte Middle East.
ACHIEVING ESG VISION WITH EV USAGE
According to Kaissi, the region’s EV business is headed in the right direction, but an ecosystem must be created to realize its full potential. One of the ways employers achieve their ESG vision is by offering incentives to their staff to adopt EVs.
With tangible and daily influence on their lives, initiatives and programs encouraging employee EV use can aid a company’s workforce in identifying with the larger ESG objective. “It is walking the talk,” says Robinson.
Businesses should consider investing in EV infrastructure. Experts say that having an EV charging station at work can inspire workers to switch to EVs. Installation of EV chargers in a business’ parking area may be covered through benefit plans for workers. In other words, companies can add this to the list of benefits while discussing conditions like vacation and sick leaves with new hires.
It may seem insignificant and modest, but actions like these motivate employees. If an employee isn’t already an EV owner when they begin working for such companies, they may soon see the perks of owning one.
“It is crucial to ensure that staff are completely committed to the company’s ESG goal. That said, while baby steps help, we must not fall into the trap of thinking that promoting EV usage is sufficient or replacing the wholesale change that organizations need to make. ESG strategies must be wide-ranging, deep, and truly change-making. We know this more today than ever before,” Robinson says.
The environmental aspect is especially relevant now, with organizations worldwide scrambling to meet the environmental demands of the Paris Agreement and halt irreversible climate change. To halt the devastating effects of climate change, decarbonization is an urgent step that needs to be prioritized by organizations.
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