Arab CEOs: ESG biggest challenge, but productivity priority

Nearly half of Middle East CEOs points to environmental sustainability as their biggest challenge over the next few years, IBM finds
Challenges around sustainability and diversity are keeping Middle CEOs awake at night, but productivity is biggest regional priority, new IBM study finds

What is keeping CEOs in the Middle East awake at night?

The challenges associated with Environmental, Sustainability and Governance (ESG), a new study finds.

The global study by IBM Institute for Business Value, which surveyed 120 CEOs from the Middle East, reveals the most pressing challenges for leaders across the region.

Nearly half (47%) of regional CEOs surveyed pointed to environmental sustainability as their biggest challenge over the next few years, while 28% said diversity and inclusion would continue to be their most pressing concern.

This comes as the region undergoes a significant transformation, in part, driven by ESG factors with regional economies diversifying dependence on fossil fuels, and as the UAE prepares to host COP28 later this year in Dubai.

New regulations are driving the shift took while an increasing number of CEOs and their executive teams now have compensation tied to sustainability goals.

These heightened CEO concerns echo PwC’s latest Middle East ESG report, which reveals a shift in perception from public and private leadership about the importance of ESG, with more organisations than ever before appointing a dedicated executive to deal with the ESG agenda.

Increased awareness of climate risk to business, coupled with new regulation, is driving the embedding of ESG in the strategy of more than six in 10 companies in the region, PwC finds.

Among the ESG challenges leaders face, according to IBM’s survey, is sustainability’s expanding definition as it broadens into topics like biodiversity – and organisational uncertainty around appropriate metrics.

There is also doubt about the trustworthiness of sustainability reporting, with just 45% of CEOs globally reporting confidence in the ability to report on ESG strategy and initiatives, as well as data security and privacy, with accuracy.

Not to mention the fact that public trust has fallen in what is being reported.

While sustainability tops the region’s biggest challenge for leaders, productivity is the biggest priority over the next three years – as uncertainty, competitiveness and new regulation accelerate.

These heightened concerns echo PwC’s latest Middle East ESG report, which reveals a shift in perception from public and private leadership about the importance of ESG, with more organisations than ever before appointing a dedicated executive to deal with the ESG agenda.

“Almost one-third of regional companies have a chief sustainability officer, while more than one-third have COP28 will lead to tighter ESG legislation and incentives for green growth in the region,” says Dr Yahya Anouti, PwC Middle East ESG Leader.

Dr Yahya Anouti, PwC Middle East ESG Leader

Increased awareness of climate risk to business, coupled with new regulation, is driving the embedding of ESG in the strategy of more than six in 10 companies in the region, PwC finds.

The established of new data protection laws, and regional targets on nationalisation and worker welfare is driving change.

When PwC asked its Middle East leaders to rank the reasons why there were adopting or progressing an ESG strategy, 63% chose ‘compliance with regulation and policies’.

Among the ESG challenges leaders face, according to IBM’s survey, is sustainability’s expanding definition as it broadens into topics like biodiversity – and organisational uncertainty around appropriate metrics.

There is also doubt about the trustworthiness of sustainability reporting, with just 45% of CEOs globally reporting confidence in the ability to report on ESG strategy and initiatives, as well as data security and privacy, with accuracy.

Not to mention the fact that public trust has fallen in what is being reported.

While sustainability tops the region’s biggest challenge for leaders, productivity is the biggest priority over the next three years – as uncertainty, competitiveness and new regulation accelerate.

Technology as a game-changer

At a time when digital acceleration is transforming the regional landscape, half of CEOs in the Middle East believe that regulatory factors will continue to significantly impact organisations.

And almost half (48%) point to technology as crucial in shaping the future of their companies, with 61% of regional CEOs expecting to realise significant value from advanced AI, including generative AI, deep learning and machine learning.

"Generative AI can be a game-changer in driving a new wave of productivity, efficiency, and service quality across industries, reducing barriers to AI adoption," said Saad Toma, General Manager, IBM Middle East and Africa. "To deploy emerging generative AI use cases at scale, CEOs need to assess company requirements in areas such as CRM, HR, modernisation, data privacy, security and sustainability."

Saad Toma, General Manager, IBM Middle East and Africa

The emergence of generative AI as a business and decision-making tool is a defining moment – one where CEOs need to define a clear plan, have the right capabilities in place, and handle disruptions of all shapes and sizes. And they need to do this without slowing down or losing focus of  their strategic vision  in order to  accomplish their objectives and safeguard their futures.”

Fahad Alanazi, General Manager, IBM Saudi Arabia says the Middle East has garnered a reputation for innovation, with countries like — buoyed by Vision 2030 — investing considerable resources to advancing digital transformation.

"It comes as no surprise to find so many CEOs quick to embrace the transformative power of advanced AI including generative AI. The more leaders across the Middle East recognize the value these solutions bring to their organizations only bodes well for the future. It primes the region for sustained success, with state-of-the-art tools, including AI, being essential to boosting productivity and enhancing customer experience.”

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