The World Bank estimates the GCC economy will grow by 3.6% in 2024, supported by non-oil sectors, sustained private consumption, strategic fixed investments, and accommodative fiscal policy. Despite the expected 3.9% contraction in the oil industry, GCC economies are primed for steady growth in the new year. The forecast has an economic diversification undercurrent that could be boosted with more sustainability considerations. While the governments will continue to play a decisive role in initiating sustainable transitions, the private sector could catalyse it through actionable solutions, utmost compliance, and more. Here are 7 trends for companies to acknowledge and embrace:
- Increased regulatory pressure
Stringent regulations and policies aimed at reducing carbon emissions and promoting sustainability are expected globally in 2024. That may include tighter controls on waste management, energy use, and supply chain transparency, requiring companies to comply by accurately reporting on various processes and outcomes. For example, in previous years, sustainability reporting had been limited to scope-1 emissions; going forward, regulators are likely to bring scope-2 and 3 emissions into the fold, requiring companies to expand their sustainability initiatives across the value chain.
- Greater focus on climate change mitigation
While addressing climate change will remain the central focus of various sustainability initiatives, the new year will necessitate more targeted actions. Corporate efforts toward mitigation — actions to reduce or remove GHG — along with adaptation — adapting to life in a changing climate — are expected to increase in response to the need for a targeted, more refined approach to tackling climate change. The incorporation of circular economy models could accelerate as businesses seek to reduce waste, reuse resources, and create sustainable products. In the GCC, where several locations are on the frontlines of a changing climate, such targeted actions are understandably the way forward.
- Enhanced ESG reporting standards
Standardisation and clarity in ESG reporting are likely to improve in 2024. There will be a push towards more uniform reporting standards to make it easier to benchmark and compare ESG performance across companies and industries. Technology will be a catalyst to this development, ensuring the reporting process is data-driven, streamlined, transparent, and simplified. The reports will gain more prominence in the decision-making process of venture capitalists, issuing banks, and regulators. That paradigm shift in reporting is also owed to the growing consumer awareness of sustainable products. Transparent reporting is companies’ best bet to align with consumer values and maintain market relevance.
- Technology-driven sustainability solutions
The role of technology in sustainable transitions will increase significantly in 2024, with more ClimateTech startups entering the fray. Technological innovations, particularly in renewable energy, energy storage, and carbon capture, will continue to drive sustainability efforts. In 2024, solutions that harness Big Data and AI will gain more traction due to their expanding applications in monitoring and managing ESG initiatives throughout their life cycle. Such solutions will have a profound impact on sustainability outcomes in traditionally conservative sectors like agriculture.
- Social and governance factors gain ground
Though ESG has become indispensable to business strategies in recent years, it disproportionately leans on environmental risks at the expense of social and governance factors. That status quo is set to change in 2024, with social and governance considerations finding equal emphasis as the environment. Issues like diversity and inclusion, employee well-being, women’s workforce participation, and ethical governance will become critical to accurate ESG evaluations.
- Sustainable finance and investment
Perhaps the most consequential projection for 2024 is the growth in sustainable finance and investment. Green bonds and ESG-focused investment funds have witnessed an uptrend in 2023 — which is expected to continue well into 2024, as leading players in the global financial market rally behind such asset classes. Investors are increasingly factoring in ESG risks, transparency, and proof of sustainability before deciding whether or not a capital infusion into a startup or a deal with a company is viable.
- Collaboration for sustainability
In 2024, the GCC is likely to witness more cross-industry and public-private partnerships (PPPs). These developments will move the needle on sustainability for multiple reasons. Firstly, cross-industry cooperation and collaboration will help reduce blind spots in the value chain and mitigate collateral damages. For example, efforts aimed at increasing greenery and sequestering carbon will not aggravate existing water scarcity. Secondly, PPPs will lead to better outcomes by reducing the red tape for private-sector companies and providing easy access to innovation for governing bodies.