08 August 2022
MENA corporate sustainability and the climate disclosure gap
Published online 2 December 2021
With the next two Conference of the Parties (COP) climate summits coming to Egypt and the UAE, businesses in the MENA region are under the spotlight to reduce their greenhouse gas emissions. Mahmoud Abouelnaga1, Solutions Fellow at the Center for Climate and Energy Solutions, explains that they have some catching up to do.
As countries work on reducing greenhouse gas (GHG) emissions to avoid the most drastic consequences of climate change, there has been increasing emphasis on corporate social responsibility (CSR) and the role of businesses in scaling up climate action. More than 20% of the world’s 2,000 largest public companies have already committed to meet net zero targets2. However, companies in the Middle East and North Africa (MENA) are still lagging behind in the race to net zero.
In 2018, the landmark Intergovernmental Panel on Climate Change (IPCC) Special Report on Global Warming of 1.5 Degrees C emphasized the need to bring global carbon dioxide emissions to net zero by 2050 to meet the Paris Agreement pledge of limiting global warming to 1.5 degrees Celsius by the end of the century3. Net zero refers to the balance between the amount of GHG emissions produced and the amount removed from the atmosphere.
While some governments in the MENA region have announced net zero commitments or updated their nationally determined contributions prior to the COP26 United Nations Climate Change Conference in Glasgow last month, it is still not clear how much of these emissions reductions would be driven by the private sector. To determine the extent of the private sector4 involvement in achieving national climate targets in the MENA region, companies need to start disclosing more data about their emissions and plans to reduce them.
Climate-related disclosure has been an increasingly important part of sustainability management in global businesses over the last few years. This is simply because companies can’t manage what they can’t measure. That is why there has been an exponential increase in the number of companies (from 228 in 2003 to 9,617 in 2020) that disclose their environmental practices to the international non-profit CDP5. Although the MENA region is extremely vulnerable to climate change impacts, less than 1% of the CDP-disclosing companies are from the MENA region. Even those who disclose their environmental practices in the region are mostly at the low range of the spectrum (e.g., D: disclosure without action, or F: failure to provide sufficient information to be evaluated) with only a handful of companies performing relatively well (e.g., B: management level, C: awareness level).
For companies to measure and report their emissions, they need to follow the GHG Protocol for Corporate Accounting and Reporting Standard6. This standard classifies a company’s direct and indirect emissions into three ‘scopes’. Scope 1 refers to the direct emissions from owned or controlled sources. Scope 2 refers to the indirect emissions from the generation of purchased energy consumed by the company. Scope 3 refers to all other indirect emissions that occur in a company’s value chain. Unlike scope 1 and 2, scope 3 emissions are difficult to address and they often represent the largest share of emissions for companies. For the many oil and gas companies and state-owned utilities with large fossil fuel fleets across the MENA region, scope 3 emissions would account for 75–90% of their total emissions. Other sectors would have different emissions distribution across the different scopes.
Companies can start addressing their scope 1 and 2 emissions by measuring, reporting and reducing them using different existing technologies and policies. For example, companies can switch to more energy efficient equipment (e.g., boilers, furnaces, etc.) and low-carbon alternatives that allow them to reduce their scope 1 emissions. There are already policies in Egypt, Jordan, Morocco and several Gulf Cooperation Council (GCC) countries to encourage companies to benefit from renewable power purchase agreements (PPAs)7. PPAs allow companies to generate their own renewable energy to power their businesses and reduce scope 1 and 2 emissions. Excess energy can also be sold back to the government at a set price for the duration of the contract.
Disclosing climate data is essential not only to identify climate-related risks, but also to unlock great business opportunities. It is also critical for elevating the sustainable investment profile in the region by supporting accountability, transparency and social responsibility practices among businesses. These sustainable business practices can unlock more than US$637 billion and generate more than 12 million jobs in the MENA region by 20308.
Scaling up corporate climate action in the MENA region is critical for meeting national and global climate pledges. With all eyes on the region as Egypt prepares to host the COP27 United Nations Climate Change Conference in 2022 and UAE plans to host COP28 in 2023, there are unprecedented opportunities for businesses to step up their emissions reduction plans, showcase their climate action and catch up with their peers in the race to net zero.
- Mahmoud Abouelnaga is a Solutions Fellow at the Center for Climate and Energy Solutions (C2ES) in the USA. His work includes research and analysis of energy technologies as well as energy and environmental policies. His work also engages business representatives on clean energy and industrial strategy. He holds an MA in international development and policy from Harris School of Public Policy, University of Chicago as part of the inaugural class of Obama Foundation Scholars. He also holds an MS in energy engineering from KTH in Stockholm and environmental management from UPM in Madrid, and a BS with honours degree in petroleum engineering from Suez University, Egypt.
- Black, R., Cullen, K., Fay, B., Hale, T., Lang, J., Mahmood, S., Smith, S.M., Taking Stock: A global assessment of net zero targets, (Energy & Climate Intelligence Unit and Oxford Net Zero, 2021).
- IPCC Special Report, Global Warming of 1.5°C, 2018.
- Reuters, UAE launches plan to achieve net zero emissions by 2050, (October, 2021); Associated Press, Saudi Arabia pledges 2060 target of net-zero emissions, (October, 2021).
- CDP (formerly the Carbon Disclosure Project) is an international non-profit organization that helps companies and governments disclose their environmental impacts and reduce their greenhouse gas emissions by assigning scores to their environmental performance and identifying the gaps in their sustainability plans. CDP scores range from A (highest level) to F (lowest level).
- WRI/WBCSD, GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, 2011.
- IRENA, Renewable Energy Market Analysis: GCC 2019, (Abu Dhabi, 2019); IRENA, Renewable Energy Outlook: Egypt, (Abu Dhabi, 2018).
- Business and Sustainable Development Commission, Better Business Better World: Sustainable Business Opportunities in the Middle East and North Africa, 2017.