Summary
Dr Fay Abdulla al Khalifa, from the University of Bahrain, highlighted the need to adapt ESG (Environmental, Social, Governance) frameworks to the hydrocarbon-based economies of the Gulf Cooperation Council (GCC) region. ESG challenges in the region include the need for economic diversification away from oil and gas, greater proactive stakeholder engagement at the board level, and a need to balance the historical context of oil and gas development with the current climate crisis, while maintaining socio-economic stability and well-governed systems in the region. Dr Abdulla al Khalifa suggested two solutions to these challenges: practical education for board members and incorporation of academic and scientific expertise into board thinking to enhance development of ESG strategy.
Key Takeaways
- Balancing sustainability while maintaining the socio-economic stability provided by hydrocarbon revenues is a central challenge for GCC nations. All countries in the region are shaped by their hydrocarbon-based economies, though climate commitments are growing. Economic diversification is a priority, but the pace of development varies across countries; Bahrain is moving away from oil and gas more quickly, while Kuwait is still heavily reliant on fossil fuels. For example, “less than 20% of our [Bahrain’s] economy is dependent on hydrocarbons and we can’t just turn off the switch, because that will impact the ‘S’ and the ‘G’ of the ESG. So, we need to work in equilibrium. We need to work out how we can move to a more environmental, social and well governed system to ensure that sustainability is taken care of, and to ensure that we can put an end to the climate crisis.”
- Stakeholder engagement is driving ESG in the GCC region and boards should be proactive rather than reactive to the pressure. Investor pressure and disclosure requirements are increasing, indicating rising interest in sustainability and climate change-related issues. However, business compliance tends to gain traction only when supported by regulatory mandates. Encouraging board-level discussion and strategic planning before regulatory requirements arise can significantly enhance an organisation’s ESG readiness and resilience.
- Incorporating academic expertise into the boardroom and practical climate education for directors could give rise to effective solutions to ESG challenges. Opening board membership to academics with climate expertise could bolster ESG decision-making within organisations. Equally, focusing board member education on scenario analysis, rather than conventional lecture-based approaches, aligns better with the dynamic nature of ESG. Both approaches could help the Board of Directors to formulate effective solutions and empower climate governance.
Conclusion
It is important to adapt global ESG frameworks to the specific reality of local hydrocarbon-based economies in the GCC region. Boards need to be proactive in responding to stakeholder pressure, while education that integrates scenario analysis could be beneficial. Moreover, academic membership on boards could give useful and applicable insights to support ESG.
“This presents an excellent opportunity for academic experts to join boards in both the private and public sectors. As environmental, social, and governance (ESG) issues demand a robust scientific understanding, individuals with such a background are crucial. They can help to improve governance and develop solutions that strengthen the eco-political frameworks within the countries where these organizations operate.”
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