Sustainability: a non-negotiable for leaders in the Middle East

The Middle East is rich in natural resources, with Saudi Arabia alone holding 17% of the world's oil reserves. The region bears a significant responsibility in global emission reduction and environmental protection. Governments are actively launching relevant initiatives, such as Saudi Arabia's "Vision 2030" and the UAE's "2050 Net Zero" vision, both of which prioritize the environment and renewable energy.

The good news is that a PwC report from May 2023 indicates that 73% of companies in the Middle East are working towards or have committed to achieving carbon neutrality. For business leaders in the Middle East, sustainability has become an integral part of their agenda. Many customers now consider a supplier's sustainability program a crucial differentiating factor. An infrastructure company, in its daily practices, will introduce innovative green products to clients whenever possible, or include more environmentally friendly options in contracts even when not explicitly required in the tender documents. These efforts are yielding clear benefits, with an increasing number of Gulf Cooperation Council (GCC) clients favoring green options even when they are not the most cost-effective choice.

As consumer demand for sustainable practices grows, this issue directly impacts companies' revenues. Consequently, it's not surprising that leadership teams are welcoming Chief Sustainability Officers (CSOs) to their ranks to drive the sustainability agenda. The role of the CSO has gained prominence in the past three years, with PwC's report showing that slightly over a quarter (27%) of organizations in the Middle East now include it in their leadership structure.

Ideally, CSOs should be selected from within the organization. This approach has been widely adopted globally over the past decade, with companies appointing CSOs from internal departments such as communications, corporate social responsibility, environment, health and safety, or strategy, as well as consultants who have advised the organization on energy transition and emissions reduction. The advantages of this approach are clear, as existing executives understand the company and likely have strong stakeholder relationships. However, as expectations for sustainability leaders increase, requiring them to be more focused, bring a global perspective, propose innovative solutions, and exercise more independent judgment on environmental, social, and governance (ESG) risks and opportunities, we are seeing more companies recruit externally, despite the relative newness of the CSO role and the scarcity of experienced talent.

The CSO plays a vital role in all aspects of the business, from dealing with suppliers to engaging with customers. Therefore, organizations should seek candidates who can comfortably engage in every stage of the business cycle and collaborate with business heads. In our search for CSOs, excellent candidates include those who have done significant work in corporate affairs, are experienced in connecting with the right people across industries, have worked on decarbonization strategies, and are business leaders with experience in low-emission industries.

To truly achieve change, CSOs often face significant challenges within organizations. For example, a large industrial organization that wants to reduce emissions may first need to invest in new infrastructure. The CSO needs to collaborate with the CEO and other executive team members to ensure that the difficult decisions made to achieve the organization's sustainability goals are widely understood and smoothly implemented. The CSO's reporting line is another important aspect to consider, and we are seeing more CSOs become part of the executive team. While CSOs can report to multiple departments such as marketing communications, operations, strategy, legal, or finance, experienced CSOs are most effective as executive team members reporting directly to the CEO.

While CSOs can drive sustainability initiatives and projects, every leader should play a role. An international construction company has developed a formal sustainability plan with measurable metrics, and leaders in each business unit are expected to drive its implementation. At another infrastructure and renewable energy company, a portion of senior leaders' bonuses is linked to sustainability initiatives. The shift to sustainable business practices will not happen overnight. CSOs can be a key catalyst, even a leader, in driving change, but all leaders in the company must share the same vision for meaningful progress to be made.

Suvi Kitchloo is the Head of Heidrick & Struggles’ Dubai office and a member of the Global Industrial Practice.

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