As the world grapples with the urgent need to combat climate change, industries that play a fundamental role in climate change mitigation face a pivotal challenge – of how to balance commercial interests with environmental and social impact, says Tuna Gulenc, Vice President at Daikin Middle East and Africa. In this context, he adds, sustainability efforts emerge as a crucial pathway towards achieving long-term sustainability goals. Gulenc says that by shifting the focus from purely commercial interests to a broader perspective that prioritises environmental responsibility, industries can drive significant change and contribute to a more sustainable future.

The Middle East region, Gulenc says, has witnessed a growing recognition of the significance of Environmental, Social, and Governance (ESG) in recent years, driven by a confluence of factors, including ambitious net-zero targets and an increasing emphasis on social responsibility. He says, “With countries in the region actively implementing strategies to transition towards cleaner, sustainable economies and achieve their net-zero objectives, businesses are now expected to prioritise ESG considerations as a crucial aspect of their operations.” This paradigm shift, Gulenc says, reflects the region’s commitment to addressing pressing environmental and social challenges while fostering responsible and sustainable business practices.

In addition to sustainability efforts, Gulenc says, the Middle East region is witnessing an increasing emphasis on social responsibility and community development. “This shift is compelling companies to address social issues and make positive contributions to society,” he says, “Strong governance is important to ensure transparency, ethical behaviour and accountability, enabling companies to build trust and confidence among stakeholders.”

Weighing in, Asim Ahmad Hashmi, Sales Director – Applied Business, SKM Air Conditioning Equipment, points out the significance of de-commercialisation in sustainability initiatives and says consultants and designers have a crucial role to play. He says: “Consultants or designers must put specifications to meet the sustainability standards. In this way, HVAC suppliers can be brought to the same page, and it will be delinked with the price; otherwise, commercial aspects will remain the central figure in the sustainability efforts.” For the Social side, Hashmi adds, companies are offering internships to students from local universities as well as offering upskilling opportunities to the workforce. Hashmi also touches upon the aspect of Governance and says most companies strictly follow a code of ethics, conduct employee surveys, and have incentives and bonus policies in place. “Employees and Management meet every quarter to review performance and take corrective actions,” he says.

Joining the conversation, Rohan Chopra, Director – Sustainable Infrastructure, Middle East & Africa, Johnson Controls, says there is no doubt that sustainability is a matter of immediate action, and organisations need to have subject-matter experts or specialist partners to guide them, develop roadmaps and manage deliverables to achieve their sustainability ambitions. Moreover, he adds, organisations need to recognise the importance of transparency and follow globally or regionally recognised reporting frameworks to maintain credibility. For instance, he says, Johnson Controls reports in accordance with Global Reporting Index (GRI), Task Force on Climate-related Financial Disclosures (TCFD), the UN Global Compact, and Carbon Disclosure Project (CDP). Chopra also underlines the importance of support from the stakeholders, including suppliers and customers, in sustainability efforts. He says: “We see immense support from our stakeholders to implement decarbonisation strategies, including demand-side management solutions and electrification solutions to reduce their Scope 1 and 2 emissions. Additionally, we use digitalisation as an enabler to facilitate the sustainability journey and track their operational carbon footprint on the way.”

Gulenc, echoing Chopra’s opinion, says it is important to establish goals aligned with international standards and best practices, which will, in turn, guide the actions and provide a framework for measuring and reporting progress. “Regular publication of comprehensive sustainability reports and following recognised frameworks, like the Global Reporting Initiative (GRI), ensures transparency and accountability,” he says. Elaborating on the topic, Gulenc says Daikin has been prioritising innovations in HVACR, which will minimise environmental impact right from the first stage of product development, and uses a third-party verification method to verify its data on greenhouse gas emissions, water use, waste emissions, and chemical substances. “This verification process adds credibility, assuring stakeholders of the accuracy of our claims,” Gulenc says. In addition to this, Gulenc underlines the importance of engaging with all the stakeholders and says that through listening to the needs and expectations of its customers, employees or investors, Daikin aligns its sustainability strategies with its concerns and ensures that its actions address real-world challenges.

Rohan Chopra

For his part, on how companies in the region are ensuring transparency and consistency in their sustainability efforts, Hashmi says that commercial interest drives companies, and price remains a crucial factor in high-efficiency products. End-users may not be ready to bear the high costs, though, he says. Therefore, adequate government policies, he says, are a must for ensuring consistency in sustainability efforts. Hashmi says: “I believe that companies are genuinely committed to green investments, though it depends ultimately on end-users. In my opinion, end-users and governments are the real drivers of sustainability and green investments, as HVAC companies are commercial organisations, which work based on the customer’s demand.”

Green investments, Gulenc says, help companies to appeal to socially conscious investors and consumers, as well as to showcase the strategic shift towards environmentally conscious business models. Moving forward, Gulenc adds that ESG scores are an important parameter and provide a comprehensive assessment of the company’s environmental, social and governance performance. He says: “These scores serve as a reliable measure of sustainability performance and long-term value-creation potential for investors, customers and stakeholders. It is essential to prioritise ESG factors sincerely, dedicated to creating a better future for people and the planet beyond financial motives.”

Tuna Gulenc

Gulenc says, “Aligning sustainability goals with business objectives makes it a strategic imperative and driver of innovation for long-term success.” To achieve this, he says, companies should develop sustainable products that meet customer and societal needs, as well as invest in research and development to improve energy efficiency and reduce environmental impact. “Moreover, companies should engage with employees, and partner and collaborate with stakeholders to address challenges associated with sustainability and ensure the longevity of their efforts,” he says.

Adding to Gulenc’s thoughts on how companies in the region leverage ESG principles to gain recognition from investment firms, equity funds or governments, Chopra says demand for high-quality ESG reporting by investors has grown significantly in the last few years to make informed decisions and to identify potential opportunities as well as risks. He says that regional players can attract investment opportunities from potential funding organisations by maintaining transparency and reporting their ESG/Sustainability disclosures through credible frameworks, like GRI, CDP and Sustainable Accounting Standards Board (SASB). Furthermore, he underlines the importance of acting on climate change solutions, ensuring a safe and healthy working environment, maintaining a culture of diversity and inclusion, linking executive compensation to sustainability and diversity goals, and transparency in reporting climate risks to gain the trust of equity funds and investment firms.

Asim Ahmad Hashmi

As the importance of ESG factors in investment decisions continues to grow, assessing and benchmarking ESG performance constitute formidable challenges. However, in order to achieve more objective, transparent and internationally recognised standards for evaluating sustainability efforts, the region must address these hurdles head-on. Gulenc says that assessing and benchmarking ESG performance can be challenging due to the lack of standardised metrics and subjective interpretation of criteria. At Daikin, he adds, the company recognises the importance of objective, transparent and internationally recognised standards for evaluating sustainability efforts and actively engages in sustainability dialogues to shape the discourse around ESG performance evaluation.

Fostering sustainable practices: The Role of Government in the GCC Region

Amid the growing urgency to address environmental challenges, the role of government in promoting sustainability and aligning the efforts of companies in the GCC region has gained significant prominence. By implementing effective policies and regulations, governments are providing crucial support to facilitate the transition towards more sustainable practices, ensuring the long-term success of sustainability initiatives.

In the GCC region countries, Hashmi says, there are standards followed by respective governments, namely the Saudi Standards, Metrology and Quality Organization (SASO) certification in Saudi Arabia and the Emirates Authority for Standardization and Metrology (ESMA) certification in the UAE, to have comprehensive benchmarking of ESG scores. “Moreover, suppliers, contractors and manufacturers should get the benefit of scoring high on ESG, as they get for In-Country Value (ICV) with ADNOC and some other organisations,” he adds.

Hashmi says that besides the energy standards that are aligned to sustainability efforts, there should be a clear policy for the use of refrigerants, safety standards for handling inflammable refrigerants, employee satisfaction score, diversity in the workforce, employee health benefits, support to local industries and universities and in-country value.

Joining the discussion, Chopra says the governments of the GCC region countries are committed to sustainability and have announced net-zero goals. However, Chopra adds, an accelerated approach towards net-zero will need substantial involvement of the private sector, effectively a collaborative effort between the private and the public sector. He says: “Now, there is a particular focus on the public sector, with a key emphasis on the adoption of renewables by utility providers in these countries. Additionally, the private sector requires a push to embrace more sustainable practices in its day-to-day operations. This can be facilitated through various government initiatives, such as removing subsidies from energy tariffs, mandating the implementation of demand-side management solutions and embracing on-site energy generation, among others.”

Gulenc also shares a similar perspective as Hashmi and Chopra and thinks that the role of the government is paramount in promoting sustainability and aligning the efforts of companies in the GCC region. In the Middle East region, Gulenc says, the governments have recognised the importance of sustainability and are actively implementing policies and regulations to support the transition towards more sustainable practices. “For example, the UAE Green Agenda 2015-2030 and the Dubai Clean Energy Strategy 2050 provide a clear roadmap for companies to follow in their sustainability efforts, he says. He further points out that the governments of the GCC region countries also offer incentives to encourage businesses to adopt sustainable practices, such as renewable energy feed-in tariffs and green building certifications. “By leveraging these supportive policies and regulations,” he says, “companies like Daikin can accelerate their sustainability initiatives, contribute to national sustainability targets and ensure the long-term success of their sustainability efforts in the GCC region.”