Environmental, Social, and Governance (ESG) reporting is no longer a niche concern; it has become a critical component of modern business strategy, especially in the MENA region. As investors and stakeholders demand greater transparency, accounting firms must equip themselves to help clients navigate the complexities of ESG reporting. At RSM, we explore how firms can prepare for this sustainable shift and the benefits of mastering ESG practices.

The Driving Forces Behind ESG Reporting

"ESG reporting is being driven by an increasing awareness of sustainability issues," says Rakesh Pardasani, Partner at RSM. "Currently, 88% of global investors consider ESG factors when making investment decisions, highlighting the growing importance of these metrics" . ESG reporting not only enhances a company's reputation but also opens up new avenues for investment and growth. A study by McKinsey & Company found that companies with strong ESG practices can achieve a 10-15% reduction in capital costs and a 20% increase in corporate valuation .

"Beyond reputation, ESG reporting is becoming a legal necessity in many regions," adds Bassam Dahman, Managing Partner and RSM Regional Leader - MENA. "Regulatory bodies are imposing stricter guidelines, making it imperative for firms to develop expertise in ESG metrics and data collection. This shift is about more than just compliance—it's about positioning firms as leaders in sustainable business practices." In the MENA region, countries like the UAE and Saudi Arabia are introducing mandatory ESG disclosures for listed companies, aligning with global standards .

Navigating the Challenges of ESG Reporting

Despite its importance, ESG reporting presents several challenges. "One of the primary challenges is the lack of standardized metrics across industries," explains Baasab B. Deyb, FCA, Partner at RSM. "This makes it difficult for firms to produce comparable and reliable ESG reports." The Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) are leading efforts to standardize ESG metrics, but the process is ongoing and complex . To overcome this, firms must invest in understanding the various ESG frameworks and selecting the most relevant ones for their clients.

Data collection is another significant hurdle. "Firms need robust systems to gather accurate ESG data," says Deyb. "This often requires integrating new technologies and analytics tools, which can be a significant investment in both time and resources." According to a PwC survey, 76% of companies struggle with ESG data collection due to the lack of integrated systems and the complexity of tracking qualitative factors .

In the MENA region, as Bassam Dahman notes, "The challenge is further compounded by the need for education and awareness among firms and their clients. Many are still in the early stages of understanding ESG reporting, making it crucial for firms to provide guidance and support throughout the process."

The Takeaway

ESG reporting is more than a compliance requirement; it's an opportunity for firms in the MENA region to lead in the evolving landscape of sustainable business. By mastering ESG metrics, adopting advanced data collection tools, and staying informed about regulatory changes, firms can provide valuable insights to their clients and contribute to a more sustainable future.

For more information on ESG reporting or how RSM can assist with your ESG strategy, please visit our [Webpage https://www.rsm.global/uae].