Sustainability is a key priority for almost all MENA-based CEOs, with 97 percent naming environmental, social and governance (ESG) principles as a driver of value over the coming years.
The EY CEO Survey 2022, part of the CEO Imperative Series, reported that the MENA figure was higher than other parts of the world.
Of the respondents, 29 percent said they see sustainability as an opportunity to gain a competitive advantage, with a number of companies looking to embed sustainability into their business strategies.
One-third of MENA respondents said that pressure from governments, regulators, and society are the primary drivers of their sustainability strategy.
While MENA companies may be encountering resistance from some investors regarding their sustainability transition strategy, they also said they recognise that it is an important factor in attracting sustainability-minded investors and talent.
The survey also showed that 40 percent of MENA CEOs have seen short-term disruption to their industries as a result of the pandemic, with one in five respondents saying that it fundamentally reshaped their industry for the better.
Brad Watson, EY MENA strategy and transactions leader, said: “Executives showing an increased interest in fast-tracking ESG principles can be attributed not only to the pandemic, but to shifting consumption behaviours within the business community.
“Both government entities and private companies are looking at the sustainability habits of who they conduct business with and the long-term impact of such strategic collaborations.”
The EY CEO Survey 2022 highlighted that MENA executives are looking to optimise portfolios through deal-making. In a typical pre-COVID year, MENA companies engage in between 400-500 transactions across the region. In 2021, that number rose to approximately 650 as the pandemic accelerated portfolio optimisation.
As MENA businesses work to achieve long-term resilience, 64 percent of MENA CEOs said they plan to pursue M&A within the next 12 months.
Brad added: “We expect above-average M&A activity to continue in 2022 as MENA companies and government-related entities acquire bolt-on operations to strengthen core areas of their portfolio while divesting of non-core assets.
“In 2021, the majority of the acquisition capital was deployed within the region. However, according to our survey, MENA respondents also identify Italy and the UK as sources of deal activity over the next twelve months. It is also clear that MENA companies feel a particular need for diversification, with 57 percent of MENA respondents saying that they are accelerating cross-border investments – significantly more than the 45 percent global average.”
The survey also showed that there are also disparities between the impact of supply chain disruptions in MENA compared to the rest of the world.
The well-documented global supply chain disruptions have significantly impacted MENA economies and businesses operating within them. Of those surveyed, 87 percent of respondents indicated that they have seen a significant rise in input prices, particularly in transport and logistics, with shipping freight rates alone increasing significantly over the last 12 months.
The EY report also showed that 88 percent of MENA executives said they have adjusted or are planning to adjust their global operations and supply chains to ensure undisrupted and accelerated fulfillment of products. This compares to a worldwide average of only 79 percent, indicating that MENA has been more exposed to supply chain shocks. In Saudi Arabia and the UAE, the percentage exceeds 90 percent.
Brad said: “The pandemic forced MENA CEOs to take difficult steps that have already proven to have made MENA companies more resilient on the prosperity that lies ahead. There is an overwhelming drive amongst MENA businesses to balance localisation with diversification as they make operational adjustments to blunt the sizable impact of supply chain disruptions.
“To address food insecurities and critical supply chain challenges, MENA governments have been focusing on localization, particularly in areas like agritech, which continues to gain momentum as an emerging solution to the issue of food security.”
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