Gen Z’s ESG paradigm shift

Generation Z has grown up in an interconnected world full of social media, global connections and shrinking distances between people from all walks of life, shaping their view of the world around them.

This generation is inherently digitally inclined, following social media for information and reacting to different topics in a differentiated fashion. Their voices have been heard over time on climate issues and environmental protection.

Generation Z is more eco-conscious about business, and compared to previous generations, gives preference to the underlying environmental and social aspects over the financial aspects.

With their growing influence, Gen Z demands a way out of carbon emissions and solid solutions to tackle climate change.

In many ways, Gen Z has been less concerned about making exaggerated market-adjusted profits and more interested in positively impacting the world around them.

This is reflected in their responses to multiple environmental, social and corporate governance value studies and surveys.

Their focus on ESG values makes Gen Z more likely to invest in sustainability-conscious companies and interact with ESG propositions. They are more likely to ask questions about how companies will impact or benefit communities.

What this means is that companies are now heavily pushed to consider this young demographic’s opinions when designing company strategies or decision-making processes around the economy.

A recent survey by Deloitte revealed that more than 40 percent of Gen Z and Millennials have changed jobs or sectors due to climate concerns, or plan to do so in the future.

Thus, their consumer behavior is distinct, and they are more inclined to invest, work, or consume products based on a company’s implementation of ESG practices.

In another survey, Gen Z was shown to have outstandingly different business views compared to previous generations.

Greener alternatives by companies appeal more to Gen Z. According to new data from a recognized insurance company, two-in-three Gen Zs (68 percent) are anxious and have frank concerns about environmental issues — more than any other generation — and a similar number (63 percent) feel the burden of climate change on their shoulders in the underlying economy.

In addition, compared to Millennials (born 1981-1996), Gen Z (born 1997-2012) has varied expectations concerning brands’ social obligations and contributions to the communities in which they operate.

In another recent survey by PwC, 71 percent of respondents in Saudi Arabia said that they intentionally buy products with eco-friendly branding or less packaging, while 72 percent buy from companies that support the environment through their business activities and 74 percent check product labels for sustainability certifications.

As of September 2022, and according to a new study conducted by a Boston-based consulting firm, total assets belonging to Gen Z and Millennials were estimated to be worth $3.6 trillion, making them the second wealthiest generation in the US.

Although young people have never been wealthier and are growing richer day by day, they are also more sensitive to the negative consequences climate change can have on their future.

Their impact has made the ESG landscape ripe for disruption. The young generation is already 10 times more likely than their elders to have a favorable view of sustainability, according to another study. When it comes to investment, it is worth noting that Gen Z, in many cases, will accept lower market-adjusted returns in exchange for robust ESG impact.

With regards to the Middle East and the Gulf region specifically, Saudi Arabia has taken solid strides in addressing environmental matters. Saudi Arabia launched Vision 2030 back in 2016 with various vital goals for the environment.

Children and youth in Saudi Arabia represent about 67 percent of the Saudi population, according to a recent report by the General Authority for Statistics. Young Saudis in the 15-34 age group make up about 36 percent of the Kingdom’s population. Gen Z in Saudi further consider key ESG issues as part of Vision 2030.

Key aspects of the vision focus on climate, including the Saudi Green Initiative, Green Riyadh, King Salman Park and King Salman Energy Park.

For Gen Z, developing alternative sources of energy and expanding vegetation cover are priorities, since this greatly benefits the environment at large.

Ultimately, Saudi Arabia aims to decrease its reliance on oil while embracing cleaner energy sources (50 percent of energy is expected to come from renewable sources by 2030) and improving quality of life.

NEOM is part of the Vision 2030 project to create a carbon-free, carless city for $1 trillion. An essential task that interests Gen Z in Saudi Arabia is planting 10 billion trees, which is part of the landmark Saudi Green Initiative.

Such initiatives reflect Gen Z’s genuine desire to reduce overall carbon footprints and protect biodiversity.

Since many companies around the world still focus solely on maximizing profits, there is a paradigm shift and a dire need for change to ensure that the longstanding effects of unethical business practices do not undermine future generations and that ESG considerations are constantly embedded at the highest level of decision-making.

Consequently, countries around the world will be increasingly urged by Gen Z to champion ambitious initiatives involving technology, innovation and legislation to ensure businesses place more emphasis on issues concerning sustainability and ESG, and securing a safe, just and eco-friendly future.

• Majed Al-Qatari is a sustainability leader, ecological engineer and UN Youth Ambassador with experience in advancing ESG and sustainability goals in corporate businesses, nonprofit organizations and financial institutions.