Strong governance can change perceptions of Saudi Arabia as a tourist destination

Environmental, social and governance (ESG) considerations have become a hot topic in most boardrooms. They are a serious concern for the C-suite, risk management teams and investors. ESG is a priority for governments, too – perhaps especially those looking to boost their tourism industries and respond to demand from eco-conscious travellers.

Saudi Arabia’s Vision 2030 aims to increase tourism’s share of GDP from three per cent to 10 per cent as the Kingdom diversifies its economy and shifts away from oil. In its efforts to do so sustainably and responsibly, the Kingdom has pledged to achieve a net zero carbon society by 2060. What is helping to set the country’s developers apart is their recognition that governance is equal in importance to environmental and social issues, that it is the glue that makes the others possible.

Without good governance, explains Dr Maryam Ficociello, Group Chief Governance Officer at the Saudi-based developer Red Sea Global (RSG), there is no way to win the backing of investors, customers, regulators and the media. If that can’t be achieved, then it is impossible to change the perception of the country as a tourist destination.

“Strong governance sits at the very heart of any successful ESG proposition, but is often overlooked for environmental and societal issues, which are more easily understood, elicit more emotional responses, and garner more participation from society,” Dr Ficociello says. “And while the E and S are important – and represent key focus areas at RSG – proof of organisational control, stability and values will always remain crucial to unlocking environmental and social sustainability. This is why governance is a key concern for investors, regulators, and other major stakeholders.”

RSG is building a reputation as a pioneer in responsible development, by building ‘regenerative tourism’ destinations The Red Sea and Amaala using technology that seeks not only to protect the surrounding environment, but actually enhance it.

Ahead of beginning construction, the developer carried out a substantial marine spatial planning (MSP) exercise, in partnership with the King Abdullah University of Science and Technology, to understand the possible impact of coastal development and also predict the potential for regeneration. It was this exercise that led the developer to put plans in place which it hopes will see biodiversity in the destination area increase by 30 per cent by 2040, including fish biomass and coral and mangrove cover.

The MSP also led to the decision that 75 per cent of THE RED SEA’s island archipelago will remain untouched. A similar approach was taken at AMAALA, with only five per cent of its greenfield site set to be developed.

Good governance is a key tenet in the delivery of Red Sea Global’s gigaprojects, which rely on collaborations with hundreds of different partners throughout the supply chain, from architects, designers and retailers to hospitality vendors and contractors. Trying to maintain the steady progress of both destinations’ development, while delivering on incredibly ambitious sustainability goals, is an impressive undertaking.

However, it is hoped that the robust governance model put in place by Dr Ficociello and her team will make this an attractive opportunity for investors, and ensure that RSG remains on course to provide a vital contribution to the Kingdom’s burgeoning tourism industry.

A successful approach has three key characteristics. First, strong governance principles are established early in the company’s development, and underpin all subsequent sustainability programmes. Second, there is continuous investment in corporate governance initiatives to ensure they remain fit for purpose. Third, partners, suppliers and employees are brought along on the journey.

RSG’s purpose-led model was established in 2018 before any major work was carried out. As Dr Ficociello explains, there was an important reason for this. “Governance must be at the heart of your business from the very earliest stages. It has framed our ambitions right from the outset to establish a new benchmark as the world’s most responsible developer, and has created strong processes and structures that allow us to effectively expand our remit and demonstrate our frameworks on an international stage.”

The early embedding of ESG principles at RSG has helped stakeholders to identify and plan for sustainability commitments, such as renewable energy targets and alignment with UN Sustainable Development Goals, as well as modelling for visitor numbers and calculating the potential for harm and regeneration to the surrounding environment and local population.

At the same time, due diligence has helped to ensure that suppliers, partners and employees adhere to strict business conduct standards and support the company’s wider goals of prioritising both people and planet. It’s a significant investment of resource and time, but the commitment will pay off, as RSG is discovering.

“We’re already seeing the rewards from our efforts,” says Dr Ficociello. “In mid-2022 we announced a major joint venture agreement with prominent investment group Al Mutlaq, demonstrating the growing interest and trust of the investment community in our strong governance processes.”

Good governance models are intended to contribute to the broader image of the Kingdom as an emerging hub for sustainable development and tourism, led by organisations such as Red Sea Global, which operate with a duty of responsibility at their core. And for Dr Ficociello and her team, this is only the beginning, as RSG turns its attention towards setting new hospitality standards worldwide.