عربي
HUC logo
HUC logo
Adaptation of ESG disclosures and Reporting in the Middle East leading to new era of Sustainability
Ms. Asfarin Qureshi From Different Corners

Adaptation of ESG disclosures and Reporting in the Middle East leading to new era of Sustainability

ESG Reporting has gained momentum worldwide and same is in the Middle East. Investors , government and all the stakeholders now demand and look upon the companies who are committed to sustainability. Since these stakeholders seek greater accountability and transparency, the popularity of ESG has been increasing. This practiced has transformed the landscape of organization and compelled organizations to disclose their sustainability risks and strategies. Middle East was previously more dependent on fossil fuels, but now it has embraced ESG reporting as a tool for its long term growth and resilience.

The government and regulatory bodies of Middle Eastern countries have introduced ESG reporting guidelines for mandatory and voluntary implementation, which indicates their commitment to growing sustainably. Initiatives taken are:-

  • UAE: - Made ESG reporting compulsory for listed companies in 2022.
  • Saudi Arabia: - Guidelines for sustainability disclosures were launched in 2021.
  • Qatar: - Reporting guidelines for ESG has been issued in 2022.
  • Oman: - In 2023, introduced ESG disclosure guidelines for voluntary adoption. Mandatory report expectation from 2025.
  • Bahrain: - Voluntary reporting guidelines was introduced in 2020.
  • Kuwait: - Voluntary ESG reporting guides has been released and sustainability regulations were implemented in 2022.

All the efforts as mentioned above along with the rise in demand for net zero commitments and green finance, have led to Middle East being positioned as rising leader for adopting ESG.

 

What are ESG disclosures?

  • Environmental:- This criteria focuses on how an organization is managing impact of its operations on the planet, efficient use of energy, water usage, climate change , carbon emissions and bio-diversity.
  • Social:- This aspect assesses how a company engages with the society and community, the nurturing relationship with its workforce. It also focuses on promoting inclusivity, customer satisfaction.
  • Governance:- This dimension examines internal systems, controls and practices. Here the focus is make sure that transparency, accountability culture is inbuilt. Compliance with industry standards has to be ensured along with ethical leadership.

For credibility and consistency, Global Frameworks were enacted in the ESG disclosures. This global frameworks are IFRS Sustainability Disclosure Standards by the International Sustainability Standards Board (ISSB) and Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI).

 

ESG Reporting examples in Middle East

 

Emirates NBD, is a leading bank in the UAE. It has published an annual sustainability report which has coverage on environmental, social and governance performance.

 

Saudi Aramco  is the world’s biggest oil company. Aramco has not only published its annual sustainability report, it has also endorsed for circular carbon economy as its green initiative. It has undertaken an commitment for massive plantation of 50 billion trees in the Middle East.

 

FAB is one of the biggest bank in UAE and it is also the first bank in MENA market that has set ‘financed’ emission reduction targets for its power generation, oil and gas and aviation industries. FAB has not only made operational changes but also expanded its scope to green financing. FAB is also focusing on Net Zero push.

 

These are just a handful of examples of multiple companies in Middle East those have taken ESG reporting seriously.

 

Challenges companies are facing in Middle East for ESG Reporting

  • Uncertainty in Regulations- Global reporting frameworks though present are not harmonized.
  • Quality and Availability of Data- ESG performance management is facing accuracy issues because of limited access to reliable and standardized data.
  • Skilled Talent- For effective implementation of ESG strategies skilled professionals and internal expertise are in shortage.

Future of ESG in the Middle East

 

Since sustainability has gained importance, disclosures for ESG have become a driving force for development of Middle East.

 

Emerging prospects are-

  • Technological developments- Cloud based platforms, AI and data analytical tools will aid in revolutionizing ESG data collection and reporting.
  • Mandatory Reporting Requirements – More and more companies and sectors will be covered mandatorily for ESG reporting and disclosures.
  • Global Influence – COP 28 and the global trend for sustainability will continue to inspire and develop ESG initiatives across Middle East region.

 

Conclusion

 

The Middle East’s ESG journey is reflection of shift towards transparency and sustainability. With adoption of advanced technologies Middle East can take global lead for a Sustainable future.

 

References:

  • https://www.pwc.com/m1/en/sustainability/insights/survey.html
  • https://www.kreston.com/article/esg-reporting-in-the-middle-east/
  • https://www.azeusconvene.com/esg/articles/esg-reporting-in-the-middle-east