ESG: Is It a Trend or Must Have? Navigating ESG Practices in the MENA Region: A Guide for International Corporations

Introduction

ESG, in essence, is the impact we have on the world (Environment) we live in, the way we behave with the people (Social) we interact with, and the accountability & transparency (Governance) we operate our business within. As international corporations increasingly expand their presence in the MENA region, understanding the nuances of ESG implementation becomes paramount.

This article delves into the significance of ESG in the context of MENA, offering practical guidance for corporations operating in the United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), and Egypt. It also reflects how ESG developments in other geographies, such as in Europe, may be relevant in this context. Though ESG developments in the MENA region broadly reflect global trends, they also present region-specific priorities and opportunities.

Environmental Considerations

In today’s global business landscape, environmental considerations have evolved from being mere trends to becoming fundamental pillars of corporate strategy and obligation. As a testament of the growing interest, the sphere of environment & GHG emissions, corporates are increasingly joining global decarbonization alliances such as the Science Based Targets Initiative (SBTI) in an effort to reduce emissions in line with the goals set up by the Paris Agreement – Currently, there are more the 10,000 businesses with targets and commitments, while over 7,000 of them have been reviewed in climate science.

The MENA region faces unique environmental challenges, including water scarcity, desertification, pollution of air, land, and sea, as well as extreme events such as floods, as clear consequences of climate change. International corporations operating in the region must navigate these challenges while minimizing their environmental footprint. Strategies as simple as ensuring lighting is off during the night, AC temperature is increased by 1 degree Celsius, as well as the responsible use of paper and plastic products do make an impact. Other, long-term strategies, such as investing in renewable energy, implementing water conservation measures, and adopting sustainable mobility solutions can help mitigate environmental risks and contribute to long-term sustainability.

Across MENA, we see that environmental regulatory frameworks, as we provide examples further below in this article, are broadly aimed at preventing adverse local environmental impacts and, to a degree, addressing sustainable finance. Emission reduction targets are not mandatory but are increasingly a priority for national governments considering the national commitments set out by the Nationally Determined Contributions (NDCs),. See the legal framework section below for more details.

Internationally, EU and UK environmental regulations have historically been the most ambitious in preventing adverse local, as well as global environmental impacts. Increasingly, there is also a focus on mitigating environmental and social impacts in supply chains. Examples of this include the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Deforestation Regulation. This may have an impact on MENA businesses – both where international businesses are operating in MENA and where MENA businesses are operating in the UK and EU.

Social Dynamics

Social dynamics in MENA are influenced by cultural diversity, socio-economic disparities, and demographic shifts. These dynamics, understandably, are dramatically different than the ones seen in the US, UK and Europe. International corporations operating in the MENA region must navigate these dynamics sensitively, respecting local customs and traditions while promoting principles related to equality, inclusivity, and, diversity. Initiatives such as physical and mental health in the workforce, localisation of employment, youth and women empowerment programs, and community engagement projects can foster positive relationships and contribute to social cohesion that ultimately lead to economic development.

The regulatory requirements in this sphere are comparatively limited, extending mainly to the protection of anti-discrimination practices, the health of employees, personal information, and the regulation of artificial intelligence (AI). Specific examples are provided under the legal framework section 

The EU has been more interventionist on the social regulatory side, pursuing legislation, such as the Forced Labour Regulation, aimed at addressing adverse human rights impacts arising from business activity. Notably, the CSDDD introduces a duty on certain companies to identify, mitigate and remediate human rights risks and impacts in their business and supply chains. The CSDDD’s scope extends to non-EU companies with a significant EU presence, which may bring large MENA companies in scope. Even where not directly obligated, any MENA companies involved in supply chains that include European companies, may need to assist their customers or suppliers in complying with the regime.

Governance Practices

International corporations must adhere to stringent regulatory requirements while upholding ethical standards and best practices. Robust governance frameworks, including independent board oversight, transparent reporting, and effective risk management, are essential for building trust and credibility in the region’s business environment.

In MENA, specific governance regimes have been adopted alongside broader governance developments, including national government strategy and disclosure obligations. These include examples in the following section.

ESG Legal Framework and Practicality in MENA

The MENA presents a diverse regulatory landscape and frameworks shaped by cultural, political, and economic factors. Understanding these frameworks is essential for international corporations seeking to align their ESG strategies with local regulations and business practices.

The themes below include European developments that may be relevant for European businesses operating in MENA, as well as MENA businesses that may also have a European presence.

In the MENA region as well, the policy action towards ESG and climate change has significantly intensified in the recent years, driven by international collaborations, national policies, and regional partnerships. With COP28 in 2023 organized in UAE, and UN Desertification COP organized in Riyadh in 2024, there has been a pivotal interest generated on environmental well-being in the region. The Middle East Green Initiative (MGI), initiated in 2021, is also an exemplary regional effort led by Saudi Arabia to mitigate the impact of climate change on the region and to collaborate to meet global climate targets. These recent developments are an evidence of MENA region’s growing trajectory towards incorporating ESG strategies in future planning and development.

United Arab Emirates (UAE)

UAE has been a frontrunner in the MENA region on structure ESG action, with some ambitious climate goals and a clear reflection of ESG principles in key national policies, strategies and plans, such as:

• UAE’s Net Zero by 2050:  The UAE’s Net Zero by 2050 plan is a national endeavour aiming at achieving net-zero emissions by 2050, making the UAE the first nation in the MENA region to commit to such a plan.
• UAE’s Nationally Determined Contribution (2024): In the 3rd NDC, the UAE updated its decarbonization commitment to reduce 47% GHG emissions by 2035 from a 2019 base year.
• National Climate Change Plan 2017–2050: Issued in 2017, this comprehensive framework aims to address the impact of climate change and develop a transition plan towards a resilient green economy. The primary objectives include managing GHG emissions while sustaining economic growth, minimize risk and improve capacity for climate change adaptation, and enhance UAE’s economic diversification through innovative solutions.
• The National Framework for Sustainable Development (2017): This framework aims to enhance the quality of life in the UAE, promote diversification and economic prosperity, preserve the UAE’s ecosystems, sustain its ecological resources and services, and support the achievement of the Sustainable Development Goals 2030. The framework is built on 5 fundamental pillars comprising of 1) Nature 2) Environmental health 3) Climate change 4) Living organisms 5) Biosecurity.
• UAE General Environmental Policy (2020): This policy aims to enhance the quality of life in the UAE. It seeks to maintain a sustainable environment that supports long-term economic growth, implement over 100 initiatives to enhance agricultural and animal resources, support production, and boost its contribution to the national economy, and employ technology to achieve sustainability.
• UAE Energy Strategy 2050: Issued in January 2017, the UAE Energy Strategy 2050 aims to triple the contribution of the renewable energy and invest AED 150 to AED 200 billion by 2030 to meet the country’s increasing demand for energy as a result of a rapidly growing economy.
• UAE Green Agenda 2015–2030: Approved by the UAE’s cabinet in 2015, the UAE’s Green Agenda is a long-term plan to achieve its goals of sustainable development and make its economy more environment-friendly. The green agenda is centred around five strategic objectives that include 1) developing a competitive knowledge economy 2) social development and quality of life 3) Sustainable environment and valued natural resources 4) Clean energy and climate action 5) Green life & sustainable use of resources.
• The UAE’s Industrial Waste Valuation Policy (2022): This policy aims to enhance the UAE’s competitive edge by providing local production inputs and reducing reliance on global waste markets. It encourages recycling, helps manage industrial waste supply and demand, and supports sustainable waste management practices. 
• The UAE Circular Economy Policy 2021-2031:  Issued in 2021, the policy represents a framework to achieve sustainable management and efficient utilization of UE’s natural resources. It aims to promote adoption of responsible consumption and production methods, enhance resource efficiency, and waste reduction.
• The National Energy and Water Demand Management Program 2050: Launched in 2021, this program aims to reduce the energy demand by 40% and increase the share of renewables in the energy mix to 50% by 2050. It also seeks to boost water reuse by 95%. This program focuses on energy and water consumption rationalization, targeting the transport, industry, and construction sectors.
• Abu Dhabi Economic Vision 2030: The Abu Dhabi government delineated a comprehensive strategy in 2008 for the emirate’s economic evolution, which entails a phased decrease in dependency on the oil sector as a primary economic driver and a forthcoming focus on fostering knowledge-based enterprises.
• Dubai Clean Energy Strategy 2050: Issued in Nov’2015, this initiative aims to make Dubai a global hub for clean energy and sustainable development. It sets targets for increasing the share of clean energy in Dubai’s energy mix and reducing carbon emissions.
• Abu Dhabi Global Market’s Sustainable Finance Regulatory Framework (2023) sets out clear environmental criteria for sustainable financial products, requiring disclosures on climate-related risks, green bond standards, and alignment with global taxonomies like the EU Taxonomy and ICMA Green Bond Principles.

To further support these policies and plans incorporating ESG principles, UAE has also set up specific regulations mandating companies in UAE to disclose on various ESG parameters. These include:

• The Dubai Securities and Commodities Authority (SCA) mandated ESG reporting for all listed companies in 2022. It requires companies to disclose their climate risks, GHG emissions, and resource usage (water, energy etc.), labor practices, human rights, community engagement, and diversity metrics in alignment with global frameworks such as the TCFD and GRI.
• Federal Decree-Law No. (11) on the Reduction of Climate Change Effects (2024): Effective May 2025, the law mandates businesses operating in the UAE to measure, track & manage GHG emissions and implement GHG emissions reduction strategies.  The businesses are subject to fines ranging from AED 50k up to 2 million in case of non-compliance.

Further to disclosures, there are clear laws and regulations specifying clear requirements for environmental, social and governance compliances to all public and private entities within UAE. These include:

• Federal Law (12) on Integrated Waste Management (2018):  Effective March 2019, this Law aims at regulating the waste management operation and unifying the mechanisms and ways of its proper disposal through applying the best available practices and technologies, in order to protect the environment and reduce the damage caused to the human health.
• Federal Law No. (24) Concerning the Protection and Development of the Environment (1999): Effective January 2000, this comprehensive law aimed at protecting and conserving the quality and natural balance of the environment in the UAE. The law addresses various aspects of environmental protection, including pollution control, waste management, and natural resource conservation.

• Federal Decree by Law Concerning Domestic Workers (2022): Effective December 2022, this law protects the rights of domestic workers in the UAE through standardized contracts and fair working conditions. It ensures timely wages, rest days, leave entitlements, and safeguards workers against abuse.
• Federal Decree by Law Concerning Equality in Wages between Men and Women (2018): Effective October 2018, this law mandates the government officials to not discriminate based on gender when determining wages for laborers at the same job grade, unless differences in qualifications, specialization, skills, or expertise justify a pay discrepancy.
• The UAE government enacted a new law effected in May 2024 safeguarding mental health and impacting some dynamics between employer and employees dealing with mental health challenges.

• Abu Dhabi Global Market’s Whistleblowing Framework (2023): The framework promotes transparency, integrity, and accountability across the financial ecosystem. It protects the whistleblowers and mandates regulated entities to establish secure, confidential reporting mechanisms.
• Dubai International Financial Centre’s (DIFC) Data Protection Law (2020): This law provides a framework for handling personal data within the DIFC. It aims to protect individuals’ privacy and ensure responsible data processing by businesses.
• Dubai International Financial Centre’s (DIFC) Employment Law (2019): This law obliges employers to provide and maintain a workplace free of discrimination and outlines significant liabilities in the event of a breach.
• SCA regulates green bonds and sukuk (Islamic equivalent) and enhances guidelines to further encourage sustainable capital market activity on public offerings. In December 2023, SCA disclosed that the total value of registered green and sustainability-linked bonds and Sukuk reached approximately AED15.45 billion during the first 11 months of 2023.

Kingdom of Saudi Arabia

After UAE, Saudi Arabia is another country which has started strongly on the journey of setting stringent targets and the right policy action on ESG and climate change. This is reflected in its national commitments and frameworks:

• Net Zero: Saudi Arabia commits to achieving net-zero emissions by 2060
• KSA’s Nationally Determined Contribution (2021): In the 2^nd NDC, Saudi Arabia updated its decarbonization commitment to reduce 278 million tCO2e GHG emissions by 2030 from a 2019 base year (over 2-fold increase vs the target in 1^st NDC)

• Saudi Vision 2030:  Launched in 2016, the vision 2030 focuses on diversifying Saudi Arabia’s economy away from oil dependency and fostering sustainable development. It aims to integrate environmental conservation, energy transition, and sustainability initiatives, with a focus on mitigating emissions, enhancing the adoption of clean energy, and addressing the challenges posed by climate change.
• Saudi and Middle East Green Initiatives (2021): The Saudi Green initiative and Middle East green Initiative are closely aligned and complementary to the Saudi Vision 2030. These initiatives outline a long-term sustainable action plan and several sub-initiatives aimed at achieving the three key targets of reducing emissions, greening Saudi Arabia & Middle East, and protecting the kingdom’s land and sea.
• Clean Energy: This initiative aims to transform domestic energy mix by increasing the share of renewable energy to 50% by 2030 and displace over 1 million liquid fuels barrels daily across power plants, industrial, and agriculture thereby reducing 175 million tCO2e emissions.
• Energy Efficiency: Saudi Arabia’s Energy Efficiency Program (SEEP) initiative aims to implement new energy efficiency standards across power generation, water desalination, and electricity transmission and distribution by 2030
• Water: Establish Zero Liquid Discharge (ZLD) desalination plant in Jubail with a capacity of 2 million tons per year and reduce discharge of saline brine to the sea by 85% by 2025.
• Waste Management: By 2035, divert 94% of waste generated in Riyadh away from landfills and compost over 1.3 million tons of biodegradable waste leading to a 4.1 million tCO2e emissions reduction

In addition to the various initiatives planned under the Saudi Vision 2030, the Saudi government has also enforced various laws to further strengthen the ESG compliance and perform within the country. These include:  

• ESG Disclosure Guidelines (2021): The Saudi Exchange (Tadawul) issued ESG disclosure guidelines, which in principle, aim at providing assistance to listed companies in the disclosure, operation and spreading awareness of ESG pursuant to Saudi Vision 2030.

• Environmental Protection Law (2021): This law outlines regulations for environmental impact assessments, waste management, and conservation efforts. Also, new waste management laws and environmental regulations were introduced in 2021 to enhance the country’s ESG practices. Further, the Kingdom has pledged to achieve net-zero carbon emissions by 2060, reflecting its commitment to global sustainability efforts and the United Nations Sustainable Development Goals.

• Labor Law amendment (2024): Effective February 2025, Saudi Arabia amended its Labor Law to enhance job stability and improve labor market efficiency, prioritize employee rights protection including work environment improvements, and enhance job stability and improve the efficiency of the labor market.

• Corporate Governance Regulations (2017): Saudi Arabia has implemented various corporate governance regulations to enhance transparency, accountability, and investor protection under the Corporate Governance Regulations. These regulations apply to listed companies and cover aspects such as board composition, disclosure requirements, and shareholder rights. With the amendment in 2023, this law further strengthens board independence, enhances transparency in related-party transactions, and reinforces sustainability disclosure requirements. The update aligns with the Saudi Vision 2030 goals by promoting ethical governance, investor protection, and long-term value creation

Anti-Corruption Law (2011): Saudi Arabia further strengthened its anti-corruption efforts with a revised Nazaha Law effective November 2024, to combat financial and administrative corruption.

• Sustainable Finance (2022): KSA’s Public Investment Fund launched a Green Finance Framework, which is part of the country’s efforts to invest in sustainable projects and support Vision 2030’s environmental objectives.

Egypt:

The Government of Egypt is in early stages of building up the standards and frameworks to support adoption of ESG principles amongst companies in the country. There are a few nation-wide plans, policies and strategy documents that provide an overview of the country’s goals on sustainable development, such as:

• Sustainable Development Strategy 2030: Launched in 2016, Egypt’s Sustainable Development Strategy 2030 outlines the country’s vision for achieving sustainable development across various sectors, including environmental conservation, social inclusion, and economic growth.
• Egypt’s Nationally Determined Contribution (2023): In the 2nd NDC, Egypt updated its sectoral emissions reduction targets in electricity (37% reduction), Transport (7% reduction), and Oil & gas (65% reduction) compared to the business- as- usual scenario in 2030.
• The Central Bank of Egypt (CBE): the CBE has supported various initiatives encouraging banks to fund environmentally friendly and ESG-centric ventures. To this end, the CBE released guidelines on sustainable finance in 2021. In a progressive shift, Egyptian banks are increasingly embedding ESG principles within their governance frameworks and introducing ESG-focused products to strengthen green financing.

To further enable these national goals and endeavors, there are some laws and regulations that apply to companies based in Egypt to ensure compliance on ESG parameters. These include:

• Financial Regulatory Authority’s Decree No. 107 and 108 (2021): FRA’s decree 107 and 108 mandate ESG disclosures for companies listed on the Egyptian Stock Exchange and those operating in the non-banking financial sector. These addressed companies are required to prepare an annual ESG reporting and companies with over EGP 500 million net equity must undertake Task Force on Climate-Related Financial Disclosures (TCFD) reporting as well.
• Environmental Law No. 4 (1994): The law focuses on environment protecting by regulating pollution, establishing the Environmental Affairs Agency (EEAA), and implementing environmental impact assessments (EIAs). The law covers land, air, and water pollution, and requires assessments for certain projects for environmental impact.

• Waste Management Law (2020): This law recognizes the Extended Producers Responsibility on their products. It defined addressed producers to include manufacturers, importers, and distributers
• New Labor Law No. 14 (2025): This law provides new major concepts such as remote working, job sharing, flexible work arrangement, equal pay, paternity leave, and protection against harassment and bullying in the workplace. The law represents the minimum rights and benefits of the employees. It outlines the duties of the employers and lays down requirements related to the workers’ rights, fair wages, safe working conditions, and prohibits child labor.
• Corporate Governance Principles (2016): Issued by the FRA, the Corporate Governance Principles outline rules for Egyptian companies regarding transparency and disclosure and guide them in implementing effective governance structures.

Europe

• Corporate Sustainability Reporting Directive (2023): The CSRD introduced a broad set of sustainability reporting requirements across a range of environmental, social and governance topics. The complex and comprehensive requirements will extend both to EU entities with MENA subsidiaries, as well as MENA businesses with a significant footprint in the EU.  

• Corporate Sustainability Due Diligence Directive (2024): The CSDDD is applicable to both large EU entities and non-EU entities with a large footprint in the EU. This law introduces a new duty to identify, prevent and remedy negative environmental and human rights impacts in businesses and their supply chains, wherever located. It also requires obligated companies to have a transition plan for climate change mitigation, which is aligned with the Paris Agreement. The recent regulatory changes had changed the implementation timeline for different category of companies. Large Non-EU companies with an EU turnover of Euro 1.5 billion need to comply effective 1^st January 2028 while Non-EU companies with an EU turnover of Euro 900 million must comply effective 1^st January 2029.

• Taxonomy Regulation (2020): This regulation sets out complex criteria for economic activities, like renewable energy generation, to be classified as ‘sustainable’. It also requires certain disclosures, such as annual reporting in the form of environmental key performance indicators. Where a company has a MENA-based economic activity, it will need to work through the Taxonomy criteria to classify the activity as ‘sustainable’ or not. Classifying activities as ‘sustainable’ can present opportunities to unlock sustainable financing.

• Forced Labour Regulation (2024): This regulation is relevant to any business supplying customers in the EU, this law prohibits the sale, import or export of any product in the EU market that is made with forced labour, wherever it was produced.

• EU Deforestation Regulation (2023): Effective December 2025, EUDR is relevant to any business supplying customers in the EU, this law prohibits certain products from deforested areas from entering the EU and requires businesses to prove that their products are not from deforested areas, wherever they were produced.

• The Carbon Border Adjustment Mechanism (2023): Effective January 2026, CBAM introduces a carbon pricing mechanism on certain imported goods (cement, steel, aluminum, fertilizers, electricity, and hydrogen) to equalize the carbon cost between EU producers (subject to the EU ETS) and foreign exporters. It requires the non-EU producers to report embedded emissions and eventually purchase CBAM certificates to cover these emissions. It is relevant to any MENA business exporting the CBAM applicable goods to the EU.
• EU Battery Regulation (2023): Effective February 2024, the EUBR is applicable to all batteries sold in the EU, governs the entire lifecycle of batteries from design to disposal. It outlines rules on carbon footprint labeling, recycled content thresholds, performance and durability standards, due diligence for supply chains (especially for raw materials like lithium, cobalt, and nickel), and end-of-life management. The EUBR is applicable to all MENA battery producers and material exporters to the EU.
• Circular Economy Action Plan (2015): Effective 2020,The CEAP is relevant to any business in MENA that supplies to the EU. It sets a policy roadmap to make products in the EU more sustainable by promoting eco-design, reducing waste, and enabling circular business models. The key sectors in CEAP include electronics, plastics, textiles, construction, and packaging.

Case studies on the contentious side

• The Egyptian Constitutional Court while considering the constitutionality of Article 4 and 16 of law No. 48 of 1982 regulating disposal of solid, liquid, and gaseous waste in water streams, ruled that illicit dumping of toxic substances or hazardous matters, or waste is endangering people’s right to life and health. The Court also differentiated between civil and political rights on one hand and economic, social, and cultural rights on the other hand. The Court clarified that the State has an active obligation to positively protect its people’s rights, and in order to do so, and in accordance with the ratified international treaties, the State must ensure protection of its resources.

• The Egyptian Supreme Administrative Court ruled that the right to live in a healthy environment is recognized as a fundamental right. In addition, international instruments, especially the Stockholm Declaration of 1972, affirmed that this right is a fundamental guarantee of the dignity of people. This right entails an obligation to preserve and improve this environment for present and future generations. Lastly, the Court considered the said international governing rules are nearly considered as mandatory rules.

Conclusion

In summary, ESG is not merely a buzzword. It is a strategic imperative for international corporations operating in the MENA region. Indeed, as regulatory requirements expand, companies may find themselves navigating multiple regimes that are similar in nature but contain important differences. This is especially the case for multinationals operating in MENA, but also Europe and more globally. By embracing ESG principles and integrating them into their operations, corporations can unlock new opportunities, mitigate risks, and contribute to sustainable development in the region.

Whilst the overall regulatory system is less mature in comparison to EU, this article shows the seriousness of the MENA region in relation to ESG. Mandatory disclosures are bound to expand (from only Stock Exchange level to the wider corporate ecosystem), similarly to CSRD in Europe. Greenwashing and oversaturation of ESG claims have caused consumer fatigue and scepticism, damaging corporate reputations and undermining genuine sustainability efforts. As MENA continues to evolve, international corporations must remain agile, adaptive, and committed to responsible business practices that create value for all stakeholders.

Authored by:

• Ammar ElBanna: Founder and Managing Partner / Incept Legal
• Rawan Abdullah: Mid-Leval Associate / Incept Legal
• Hani Tohme: Senior Partner, Head of Sustainability MEA / AT Kearney
• Dr. Darren Perrin: Partner, Lead Circular Economy MEA / AT Kearney
• Dragos Fundulea: Vice President, Lead of Decarbonization MEA / AT Kearney