Environmental, Social, and Governance (ESG) standards are gaining traction among Saudi companies, marking a strategic shift that strengthens the Kingdom’s position as a regional sustainability leader. This push aligns with Vision 2030—Saudi Arabia’s roadmap for economic diversification—and its ambitious net-zero emissions target by 2060.
This momentum signals a genuine effort to promote more sustainable strategies, facilitating a gradual transition from a hydrocarbon-reliant economy.
Why ESG now?
Globally, ESG adoption is increasingly viewed as essential for future proofing businesses. Companies that embed ESG principles are better positioned to attract top talent, operate efficiently, enter new markets, and scale sustainably.
Millennial and Gen Z consumers also tend to favour environmentally conscious brands—an important factor in ESG ratings.
But beyond business appeal, ESG frameworks aim to address real operational and social challenges. In the MENA, these include political instability, social inequality, climate vulnerability, and water scarcity. Addressing these requires tailored solutions that acknowledge regional specificities.
Despite limited awareness prior to 2020, ESG understanding in the region has evolved rapidly. Historically, the focus remained on environmental risk, with social and governance concerns often sidelined. This stemmed from the region’s fossil fuel dependency, lack of transparency, and short-term investor thinking.
From 2021 onward, Gulf states began rolling out ESG protocols—Bahrain and the UAE were among the early movers. Only recently, however, have Saudi financial regulators moved decisively to enforce ESG principles, marking a new phase of strategic implementation.
Towards standardisation
In 2021, the Saudi Stock Exchange (Tadawul) released ESG Disclosure Guidelines to steer companies towards best reporting practices. In 2023, listed firms were urged to identify and prioritise ESG metrics most relevant to their operations. While this didn’t amount to a unified framework, it offered regulators a testing ground for deeper reforms.
By 2025, the Capital Market Authority (CMA) will mandate ESG inclusion in IPO filings and annual reports. The Public Investment Fund (PIF)—a key economic driver—is also spearheading ESG efforts through initiatives like the One Planet Sovereign Wealth Fund, while investing heavily in renewable energy to meet national clean energy targets by 2030.
“It’s really important that we take the lead when it comes to ESG, to make sure to manage it well so that we will attract more investment,” said Saad Alshahrani, Deputy Minister for Economic Affairs and Investment Studies.
Tareq Al-Sadhan, CEO of Riyad Bank, explained:
“We are responsible for spreading the awareness of ESG by measuring our consumption, whether it’s electricity or water; we also count paper and plastic consumption and award divisions who perform best in reducing their waste,. We are also responsible for encouraging the private sector to consider ESG as part of their strategy. In 2021, we introduced our ESG financing (or green financing) that includes nine products. Sustainability should be a priority all the time.”
Speaking to ESG MENA, Sara Hattar, Director – Sustainability at Clenergize Consultants, observed:
“Saudi companies are showing a strong commitment to ESG, especially as sustainability becomes a national priority. However, one of the most common challenges we see across the market is the lack of robust systems for collecting and managing ESG data. This is particularly evident in complex areas like Scope 3 emissions, supply chain disclosures, and social performance. International frameworks demand a level of consistency, depth, and traceability that many companies are still building toward. As a result, there’s growing recognition of the need for digital solutions and integrated platforms to support ESG reporting. Developing this capability has become a key step for organisations aiming to meet global expectations and drive long-term impact.”
David Howell, ESG & Sustainability Advisor at Sustainable Square, also told ESG MENA:
“Saudi Arabia’s ESG evolution is gaining traction with growing awareness, regulatory guidance from Tadawul and CMA, as well as alignment with national transformation goals such as the Saudi Green Initiative (SGI) and Vision 2030. At this stage, we are seeing the emergence of a more structured ESG landscape, but some organisations still treat ESG as a reporting requirement rather than a driver of long-term value creation. Encouragingly, the foundations are being firmly laid. There is a noteworthy shift in how organisations view sustainability in the Kingdom, especially as regulators, boards and investors begin to ask more informed and strategic questions. ESG is no longer viewed as an optional add-on. It is becoming a direct lens through which corporate purpose, resilience and tangible impact are being assessed.”
These comments reflect a systemic integration of ESG into Saudi Arabia’s financial fabric. A parallel trend is the rise in ESG-linked financial products. Between 2019 and 2023, the value of sustainability-related sukuk and green bonds surged from $1 billion to nearly $8 billion.
This has normalised ESG audits, encouraging transparency and drawing both domestic and international ESG-conscious investors.
A commercial and moral imperative
Embedding ESG is no longer just ethically desirable—it’s commercially sound. Investors and consumers increasingly expect companies to demonstrate ESG alignment. Prioritising sustainability boosts branding, opens new capital channels, and drives operational resilience.
Saudi Arabia’s push for sustainable financing creates new incentive structures for companies aligned with national goals. A clear outcome of this is the expected boom in renewable energy startups, with the Kingdom aiming for renewables to make up 50% of electricity generation by 2030.
Hattar added:
“Since the release of Tadawul’s ESG guidelines and the CMA’s evolving requirements, there has been a noticeable shift in how companies in Saudi Arabia approach ESG. What began as a focus on compliance has quickly broadened into a more strategic interest in integrating ESG across operations. From our consulting experience, we’ve observed companies moving beyond baseline reporting toward developing comprehensive ESG strategies that align with both regulatory expectations and Vision 2030 objectives. There’s a growing recognition that ESG is not just about meeting disclosure requirements — it’s about long-term value creation, risk management, and positioning for future growth in an increasingly sustainability-driven economy.”
Innovation meets impact
Saudi startups like SAWACO Water Group and WAYAKIT exemplify how ESG can drive innovation. WAYAKIT—woman-led and committed to sustainability—develops disinfectants with 93% biodegradable ingredients, replacing hazardous compounds with nano-modified citric acid. This has reduced its environmental impact by 94%, especially in airline sanitation.
The company also uses an environmental footprint tracker to monitor energy efficiency, water use, pollution, and health impacts.
WAYAKIT illustrates how an ESG-friendly ecosystem nurtures high-impact, tech-driven solutions. This contrasts sharply with legacy fossil-fuel industries, and reveals how ESG and innovation can reinforce each other across sectors.
A model for the region?
Saudi Arabia’s pivot to ESG is a multifaceted transformation requiring regulatory, financial, and social coordination. Incentivising change in an oil-rich economy is no small feat, but momentum is building.
The Kingdom is on track to become a regional hub for ESG knowledge and climate resilience—particularly in the development of solutions tailored to arid environments. If this trajectory holds, Saudi Arabia could well become a leader not just in ESG compliance, but in ESG-driven innovation.
By: Omar Ahmed