Sustainability and ESG Disclosures

Environmental, Social, and Governance Reporting in the Saudi Capital Market

First: Introduction

Environmental, Social, and Governance (ESG) disclosures have moved from voluntary practice to strategic imperative in the Saudi capital market. Driven by Vision 2030’s sustainability ambitions, international investor expectations, and the global ESG movement, Saudi listed companies are increasingly disclosing detailed ESG information. Tadawul issued its ESG Disclosure Guidelines in 2021 — a voluntary framework that has gained significant adoption. As global standards evolve, particularly through ISSB, Saudi disclosure requirements are expected to formalize and expand.

Per OECD’s 2025 report, 94 Saudi companies disclosed ESG practices in 2024, up from 76 in 2023. Among the top 100 Main Market companies, 65% disclosed ESG information in 2024, up from 58% in 2023. This trajectory reflects rapid acceleration, driven by Vision 2030 (Saudi Green Initiative, carbon neutrality by 2060, 50% renewable energy by 2030), MSCI inclusion, and FTSE Russell ratings. This article examines the current ESG disclosure landscape, international standards, content areas, and emerging requirements.

💡  Key Insight ESG disclosure is no longer optional for ambitious Saudi companies. Major institutional investors — including sovereign wealth funds, pension funds, and global asset managers — increasingly require ESG information for investment decisions. Companies without quality ESG disclosure are progressively excluded from large pools of capital. The question is not whether to disclose ESG, but how comprehensively, how authentically, and how strategically.

Second: ESG Concept and Evolution

1. What ESG Means

1.1 Environmental

• Company’s environmental impact.
• Climate change emissions.
• Resource use.
• Waste and pollution.
• Biodiversity.

1.2 Social

• Relationships with stakeholders.
• Employees, customers, communities.
• Human rights.
• Health and safety.
• Diversity and inclusion.

1.3 Governance

• How the company is governed.
• Board structure.
• Ethics and compliance.
• Risk management.
• Transparency.

2. Historical Evolution

2.1 Origins

• Socially Responsible Investing (1960s).
• Sustainability movement (1990s).
• UN PRI (2006).
• Increasing institutional adoption.

2.2 Transformation

• Paris Agreement (2015).
• UN SDGs (2015).
• Major investor commitments.
• Mainstream adoption (2018+).

2.3 Recent Acceleration

• COVID-19 pandemic catalyst.
• ESG fund growth.
• Regulatory mandates.
• Standardization efforts.

3. Saudi Context

3.1 Vision 2030

• Sustainability central to vision.
• Saudi Green Initiative.
• Carbon neutrality by 2060.
• 50% renewable energy by 2030.
• 10 billion trees.

3.2 Capital Market Context

• MSCI inclusion (2019).
• FTSE Russell.
• Increasing foreign investment.
• International standards demand.

3.3 Tadawul Initiative

• ESG Disclosure Guidelines (2021).
• 31 recommended metrics.
• Voluntary framework.
• Aligned with GRI and SASB.

Third: International Standards Framework

1. GRI Standards

1.1 Overview

Global Reporting Initiative:

• Most widely adopted globally.
• Comprehensive framework.
• Independent organization.
• Continuously updated.

1.2 Structure

• Universal Standards (basic disclosures).
• Sector Standards (industry-specific).
• Topic Standards (specific issues).
• Material topics approach.

1.3 Application

• “In accordance with” — full application.
• “With reference to” — partial.
• Most common globally.
• Widely understood.

2. SASB Standards

2.1 Overview

Sustainability Accounting Standards Board:

• Industry-specific (77 industries).
• Investor-focused.
• Financially material focus.
• Now part of IFRS Foundation.

2.2 Difference from GRI

• SASB: financial materiality (investors).
• GRI: stakeholder materiality (broader).
• SASB: limited industry-specific metrics.
• GRI: comprehensive.

3. TCFD

3.1 Overview

Task Force on Climate-related Financial Disclosures:

• Climate-specific framework.
• Established 2015.
• Highly influential.
• Foundation for ISSB climate standard.

3.2 Four Pillars

• Governance: Board oversight of climate.
• Strategy: Climate impact on business.
• Risk Management: How climate risks are managed.
• Metrics and Targets: Quantitative measures.

3.3 Status

• Mandatory in UK, Japan, etc.
• Voluntary in many.
• Incorporated into ISSB.
• Global influence.

4. ISSB Standards

4.1 Overview

International Sustainability Standards Board:

• Created 2021 under IFRS Foundation.
• Global baseline for sustainability.
• Investor-focused.
• Increasing adoption.

4.2 Standards Issued

• IFRS S1: General sustainability disclosures.
• IFRS S2: Climate-related disclosures.
• Effective for periods beginning 1 Jan 2024.
• More standards developing.

4.3 Adoption

• Multiple jurisdictions adopting.
• Expected Saudi alignment.
• Global baseline emerging.
• Convergence of standards.

5. Other Standards

5.1 CDP

• Carbon Disclosure Project.
• Climate, water, forests.
• Major data platform.
• A-D- scoring.

5.2 GRESB

• Real estate focus.
• Sustainability benchmark.

5.3 Various Sectoral

• Industry-specific frameworks.
• PRI for asset managers.
• Equator Principles for banks.
• Industry initiatives.

Fourth: Tadawul ESG Framework

1. The 2021 Guidelines

1.1 Issuance

• Tadawul ESG Disclosure Guidelines.
• Issued October 2021.
• Voluntary framework.
• Major step for market.

1.2 Approach

• Aligned with GRI.
• Aligned with SASB.
• Aligned with WFE (World Federation of Exchanges).
• Saudi context incorporated.

1.3 31 Metrics

• Environmental: 8 metrics.
• Social: 13 metrics.
• Governance: 10 metrics.
• Comprehensive coverage.

2. Environmental Metrics

2.1 Climate

• GHG emissions (Scope 1, 2, 3).
• Emissions intensity.
• Climate risk.

2.2 Resource Use

• Energy consumption.
• Energy intensity.
• Water consumption.
• Water intensity.

2.3 Operations

• Environmental operations.
• Environmental policy.

3. Social Metrics

3.1 Workforce

• CEO pay ratio.
• Gender pay ratio.
• Employee turnover.
• Gender diversity.
• Saudization.
• Temporary worker ratio.
• Non-discrimination.

3.2 Health and Safety

• Injury rate.
• Global health and safety.
• Child and forced labor.

3.3 Human Rights

• Human rights policy.

3.4 Community

• Community investment.

4. Governance Metrics

4.1 Ethics

• Ethics and anti-corruption.
• Code of business conduct.

4.2 Personal Data

• Data privacy.

4.3 Disclosures

• Sustainability reporting.
• Disclosure practices.
• External assurance.

4.4 Operations

• Board diversity.
• Board independence.
• Incentivized pay.
• Collective bargaining.
• Supplier code of conduct.

5. The Evolution

5.1 From Voluntary to…

• Currently voluntary.
• Increasing adoption.
• Pressure from investors.
• Expected gradual mandatory transition.

5.2 Statistics

Per OECD 2025 (data for 2024):

• 94 Saudi companies disclosed sustainability.
• 65% of top 100 Main Market companies.
• Growing year-over-year.
• Quality varies significantly.

📌  Note The transition from voluntary to mandatory ESG disclosure is happening globally — in the EU (CSRD), UK, US (SEC climate rule under development), Japan, and others. Saudi Arabia is part of this global trajectory. Companies that start now, even voluntarily, build capabilities and credibility. Companies that wait for mandates often struggle to comply quickly when rules come into force.

Fifth: Environmental Disclosures Detail

1. Greenhouse Gas Emissions

1.1 GHG Protocol Framework

• Scope 1: Direct emissions from operations.
• Scope 2: Indirect from purchased energy.
• Scope 3: All other indirect (value chain).

1.2 Reporting

• Tonnes CO2-equivalent.
• By scope.
• Year-over-year comparison.
• Intensity metrics (per revenue, per unit).

1.3 Targets

• Reduction commitments.
• Net zero pathways.
• Science-based targets (SBTi).
• Saudi context (2060 net zero).

2. Energy

2.1 Consumption

• Total energy used.
• By type (electricity, fuels).
• By geography.
• Intensity.

2.2 Renewable

• Renewable energy ratio.
• Sources.
• Progress toward targets.
• Saudi context (50% by 2030 vision).

2.3 Efficiency

• Energy efficiency initiatives.
• Reductions achieved.
• Investment.

3. Water

3.1 Use

• Total water consumed.
• Water-stressed regions.
• Source (freshwater, recycled).
• Intensity.

3.2 Management

• Water policy.
• Recycling/reuse.
• Discharge.
• Quality.

3.3 Saudi Context

• Water-stressed nation.
• Critical resource.
• Increasing focus.

4. Waste

4.1 Generation

• Total waste produced.
• Hazardous vs non-hazardous.
• By type.

4.2 Management

• Recycled/recovered.
• Landfill.
• Incineration.
• Circular economy.

5. Climate Risk

5.1 Physical Risks

• Acute (storms, floods, heat waves).
• Chronic (rising temperatures, sea level).
• Asset exposure.
• Operational impacts.

5.2 Transition Risks

• Policy and regulation.
• Technology shifts.
• Market changes.
• Reputation.

5.3 Scenario Analysis

• Per TCFD/ISSB.
• Multiple scenarios (1.5°C, 2°C).
• Quantified impacts.
• Strategic implications.

Sixth: Social Disclosures Detail

1. Workforce

1.1 Composition

• Total employees.
• By gender.
• By nationality.
• By geography.
• By function.

1.2 Saudization

• Critical Saudi metric.
• Saudi national ratio.
• Including women.
• Progress toward targets.
• Vision 2030 alignment.

1.3 Women Empowerment

• Women in workforce.
• Women in leadership.
• Women on board.
• Saudi growth in this area.

1.4 Turnover

• Voluntary turnover.
• Total turnover.
• By segment.
• Retention efforts.

2. Compensation

2.1 Pay Equity

• Gender pay ratio.
• CEO pay ratio.
• Comparisons.

2.2 Living Wages

• Minimum wage compliance.
• Above living wage.
• Benefits.

3. Health and Safety

3.1 Injury Statistics

• Total recordable injuries.
• Lost time injuries.
• Fatalities.
• By segment.

3.2 Management

• H&S management system.
• Certifications (ISO 45001).
• Training.
• Continuous improvement.

4. Training and Development

4.1 Investment

• Training hours per employee.
• Training spend.
• By category of employee.
• By type.

4.2 Career Development

• Internal promotions.
• Career programs.
• Leadership development.

5. Community

5.1 Investment

• Community investment spend.
• Type (education, health, etc.).
• Geographic distribution.
• Impact.

5.2 Local Content

• Saudi suppliers.
• Local procurement.
• Vision 2030 alignment.
• Knowledge transfer.

6. Human Rights

6.1 Policy

• Human rights policy.
• Based on UN Guiding Principles.
• Due diligence.
• Remediation.

6.2 Supply Chain

• Supplier code of conduct.
• Audits.
• Remediation programs.
• Transparency.

Seventh: Governance Disclosures Detail

1. Board

1.1 Composition

• Size.
• Independence.
• Diversity (gender, expertise).
• Tenure.

1.2 Activities

• Meetings.
• Attendance.
• Committee work.
• Evaluation.

2. Ethics and Compliance

2.1 Code of Conduct

• Comprehensive.
• Distributed.
• Training.
• Enforcement.

2.2 Anti-Corruption

• Policy.
• Training.
• Investigations.
• Consequences.

2.3 Whistleblowing

• Channels.
• Protection.
• Investigations.
• Statistics.

3. Risk Management

3.1 Framework

• Comprehensive risk framework.
• ESG risks included.
• Climate risks specifically.
• Reporting to Board.

3.2 Cybersecurity

• Policy.
• Investments.
• Incidents.
• Continuous improvement.

4. Sustainability Governance

4.1 Board Oversight

• Sustainability committee (some companies).
• Board attention.
• Linked to compensation.

4.2 Management

• Chief Sustainability Officer.
• Sustainability team.
• Cross-functional integration.

Eighth: Reporting Approaches

1. Format Options

1.1 Standalone Report

• Separate sustainability report.
• Comprehensive.
• Increasingly common in Saudi market.

1.2 Integrated Reporting

• Within annual report.
• Connecting financial and ESG.
• IIRC framework.
• Strategic perspective.

1.3 Web Disclosures

• On company website.
• Continuous updates.
• Interactive features.
• Complementary.

1.4 Mixed Approach

• Multiple channels.
• For different audiences.
• Most common today.

2. Frequency

• Annual standard.
• With financial reporting.
• Sometimes more frequent updates.
• Continuous on website.

3. Assurance

3.1 Limited Assurance

• Less comprehensive.
• Less expensive.
• Common starting point.

3.2 Reasonable Assurance

• More comprehensive.
• Higher confidence.
• More expensive.

3.3 Trend

• Growing assurance.
• Investor expectations.
• Standards (ISAE 3000).
• Credibility.

Ninth: ESG Ratings and Indices

1. Major Rating Agencies

1.1 MSCI ESG

• AAA to CCC scale.
• Comprehensive assessment.
• Widely followed by investors.
• Methodology evolving.

1.2 Sustainalytics

• ESG Risk Rating.
• Negligible to Severe.
• Risk-focused.
• Morningstar owned.

1.3 S&P Global

• Corporate Sustainability Assessment.
• Annual.
• Comprehensive.
• Used in DJSI.

1.4 FTSE Russell

• ESG Ratings.
• Used in indices.
• Multiple dimensions.

1.5 CDP

• Climate, water, forests.
• A to D- scoring.
• Highly respected.

2. ESG Indices

• MSCI ESG Leaders.
• S&P 500 ESG.
• FTSE4Good.
• Dow Jones Sustainability Indices.
• Saudi-specific (developing).

3. Inclusion Benefits

• Index-tracking capital.
• Visibility.
• Reputation.
• Improvement pressure.

Tenth: Implementation Challenges

1. Data

1.1 Issues

• Data collection complex.
• Consistency challenges.
• Quality varies.
• Verification difficult.

1.2 Solutions

• Investment in systems.
• Data governance.
• External assurance.
• Continuous improvement.

2. Greenwashing Risk

2.1 Definition

• Overstating environmental claims.
• Or social impacts.
• Misleading investors and stakeholders.

2.2 Prevention

• Honest disclosures.
• Evidence-based claims.
• External assurance.
• Balanced reporting.

3. Cost

3.1 Investment Required

• Systems and tools.
• Personnel.
• External advisors.
• Assurance.

3.2 ROI

• Investor access.
• Lower cost of capital.
• Reputation.
• Risk reduction.

4. Evolving Standards

4.1 Multiple Frameworks

• GRI, SASB, TCFD, ISSB, CDP…
• Different requirements.
• Convergence happening.
• ISSB becoming baseline.

4.2 Continuous Updates

• Standards evolving.
• Requirements changing.
• Capability building needed.
• Continuous learning.

Eleventh: Strategic Considerations

1. ESG as Strategy

1.1 Integration

• Integrate into business strategy.
• Not separate function.
• Drives competitive advantage.
• Long-term value.

1.2 Linked to Compensation

• Executive ESG targets.
• In compensation.
• Accountability.
• Alignment.

2. Materiality

2.1 Concept

• Material ESG topics for the company.
• Through stakeholder engagement.
• Focus efforts.
• Reduces noise.

2.2 Process

• Stakeholder identification.
• Engagement (surveys, interviews).
• Analysis.
• Materiality matrix.
• Reporting focus.

3. Stakeholder Engagement

• Investors.
• Employees.
• Customers.
• Suppliers.
• Communities.
• NGOs.

4. Long-Term Thinking

• ESG often takes years.
• Investment in capabilities.
• Patience required.
• Compounding benefits.

Twelfth: Best Practices

1. Strategy and Integration

• Strategic integration: not bolt-on.
• Materiality focus: what matters.
• Board oversight: active.
• Linked compensation: for accountability.

2. Disclosure Quality

• International standards: GRI, SASB, TCFD, ISSB.
• Comprehensive: all material topics.
• Honest: challenges acknowledged.
• Quantified: where possible.

3. Continuous Improvement

• Annual cycle: review and improve.
• Benchmark: with leaders.
• Stakeholder feedback: incorporate.
• Investment: in capabilities.

4. Assurance

• Limited assurance: starting point.
• Reasonable assurance: longer term.
• Selected metrics: high-impact.
• Credibility: with investors.

Conclusion

ESG disclosure represents one of the most significant evolutions in corporate reporting in decades. The Saudi capital market is participating actively in this evolution, driven by Vision 2030’s sustainability ambitions, international investor expectations, and emerging global standards. The journey from voluntary Tadawul guidelines (2021) to growing adoption (94 companies, 65% of top 100 in 2024) reflects rapid progress, with mandatory ISSB-aligned standards likely in the coming years.

Companies that approach ESG strategically — integrating it into business strategy, building data systems, providing honest disclosure, seeking assurance — gain meaningful competitive advantages: institutional investor access, lower cost of capital, stronger reputation, better risk management, and alignment with Vision 2030. Companies that treat ESG as compliance bolt-on miss these benefits and face increasing exclusion from capital pools. As the framework continues to develop, especially through 2026 with potential mandatory standards, the time to invest is now. Saudi companies that lead in ESG disclosure will be the global champions of the next decade.

🎯  Essential Points to Remember (1) ESG = Environmental, Social, Governance — comprehensive sustainability framework. (2) Tadawul ESG Disclosure Guidelines (2021) with 31 metrics, voluntary. (3) International standards: GRI (widely adopted), SASB (industry-specific), TCFD (climate), ISSB (emerging baseline). (4) ISSB Standards (IFRS S1, S2) — likely Saudi alignment. (5) Saudi context: Vision 2030, Saudi Green, carbon neutrality 2060, 50% renewable by 2030. (6) 2024 statistics: 94 companies disclosing, 65% of top 100 Main Market. (7) Environmental: emissions (Scope 1,2,3), energy, water, waste, climate risk. (8) Social: workforce, Saudization, women empowerment, H&S, human rights, community. (9) Governance: Board, ethics, anti-corruption, risk management, sustainability oversight. (10) Best practices: strategic integration, materiality focus, quality disclosure, assurance, continuous improvement.

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FAQS

What are ESG disclosures, and why are they important for listed Saudi companies?

ESG disclosures refer to reporting on Environmental, Social, and Governance performance. These have moved from voluntary practice to a strategic imperative in the Saudi market to attract institutional capital, meet investor expectations, and align with Vision 2030 sustainability goals.

Are ESG disclosures mandatory in the Saudi capital market (Tadawul) at this time?

Tadawul issued its ESG Disclosure Guidelines in 2021 as a voluntary framework. While currently voluntary, global trends and the evolution toward ISSB standards suggest that requirements will likely formalize and expand in the future.

Which international standards are most relevant for ESG reporting in Saudi Arabia?

The most widely recognized standards include GRI (Global Reporting Initiative) for comprehensive reporting, SASB (Sustainability Accounting Standards Board) for industry-specific financial materiality, TCFD for climate-related disclosures, and ISSB (IFRS S1 and S2) as the emerging global baseline.

References and Sources

• Tadawul ESG Disclosure Guidelines (2021).
• Corporate Governance Regulations — Chapter Eight.
• Global Reporting Initiative (GRI) Standards.
• Sustainability Accounting Standards Board (SASB) Standards.
• Task Force on Climate-related Financial Disclosures (TCFD).
• ISSB IFRS Sustainability Disclosure Standards (IFRS S1, S2).
• OECD Corporate Governance Factbook 2025 — Saudi Arabia.
• Saudi Vision 2030 — Saudi Green Initiative.
• GHG Protocol Corporate Standard.
• MSCI ESG, Sustainalytics, S&P Global ESG, CDP.