ESG Is Now Enforceable in the UAE: What Private Companies Must Do

The Climate Law applies to you. So do your bank's new lending criteria.

The Shift from Voluntary to Mandatory

For years, ESG in the UAE was a listed company issue. Public joint stock companies had disclosure requirements under ADX and DFM guidelines. Private companies could ignore it.

That changed on 30 May 2025.

Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects came into force. The UAE became the first country in the MENA region to establish binding climate obligations for all businesses.

The law applies to every entity operating in the UAE:

• Private companies
• Family businesses
• Free zone entities
• Foreign branches

There are no exemptions based on listing status. There are no exemptions based on size.

If your company emits greenhouse gases, you must measure those emissions, report them to the Ministry of Climate Change and Environment, and demonstrate steps to reduce them.

What the Law Requires

Measurement

Establish systems to calculate your Scope 1 emissions (direct emissions from operations) and Scope 2 emissions (indirect emissions from purchased electricity).

Calculations must follow MOCCAE-approved methodologies, aligned with the GHG Protocol.

Reporting

Submit emissions data through MOCCAE's Measurement, Reporting and Verification (MRV) platform.

First reports are due by 30 May 2026.

Reduction

Develop and implement strategies to reduce emissions.

The law does not specify targets for individual companies, but you must demonstrate active efforts and progress.

Record-keeping

Maintain documentation of emissions calculations for at least five years.

Records are subject to regulatory audit.

Climate adaptation

Assess your exposure to climate-related risks and implement plans to address them.

Companies with annual emissions exceeding 0.5 million tonnes CO2 equivalent face accelerated obligations and must register with the National Register for Carbon Credits.

Fines and Enforcement

Non-compliance carries administrative fines from AED 50,000 to AED 2,000,000.

Repeat violations within two years: penalties double to AED 4,000,000.

Beyond fines, non-compliance may result in:

• Licence suspension
• Activity restrictions
• Exclusion from government procurement

MOCCAE officials have authority to conduct inspections and audits.

Why Your Bank Is Asking Questions

UAE banks have begun integrating ESG criteria into lending decisions.

The Central Bank has issued guidance requiring financial institutions to monitor climate risk exposure. Banks have conducted stress tests on corporate lending to climate-vulnerable sectors. The UAE banking sector has committed to mobilising AED 1 trillion in sustainable finance by 2030.

Sustainability-linked loans

These are now standard for larger transactions. Interest rates are tied to performance against ESG indicators: emissions reduction, renewable energy adoption, green building certifications.

Meet your targets, pay less. Miss them, pay more.

Credit assessment

Banks are looking at climate risk exposure, emissions profiles, and transition readiness when evaluating loan applications.

A company in a high-carbon sector with no decarbonisation strategy represents higher risk than a competitor with a credible transition plan.

Green financing

Banks have dedicated capital pools for sustainable projects. Qualifying requires demonstrable ESG performance and data.

For private companies that have never considered ESG, these expectations come as a surprise. A company seeking project finance or refinancing may find documentation requirements now extend beyond financial statements.

Supply Chain Pressure from International Clients

Large private companies in the UAE increasingly operate within global supply chains. Those supply chains impose their own ESG requirements.

International buyers in pharmaceuticals, FMCG, hospitality, automotive, and construction now require sustainability assessments for vendor qualification.

The most common platform is EcoVadis. It evaluates suppliers across:

• Environmental performance
• Labour practices
• Ethics
• Sustainable procurement

For many UAE companies, this is commercial reality: no EcoVadis rating, no tender participation.

Where the pressure comes from

EU regulations drive this. The Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) require European companies to assess sustainability risks across their value chains.

That includes their UAE suppliers.

A private company with significant European clients should expect increasing requests for:

• Emissions data
• Labour practice documentation
• Governance information
• Sustainability policies

These requests are not optional if you want to maintain the relationship.

ADGM Disclosure Requirements

Companies domiciled in Abu Dhabi Global Market face additional obligations.

ADGM's ESG Disclosures Framework applies to:

• Any ADGM company with annual turnover exceeding USD 68 million
• Asset managers with more than USD 6 billion under management

Companies within scope must include ESG performance information in their annual accounts, using frameworks such as GRI, TCFD, or ISSB standards.

ADGM currently operates on a "comply or explain" basis. Companies may choose not to provide this information if they submit a reasoned explanation to the Registrar.

This flexibility may not last. ADGM has committed to periodic review, and the direction is toward mandatory disclosure.

For large private companies considering ADGM for their holding structure, ESG disclosure is now a factor in that decision.

Government Procurement

Federal Decree-Law No. 11 of 2023 on Federal Government Procurement references sustainable development as a procurement objective.

Government entities increasingly evaluate suppliers on sustainability criteria. Some Abu Dhabi entities have adopted ISO 20400:2017 (Sustainable Procurement Management System) requirements.

For private companies supplying goods or services to government, sustainability credentials are becoming a competitive factor in tender evaluation.

This will accelerate as government entities face pressure to demonstrate progress on national climate targets.

What Large Private Companies Should Do Now

The May 2026 reporting deadline leaves approximately three months. Companies that have not started are operating under time pressure.

Establish emissions measurement capability

You need systems to capture energy consumption data across operations and convert it to emissions figures using approved methodologies.

This requires cooperation between facilities management, finance, and IT. Most companies need external support for their first emissions inventory.

Identify which regulations apply to you

The Climate Law applies to everyone.

ADGM requirements apply if you meet the turnover thresholds.

Listed company requirements apply if you have listed securities.

Each regime has different disclosure requirements and timelines.

Assess your data gaps

Many companies discover during initial ESG assessment that they lack basic data:

• Energy consumption by facility
• Waste volumes
• Water usage
• Workforce demographics
• Supply chain mapping

Identify gaps early. Establish data collection processes.

Develop a reduction strategy

The Climate Law requires reduction efforts, not just measurement.

Common measures:

• Energy efficiency improvements
• Renewable energy procurement
• Fleet electrification
• Process optimisation

Prepare for banking conversations

If you anticipate seeking finance in the next 12-24 months, understand what ESG information your bank will require.

Proactively assembling this information improves your position in credit discussions.

Respond to supply chain requests

If international clients are requesting sustainability assessments, treat these as priority commercial matters.

A delayed or poor EcoVadis submission can jeopardise contracts.

How Kayrouz & Associates Can Help

ESG compliance for private companies involves legal, regulatory, and governance dimensions. These intersect with corporate structuring, commercial contracts, and risk management.

We advise large private companies and family groups on:

• Governance structures for ESG oversight
• Regulatory compliance mapping
• Board-level responsibilities
• Contractual obligations arising from sustainability commitments

If you are assessing your company's exposure to the Climate Law or need to establish governance frameworks, contact our corporate team for an initial discussion.

For listed companies subject to ADX or DFM disclosure requirements, see our guidance: UAE ESG Reporting: ADX, DFM & ADGM.

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