The sustainability pillar of Environmental, Social, and Governance (ESG) frameworks is facing mounting scrutiny across much of the world. Polarization and regulatory gridlocks have triggered investor withdrawals and hesitation in boardrooms. But in the Gulf, the momentum is in the other direction. With national visions in full swing, countries like the UAE and Oman are embedding governance as the foundation for growth, resilience, and leadership.
Oman Vision 2040 hardwires governance into economic transformation, with over 54 strategic programs launched and 87% currently in execution. The UAE’s ‘We the UAE 2031’ plan follows a similar path, directly tying sustainability and competitiveness to institutional excellence. While global debates around sustainability continue to evolve, the Gulf’s consistent emphasis on governance is offering clarity for leaders navigating this transformation.
In May 2025, the UAE issued a federal law on climate change requiring public and private sector organisations to measure and report their greenhouse gas emissions, and publish time-bound plans to achieve reductions, reinforcing the region’s position on ESG as a legal and strategic priority.
Similarly, as of June 2025, the Muscat Stock Exchange introduced mandatory ESG disclosure requirements for listed companies. The Oman Chamber of Commerce and Industry is backing this move by helping businesses build the systems and skills needed to comply. It’s a coordinated push to bring sustainability reporting in line with Oman’s national sustainability goals.
While the Gulf strengthens policy foundations, other markets are pulling back. In Q1 2025, investors withdrew more than $8 billion from ESG-focused funds across the US and Europe, driven by rising political pressure and market uncertainty. The Gulf’s steady, policy-led approach provides leaders with the room to integrate ESG into their strategy. When governance becomes part of how companies operate and lead, it strengthens accountability and sharpens execution.
Turning ESG into strategic advantage
ESG is now a proven driver of business value. Globally, a KPMG study found that 58% of dealmakers identified ESG risks and opportunities early as a direct driver of investment value, with many investors willing to pay a premium for assets with strong ESG credentials. For leadership teams, integrating ESG into strategic planning is becoming critical to attracting capital, managing risk, and earning stakeholder trust.
For investors, governance is the most influential aspect of ESG. It indicates whether a business is stable, transparent, and well-equipped to perform. As scrutiny of ESG disclosures intensifies, businesses must provide data that informs decision-making and demonstrates alignment between purpose and performance. In the UAE, Dubai Chambers shows growing momentum for ESG adoption, with 72% of businesses recognising its importance, and half already initiating implementation. Adoption is strongest in high-scrutiny sectors, such as financial services, real estate, and professional services, where governance reflects strategic discipline and operational strength.
Emilio Pera, Deputy CEO of KPMG Middle East and CEO of KPMG Lower Gulf
Challenges in implementing governance
As ESG adoption accelerates, businesses will have to navigate practical challenges. Many organisations face gaps in internal capabilities, particularly in areas such as sustainability reporting, data quality, regulatory complexity, and risk measurement. For smaller companies, limited resources can delay implementation or restrict scope in efficient ESG practices. While regulatory frameworks are evolving, consistent standards and sector-specific guidance will be key to ensuring that ESG practices are scalable, comparable, and decision-relevant across the market.
Beyond operational gaps, perceptions around ESG can also hinder progress. Some organisations still view it as a compliance exercise, driven more by regulatory pressure than by business value. Part of the hesitation stems from limited internal visibility into how ESG performance translates into business outcomes. Bridging this gap will depend on stronger internal governance, leadership-level ownership and accountability, and clearly defined performance indicators that connect ESG priorities with strategic results.
Embedding governance where it matters most
While ESG has become fragmented in parts of the world, the Gulf’s approach remains focused, and policy- led. Government strategies in the UAE and Oman have built strong momentum, but the lasting impact depends on how businesses respond. It is now up to executive teams to turn structure into performance and demonstrate that governance reflects real leadership. The Gulf has the opportunity to shape regional ESG standards into a global benchmark that others will follow and to demonstrate the distinction between leadership and greenwashing.
The writer is Deputy CEO of KPMG Middle East and CEO of KPMG Lower Gulf
