GCC stands to gain from new EU green standards

EU rules start in 2028
Reporting for non-EU companies
Could draw FDI

Companies in the Gulf are raising their game on environmental, social and governance reporting even as sustainability has lost some of its shine, industest observers declare.

The alter is partly driven by tougher EU disclosure rules for large foreign companies that will bring more Gulf organisations into scope from 2028. Experts declare the more demanding rules might support Gulf states to attract inbound investments in green energy.

The more encompassing framework, entitled the Corporate Sustainability Reporting Directive (CSRD), will expand oversight over the course of three years to a wider range of entities than is presently covered.

This includes non-EU headquartered companies that have at least €150 million ($176 million) in turnover in the bloc for two consecutive years and own a substantial EU subsidiary, or an EU branch with €40 million or more in turnover. They will necessary to start reporting in fiscal year 2028.

“In practice, this captures dozens of high-profile Gulf entities, particularly those with aviation hubs, hospitality brands or energy partnerships in Europe,” stated Marian Fletcher, Dubai-based founder and director of The Climate Consultancy.

Diversified family conglomerates, state-linked companies and Gulf-based multinationals with significant presence in the EU are among those that fall within the scope of the new directive, Fletcher stated.

They will have to create their disclosures pursuant to standards that Fletcher declares go significantly beyond traditional sustainability reports by involving a method known as “double materiality”.

Risks and opportunities

This means reporting entities must lay out the risks and opportunities for their bottom lines that derive from sustainability efforts, as well as the positive or negative effects of their activities on surrounding peoples and environments.

At the moment, awareness of the forthcoming EU requirements among Gulf corporations is uneven according to Fletcher.

The largest names in business are already gearing up to comply “but mid-sized Gulf corporates with subsidiaries in Europe are significantly less prepared,” she stated.

“Many still view ESG primarily through a reputational or domestic compliance lens, and underestimate CSRD’s legal enforceability.”

Gulf states have developed their own ESG approaches, which are not always in line with Europe’s. Adoption even in the UAE and Saudi Arabia has been incremental, although the focus on utilizing these efforts to attract FDI is growing.

Geopolitical shifts

Meanwhile, geopolitical shifts driven by US President Donald Trump have cooled sustainability ambitions worldwide. European authorities are working through a package of proposed alters to the CSRD and other initiatives from the 2020 European Green Deal that critics declare risk necessarylessly delaying deadlines and reducing the number of reporting entities.

Gulf corporations should not apply this EU backtrack as a distraction, but rather take it as an opportunity to drive their own sustainability momentum, stated Christopher Gooding, an energy transition analyst with Cornucopia Capital in London.

“This matters for the Gulf becaapply investors and vconcludeors increasingly benchmark global capital destinations against EU-grade disclosures,” he stated. “And now that’s pushed back, who’s setting the benchmark, who’s the leader?

“Groups that still align their Gulf operations with CSRD-level quality systems can leverage that credibility to attract green FDI at home.”