ESG and the Saudi Green Initiative: Where Mid-Sized Companies Can Start

ESG has moved quickly from boardroom jargon to a practical question for Saudi companies of every size. Large customers ask suppliers for environmental data, lenders ask about environmental risk, and national targets set a clear direction. For a mid-sized manufacturer or service company, the challenge is knowing where to start without launching a programme that is bigger than the business needs.

This article sets out the national context and a realistic starting point.

The national context

Since the launch of Vision 2030 in 2016, the Kingdom has taken a series of steps towards a more sustainable future. The Saudi Green Initiative (SGI), inaugurated in 2021, brings together environmental protection, energy transition and sustainability programmes. According to SGI, its three overarching targets are emissions reduction, afforestation and land regeneration, and land and sea protection.

Headline commitments published by SGI include:

• reaching net zero emissions by 2060, through a Circular Carbon Economy approach;
• reducing carbon dioxide equivalent emissions by more than 278 million tonnes a year by 2030, as part of the Kingdom's Nationally Determined Contribution;
• around 50% of electricity generation capacity from renewable sources by 2030;
• protecting 30% of the Kingdom's land and sea by 2030;
• planting more than 600 million trees by 2030, towards a long-term goal of 10 billion.

These are national targets, not obligations placed directly on each company. But they shape policy, procurement, financing and the expectations of large buyers, and those expectations flow down supply chains.

What ESG means for a mid-sized company

ESG stands for environmental, social and governance. For a company that is not listed and does not publish a sustainability report, it can sound remote. In practice, the first questions usually come from three directions:

• Customers, especially large companies and government-linked entities, asking for energy, emissions, water or waste data from suppliers.
• Lenders and investors, who want to understand environmental risk. The Environmental Law itself, in Article 45, asks lending funds to take into account the environmental impact of the projects they finance.
• Your own board or owners, who want to know whether the company is exposed to rising costs, regulation or reputational risk.

Listed companies face more structured expectations. For most mid-sized private companies, though, the realistic aim is not a glossy report. It is reliable data and a few credible actions.

Start with compliance

The most credible environmental foundation is a clean compliance record. Before anything else, confirm that:

• your environmental permits are valid and cover all activities;
• monitoring and reporting required by your permit are up to date;
• waste goes to licensed service providers with proper documentation.

A company that cannot show this will struggle to make any ESG claim stand up. A company that can already has much of the environmental data it needs.

Five practical first steps

1. Measure what you already pay for. Electricity, fuel, water and waste all appear on invoices or delivery records. Collecting twelve months of this data, by site, gives you a baseline at very low cost.
2. Estimate your main emissions. From fuel and electricity use, you can estimate direct emissions from your own operations and indirect emissions from purchased electricity, using a recognised method. Keep the method and assumptions documented so the numbers can be checked and repeated.
3. Pick a small number of indicators. Three to five indicators that matter to your business, such as energy per unit produced, water use, waste sent to recycling versus landfill, or environmental incidents, are more useful than a long list nobody maintains.
4. Give it an owner. ESG fails when it belongs to everyone. Name one person responsible for the data and a senior sponsor who reviews it.
5. Act where it saves money. Energy efficiency, leak repairs, better waste segregation and water reuse often reduce costs as well as impacts. Early wins build support for the next step.

Avoid common pitfalls

• Claiming more than you can prove. Statements such as "green", "carbon neutral" or "sustainable" without evidence create risk. Describe what you have measured and done, and no more.
• Copying a large company's framework. International reporting frameworks are useful references, but a mid-sized company does not need to adopt one in full to start.
• Separating ESG from operations. The data comes from production, maintenance, procurement and finance. Involve them from the start.
• Treating it as a one-off. A single report with no follow-up has little value. A simple annual cycle of collecting, reviewing and improving is better.

Explaining your performance

Once you have a year of reliable data, you can respond confidently to customer questionnaires, lender requests and board questions. A short, plain-language summary of your indicators, what changed and what you plan next is often enough. If you later need a fuller disclosure, the groundwork will already be done.

The bottom line

Saudi Arabia's national targets set a clear direction, and expectations will keep reaching further down supply chains. Mid-sized companies do not need to match the largest corporates. A clean compliance record, a measured baseline, a few honest indicators and a named owner are a realistic and credible start.

Sources: Saudi Green Initiative: About SGI · Saudi Green Initiative: Reducing carbon emissions · Environmental Law, Royal Decree M/165 (official English translation, Bureau of Experts, hosted by MISA)