Sustainability Report on Environmental, Social and Governance (ESG)

The concept of environmental, social, and governance (ESG) has acquired significant momentum in recent years since business entities recognized how important it is to consider nonfinancial factors in decision-making.

In this context, business entities seek consulting services for preparing Sustainability Report on Environmental, Social, and Governance (ESG) to fulfill compliance with the relevant regulatory requirements.

What is the Environmental, Social, and Governance (ESG) framework?

The Environmental, Social and Governance framework is a comprehensive approach to assess the sustainability and ethical impact of a business entity. Such framework is based on the correlation and interaction among environmental, social and governance factors in evaluating the sustainability, impacts, and long-term viability of the business entity. It emphasizes the importance of sustainable and responsible business practices.

What are the statutory and regulatory mandates that require listed companies to develop Sustainability Report on Environmental, Social, and Governance (ESG)?

Article 1-17-1 of Module Twelve “Listing Rules” of the Executive Bylaws of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities sets forth:

The Listed Company may issue an annual Sustainability Report and publish it through its website. The report shall determine the impact of the company’s activities on the environment, society, and the economy, as well as the company’s opportunities and risks associated with those areas and how it manages them. The CMA shall be notified of the report, and it shall be published on the website of the Exchange.

Further, Article 1 of the Resolution No. (74) of 2023 dated 22 May 2023 Regarding the Comprehensive Sustainability Reporting Guide for Listed Companies sets forth:

The Comprehensive Sustainability Reporting Guide for Listed Companies presented by Boursa Kuwait Securities Company is hereby approved pursuant to Article 1-17-3 of (Sustainability report regulations for listed companies) of Module Twelve (Listing Rules) of the Executive Bylaws of Law No. 7 of 2010 Regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities, as amended.

What are the most significant specifications that feature the Sustainability Report on Environmental, Social, and Governance (ESG)?

Pursuant to Article 1-17-2 of Module Twelve, “Listing Rules” of the Executive Bylaws of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority and Regulating Securities Activities, the most important specifications of the Sustainability Report can be summarized as follows:

The information provided in the report must be clear and accurate, and the report must cover the most important issues of environmental, social, and economic impact. The following points shall be taken into consideration while preparing the report:

1. The report shall be prepared according to one or more of the International Sustainability Reporting Standards.
2. Describe the scope of the report and the basis for its determination.
3. Determine the company’s most important issues of environmental, social, and economic impact.
4. Describe the approach and procedures adopted in dealing with each sustainability issue.

What are the recognized international organizations setting standards for sustainability reporting on environmental, social, and governance (ESG)?

The recognized international organizations setting standards for sustainability reporting on environmental, social, and governance are as follows:

1. The Global Reporting Initiative (GRI)
2. The Sustainability Accounting Standards Board (SASB)
3. The Task Force on Climate-Related Financial Disclosures (TCFD)
4. The United Nations Global Compact (UNGC)
5. The Carbon Disclosure Project (CDP)
6. The International Integrated Reporting Framework (IR Framework).

What is the added value to business entities from seeking services for preparing Sustainability Report on Environmental, Social, and Governance (ESG)?

• Ensuring compliance with the CMA regulatory requirements.
• Enhancing the company’s potential for profitability and competitiveness.
• Ensuring that compliance and financial disclosure risks are managed.
• Leveraging the stakeholders’ trust in the business entities and enhancing the business entity’s reputation.

What are the services that Baker Tilly Kuwait provides?

1. Developing the Sustainability Report on Environmental, Social, and Governance (ESG)
2. Developing the Processes, Policies, and Procedures Manual for managing compliance with preparing Sustainability Report on Environmental, Social, and Governance (ESG)