Sustainability Reporting Services (ESG)

The concept of environmental, social, and governance (ESG) sustainability has gained significant momentum in recent years since business entities recognized how important it is to consider non-financial 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.

It is worth highlighting that Baker Tilly is a registered member of the Global Reporting Initiative (GRI) and stands as the first company in Kuwait to achieve this accreditation. This accomplishment underscores Baker Tilly’s technical expertise, skills, and capabilities in preparing high-quality sustainability reports that comply with regulatory requirements, align with international standards, and adhere to the best practices within this domain.

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

The ESG sustainability framework is a comprehensive approach to assessing 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.

Are there regulatory mandates that require business entities to develop Sustainability Report (ESG)?

Yes, there are mandates by the regulators related to issuing and disclosing sustainability reporting as follows:

With respect to mandatory requirements issued by Capital Markets Authority to companies listed on the Premier Market:

On 12 February 2025, the Capital Markets Authority issued Circular No. 04 of 2025 to all companies listed on the Premier Market regarding Sustainability Reporting. The circular stipulates that sustainability reporting will become mandatory for companies listed on the Premier Market starting effective from 2026. Accordingly, these companies are required to prepare and disclose sustainability reports for the year 2025. This requirement is based on the provisions of Article 1-17-4 of Module Twelve, “Listing Rules” of the Executive Bylaws of Law No. 7 of 2010 concerning the Establishment of the Capital Markets Authority and the Regulation of Securities Activities, which states as follows:

Pursuant to instructions issued by the CMA, Boursa Kuwait shall require companies listed on one of the markets categorized under Article (1-8) of this Module to disclose sustainability reports. The Bourse’s rules will specify the disclosure requirements for sustainability reports.

Regarding the timeframe set by the Capital Markets Authority, companies listed on the Premier Market shall disclose their sustainability reports on the Boursa Kuwait website no later than the end of the second quarter of the financial year (30 June 2026) and hence, for subsequent years, considering variations in companies’ financial periods.

Boursa Kuwait developed the Comprehensive Sustainability Reporting Guide for Listed Companies to enable the preparation of sustainability report.

Optionally, a 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.

With respect to mandatory requirements issued by the Central Bank of Kuwait to banks:

The CBK’s circular No. (2/BS/IBS/500/2022) regarding the Sustainable Finance provides for the following:

III. Directives on Sustainable Finance (ESG)

……..

1. Emphasizing the significance of transparency in relation to the Sustainable Finance Guidelines, banks should issue annual reports on sustainability (“Sustainability Report”) or incorporate within their annual reports published on their websites as a special section on Sustainability. Sustainability Report or the specific section about Sustainability in the annual report shall demonstrate the Bank’s activities in respect of environmental, social and economic factors and enable stakeholders to assess the level of the Bank’s sustainability during the reporting period.

What is the required timeframe for preparing sustainability (ESG) report?

The process of preparing a sustainability (ESG) report takes four months on average.

What are the most significant specifications that feature the Sustainability Report (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 (ESG)?

The recognized international organizations setting standards for sustainability reporting (ESG) 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).

Who are the target users of sustainability reports?

The target users of sustainability reports are the stakeholders interested in the business entity’s ability to create value over time, including the employees, customers, suppliers, investors, business partners, local communities, legislators, regulators and policymakers.

What is the added value to business entities from seeking services for preparing Sustainability Report (ESG)?

1. Ensuring compliance with the requirements of regulatory authorities, e.g., Capital Markets Authority and Central Bank of Kuwait.
2. Enhancing the company’s potential for profitability and competitiveness.
3. Ensuring that compliance and financial disclosure risks are managed.
4. 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 Sustainability (ESG) Strategies
2. Developing Sustainability (ESG) Reports
3. Training programs and workshops on the sustainability (ESG) framework
4. Developing the Processes, Policies, and Procedures Manual for sustainability function
5. Developing the Job Descriptions for incumbents of sustainability function roles

Why Baker Tilly?

1. Member of Global Reporting Standards (GRI)
2. Baker Tilly International network provides an online knowledgebase to member firms covering the sustainability activity.
3. Baker Tilly International network provides international sustainability subject-matter experts to member firms as and when requested.
4. Baker Tilly Kuwait has a bilingual team with experience in sustainability areas
5. A team specialized in measuring carbon emissions and utilizations of natural resources.
6. Proven track record in sustainability activity.