Introduction 

Environmental, Social and Governance (ESG) principles have shifted from “emerging trend” to “strategic imperative” globally.  Governments are committing to ambitious climate targets. Investors are demanding higher-quality disclosures, and regulators are tightening expectations for listed companies, as well as those in the financial services sector. Despite this momentum, many organisations still struggle to move from high-level ESG ambition to practical, scalable implementation. In this article, we explore the key challenges companies face and set out a practical roadmap for organisations to manage these challenges. 

Countries at an ESG inflexion point 

Most countries throughout the globe are witnessing rapid acceleration in sustainable finance, clean energy investment, and ESG reporting regulatory mandates. For example, in the Middle East region, the UAE, Saudi Arabia, Qatar, Jordan, , Kuwait and Bahrain have each introduced reporting frameworks or voluntary ESG disclosure guidelines for listed entities. For companies, this creates both business opportunity and pressure: stronger ESG performance can improve access to capital, reduce risk, and enhance brand differentiation, while poor disclosure results in reputational risks and increases regulatory and investor scrutiny. 

Despite this progress, implementation remains uneven and slow. Most companies are still transitioning from early-stage ESG activity—focused mainly on compliance and corporate responsibility—towards integration with business decision-making, risk management and financial reporting.  

What are the key challenges facing companies in implementing ESG? 

Fragmented and evolving reporting requirements 

Management is often confused with various reporting frameworks, including GRI, CDP, TCFD, SASB, ISSB, and stock exchange reporting requirements for listed entities – they struggle to select the most appropriate one.  With many standards overlapping, companies often feel uncertain about which metrics matter most for their stakeholders. Although the ISSB is emerging as the global baseline for investor-grade sustainability reporting, full alignment across the various regions will take some time. As a result, many companies are producing disclosures and reports based on different frameworks, which affects peer-to-peer comparison on performance and decision-making. 

Data quality, systems and assurance gaps 

ESG implementation depends heavily on standardised, accurate, auditable non-financial data—yet most companies rely on manual data collection or siloed departmental systems. This reduces the reliability of data on emissions, water, waste, and social metrics, making it difficult to obtain assurance or respond to investor information requests. Many companies and regional organisations have not yet integrated ESG data with financial reporting systems, limiting their ability to produce consistent, investor-grade disclosures. 

Governance and capability limitations 

The responsibility for ESG is often distributed across various departments, including Human Resources, HSE, facilities management, legal, procurement, and investor relations, without a single accountable leader or a clear governance structure. This slows decision-making and creates internal confusion about priorities. While companies are increasingly moving beyond “pilot initiatives,” a significant share still lack mature governance and internal capability to scale up ESG performance. 

Capital allocation and project economics 

ESG initiatives—especially in real estate, construction, energy and heavy industry—require significant upfront capital. Retrofits, metering upgrades, energy-efficiency projects and low-carbon materials often come with long payback periods. The boards of directors are often split between meeting the shareholders' needs and doing the right thing, i.e. investing in ESG initiatives, which may not have a higher rate of return in the short term. In most regions of the world, there is still no convincing evidence that customers would be willing to pay a premium for environmentally friendly goods and services. 

Without accessible green finance or strong internal valuation mechanisms for non-financial benefits (e.g., brand value, tenant retention, lower risk premiums), investment decisions can stall, and budgets will take longer to be approved. Split incentives between landlords and tenants—where savings accrue to occupants rather than owners—add another complexity.  

Supply chain readiness 

Most regions are improving rapidly in embedding ESG in the supply chain. However, there are still limitations in certified sustainable materials, qualified contractors, and specialised ESG consultancies. This slows the pace of implementation even for companies with strong ambitions and available capital. 

A practical roadmap for effective ESG implementation 

To move from fragmented ESG activity to a structured, value-adding programme, companies should focus on the following pillars: 

Establish strong governance and clear ambition 

Assign a senior executive (e.g., CSO or Head of Sustainability) with decision-making authority and establish structured board oversight. Set a 3–5 year ESG ambition linked directly to business outcomes, such as cost savings, compliance, or access to green finance. Undertake an ESG awareness session for all employees to ensure they understand the ESG ambition, the benefits and their role in achieving it. Read more on Aligning communications and leadership teams to drive sustainability engagement. 

Conduct a materiality assessment and prioritise 

Survey all key internal and external stakeholders to identify the ESG issues most relevant to the company’s operations, sector and stakeholder expectations. Prioritise initiatives that deliver measurable value, and plan implementation in phases—quick wins first, followed by medium-term improvements and long-term transformation. Read more on Leading the change: ESG implementation. 

Invest in data infrastructure and assurance. 

Standardise data definitions, implement ESG data platforms, integrate them with financial systems, and secure third-party assurance where necessary. Companies with robust systems and verified data are better positioned to report on their ESG accurately, thereby attracting investors and complying with future regulations. To improve accuracy, at a certain point of maturity, the ESG reports should be audited to identify any data integrity issues. 

Align reporting with relevant ESG reporting and local requirements 

Companies can use the ISSB standards and other relevant locally mandated reporting frameworks as the baseline for investor-grade reporting and map disclosures. This helps avoid duplication and ensures preparedness for future regulatory shifts. Generally, most countries provide reporting guidelines and regulations. 

Unlock green finance and external incentives. 

ESG initiatives/projects require funding, and this funding is often met from external sources. Companies should explore green bonds, sustainability-linked loans, energy-performance contracting and government incentives to overcome funding constraints. Demonstrating measurable ESG performance can translate into lower borrowing costs and improved investor interest. 

Sustainable supply chain 

As part of decarbonising the supply chain, companies should embed sustainable procurement criteria, work with suppliers to build capability, and incentivise partners and vendors through collaborative efficiency programmes. Vendors can be required to demonstrate their commitment to ESG by sharing their ESG reports or policies. This will ensure that companies engage with the suppliers who share and support the same ESG vision. Read more on How to manage and achieve a sustainable supply chain effectively.  

Build skills across the organisation. 

Companies should embed ESG into a wider risk management framework, including identifying key ESG risks for the company. Finance, procurement, asset management and HR teams should also be trained to incorporate ESG criteria into everyday decision-making. Capabilities—not just commitments—are what differentiate leaders from followers. Read more on Integrating ESG into enterprise risk management. 

Embed ESG into the corporate culture. 

Companies should dynamically integrate ESG into the corporate culture, focusing on involving their employees, key internal stakeholders in all ESG initiatives. Once employees are conscious of the importance of ESG, risks and their role, it becomes easy to have ESG as part of the culture of the organisation. 

Conclusion 

The world is at a pivotal moment in ESG adoption, and there are challenges for companies along the journey. With regulatory momentum, rising investor scrutiny and growing business incentives, companies must shift from ambition to disciplined execution. Those who invest in governance, data, skills and aligned reporting will not only meet stakeholder expectations but also unlock competitive advantage through improved access to capital, stronger brand trust, and greater operational efficiency. 

BDO supports organisations that want to embark on their ESG journey or optimise their existing ESG frameworks and overcome any implementation challenges.  Find out about how BDO can help, specifically around activating your sustainability journey. Please also feel free to reach out to our BDO sustainability experts tagged on this page for more information about your sustainability needs. 

 

Author: Charles Tungwarara 

Head of Business Process, ESG & Sustainability, BDO UAE 
 

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