UAE Climate Law 2025: The Start of Mandatory Climate Governance in the UAE

 

Federal Decree-Law No. 11 of 2024, effective 30 May 2025, is not simply an environmental regulation. It marks the beginning of mandatory climate governance in the UAE. 

 

For the first time, all UAE businesses — including private companies, SMEs, and free zone entities — are expected to: 

 

• measure greenhouse gas (GHG) emissions,  

• report climate-related data,  

• implement emissions reduction strategies,  

• and assess climate-related operational risks.  

 

Large emitters faced accelerated obligations beginning in June 2025, while all other businesses are operating within a transition window ending 30 May 2026. 

 

The larger implication is this: climate data is moving toward the same credibility expectations traditionally associated with financial reporting. Businesses that fail to establish governance, controls, ownership, and assurance readiness around ESG data may face not only regulatory exposure — but financing, operational, and reputational risk. 

The UAE Climate Law Is Bigger Than Environmental Compliance 

 

Most businesses initially interpreted the UAE Climate Law as an environmental obligation. 

 

That interpretation is incomplete. 

 

The law represents a structural shift in how climate-related information will increasingly be governed, disclosed, and scrutinised within the UAE economy. 

 

Historically, sustainability disclosures were largely voluntary: 

• ESG reports,  

• net-zero announcements,  

• sustainability pledges,  

• climate branding initiatives.  

 

Now, climate-related reporting is moving into the sphere of: 

• governance,  

• operational risk,  

• assurance,  

• compliance,  

• and financial credibility.  

 

This matters because regulators, lenders, institutional investors, and multinational counterparties increasingly expect ESG data to be: 

• measurable,  

• traceable,  

• consistent,  

• and independently verifiable.  

 

In practical terms, climate reporting is beginning to resemble financial reporting. 

 

And many businesses are not operationally prepared for that transition. 

What the Law Actually Requires 

 

Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects came into force on 30 May 2025. 

 

The law establishes four core obligations for businesses operating in the UAE: 

 

 

The law applies broadly across: 

• public sector entities,  

• private businesses,  

• free zone companies,  

• branches,  

• and permanent establishments.  

 

There is no broad exemption for private or family-owned structures. 

The NRD Perspective: This Is a Governance Law as Much as a Climate Law 

One of the biggest misconceptions in the market is that compliance is primarily about emissions calculation. 

 

In reality, the larger challenge for most businesses is governance. 

 

In our experience, organisations typically struggle more with: 

• fragmented operational data,  

• unclear reporting ownership,  

• weak internal controls,  

• inconsistent methodologies,  

• and poor documentation  

 

than with the emissions calculations themselves. 

 

This distinction is critical. 

 

The businesses likely to face the greatest long-term ESG risk are not necessarily those with the highest emissions. They are often the businesses with the weakest governance around ESG data. 

The Governance Problem Behind Climate Reporting 

 

Most UAE companies do not yet operate climate reporting systems with audit-grade discipline. 

 

That creates practical challenges immediately. 

 

For example: 

• utility data may sit with facilities teams,  

• vehicle fuel records may sit with operations,  

• procurement data may sit with finance,  

• refrigerant tracking may sit with maintenance contractors,  

• and no single function may own ESG reporting centrally.  

 

As climate reporting obligations increase, these fragmented systems become a major risk. 

 

The market is gradually moving toward: 

• assurance-ready ESG reporting,  

• documented methodologies,  

• traceable data,  

• board oversight,  

• and defensible disclosures.  

 

This is why ESG is rapidly becoming a finance and governance issue — not merely a sustainability initiative. 

Large Emitters: The First Wave of Enforcement 

The law introduced accelerated obligations for large emitters. 

 

Entities with combined Scope 1 and Scope 2 emissions of: 

≥500,000 tCO₂e annually 

 

were required to register with the National Register for Carbon Credits (NRCC) by 28 June 2025. 

 

Businesses that missed this deadline should assess their exposure immediately and seek guidance on remediation and late registration pathways. 

 

This early enforcement phase is significant because it signals regulatory intent. 

 

The UAE is not positioning the Climate Law as a symbolic framework. It is establishing operational compliance expectations. 

Governance Before Carbon™ 

The NRD Climate Compliance View 

For many UAE businesses, the immediate ESG priority should not be ambitious climate branding. 

 

It should be governance readiness. 

 

Businesses that establish: 

• clear ownership,  

• internal controls,  

• documented methodologies,  

• reporting accountability,  

• and assurance readiness  

 

will adapt significantly faster as regulatory and commercial expectations evolve. 

 

The market increasingly rewards credible governance over aspirational sustainability language. 

Scope 1, Scope 2, and the Reality for UAE Businesses 

The Climate Law currently places primary emphasis on: 

• Scope 1 emissions (direct emissions),  

• and Scope 2 emissions (purchased electricity emissions).  

 

For many UAE office-based businesses: 

• electricity consumption,  

• cooling systems,  

• company vehicle fleets,  

• and generators  

 

represent the largest initial reporting areas. 

 

This is important because many companies overestimate the technical complexity of beginning compliance. 

 

In practice, most mid-market businesses can establish an initial Scope 1 and 2 baseline using: 

• utility bills,  

• fuel records,  

• refrigerant data,  

• and accepted emissions methodologies such as the GHG Protocol or ISO 14064.  

 

The more difficult challenge usually emerges later: 

• governance,  

• consistency,  

• documentation,  

• and assurance readiness.  

What Boards Should Be Asking Management Right Now 

Many boards still view climate reporting as an operational issue delegated to sustainability or facilities teams. 

 

That is increasingly insufficient. 

 

Boards should now be asking: 

Governance Questions 

• Who owns climate reporting internally?  

• Which function validates the data?  

• Is there board oversight?  

Data Questions 

• Can emissions data be traced to source records?  

• Are methodologies documented?  

• Are assumptions consistent year-on-year?  

Risk Questions 

• What operational risks could climate regulation create?  

• How exposed are we to supply chain ESG requirements?  

• Could ESG affect financing access?  

Assurance Questions 

• Could our ESG data withstand independent assurance review?  

• Are internal controls sufficient?  

These are governance questions — not merely environmental questions. 

The NRD ESG Readiness Curve™ 

 

Most UAE businesses are currently transitioning between the first and second stages. 

 

The businesses likely to lead over the next decade will integrate ESG into governance and financial oversight early.  

The Financial Reality Behind Climate Reporting 

One of the biggest shifts happening globally — and increasingly in the UAE — is the financialisation of ESG data. 

Banks, investors, and institutional lenders increasingly treat climate disclosures as: 

• risk indicators,  

• governance indicators,  

• and credit quality indicators.  

 

This is already influencing: 

• sustainability-linked financing,  

• green loans,  

• investor due diligence,  

• and procurement qualification processes.  

 

A business with weak ESG governance may increasingly be viewed similarly to a business with weak financial controls. 

 

That is a major market shift. 

What Happens Next in the UAE 

Several trends are becoming increasingly clear.

1. Assurance Expectations Will Increase

Climate-related disclosures are likely to move progressively toward independent verification and assurance expectations.

2. ISSB Alignment Will Accelerate

UAE reporting expectations are likely to converge increasingly with ISSB standards over time.

3. Supply Chain Pressure Will Intensify

Multinational procurement frameworks and CBAM-related expectations will increasingly affect UAE exporters and suppliers.

4. ESG Will Move Closer to Finance Functions

Finance teams, audit committees, and governance structures will play a larger role in ESG reporting and oversight. 

What We Are Seeing in the UAE Market 

At NR Doshi & Partners, we are already observing several recurring patterns: 

• Many mid-market companies still do not know who internally owns ESG reporting  

• Businesses often underestimate the governance challenge behind climate disclosures  

• Family-owned groups frequently have strong operational practices but weak documentation  

• Boards increasingly recognise ESG risk — but lack reporting infrastructure  

• Companies seeking financing are beginning to face ESG-related diligence questions earlier in the process  

 

The transition is already underway. 

How NR Doshi & Partners Can Help 

NR Doshi & Partners supports UAE businesses at the intersection of: 

• ESG,  

• governance,  

• financial reporting,  

• assurance,  

• and risk advisory.  

 

Our climate compliance and ESG advisory services include: 

• GHG inventory preparation,  

• Climate Law readiness assessments,  

• governance and reporting controls,  

• ESG assurance readiness,  

• framework alignment,  

• and independent assurance support.  

 

As a CPA and advisory firm, our approach is grounded not only in sustainability reporting — but in the governance, controls, and reporting discipline required to make ESG disclosures credible and defensible. 

 

Because the future of ESG reporting in the UAE will increasingly depend not only on what businesses disclose — but on whether stakeholders trust the data behind it. 

Key Takeaways 

• The UAE Climate Law marks the beginning of mandatory climate governance — not merely environmental compliance  

• All UAE businesses are affected, including private companies and free zone entities  

• The biggest challenge for many businesses is governance and data ownership, not emissions calculation  

• ESG data is moving toward assurance-sensitive territory with increasing investor and lender scrutiny  

• Boards should begin treating climate reporting as a governance and risk oversight issue  

• Businesses that establish governance-ready ESG systems early will adapt significantly faster as expectations tighten  

Frequently Asked Questions 

Does the UAE Climate Law apply to private companies and SMEs? 

Yes. Federal Decree-Law No. 11 of 2024 applies broadly across businesses operating in the UAE, including private companies, SMEs, and free zone entities. There is no general exemption based on company size or ownership structure. 

Is ESG assurance already mandatory in the UAE? 

Not universally. However, independently verified emissions data is already expected for certain large emitters and increasingly demanded by investors, lenders, and institutional stakeholders. The broader market trend is clearly moving toward assurance-ready ESG reporting. 

What is the biggest climate reporting challenge for UAE businesses? 

In our experience, the biggest challenge is usually governance: 

 

• unclear ownership,  

• fragmented data systems,  

• inconsistent methodologies,  

• and weak reporting controls.  

 

The technical emissions calculations are often easier than the governance framework required to support them. 

Why are finance teams becoming more involved in ESG reporting? 

Because ESG disclosures increasingly affect: 

 

• financing,  

• investor confidence,  

• assurance,  

• and risk management.  

 

As ESG data becomes more material to stakeholders, businesses require stronger controls, governance, and reporting discipline — areas traditionally overseen by finance and audit functions.