ESG Without an ESG Law: A Comparative Study of Regulatory Frameworks in the UK and UAE

16 min 5 sec July 8, 2026 (Edited)

Written by

Euan Lloyd

Partner, Head of Construction and Infrastructure

e.lloyd@tamimi.com

Raneem Salha

Associate

r.salha@tamimi.com View LinkedIn Profile

Mohamad El Daouk

m.daouk@ucl.ac.uk View LinkedIn Profile

Armando Castro

a.castro@ucl.ac.uk View LinkedIn Profile

The growing prominence of environmental, social, and governance (ESG) considerations across the global business landscape has prompted jurisdictions worldwide to develop regulatory and governance frameworks aimed at embedding sustainability, ethical conduct, and corporate accountability into commercial practice.

In sectors such as real estate and construction, where complex procurement structures, extensive supply chains, and significant environmental impacts converge, the question of how ESG obligations are formulated, implemented, and enforced is of particular practical importance.

Despite the increasing attention given to ESG, neither the United Kingdom (UK) nor the United Arab Emirates (UAE) has enacted a single, unified ESG law. Instead, both jurisdictions have developed ESG-related obligations through a combination of existing legislative instruments, regulatory initiatives, and voluntary governance standards.

This article undertakes a comparative analysis of the ESG frameworks operating in the UK and the UAE, examining the extent to which ESG obligations in each jurisdiction are legally enforceable, and identifying the principal areas of convergence and divergence between the two systems. In doing so, the article considers the respective roles of statutory duties, procurement regulation, contractual mechanisms, and soft-law instruments in shaping ESG governance. Finally, it assesses whether the current frameworks provide sufficient enforceability or whether a more consolidated legislative approach may be warranted in either jurisdiction.

ESG in the UK

ESG is becoming increasingly important within the UK, especially in sectors such as real estate and construction where procurement, supply chains, and corporate accountability are closely connected. The UK is yet to introduce a single ESG statute or unified framework. Instead, ESG obligations have developed gradually through a mixture of company law duties, procurement rules, reporting requirements, and standard-form contractual provisions drafted by practitioners, such as the Chancery Lane Project.

As a result, the UK currently operates through a system that combines both legally enforceable obligations and voluntary governance standards. This has led to ongoing debate over whether ESG duties in the UK are genuinely enforceable in practice or whether much of ESG governance still functions primarily through soft-law mechanisms that do not guarantee absolute enforceability and, therefore, compliance.

The development of ESG governance in the UK initially depended on standards that were voluntarily expressed and shaped by the expectations of investors, rather than arising from direct statutory or regulatory duties. Sustainability initiatives initiated by the United Nations Global Compact and the Organisation for Economic Co-operation and Development (OECD) encouraged UK corporations to incorporate environmental and social considerations and responsibilities into their organisational and operational frameworks, alongside profitability and shareholder interests.

Over time, these standards gradually influenced governance expectations and corporate reporting practices. One example that stands out in this context is section 172 of the Companies Act 2006. Company directors are required, by statute, to promote the success of their company as well as to account for broader factors, such as the impact their company’s operations may have on the environment, and to act in the interests of their employees and external communities. Although section 172 was not introduced specifically as an ESG obligation, it is now regularly discussed within the ESG discourse because it broadened the general understanding of corporate responsibility beyond traditional shareholder value alone.

ESG considerations further consolidated in the following years. The Bribery Act 2010 imposed corporate liability for failure to prevent bribery carried out by persons associated with an organisation. The legislation applies broadly across commercial relationships and supply chains, which has made governance and compliance procedures increasingly important and enforceable within construction projects.

Similarly, the Modern Slavery Act 2015 introduced mandatory reporting obligations requiring certain companies to publish annual statements explaining the steps taken to reduce the risk of exploitation within supply chains.

While neither the Bribery Act nor the Modern Slavery Act was originally enacted as ESG legislation, both now form an important part of the UK’s wider ESG framework because they promote ethical governance, transparency, and corporate accountability. Castro and El Daouk argue that much of the UK’s ESG framework has developed in this indirect and flexible way through the adaptation of existing statutory obligations rather than through a dedicated ESG regime.

In addition to legislation, ESG obligations are increasingly incorporated into procurement systems and contractual arrangements. Recently, the Procurement Act 2023 strengthened obligations relating to transparency, integrity, and public benefit within procurement procedures.

ESG considerations also appear more frequently within standard-form construction contracts, particularly through sustainability obligations, anti-corruption clauses, and modern-slavery compliance provisions. This shows that ESG obligations are gradually becoming part of project delivery and supply-chain management, rather than remaining limited to corporate policy documents alone.

Despite these developments, some academics and practitioners contend that ESG obligations within the UK remain fragmented and inconsistently enforced. One reason for this is that, as outlined above, ESG duties are spread across several different areas of law, including company law, procurement law, construction regulation, health and safety law, and contractual obligations.

Others suggest that such a structure makes compliance problematic due to the weakening effect on sustainability requirements as the project progresses through procurement, contracting, and delivery stages. Sustainability pledges can be made at the planning or procurement stage, but they do not necessarily become concrete, enforceable requirements at later construction stages.

It is worth mentioning that the above observation is especially applicable to contract-based ESG clauses. While sustainability clauses have become standard in construction contracts, they are usually expressed in general terms. As a result, enforcing such clauses through legal means (e.g. by way of contract, or at worst, litigation) may become difficult, especially where obligations lack measurable standards (e.g. in the form of KPIs) or sufficient certainty.

Critics may therefore argue that ESG obligations can end up becoming reputational commitments as opposed to legally enforceable duties. In this sense, ESG governance in the UK is still criticised for depending heavily upon disclosure obligations, investor pressure, and commercial reputation, rather than direct statutory enforcement.

At the same time, describing ESG governance in the UK as entirely voluntary would not be accurate. Certain areas already involve significant legal obligations supported by criminal or financial penalties. For instance, failing to prevent bribery under the Bribery Act or failure to report under the Modern Slavery Act can make corporations vulnerable to significant consequences.

However, in reality, especially in the case of construction-related procurements with complicated and extensive supply chains, it is challenging for companies to deal with such risks effectively. This is because it is difficult to ascertain every stage of the project lifecycle in real estate and construction. Failure in governance issues may also be a reason to hold firms accountable for breaching laws such as the Health and Safety at Work etc Act 1974 and the Building Safety Act 2022 in case such problems affect general safety operations or result in other similar issues.

The recent trend of including ESG requirements in procurement policies and contracts indicates that there has been an increase in enforceability in this area, despite the fact that there is still considerable fragmentation in the system of ESG obligations.

In general, the UK’s ESG approach can be described as a combination of corporate voluntary initiatives and legislative measures. ESG-related obligations have moved away from mere corporate ambitions and declarations, and legislation concerning bribery, procurement, supply chain management, and governance issues plays a significant role.

However, the absence of a single, coherent ESG framework continues to create uncertainty around enforcement, consistency, and the precise legal status of many sustainability obligations in practice. The framework remains dispersed across multiple legal regimes. Current academic and professional debate therefore continues to focus on whether existing mechanisms provide sufficient enforceability or whether stronger legislative intervention is still required. It is likely that future reform in the UK will continue moving towards closer integration between ESG obligations, procurement systems, contractual drafting, and statutory compliance duties.

ESG in the UAE

In the UAE, the ESG landscape presents both notable parallels with and significant departures from the UK position. Like the UK, the UAE does not operate under a single, unified ESG law. Instead, ESG obligations have developed across a combination of federal legislation, emirate-level regulation, and specialised free-zone frameworks, each playing a complementary role. This multi-layered structure enables a tailored approach to ESG governance, allowing the enforceability and scope of ESG obligations to be adapted to the specific regulatory and commercial context of each emirate and free-zone jurisdiction.

As in the UK, standard-form contractual provisions have also played a role in embedding ESG considerations into project delivery. Instruments such as the Chancery Lane Project are starting to be referenced in UAE construction and real-estate transactions as a means of incorporating sustainability obligations into commercial agreements.

At the federal level, corporate governance in the UAE is primarily regulated by Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended (the UAE Companies Law). The UAE Companies Law imposes duties on directors and managers relating to the proper management and oversight of companies, including obligations to act with due care, to preserve the rights of the company, and to carry out acts consistent with the company’s objects.

Article 6 of the UAE Companies Law expressly provides for the issuance of governance decisions applicable to companies, with the Securities and Commodities Authority (SCA) responsible for issuing governance decisions in respect of public joint stock companies (PJSCs).

Article 7 further provides that governance decisions shall include fines for violations, reinforcing the legally enforceable character of corporate governance obligations. Building upon this statutory foundation, the SCA issued its Corporate Governance Code for PJSCs under Chairman of SCA Board Decision No. 03/RM/2020 (the New Rules), which came into force in April 2020.

The New Rules set out minimum corporate-governance standards applicable to PJSCs listed on the Abu Dhabi Securities Exchange and the Dubai Financial Market, and include requirements addressing the conduct of board members, the management of conflicts of interest, the establishment of board committees, and the role of auditors.

Whilst the New Rules were not enacted as a dedicated ESG instrument, they embed governance standards that are directly relevant to the governance dimension of ESG, including requirements for board independence, transparency in related-party transactions, and the appointment of compliance officers. Accordingly, the governance dimension of ESG is of increasing importance to investor decision-making, and the New Rules represent a significant step towards institutionalising governance accountability within the UAE’s listed company sector.

Beyond corporate governance, the UAE has enacted legislation that directly addresses the social and governance dimensions of ESG. Cabinet Decision No. 2 of 2018 on Corporate Social Responsibility (the CSR Law) established a regulatory framework for CSR contributions in the UAE.

The CSR Law introduced mandatory reporting obligations, requiring all commercial companies operating in the UAE, including banks, financial institutions, and branches of foreign companies, to disclose their CSR contributions annually through a dedicated national platform before renewing their trade licences. Whilst the CSR Law characterised social responsibility as being based on voluntary principles, the obligation to file an annual CSR return and to register on the platform is mandatory for all businesses within its scope.

The CSR Law also established a National Social Responsibility Fund and introduced financial incentives, including a CSR Label and CSR Passport, to encourage participation. The mandatory annual contribution of AED 1,500 payable by all in-scope businesses further underscores the legally enforceable character of certain CSR obligations in the UAE.

In the area of financial crime and governance, Federal Decree-Law No. 10 of 2025 on Combating Money Laundering Crimes, Combating the Financing of Terrorism and the Financing of Arms Proliferation (the AML Law) imposes extensive obligations on financial institutions, designated non-financial businesses and professions, and virtual asset service providers. These obligations include requirements to identify and manage crime risks, to implement due diligence measures, to maintain records, and to report suspicious transactions to the Financial Intelligence Unit.

The AML Law carries significant criminal and administrative penalties for non-compliance, including imprisonment and substantial fines, and its obligations are directly relevant to the governance dimension of ESG insofar as they require entities to maintain robust internal controls, transparency, and accountability across their operations and commercial relationships.

The social dimension of ESG in the UAE is further addressed through Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (the Labour Law), as amended by Federal Decree-Law No. 14 of 2022 and Federal Decree-Law No. 9 of 2024. The Labour Law governs employment relationships across the private sector and imposes comprehensive obligations on employers. These include duties to provide safe and appropriate working environments, to bear the costs of workers’ medical treatment, to pay remuneration on time, and to refrain from any form of forced labour, sexual harassment, bullying, or physical or psychological violence against workers.

The Labour Law expressly prohibits discrimination on the grounds of race, colour, sex, religion, national origin, social origin, or disability, and requires equal remuneration for male and female workers performing work of equal value. These provisions are directly relevant to the social dimension of ESG, addressing worker welfare, equality, and ethical employment practices.

The Labour Law also imposes obligations on employers to invest in the development of workers’ skills and to provide training and qualification programmes, reflecting a broader policy objective of enhancing workforce capability and sustainability.

Non-compliance with the Labour Law carries significant financial penalties, with fines of up to AED 1 million per violation in certain cases, and the penalties multiplied by the number of workers in respect of whom a violation occurs.

Worker welfare in the construction sector has received particular regulatory attention. The Labour Law’s provisions on working hours, rest periods, occupational safety, and compensation for work injuries are of direct practical relevance to real-estate and construction projects in the UAE.

In this respect, the UAE’s approach to the social dimension of ESG through the Labour Law bears a functional resemblance to the role played in the UK’s ESG framework by the Modern Slavery Act and the Health and Safety at Work etc Act, albeit through a distinct legislative mechanism.

The environmental dimension of ESG in the UAE is addressed through a combination of emirate-level regulatory frameworks and free-zone guidance. In Dubai, the Dubai Municipality Environmental Sustainability Department administers the Environmental Clearance (EC) system, which requires development, infrastructure, and industrial projects to obtain an EC as a condition of commencing construction or operational activities. The EC process is underpinned by Federal Law No. 24 of 1999 on the Protection and Development of the Environment, and requires project owners to conduct environmental impact assessments (EIAs) and to comply with environmental compliance conditions throughout the project lifecycle.

The EC system represents a directly enforceable regulatory mechanism, with non-compliance resulting in penalties and the potential rejection or revocation of environmental licences. The Dubai Municipality’s Guidance on Environmental Clearance Requirements sets out detailed procedures for development, infrastructure, and industrial projects, categorising industrial activities according to their environmental impact and prescribing corresponding EIA requirements. This approach embeds environmental obligations directly within the regulatory approval process, ensuring that ESG-related environmental considerations are addressed at the project inception stage, rather than being left to contractual or voluntary mechanisms alone.

In the Abu Dhabi Global Market (ADGM), the Registration Authority has introduced an ESG Disclosures Framework applicable to ADGM-incorporated companies meeting specified thresholds for turnover or assets under management. The ADGM ESG Disclosures Framework adopts a flexible ‘comply or explain’ approach, requiring in-scope companies to prepare and submit ESG disclosures consistent with a globally recognised standard, such as those under the Global Reporting Initiative, the International Sustainability Standards Board, or the Carbon Disclosure Project. The ADGM framework expressly acknowledges that it may in future move towards a mandatory ESG disclosures regime, reflecting the broader trajectory of ESG regulation in the UAE.

The launch of the FTSE ADX ESG Screened Index by the Abu Dhabi Securities Exchange in November 2023, developed in partnership with FTSE Russell, further illustrates the growing integration of ESG performance metrics into the UAE’s capital markets infrastructure, measuring the ESG performance of listed companies on the basis of publicly reported data.

In addition to the environmental clearance regime, several emirates have introduced mandatory green building-rating systems that further embed environmental obligations within the construction and development process.

In Abu Dhabi, the Pearl Rating System (PRS) was introduced in 2010 as a framework to advance Estidama, a sustainable urban-planning initiative developed by the Abu Dhabi Department of Urban Planning and Municipalities. The PRS establishes mandatory sustainability benchmarks for the design, construction, and operation of communities, buildings, and villas within the emirate.

All buildings are required to achieve a minimum Pearl Rating of 1, whilst government buildings must achieve a Pearl Rating of 2, and developments within Masdar City, Abu Dhabi’s dedicated eco-city, are required to achieve a Pearl Rating of 3, with the highest attainable rating being 5.

The PRS addresses a range of sustainability criteria, including energy efficiency, water conservation, and waste management, and its mandatory character ensures that environmental considerations are integrated into the development approval process at the outset.

In Dubai, the Al Sa’fat Dubai Green Building System imposes a set of mandatory requirements applicable to all new buildings, which must achieve at least the Silver Sa’fa rating. Higher levels of performance may be attained through compliance with additional requirements to achieve the Golden or Platinum Sa’fa ratings.

Al Sa’fat is designed to foster innovation in the integration of green systems and technologies into building design, with the objective of enhancing building performance, reducing energy consumption, improving the efficiency of electrical and mechanical systems, and consequently reducing carbon emissions.

In Ras Al Khaimah, the Barjeel Green Building Regulations, launched in 2019, impose requirements across five categories, encompassing energy efficiency, water efficiency, renewable energy, recyclable materials and resources, and occupant comfort and wellbeing.

Taken together, these emirate-level green-building frameworks constitute a significant body of directly enforceable environmental regulation within the UAE’s construction sector, reinforcing the integration of the environmental dimension of ESG into the regulatory approval and project delivery process.

Overall, the UAE’s ESG framework reflects a dynamic and rapidly advancing regulatory landscape in which federal legislation, emirate-level initiatives, and free-zone regulations operate in a complementary manner to promote sustainability governance. The distribution of regulatory authority across these different levels enables ESG obligations to be calibrated to the particular regulatory environment in which an entity operates, providing a degree of flexibility and specialisation that is characteristic of the UAE’s broader regulatory architecture.

In certain respects, the UAE’s approach to ESG governance shares structural similarities with the approach taken in the UK. Both jurisdictions have developed ESG obligations primarily through the adaptation of existing statutory frameworks, rather than through a single dedicated ESG law. In addition, both rely upon a combination of legally enforceable obligations and softer governance standards.

However, the UAE’s approach also presents distinctive features. The mandatory CSR reporting obligations introduced by the CSR Law, the directly enforceable environmental clearance requirements administered by the Dubai Municipality, and the comprehensive worker welfare protections contained in the Labour Law together constitute a body of ESG-relevant legislation that carries real legal consequences for non-compliance.

At the same time, areas such as sustainability disclosure for non-listed companies and supply-chain transparency remain less comprehensively regulated at the federal level, and the ‘comply or explain’ approach adopted by the ADGM ESG Disclosures Framework reflects the continued role of voluntary mechanisms in certain parts of the UAE’s ESG landscape.

As the UAE continues to develop its regulatory framework, it is anticipated that further legislative and regulatory measures will be introduced to strengthen ESG governance, reinforcing the UAE’s position as a significant jurisdiction in the global ESG landscape, and deepening the integration of ESG obligations across its corporate, financial, and construction sectors.