The path to Net Zero and carbon monetisation

ESG in Saudi Arabia – Vision 2030

The path to Net Zero and carbon monetisation

Saudi Arabia is at the forefront of environmental, social and governance (ESG) transformation, embedding sustainability at the core of its economic and policy frameworks. Globally, the race towards Net Zero by 2050 is intensifying as nations work to curb climate risks and stabilise global temperatures. As a major energy player, Saudi Arabia has planned to achieve Net Zero by 2060, leveraging on renewables, carbon capture and green hydrogen to balance economic growth with environmental responsibility. Environmental initiatives, such as the Saudi Green Initiative (SGI), NEOM’s sustainable city designs and the National Renewable Energy Programme (NREP) are accelerating emissions reductions.

Beyond environmental efforts, the Social (S) and Governance (G) components are also gaining momentum. The social landscape is evolving through workforce diversity initiatives, particularly the increase in women's workforce participation, which has exceeded Vision 2030 targets. Investments in education, healthcare and digital transformation are enhancing human capital development, while local content policies and SME support programmes foster economic inclusivity. 


On the Governance front, the personal data protection law (PDPL) aligns with international standards, safeguarding consumer data privacy in the digital economy. Cybersecurity is also a key governance priority, with the National Cybersecurity Authority (NCA) implementing stringent cybersecurity regulations to protect businesses, critical infrastructure and digital assets from cyber threats. As Saudi Arabia accelerates its digital transformation, cybersecurity compliance has become an essential pillar of corporate risk management and investor confidence. From a governance perspective, regulatory bodies such as the Capital Market Authority (CMA), Ministry of Finance and the Ministry of Commerce (MoC) are reinforcing corporate governance frameworks, ensuring enhanced financial disclosures, anti-corruption measures and sustainable finance mechanisms. 

On reporting within the Kingdom, introduction of Tadawul’s ESG reporting guidelines and the review of IFRS S1 & S2 by SOCPA demonstrate KSA’s commitment to corporate transparency and investor confidence. Even if the reporting of ESG has not been mandated yet in the Kingdom, several companies have already started reporting and publishing their ESG reports, which is a significant step forward. 
Other initiatives in sustainability space include:

  • Green finance instruments, such as PIF’s Green Bonds and Ministry of Finance Green Financing Framework are significant steps forward in the Kingdom’s journey towards sustainability and its commitment to achieving net zero emissions through the circular carbon economy approach. These initiatives encourage the investors and investees to make investments in sustainable projects 
  • Also, there are steps taken in the Kingdom to create infrastructure for carbon trading for the investors who are looking to invest in sustainable projects which will generate carbon credits e.g. the creation of the Regional Voluntary Carbon Market Company (RVCMC) to facilitate carbon trading in the Kingdom. This is a PIF initiative enabling companies to monetise their good work done for the environment. 


In a nutshell, Saudi Arabia is not just following global sustainability trends, it is shaping them, positioning itself as a leader in the transition towards a resilient, low-carbon future.

What is Net Zero?

Net zero refers to balancing the amount of greenhouse gases emitted with the amount removed from the atmosphere. The goal is to prevent further accumulation of emissions, ultimately stabilising global temperatures in order to avoid the worst effects of climate change, such as extreme weather, rising sea levels and ecosystem disruptions. Beyond this threshold, climate-related risks become significantly more severe and harder to reverse.

Path to Net Zero: Avoid → Minimise → Offset.

Achieving net zero requires a structured approach where companies first identify and eliminate emissions at the source by transitioning to cleaner alternatives and adopting sustainable practices. For emissions that are inevitable, organisations must focus on reducing their impact through environmentally friendly technologies, energy efficiency measures and process optimisation. Only as a last resort companies should offset remaining emissions through mechanisms such as carbon credits, afforestation and carbon capture technologies. By prioritising prevention and reduction before offsetting, businesses can ensure a genuine and lasting net zero transition while aligning with global sustainability goals.

Avoid – examples of activities to prevent emissions:
  • Switching to renewable energy (e.g. using solar or wind instead of fossil fuels)
  • Designing low-carbon products (e.g. electric vehicles vs. gasoline-powered cars)
  • Reducing business travel by using virtual meetings instead of flights.

Minimise – examples of reduce emissions through:

  • Energy efficiency (e.g. installing LED lighting, upgrading to energy-efficient equipment)
  • Process optimisation (e.g. reducing waste in manufacturing, optimising logistics for lower fuel use)
  • Sustainable supply chains (e.g. sourcing materials from low-carbon suppliers).

Offset – examples compensate for unavoidable emissions:

  • Investing in carbon credits that fund renewable energy or reforestation projects
  • Supporting afforestation & reforestation programmes (e.g. planting trees to absorb CO₂)
  • Using carbon capture and storage (CCS) to remove emissions from industrial operations.

Companies must prioritise avoidance and minimisation before relying on offsets to ensure a genuine and lasting net zero transition.

How to earn carbon credits:

Companies earn carbon credits by implementing projects that reduce, avoid or remove greenhouse gas emissions, such as renewable energy (solar, wind, hydro), afforestation, methane capture, energy efficiency improvements and carbon capture and storage (CCS). These emission reductions must be measured, verified and certified by internationally recognised standards like Verra, Gold Standard or the Clean Development Mechanism (CDM). Once validated, companies receive tradable carbon credits based on the amount of CO₂ reduced or removed. These credits can then be sold in compliance or voluntary carbon markets, allowing businesses to generate revenue while supporting global climate goals and aligning with net zero commitments.

Carbon monetisation: 

Carbon monetisation is an emerging financial mechanism that allows companies to generate economic value from their sustainability initiatives. Businesses can either purchase carbon credits to offset their emissions or develop projects that generate carbon credits for sale, depending on whether they are a buyer (high-emission company) or a seller (carbon project developer).

Understanding carbon monetisation:

Carbon monetisation refers to turning emissions reductions into financial value. This can be done in two main ways:
1.    Carbon trading (compliance & voluntary markets) – Companies can buy or sell carbon credits in regulated markets (government-mandated cap-and-trade programmes) or voluntary carbon markets. For example:

  • Companies with high carbon footprints (e.g. oil & gas, cement, steel, aviation and manufacturing) are required to offset emissions. They buy credits from sellers to comply with regulations or voluntarily achieve carbon neutrality
  • On the other hand, companies which have projects / initiatives in place to reduce carbon footprints would register their clean energy project with Verra and sell carbon credits to high-emission industries. Verra’s verified carbon standard (VCS) is the largest voluntary carbon market programme globally used by businesses, governments and NGOs to achieve climate targets and monetise sustainability efforts.

2.    Beyond trading – alternative carbon monetisation – Companies can generate financial value from carbon reduction efforts even without direct participation in carbon markets. These may include:

  • Sustainable supply chains help businesses charge higher prices (‘green premium’) by using low-carbon materials and eco-friendly production methods, attracting environmentally conscious customers
  • Government incentives, tax credits and grants also offer financial support for emission reduction initiatives
  • Circular economy & waste-to-value initiatives – the Saudi Investment Recycling Company (SIRC) is at the forefront of Saudi Arabia’s push toward a circular economy, transforming waste into valuable resources. SIRC’s waste-to-energy and material recovery programmes help businesses reduce landfill emissions and enhance waste monetisation.
  • Green finance and ESG investments provide access to sustainable funding. 

Additionally, internal carbon pricing and trading encourage corporate sustainability. By leveraging these strategies, companies can drive financial gains while advancing sustainability goals.

How BDO can help 

For further information, insights and assistance with your ESG and IFRS reporting needs, please contact us. Our team of experts is ready to support you in this transition.

Authors
Abdur R. Sharjeel
Head of Advisory
Mobile: +966 55 754 0579
a.sharjeel@bdoalamri.com

Syed Moin Ahmed Zaidi
Manager – Sustainability Services
Mobile: +966 50 765 1071
s.zaidi@bdoalamri.com