Sustainability Governance in the Public and Private Sectors
Having clarified in the previous article how greenwashing has reached global criminal proportions—not only due to its inclusion of consumer deception and overlap with other crimes such as accounting fraud, money laundering, and financial market manipulation—we now witness the catastrophic global consequences. These manifest not only in the form of global warming, depletion of freshwater resources, desertification of agricultural lands, and air pollution, but also in the transformation of environmental violation practices into a tool of organized crime. Consequently, protecting environmental sustainability must begin with the most significant economic and administrative entities in the state: joint-stock companies, followed by public sector entities. This represents the critical regulatory administrative point that must precede any strict sustainability legislation; because the spread of environmental laundering practices to the point where they are considered an accepted custom in investment circles and the public sector would make the enforcement of any sustainability law so detached from reality that it becomes unworkable. Therefore, we must begin the mission of instilling a practical culture of environmental sustainability protection before issuing and enforcing strict environmental laws.
In Kuwait, work has been underway for many years on this environmental cultural groundwork, as follows:
1. The Corporate Governance Book was issued as part of the Executive Regulations of the Capital Markets Authority Law No. 7 of 2010, making sustainability a mandatory standard for companies. However, it remains subject to compliance or interpretation, thereby allowing companies to violate sustainability rules if they provide convincing justifications to the Authority, such as financial pressure or distress.
2. The General Secretariat of the Supreme Council for Planning and Development issued a governance guidance document titled the "National Framework for Government Administrative Governance 2021." The framework explicitly states that sustainability is one of the pillars of governance (p. 2), and the Secretariat reaffirmed this in its National Program issued in 2024 (p. 8). Indicators show that Kuwait’s ranking in governance application has declined from 46 to 42 out of 100 points between 2011 and 2020, and its global classification has dropped from 54th to 78th out of 180 countries during the same period (Framework, p. 3). This stagnant negative reality of public sector governance persists despite the existence of numerous laws, such as Law-Decree No. 346 of 2007, concerning the establishment of the Government Performance Monitoring Authority. Thus, we can imagine the scale of environmental damage resulting from the weak sustainability compliance framework in the corporate sector and the poor application of environmental standards in the government sector.
What, then, is the stance of the Environmental Law? Theoretical and Practical Dimensions
Kuwait enacted Law No. 42 of 2014 for the Protection of the Environment with a highly ambitious vision. The law stipulates the protection of terrestrial and external environments from waste pollution, safeguards biodiversity, and establishes rules for managing environmental crises and disasters. Despite this diverse and robust legal framework, the associated penalties mostly allowed courts to impose fines alone without imprisonment. Even when imprisonment was mandatory, Article 144 of the law opened the door to settlement in cases of unintentional pollution. This is despite the fact that major corporations have global practices in this regard; some allocate budgets to pay settlement amounts to the countries in which they operate, as these amounts, along with compensation, constitute only a small percentage of their profits. If they represent a significant proportion, the settlement amounts are passed on to customers through price increases on environmentally harmful goods.
Thus, it appears that the path toward industrial and investment development naturally collides with environmental protection, because imposing strict laws would cause giant companies to avoid entering the market. So, how can sustainability governance be applied practically, administratively, and legally while respecting the sensitivity of environmental regulation?
An Investment Opportunity
Law No. 116 of 2013 for the Encouragement of Direct Investment stipulates a set of smart rules attractive to sustainability investment and encouraging companies that respect environmental rules. The law makes the granting of licenses and investment benefits conditional upon the project’s contribution to achieving sustainable development, in line with the Kuwait New Vision 2035. The law established evaluation criteria that precede license issuance, including measuring the project’s developmental impact, incorporating technologies that reduce emissions and energy waste, and prioritizing projects that serve environmental sustainability, such as renewable energy, waste management, and water treatment.
In return for meeting these environmental standards, companies enjoy privileges, such as exemption from income tax and other taxes for up to 10 years, with full or partial exemption from customs duties on machinery, equipment, and raw materials imported to serve the environmental project. Additionally, the law facilitates obtaining the lands and plots necessary for establishing investment projects. Through this smart legal approach, it can be said that the legislator has used investment incentives as a tool to apply sustainability governance realistically, turning it into an investment opportunity rather than a financial burden on companies.
However, legislative gaps remain regarding greater strictness in penalizing environmental violations, making sustainability rules more serious and stringent in the Corporate Governance Book, issuing a law to combat greenwashing, and imposing administrative auditing and accountability on public sector activities. This would make the application of sustainability governance logical and self-reinforcing.
Faten Al-Naqeeb
