there is a paradox at the heart of the sustainability transition: some companies already hold the capabilities that will define success in a greener, more inclusive economy. Yet these capabilities remain largely invisible to investors and undervalued by markets. These are what I refer to as trapped competencies.
These are not niche sustainability gestures. They are the organisational strengths that prepare firms for tomorrow’s economy: designing for circularity, investing steadily in workforce resilience, building trust with stakeholders, and creating resilient supply chains. What unites them is not their form, but the fact that they are “ahead of the system.” They anticipate the day when ecological limits and social priorities are fully integrated into economic logic.
In today’s short-termist markets, however, these strengths are hidden. Valuation models and incentive structures still privilege immediate gains, asset-light efficiency, and quarterly returns. The competencies that will be decisive in the transition economy are present, but trapped.
For the Gulf region, this concept carries particular weight. As Saudi Arabia’s Vision 2030 and the UAE’s Net Zero 2050 strategies reshape regional economies, firms across the region are uniquely placed to surface these hidden capabilities and, by doing so, leapfrog global competitors.
What are Trapped Competencies and Why Now?
Trapped competencies emerge when a company builds strengths that current markets do not reward but future systems will. Take workforce resilience, a Gulf conglomerate that invests deeply in upskilling employees, fostering inclusion, and supporting long-term careers may seem inefficient compared with rivals that squeeze costs. Yet when regulations, demographics, and social expectations shift, such practices transform into a decisive source of loyalty, productivity, and legitimacy.
Or consider circular product design. A UAE-based manufacturer embedding repairability and recycling pathways into its operations might appear less competitive in today’s cost-driven markets. But as circular economy frameworks expand, a trend already supported by the UAE’s sustainability agenda, these practices will become essential.
Saudi Arabia’s Vision 2030 provides another example. By setting out to diversify the economy beyond oil, strengthen non-oil sectors, and enhance quality of life, it opens a policy and investment space where hidden competencies can be developed and recognised. Similarly, the UAE’s Net Zero 2050 strategy commits to a carbon-neutral future, prioritising renewable energy, sustainable cities, and innovation. Both create national environments that allow forward-looking firms to nurture competencies once considered peripheral – renewable integration, resource efficiency, resilient supply chains, and inclusive workforce development.
These strategies are not endpoints but catalysts. They signal intent, attract capital, and create the institutional momentum needed for hidden strengths to come into view.
Why Aren’t Gulf Firms Already Rewarded?
The problem is systemic. Global markets remain tied to outdated categories of performance. Investors and rating agencies still measure success through the narrow lens of short-term profitability. Benefits such as ecosystem restoration, workforce durability, or community trust fall outside conventional valuation.
This disconnect is not because Gulf firms are failing. On the contrary, many Gulf companies are already investing in renewable energy, circular economy solutions, and inclusive workforce practices. The obstacle lies in institutional inertia. Legacy systems of measurement and recognition were built for a linear, resource-intensive economy. Updating them requires regulatory change, investor adaptation, and global coordination, processes that move slowly, even as corporate practice accelerates.
Steps Regional Firms Can Take
So what can companies in Saudi Arabia, the UAE, and across the Guld do to bridge the recognition gap? Here I can highlight four pathways:
1. Engage regulators: Firms can work with national authorities to demonstrate how resilience, continuity, and ecological regeneration translate into measurable outcomes. By volunteering for pilots or providing robust data, companies help governments update reporting frameworks.
2. Partner with investors and rating agencies: Many financial actors know existing metrics are incomplete. Gulf companies can co-develop better tools by sharing methodologies and opening their books.
3. Join collective initiatives: Pre-competitive collaborations on taxonomies, verification, and supply-chain standards can amplify visibility across sectors. For instance, supply-chain agreements embedding sustainability outcomes can turn isolated practices into new industry norms.
4. Craft consistent narratives: Firms that explain what they measure, why it matters, and how it is assured provide the transparency that financial intermediaries require.
Through these steps, trapped competencies can begin to surface, not as hidden extras, but as visible, recognised value drivers.
Leapfrogging: A Gulf Advantage
Timing is everything. Firms that act early enjoy a head start when markets and regulators begin valuing the competencies they hold. For Gulf businesses, this presents an opportunity to leapfrog.
While some global competitors remain locked into old systems that reward extraction and short-term gains, Gulf firms aligned with Vision 2030 and Net Zero 2050 can position themselves as leaders in the transition economy. By cultivating competencies now, they accumulate trust, legitimacy, and experience that latecomers cannot easily replicate.
For instance, investments in ecosystem restoration in Saudi Arabia, once viewed as philanthropy could soon be recognised as strategic capabilities that secure resource stability, reduce climate risks, and generate ecological assets. Firms that have practiced this early will be stronger when such outcomes are classified as performance and rewarded with capital and partnerships.
This leapfrogging potential does not mean skipping challenges. It means entering the global transition with scaled, proven competencies while rivals are still catching up.
A Choice Point for the Region
The stakes are high. Saudi Arabia’s Vision 2030 and the UAE’s Net Zero 2050 are not only national strategies but also markers of the global system shift underway. Firms across the region have a rare choice to allow their trapped competencies to remain invisible, or surface them now and shape the very rules of competition that will soon dominate.
The paradox of trapped competencies is also an invitation. For the Gulf region, it is an opportunity to convert hidden strengths into global leadership, to turn undervalued capabilities into the crown jewels of a diversified, sustainable, and competitive economy.
Dr Ioannis Ioannou is an Associate Professor of Strategy and Entrepreneurship at London Business School. A leading expert in sustainability leadership and corporate responsibility, Dr Ioannis Ioannou’s research provides valuable insights into the challenges and opportunities organizations encounter when developing sustainable business models. His award-winning academic work on strategic ESG integration, coupled with his focus on the investment community and financial markets, has established him as a thought leader in the field.
