The most common and most likely answer to this crossword clue is the 7 letter word PENNANT
I've seen this crossword clue in The Times
P
E
N
N
A
N
T
More clues leading to the result PENNANT
Buddy explains!

The straight part
We know that "flag" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case flag = pennant.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does PENNANT mean?
PENNANT noun- A flag normally used by naval vessels to represent a special condition.
- The winning of a competition, represented by a flag.
- A rope or strap to which a purchase is hooked.
- A sandstone between coal measures in parts of South Wales