ESG in Pakistan: promises versus reality

In global finance, Environmental, Social and Governance (ESG) principles are being marketed as a quiet revolution. Capital, we are told, has discovered a conscience, and sustainability now walks hand in hand with profitability. With ESG-linked assets forming a growing share of global investment, the message for Pakistan seems straightforward: align with ESG or risk being left behind.

But before embracing this narrative, a harder question must be asked. Is ESG in Pakistan becoming a genuine tool to protect people and the planet, or is it drifting toward yet another well-crafted framework that looks impressive on paper while leaving structural damage intact?

Pakistan sits at the intersection of overlapping crises. It ranks poorly on global competitiveness, remains among the most climate-vulnerable countries and faces recurring floods, heatwaves, energy shortages and widening inequality. These are not distant threats but lived realities. In theory, ESG frameworks are designed to address precisely these risks. In practice, however, the danger lies in mistaking formal adoption for real transformation.

There is visible institutional momentum. The Pakistan Stock Exchange (PSX) and the Securities and Exchange Commission of Pakistan (SECP) have introduced ESG task forces, roadmaps, disclosure guidelines and international partnerships. These moves signal awareness and intent. Yet intent alone does not rebuild washed-away villages, clean polluted air or stabilise fragile livelihoods.

Regulation lies at the heart of Pakistan's ESG push. While evolving frameworks are necessary, enforcement remains uneven. The real risk is that ESG becomes another compliance ritual by companies learning to speak the language of sustainability without changing how they actually operate. When disclosure becomes an end in itself, transparency turns performative.

Global reporting standards are often presented as technical solutions to credibility and comparability. They matter, but they are not neutral. What can be measured and audited tends to favour large firms with stronger reporting capacity and access to consultants and capital. Smaller enterprises and informal suppliers, the backbone of Pakistan's economy, risk being sidelined unless ESG implementation is deliberately inclusive.

The issue is not the absence of sustainability reporting. A large majority of Pakistani companies already claim to report on ESG-related matters. The real problem is quality. Too many disclosures remain descriptive rather than analytical, focused on intentions rather than outcomes. Policies are listed, commitments are announced and glossy reports are published while emissions rise, water resources shrink and labour protections remain fragile. This is where the ESG conversation must become uncomfortable.

Profit cannot be treated as a moral flaw, but it also cannot remain unquestioned. Businesses exist to generate returns, and no sustainable transition will occur if firms are expected to absorb costs without incentives. At the same time, Pakistan's growth model has long depended on shifting environmental and social costs onto vulnerable communities and future generations. ESG, if taken seriously, should expose this imbalance and not conceal it behind polished disclosures.

Reducing ESG to an extension of corporate social responsibility misses the point. Charity cannot compensate for unsafe workplaces, polluted rivers or extractive supply chains. ESG is meant to integrate risk, responsibility and resilience into core business decisions. That requires asking who benefits from profits, who bears the risks and who is excluded from decision-making.

Implementation remains the weakest link. Companies embarking on ESG reporting face familiar challenges: unclear internal ownership, weak coordination across departments, limited stakeholder engagement, superficial materiality assessments and unreliable data. These are not merely technical hurdles; they reflect deeper governance gaps. Without internal accountability and external scrutiny, ESG risks becoming a tool for narrative control rather than meaningful transparency.

Capacity-building initiatives like training programmes, primers and data tools are useful steps. They reduce confusion and lower entry barriers. But tools alone do not change incentives. If markets reward appearance over performance, companies will rationally invest in appearance. If enforcement is selective and penalties rare, disclosure will not translate into behavioural change.

This exposes a central tension. ESG is promoted as a gateway to global capital, yet capital is not patient with ambiguity. Investors demand clarity, consistency and credible risk management. At the same time, chasing foreign investment without grounding ESG in local realities risks creating a hollow sustainability economy, one that communicates fluently with investors but poorly with citizens.

A credible ESG pathway for Pakistan must therefore do three things simultaneously. First, it must protect people by treating labour rights, health impacts and community resilience as material risks, not footnotes. Second, it must protect the planet by linking environmental reporting to measurable reductions in harm, not symbolic commitments. Third, it must recognise profit as a driver while disciplining it through transparency, enforcement and long-term thinking.

This is not a debate about choosing growth over sustainability. Growth built on environmental degradation and social neglect is already failing. Climate disasters, health costs and infrastructure damage are quietly eroding whatever short-term gains were achieved. ESG, stripped of its marketing gloss, is simply a framework for making these hidden costs visible.

Pakistan still has a choice. ESG can be used as a corrective lens forcing accountability, aligning incentives and directing capital toward resilience rather than repair. Or it can become another imported vocabulary: impressive, expensive and disconnected from the lives it claims to improve. The difference will not be made by frameworks alone, but by whether ESG is allowed to challenge power or merely decorate it.