In today’s rapidly evolving world, investors are no longer focusing solely on a company’s bottom line. Issues like social inequality, environmental loopholes, and the failure of corporate governance heavily influence a company's performance.
Regulatory and stakeholder pressures increasingly supplement the need for profitability, while technological advancements and a growing consumer consciousness shape the global landscape.
Implementing the three-legged model – environmental, social, and governance (ESG) – is a complex trade-off between immediate financial gains and long-term sustainability. Pakistan currently stands at a critical juncture where it falls behind on ESG due to several interlinked factors.
Economic stability, understanding of ESG principles, infrastructure setup, corporate commitment, and enforcement of environmental and social regulations are all factors where we can do better. As businesses and policymakers, we must overcome these gaps to commit to ESG principles.
The corporate sector in Pakistan – especially the big companies, including multinationals and local giants – is spearheading this evolving way of doing business. The good news is that the private sector possesses significant space and potential to revolutionize ESG. From allocation of funds towards community development efforts, children's education, and waste management measures to renewable energy solutions for sustainable living, the corporate sector is beginning to create shared value for shareholders and society.
Projects such as Shell’s Access to Energy programme and many other commendable e by other organizations highlight the potential of ESG strategies. In partnership with the National Rural Support Program (NRSP), the Access to Energy programme empowers households with solar-powered solutions; addressing community needs and rural development.
Corporate ESG strategies can lead to the creation of new industries and jobs and can boost entrepreneurship, particularly in areas like renewable energy, sustainable agriculture, and social enterprises. Successful ventures like Concept Loop and Asani.io, demonstrate the power of corporate sponsorship in driving innovative solutions.
Concept Loop converts plastic waste into sustainable construction materials, while Asani.io provides innovative solutions for water conservation. These examples show how young entrepreneurs can thrive with corporate support, and in turn contribute to the country’s economy. Shell Tameer supports young entrepreneurs with training, mentoring, and funding; and has reached out to over a million young people.
However, here’s the lacuna. The private sector cannot address ESG challenges alone. While it must take the baton to drive sustainable development, the only model that would work in a country like Pakistan is one in which the government facilitates a fair and enabling environment. Fostering collaborations between the government and private sector to drive ESG projects and pooling resources for public-private partnerships has created the necessary impact globally and can do the same locally.
For example, efforts to increase road safety through public awareness campaigns, driver training, and government and non-governmental partnerships can minimize accidents and improve safety.
Policy incentives are crucial for promoting ESG adoption in Pakistan. The introduction of suitable tax breaks, subsidies, and financial incentives to promote the adoption of ESG practices will only stimulate investment in sustainability. Currently, only a small percentage of companies in Pakistan report on their ESG practices – and that too voluntarily, highlighting a significant gap in awareness and commitment.
Without policy incentives, like those seen in many neighbouring countries for mandatory corporate social responsibility spending, this gap is likely to persist. However, efforts by the Pakistan Stock Exchange have been commendable. From the formation of the ESG Taskforce to providing guidelines on ESG for listed firms, these are solid steps in strengthening ESG reporting and standards. Yes, wider adoption of ESG will take time, but we are heading in the right direction.
Another wide space for public-private partnerships where we can do wonders in promoting sustainable practices are the small and medium-sized businesses that have not started out yet.
Imagine a Pakistan where every business not only thrives but also nurtures the environment and empowers its communities. This vision is within our reach, but it requires a shift in mindset from short-term gains to long-term sustainability.
For the greater good, we must rethink traditional approaches to profitability and growth. Investing in ESG ‘in true spirit’ will be an uphill task, but it is our responsibility to take up this challenge if our vision is inclusive growth and a sustainable future. It is part of Pakistan’s DNA.
As Quaid-e-Azam Mohammed Ali Jinnah in his address to the new nation said, “Traders and merchants will always be welcome and they, in building up their own fortunes, will not forget their social responsibility for a fair and square deal to one and all, big and small.”
The writer is the chief executive managing director of Shell Pakistan Limited.