Page 34 - CMA Journal (Nov-Dec 2025)

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activities, environmental stewardship, social
responsibility, and resource efficiency in a
world facing significant sustainability
challenges. Embracing these concepts can
lead to more sustainable and resilient
businesses, economies, and societies’ (Maio &
Rem, 2015).
Understanding ESG in the Context
of Pakistan
Advanced markets across the world have
adopted the notion of ESG Principles as a
mandatory mainstream concept, but it is a
comparatively new and challenging idea in
Pakistan. There is limited awareness, especially among
Major threats for the world emanate from climate
those who matter most, such as policymakers,
change, social disparity, environmental problems, and
businesspersons, and civil society. It has still not been
resource depletion. ESG represents a set of parameters
considered a core business requirement and is being
that appraises various endeavors of organizations and
treated as a voluntary activity, like CSR.
their practices in key areas of ESG.
Most organizations in the corporate sector believe that
• Environmental: Business organizations pursuing
ESG has a very minor role to play, confined to
environmental correction activities like managing
philanthropy, whereas ESG has a broader and critical role
waste, reducing carbon emissions, conserving
in managing risks, creating resilience in the supply chain,
resources, and fostering sustainable practices.
and building investor trust. ESG requires technical
• Social: This aspect of any business organization is expertise that could help in its effective implementation
important from a societal point of view, as the and make it part of business strategies. Businesses
congenial relationship of the company with its work- lacking such expertise face a knowledge gap. Small and
ers, clients, suppliers, and adjacent communities is a medium-sized enterprises (SMEs) in Pakistan form a vital
vital part of positive implementation of ESG. It also and sizeable sector of production, with almost no
evaluates factors such as labor practices, diversity experience and awareness of the significance of global
and inclusion, health and safety, and community ESG and its reporting framework. Hence, ESG is not given
engagement. priority over other activities, which has rendered its
progress very sluggish, whereas regional countries like
• Governance: Every society has a system of
India have seriously embraced ESG.
governance that oversees and regulates a company’s
configuration and authority structure to safeguard Weak ESG Reporting and Data Infrastructure
the rights of all stakeholders and ensure solid
Data transparency and reporting frameworks are global
functional management of businesses based on
indicators of the successful adoption of ESG. One of the
ethical prerequisites.
crucial barriers to adopting standardized ESG reporting
Linear vs. Circular Economy systems is its complete non-existence in Pakistan. The
absence of ESG guidelines and clear reporting
Companies that prioritize ESG considerations aim to align regulations contrasts with mandatory ESG disclosures in
their operations with sustainable practices, reduce developed countries. There are some large organizations
negative impacts on society and the environment, and in the corporate sector of Pakistan that regularly publish
enhance their financial performance in the long run (Zu
reports on sustainability, but they ignore internationally
Mente & Bistrova, 2021). The best practices of business recognized frameworks like GRI, SASB, or TCFD, which
organizations based on the framework of ESG principles
creates inconsistencies in corporate disclosures. Issues of
are meant to guide investors and consumers to make non-authentic data, resulting from weak monitoring
informed decisions regarding investments that would be
systems, raise questions on the reliability and precision of
profitable and protect consumers from losses due to
faulty consumption of different products supplied by reported ESG data. It is imperative for countries,
including Pakistan, to remain integrated in the global
reputable companies in the market.
supply chain through proper compliance with ESG to
‘ESG and Circular Economy are interconnected notions fulfill this precondition.
that highlight the significance of responsible business

ICMA’s Chartered Management Accountant, Nov-Dec 2025