Page 53 - CMA Journal (May-June 2025)

Focus Section

Nowhere is this risk more imminent than in the GSP+ Finally, ESG metrics must be formally integrated into the
preferences, which hinge on adherence to 27 Strategic Trade Policy Framework (STPF), ensuring that all
international conventions on human rights, labor sectoral incentives—particularly in textiles, IT, and
standards, and environmental safeguards. The European renewable energy—are conditioned on verifiable ESG
Commission’s 2024 review flagged serious lapses in performance. Without these coordinated structural
governance and climate policy, casting doubt over reforms, Pakistan will remain confined to low-margin
Pakistan’s renewal prospects (Durrani, 2024). Failure to export markets and miss the opportunity to integrate
comply could mean losing access to one of its most into high-value, ESG-sensitive global value chains.
lucrative markets. Coda: As global markets pivot toward mandatory and
And it is not just the EU—ESG is now hardwired into auditable ESG standards, countries that fail to align will
multilateral financing, sovereign credit ratings, and not just fall behind—they will be written out of the rules
preferential trade agreements. The cost of entirely. For Pakistan, the stakes are clear: ESG integration
non-compliance is no longer hypothetical; it’s structural is no longer a corporate initiative but a national
and compounding. Multinational corporations, economic imperative. Without urgent structural reforms,
particularly in the EU, are already recalibrating their the country risks strategic irrelevance—outpaced,
supply chains to exclude non-compliant vendors. outpriced, and ultimately, out of the market.
Supplier audits now routinely include Scope 3 emissions,
labor rights records, and water stewardship. Pakistani References
firms that lack traceability, ESG certifications, or Durrani, M. (2024, November 4). Is Pakistan Ready for the ESG Business
third-party audits are being quietly dropped from Championships? Retrieved from Aurora: https://aurora.dawn.com/news/1145250/is-
pakistan-ready-for-the-esg-business-championships
procurement lists. They’re not losing out on
price—they’re losing on principles. Durrani, M. K., Naguib, N., & Alamgir, U. (2025, May 28). Can the world afford $5-7
trillion a year for green goals in 2025? Retrieved from Axial Consulting:
To reposition ESG from a compliance burden to a https://axialconsulting.io/can-the-world-afford-5-7-trillion-a-year-for-green-goals-i
competitive advantage, Pakistan must execute a n-2025/
comprehensive, policy-integrated strategy that embeds Economic Survey. (2024-25). Energy - Pakistan Economic Survey. Retrieved from
ESG principles across its trade, financial, and industrial Finance Division, Government of Pakistan: https://finance.gov.pk/survey/chapter_
25/14_Energy.pdf
frameworks. First, the SECP should amend its 2023 ESG
Disclosure Guidelines to make ESG reporting mandatory Henisz, W., Koller, T., & Nuttall, R. (2019, November). Five ways that ESG creates value.
Retrieved from McKinsey & Company: https://www.mckinsey.com/~/media/
for all firms listed on the Pakistan Stock Exchange (PSX) McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%
and for those receiving export-related incentives. This 20Insights/Five%20ways%20that%20ESG%20creates%20value/Five-ways-that-ESG-
should be aligned with the aforementioned international creates-value.ashx
frameworks to ensure standardization and global Iqbal, F. (2025, March 14). Using Trade Policy to Achieve Environmental Goals in
comparability. Pakistan. Retrieved from Consortium for Development Policy Research:
https://www.cdpr.org.pk/insights-for-change/using-trade-policy-to-achieve-environ
Simultaneously, the State Bank of Pakistan (SBP) should mental-goals-in-pakistan/
incorporate ESG performance into export refinancing PBC. (2023, October). Pakistan’s Trade with the EU & its Member States. Retrieved from
schemes, enabling firms with third-party verified ESG The Pakistan Business Council: https://www.pbc.org.pk/research/pakistans-
trade-with-the-eu-and-its-member-states-october-2023/
credentials to access concessional financing and
enhanced duty drawbacks. Tax incentives for exporters SECP. (2023). Guidelines on ESG Disclosures for Listed Companies. Retrieved from
Securities and Exchange Commission of Pakistan: https://www.secp.gov.pk/
should similarly be indexed to ESG compliance. document/secp-esg-disclosure-guidelines-for-listed-companies/?ind=17182607182
On the trade policy front, Pakistan must reduce import 31&filename=SECP-ESG-Disclosure-Guidelines-for-Listed-Companies.pdf&wpdmdl=
51940&refresh=684eb211830571749987857
tariffs and para-tariffs on environmental goods (EGs) to
below 5%—especially on renewable energy inputs and Transparency International Pakistan. (2024). Transparency in Corporate Reporting
2024: Assessing Pakistan's Top 69 Public Limited Companies. Retrieved from
emissions-reducing technologies—and complement this Transparency International Pakistan: https://transparency.org.pk/PUBLICATION/
with the phased introduction of a carbon pricing Transparency-in-corporate-reporting-2024.pdf?fbclid=IwY2xjawIgPYpleHRuA2FlbQI
mechanism targeting high-emission imports to fund xMAABHbkelPHwRUxwVkDz-kMTNbimT8lhAleIlU-h5fQqRztLvs_KAErJl_ao9g_aem_
AXfcQ734O09_Gv4ReF443A
domestic green transitions.
About the Authors: Arfa Ijaz is an environmental engineer and a
To operationalize ESG compliance at the industrial level, researcher working in the energy sector focusing on industrial
dedicated ESG facilitation units should be embedded decarbonization and Pakistan’s clean energy transition. As a writer,
within Special Economic Zones (SEZs) to assist SMEs with she also contributes to the News and the Friday Times. Currently, she
emissions reporting, labor rights audits, and works as a researcher at the Sustainable Development Policy
sustainability certifications—offering subsidized access Institute (SDPI).
to expert consultants and verification platforms.
Furqan Ali is a Peshawar-based researcher, currently working in
Additionally, a centralized ESG reporting registry, jointly content development at Axial Consulting. He is the Co-founder of
administered by the Ministry of Climate Change and Policy Club and an Advisory Associate at Zahid Jamil & Co., where
SECP, should be established to consolidate firm-level data he works on higher education reform and climate-related projects.
on emissions, governance structures, labor standards, He is also Chairperson of the Children & Youth Advisory Board at
and anti-corruption safeguards. This registry should also Climate Forward Pakistan and a frequent contributor to The News
support sectoral emissions benchmarking aligned with and The Friday Times.
Pakistan’s Nationally Determined Contributions (NDCs).

ICMA’s Chartered Management Accountant, May-June 2025 51