Page 75 - CMA Journal (Nov-Dec 2025)

Articles Section
Governance in ESG Context

The Global Risks Perception Survey 2022-2023 (GRPS), works. Once stake-
administered by the World Economic Forum, captured the holders are identified,
top 10 risks in the two-to-five-year landscape. With regard to the next step is further
environmental risks, the GRPS’s results are alarmingly categorization,
revealing: (i) 5 risks in the next 2 years and (ii) 7 risks in the prioritizing engage- Muhammad Junaid
next 5 years, including 4 among the top 5. ment with major
stakeholders first. Shekha, FCMA
Keeping in mind the GRPS’s results, an important question
arises – what emerging risks are businesses exposed to? Material Topics Head of Internal Audit,
Based on these findings, ESG/Sustainability is an immediate The next step involves Yunus Textile Mills Limited
answer. Although some in the fraternity undervalue the engaging major (Part of YBG)
significance of ESG as a risk and question its relevance to a stakeholders and
company’s business model, the need to evaluate and understanding their ESG-related expectations. Companies
address ESG concerns remains critical. Failure to seriously can use different engagement methods, from personal
address ESG concerns poses a significant threat to the meetings to well-crafted questionnaires. These question-
long-term sustainability and survival of the business. naires are key tools, enabling the company to plan and priori-
Risk and governance are integrated concepts, making a tize actions that meet stakeholder expectations and serve
strong case for addressing ESG risks through a proper and them better. The company must emphasize the importance of
formalized governance framework. A suggestive completing these questionnaires and encourage stakehold-
governance approach for ESG is outlined in IFRS S1, issued ers to participate fully. Once responses are collected, they
by IASB and adopted by SECP for phased implementation in should be filtered to create a prioritization hierarchy, and a
Pakistan, commencing from the accounting period plan should be devised to address them. This provides a
beginning on or after January 01, 2025. To support its ESG holistic view for the company of what stakeholders expect
agenda, a company can take the following steps to with respect to ESG. This is crucial because otherwise a
strengthen its governance structure: company may undertake ESG initiatives without aligning
them to stakeholder requirements and expectations.
Business Strategy
Targets
A company typically follows a business strategy centered on
its mission and vision statement. It is important to integrate Based on key stakeholders and their material topics, the
its ESG strategy within the broader business strategy. This company should set targets achievable within the next three
approach not only increases focus and generates greater to five years. This helps the company in the following ways:
visibility toward ESG concerns but also fosters engagement • Better visibility to align resources with stakeholders’
at various levels within the organization. A company’s ESG expectations
strategy, similar to its business strategy, should be reviewed, • Prioritization of milestones based on what is material
revised, and updated periodically to ensure alignment with and important, keeping stakeholders’ expectations in
its overarching goal of sustainable growth. It is also essential view
for a company to factor stakeholders’ expectations • Integrating ESG into culture, business plans, and
regarding sustainability into its strategy. Consequently, a execution
company should pay particular attention to its interactions
• Setting budgets for ESG initiatives
with stakeholders and evaluate them for key insights into • Breaking targets into manageable phases to monitor
how their views on sustainability are evolving.
periodic progress
Stakeholder Engagement
Conclusion
A constantly changing business environment, particularly Once a company decides to embark on its ESG journey, it is
due to the proliferation of social media platforms, under- important to identify stakeholders and their material areas
scores the need to establish and maintain strong engage- of interest. The next step is to break these into KPIs so that
ment with stakeholders. This enables companies to better progress can be routinely monitored. Building a strong
understand shareholders’ expectations and adjust their governance structure around ESG at various levels ensures
business strategy accordingly. The company should first constant discussion and regular reporting, including at the
identify its stakeholders using a defined methodology. This is
Board level. The Board, CEO, and senior executive team have
one of the most critical activities forming the foundation of to take the lead, ensuring this agenda penetrates to the
the entire ESG program. Stakeholders will differ across bottom of the organization.
companies; they vary from company to company, sector to
sector, and according to business ideology. For example, About the Author: Muhammad Junaid Shekha is a Fellow
stakeholders for an insurance company differ from those of a member of ICMA with a keen interest in governance and ESG. He is
textile manufacturer and exporter, due to differences in currently associated with Yunus Textile Mills Limited (part of YBG) as
customer base, product offerings, and regulatory frame- Head of Internal Audit, where he reports to the Board on matters
related to controls and governance.
ICMA’s Chartered Management Accountant, Nov-Dec 2025 73