ENVIRONMENTAL, Social and Governance (ESG) protocols are no longer an optional ethical compass in the changing global business landscape; they are a strategic necessity.
Pakistan must adapt to the changing priorities of industries worldwide to avoid being left behind in a rapidly greening global economy. This includes the integration of sustainability, equity and transparency. ESG compliance has become a critical metric for investment, commerce and reputation on a global scale. Many financial institutions, such as the World Bank, the IMF and regional development banks, associate funding with ESG indicators. Multinational corporations are unwilling to collaborate with supply chains that fail to exhibit credible ESG practices. The Corporate Sustainability Reporting Directive (CSRD) of the European Union, the United Nations Principles for Responsible Investment (UNPRI) and frameworks such as the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) are all influencing the global rules of the game.
The UN Global Compact, the OECD Guidelines for Multinational Enterprises and the IFC Performance Standards are now the foundation of ESG commitments for both countries and corporations. These instruments provide comprehensive guidance on corporate governance, labour rights, environmental stewardship and anti-corruption frameworks. Despite Pakistan’s endorsement of numerous frameworks in principle, enforcement and industry-level adoption are still fragmented, with limited sectoral accountability and little data transparency. Pakistan’s regulatory framework does show some recognition of ESG principles. The Pakistan Environmental Protection Act (1997) sets the legislative foundation for environmental protection, while the Securities and Exchange Commission of Pakistan (SECP)’s Corporate Social Responsibility (CSR) Guidelines (2013) establish a framework for corporate accountability. The National Climate Change Policy (2021) and the Alternative & Renewable Energy Policy (2019) also demonstrate an intention that is consistent with environmental mandates. Furthermore, the Pakistan Stock Exchange (PSX) now mandates that listed companies disclose their sustainability practices by its ESG Disclosure Guidelines.
Nevertheless, these measures are insufficient to establish systemic, enforceable ESG mandates. Many industrial zones, particularly those in the textiles, chemicals, construction and energy sectors, continue to operate without comprehensive ESG audits, indicating that sectoral adherence is inconsistent. A weak link in governance persists; enforcement mechanisms are politically undermined or impoverished, even in the presence of environmental or labour regulations. Environmental non-compliance is prevalent. Consider the unregulated discharge of untreated effluents into river systems by textile and tannery units, or the increasing air pollution levels in urban centres as a result of coal-fired brick kilns and fossil-fuel power plants. Social indicators, including wage equality, occupational safety and gender parity in employment, are not adequately reported. Corporate boards frequently lack diversity, transparency and ethical risk management structures at the governance level.
To progress, Pakistan must implement a series of deliberate measures, including making every industrial license, regardless of whether it pertains to textile mills, cement factories or energy facilities, subject to ESG benchmarks. These must be by international protocols and monitored through annual ESG audits. Ideally, a cross-ministerial body that reports directly to the Prime Minister or Cabinet Committee on Climate Change should be established with the authority to establish ESG standards, monitor compliance and disseminate industry-specific ESG scorecards. ESG reporting must be mandated for all companies with turnovers exceeding a specific threshold, as per the PSX model. This should be consistent with international disclosure formats such as SASB and GRI (Global Reporting Initiative).
Pakistan must allocate resources to the training of sustainability officers, legal professionals and ESG compliance auditors. The localization of ESG expertise will promote accountability and reduce reliance on costly foreign consultants. ESG criteria must be incorporated into lending frameworks by the State Bank of Pakistan and commercial institutions. Compliant entities should be rewarded through green financing instruments, while industries with poor ESG records should find it more challenging to secure credit. Customized ESG action plans should be created for critical industries, including textiles, cement, power, chemicals and mining, considering their unique risks and global best practices. India’s ESG disclosure mandate under SEBI and the Bangladesh Accord (post-Rana Plaza) are two neighbouring models from which to learn.
The government must establish platforms for ESG dialogue, innovation and peer benchmarking by collaborating with chambers of commerce, multinational corporations and civil society. To monitor progress, it is recommended that a national ESG dashboard be implemented, with updates occurring quarterly. This must encompass emissions, waste metrics, water consumption, labour data and governance indicators across industries. Pakistan’s progress towards ESG compliance is not only a moral and environmental obligation but also an economic one. The country is at risk of being excluded from preferential trade agreements, green supply chains and development finance if it fails to demonstrate tangible progress. In contrast, Pakistan has the potential to transform ESG from a compliance checklist to a competitive advantage with the appropriate political will and regulatory drive.
Given this context, the Global Peace Summit’s forthcoming ESG Summit in September 2025 represents an invaluable opportunity. It is time for Pakistan to assume a leadership role in the Global South, rather than merely participating. Pakistan can establish itself on the global ESG map and gain access to green capital, partnerships and technological innovation by demonstrating a strong performance at the summit, supported by tangible commitments and sectoral roadmaps. The global community is monitoring the situation. Compliance is no longer an option. It is strategic. The situation is urgent. Additionally, it is currently occurring.
—The writer is a International Law expert with a rich experience in negotiation, mediation and Alternate Dispute Resolution.
