07/12/2025

ON SUNDAY December 7, 2025 theSunday Special IV

In the future, ESG cannot remain a checklist. It must become a vehicle for solving climate change, inequality and digital risk.”

Rethinking ESG for real impact

BY DAYANA SOBRI

W ALK into any supermar ket or scroll through any major brand’s website today and you’ll see the same buzzwords everywhere – “sustainable”, “ethical”, “responsible”. With the growing urgency of the climate crisis and social inequality, environmental, social and governance (ESG) frameworks were meant to help hold corporations accountable. But be hind the glossy sustainability reports and carbon-neutral pledges lies a more uncomfortable truth: ESG, as it is used today, is not working. F URP PLVDOLJQHG LQFHQWLYHV WR ÀDZHG measurements, the ESG movement has become more about box-ticking than real change. And the consequences are far reaching – for the planet, for communities and for the future of business itself. Similarly, it is hard to go a day without seeing the acronym ESG splashed across glossy corporate reports or sustainability pledges. From multinational giants to local startups, almost every company now claims to have an ESG strategy. The SURPLVH" 7R JHQHUDWH SUR¿WV ZKLOH DOVR protecting the planet, uplifting com munities and practising good governance. But in the real world, the results are underwhelming. ESG was designed to encourage businesses to solve the biggest challenges of our time – climate change, social inequality and digital vulnerability. Yet, despite a surge in ESG-related invest ments, carbon emissions are still rising, wealth gaps are widening and public trust in corporations continues to erode.

What went wrong? A good idea, poorly implemented. “The original idea behind ESG was a good one, and it still is,” said Rajeev Pe shawaria, CEO of Stewardship Asia Centre and author of Sustainable Sustainability: Why ESG is not enough. He explained that ESG was intended as a framework to drive responsible value creation. “Many companies are now bigger and more powerful than countries. ESG was the much-needed cry for businesses to gener ate their returns by addressing today’s existential challenges.” But that cry has been lost in translation. According to Peshawaria, the problem is not with ESG’s intent, but its execution. The framework has become a compliance exercise rather than a catalyst for real change. “We’ve been using all the wrong tools to achieve the right goals,” he said. Why regulation and incentives fall short To encourage companies to behave more responsibly, governments and markets turned to regulation, incentives and ESG OLQNHG ¿QDQFH But regulation, by nature, focuses on minimising harm – not maximising good. “Doing no wrong does not equate to doing right,” said Peshawaria. Similarly, over-reliance on incentives and mandated reporting has led to unin tended consequences. “We thought what gets measured gets done,” he said.

“In reality, what gets done gets mea sured and reported conveniently.” This has given rise to thicker sustain ability reports, fancier infographics and, ultimately, more greenwashing. “Instead of driving impact, we got a glossy version of the same status quo,” he added. When ESG becomes a marketing tool One of the most troubling aspects of ESG today is its use as a branding weapon. Companies cherry-pick feel-good initia tives – planting trees, switching to LED lights, holding charity drives – and pres ent them as evidence of deep sustainability commitments. But these are surface-level gestures that barely scratch the surface of systemic problems. “We created pools of green or sustain able funds that became trading instru ments for banks and asset managers. “They did not drive the intended envi ronmental or social impact,” Peshawaria said. According to a 2023 analysis by the Securities Commission, although 85% of Malaysian public-listed companies issued sustainability reports, fewer than half had meaningful performance indicators. Many simply chose measurement frameworks that made them look good, out of the 850 frameworks available globally. This leads to the illusion of progress. And when executive pay is tied to the • ÀDZHG PHWULFV LW LQFHQWLYLVHV HYHQ PRUH window-dressing.

It is not about doing less harm. It is about doing more good, on purpose.”

Peshawaria