By Babar Akhtar
The business world has entered the time when only the knowledge of the business world does not suffice to tackle problems of the future, as every industry has been ruled by seasoned professionals specializing in finance, law, engineering, and business strategy. Even though the individuals mentioned above have significantly contributed to the success of companies and economic development, the business world has gone through huge changes. The impact of climate changes, evolving expectations among investors, carbon regulations, and resource deficiency, as well as world sustainable standards in business, has changed the nature of competition between companies. As of today, modern firms do not need to clarify whether ESG issues need addressing; they need to realize whether the top management has enough knowledge to lead through the transition period.
Everywhere in the world, sustainability has developed from a corporate accountability campaign to a vital business tactic. Investors are becoming more drawn to businesses that have successfully integrated ESG into their operations, banks examine companies’ environmental risks before lending to them, and big businesses would rather work with suppliers who can prove that their operations are sustainable. Governments are implementing tougher rules regarding climate-related reporting, and customers are only accepting companies that adhere to good principles for environmentally responsible business operations. Even when this happens, however, many businesses continue to treat ESG as something that needs to be adhered to and left for the operations department instead of understanding it as something that must be dealt with by the board of directors. By doing this they forget that the matter of climate risk, carbon markets, sustainable finance, resource management, and long-term sustainability is decided at the level of the board. Therefore, having ESG experts on the board should not be viewed as a trend but as a necessary investment in the ability to remain competitive, in good decision-making, and tocreate sustainable value.
For Pakistan, achieving this transformation offers both a risk and an opportunity. The export-oriented sectors are increasingly put under pressure to respect sustainability standards and banks, investors, and development partners are gradually embracing the ESG framework in their financing. Global markets are getting more carbon-sensitive, which means that companies that rely only on traditional management techniques may begin to struggle with competitiveness. Pakistan’s firms need directors with the knowledge of industrial de-carbonization, climate finance, ESG reporting, carbon accounting, principles of the circular economy, and sustainable investment methods. Such knowledge will allow companies to predict and adapt to the upcoming regulations, discover the opportunities, minimize operational risks, and improve their positions in the international markets.
Nonetheless, effective leadership in isolation is not sufficient. Businesses – particularly small to medium enterprises – generally don’t have the necessary technical abilities to effectively convert their sustainability goals into action. This is where Pakistan must come up with a completely new idea: Sustainability Clinics. These clinics could be located inside universities, chambers of commerce, industry associations, and even major businesses, thereby becoming the centres for practical solutions and innovations. Most importantly, Sustainability Clinics would not act as monitoring bodies, but rather help businesses assess their carbon footprints, develop ESG reports, find funding opportunities, and grow their energy effectiveness, as well as help businesses to develop the decarbonization plans and understand changing requirements of international standards. They would also provide training, technical support and consulting for companies. Sustainability Clinics would, therefore, help businesses to adopt sustainability into their operations as easily as possible as well.
The effect of the integration of ESG knowledge within the boardrooms and Sustainability Clinics may go well beyond sustainability. Organizations will increase their operating efficiency, lower energy expenses, reinforce management effectiveness, attract ethical investments, and facilitate the access to green financing. Above all, the organizations will be more capable to withstand risks related to climate change, choice of consumers, andtrade policies. For Pakistan specifically, when industrial competitiveness is increasingly linked to sustainability, this approach may help increase exports, promote innovation, create green jobs, and make local companies preferred partners in international supply chains. Sustainability should not be perceived as a cost or duty but should be regarded as an important factor of productivity.
Pakistan keeps on proving its priorities regarding sustainable development merely because resources are insufficient and due to the bottleneck issues caused by climate changes. The next logical step is to increase the efficiency of institutions enabling commercial companies to go through this transformation. It is essential for all boards to include an ESG expert responsible for the development of a long-term strategy and for providing every company with the possibility to access a Sustainability Clinic that will make complex sustainability requirements available in a commercial format. Together these two suggestions do not only represent good principles of corporate governance but a new vision of sustainable economic development. Those companies that will be pivotal in the future are not the ones with a strong balance sheet but the companies that are aware that sustainability development can be a source of innovation and competitive advantage. The next corporate revolution will not be based solely on technology but on the combined effect of managerial excellency, ESG expertise, and existence of Sustainability Clinics.
