Profit with a purpose

In today’s fast-changing world, investors are no longer focused solely on a company’s profits. Issues such as social inequality, environmental loopholes and corporate governance failures have a major impact on a company’s performance.

Regulatory and stakeholder pressures are increasingly driving the need for profitability, while technological advances and growing consumer awareness are shaping the global landscape.

Implementing the three-legged model – environmental, social and governance (ESG) – is a complex trade-off between immediate financial gains and long-term sustainability. Pakistan is currently at a critical point where it is lagging behind on ESG due to several interlinked factors.

Economic stability, understanding of ESG principles, infrastructure design, corporate engagement and enforcement of environmental and social regulations are all areas where we can do better. As companies and policymakers, we need to overcome these gaps to commit to ESG principles.

The corporate sector in Pakistan – particularly the large corporates, including multinationals and local giants – is the driving force behind this changing way of doing business. The good news is that the private sector has significant scope and potential to revolutionize ESG. From allocating funds to community development efforts, children’s education and waste management measures to renewable energy solutions for sustainable living, the corporate sector is starting to create shared value for shareholders and society.

Projects such as Shell’s Access to Energy programme and many other commendable projects by other organisations highlight the potential of ESG strategies. In partnership with the National Rural Support Programme (NRSP), the Access to Energy programme provides households with solar energy solutions; it focuses on community needs and rural development.

Corporate ESG strategies can lead to the creation of new industries and jobs and can stimulate entrepreneurship, particularly in areas such as renewable energy, sustainable agriculture and social enterprises. Successful companies such as Concept Loop and Asani.io demonstrate the power of corporate sponsorship in driving innovative solutions.

Concept Loop converts plastic waste into sustainable building materials, while Asani.io offers innovative solutions for water conservation. These examples show how young entrepreneurs can flourish with corporate support and in turn contribute to the country’s economy. Shell Tameer supports young entrepreneurs with training, mentoring and financing; and has reached over a million young people.

Here is the gap, however. The private sector cannot tackle ESG challenges alone. While it must take the lead in driving sustainable development, the only model that would work in a country like Pakistan is one where the government facilitates a fair and enabling environment. Fostering government-private partnerships to drive ESG projects and pooling resources for public-private partnerships has created significant impact globally and can do the same locally.

For example, efforts to increase road safety through awareness campaigns, driver training and cooperation between government and non-governmental organizations can reduce the number of accidents and improve safety.

Policy incentives are crucial to driving ESG adoption in Pakistan. Introducing suitable tax breaks, subsidies and financial incentives to promote the adoption of ESG practices will only encourage investments in sustainability. Currently, only a small percentage of companies in Pakistan report on their ESG practices – and that too voluntarily, which points to a significant gap in awareness and engagement.

Without policy incentives, such as those in many neighbouring countries for mandatory corporate social responsibility spending, this gap is likely to persist. However, the efforts of the Pakistan Stock Exchange are commendable. From the establishment of the ESG Taskforce to providing ESG guidelines for listed companies, these are solid steps in strengthening ESG reporting and standards. Yes, broader adoption of ESG will take time, but we are on the right track.

Another great area for public-private partnerships, where we can do wonders in promoting sustainable practices, is in small and medium-sized businesses that have not yet started.

Imagine a Pakistan where every business not only thrives, but also nurtures the environment and empowers its communities. This vision is within our reach, but it requires a shift in mindset from short-term profit to long-term sustainability.

For the greater good, we need to rethink traditional approaches to profitability and growth. Investing in ESG ‘in true spirit’ will be a tough task, but it is our responsibility to take up this challenge if our vision is inclusive growth and a sustainable future. It is part of Pakistan’s DNA.

As Quaid-e-Azam Mohammed Ali Jinnah said in his address to the new nation, “Traders and merchants will always be welcome and they will not forget, in building their own fortunes, their social responsibility of fair and just dealing with all, great and small.”

The writer is the CEO/Managing Director of Shell Pakistan Limited.