Companies, both globally and in Pakistan, have a heightened awareness of environmental, social and governance (ESG) issues as investors, regulators, employees, and the community at large are demanding greater transparency and board accountability. Organizations that prioritize ESG can drive value and mitigate risks to operations and the bottom line over time.
In Pakistan, new mandatory reporting standards are rapidly emerging, driven by the Securities and Exchange Commission of Pakistan's (SECP) phased adoption of IFRS Sustainability Disclosure Standards (S1 and S2). As such, lenders and investors are increasingly withdrawing funding from and voting against businesses that fail to consider ESG factors. The ESG narrative is dominated by various reporting frameworks, ecolabels, and standards, with investors demanding adherence to reporting outlines that are measurable, comparable, transparent, and holistic.
The regulatory landscape in Pakistan is shifting from voluntary to compulsory reporting. Historically, companies disclosed Corporate Social Responsibility (CSR) activities in their annual financial statements under the 'Corporate Social Responsibility (CSR)-Order, 2009'. This has evolved with the adoption of the United Nations Sustainable Development Goals (UN SDGs) and the implementation of sustainability initiatives under 'Pakistan Vision 2025', along with corresponding reporting requirements under corporate laws, alongside as the upcoming IFRS S1 and S2 requirements.
