ISLAMABAD (GNP): Senator Sherry Rehman has urged Pakistan to adopt an ESG framework that is transparent and built on incentives. She said environmental, social and governance reporting cannot stay voluntary or serve as a tool for polishing corporate reputations. It has to deliver measurable gains in environmental performance, social responsibility and governance.
Speaking as chief guest at the launch of the Pakistan ESG Policy Report 2026, she argued that the discussion should reach well beyond the corporate world. In her view, ESG needs to be considered together with climate policy and the political and legal context, and the people with technical, regulatory and legislative expertise must be brought into the same conversation.
She said the real question is no longer whether Pakistan needs ESG, but what kind of framework the country wants and what its consequences will be. Legislation matters, she noted, particularly when the framework must work alongside international partners.
Senator Rehman highlighted how far corporate practice lags behind understanding. A 2023 ESG survey found that 86 percent of businesses recognised ESG risks and 81 percent recognised its opportunities. Yet only 18 percent had an ESG-certified director on the board, and only 11 percent published sustainability reports. Even among those that did, disclosures were frequently thin or lacking in detail.
With around 537 companies listed on the Pakistan Stock Exchange, she said, few report their actual carbon footprint, circularity, resource consumption or the measurable environmental effects of their operations. She stressed that this matters most for exporters, who are increasingly subject to regimes such as the EU’s Carbon Border Adjustment Mechanism (CBAM).
The issue, she said, is not just how many firms produce ESG reports but what the reports reveal, who verifies and inspects them, and what happens when claims do not match reality on the ground. Drawing on her work chairing a Senate Standing Committee that deals regularly with companies and regulators, she said she sees nowhere near the volume of sustainability disclosures that would indicate ESG is truly embedded. Without a compulsion to act, she suggested, there is little reason for firms to take on responsibility.
She warned against treating reporting as a goal in itself, saying that without verification, accountability and measurable results it risks becoming one more bureaucratic exercise. She observed that some of the world’s heaviest polluters produce the most elaborate ESG reports, since large firms, including those in high-emission industries, can afford extensive sustainability messaging to protect their reputation, attract capital and lower perceived risk.
She was careful to add that she was not accusing every reporting company of greenwashing, only stating that a report alone does not demonstrate responsible conduct.
At the same time, she said the ESG framework should not become another punitive burden on a private sector that already carries heavy taxation. She called for a system that pairs reporting obligations with incentives and a clear route to compliance.
She proposed a regime in which companies have a genuine reason to improve their environmental and social performance, with incentives that can be realised quickly and transparent boards that both regulate and reward. Credible penalties, she added, should also be part of the picture where needed.
Senator Rehman said companies should take part in shaping policy. Firms should spell out the real obstacles they face, regulators should clarify what will become compulsory, and Parliament should identify where legislation is needed. She floated the idea that companies filing sustainability reports might eventually be asked to appear before parliamentary committees to explain their disclosures, as institutions already do in finance and other policy areas. Accurate data, she said, will not emerge without incentives, and the aim should be a system in which firms are motivated to disclose honestly, improve and help design the rules.
She also pointed to the Pakistan Green Taxonomy as a key structural tool for establishing a shared understanding of what counts as sustainable economic activity. The taxonomy is being developed with the State Bank of Pakistan, the Ministry of Climate Change and international partners including the World Bank. She described it as a common language, even a dictionary for sustainability, that would help businesses, financial institutions and regulators align their practices, supply chains and financing with climate-resilient approaches.
She added that Pakistan’s ESG architecture must keep pace with fast-changing international trade and regulatory demands, especially CBAM, which will increasingly affect exporters according to the carbon intensity of covered goods.
She noted that the country has already started moving toward mandatory ESG disclosure through the phased framework introduced by the Securities and Exchange Commission of Pakistan (SECP). Under the current timetable, Phase I starts on July 1, 2029, and applies to companies meeting at least two of three thresholds: turnover above Rs25 billion, more than 1,000 employees, or assets above Rs12.5 billion.
Senator Rehman said disclosure rules alone are not enough, and that the current framework does not clearly address penalties. Any law she brings, she said, will include penalties but must also include incentives, since a law without a supporting framework of consequences is pointless.
She recalled piloting the corporate social responsibility legislation, which she stressed is distinct from ESG. That effort met strong resistance and was eventually scaled back to a non-mandatory framework. She said the experience shows how hard it is to move from voluntary corporate responsibility to binding obligations, and that Pakistan should learn from it.
She argued that cleaner production has to make economic sense, especially in industries with large footprints. If cement makers are to invest in cleaner technology, she said, they need incentives that make it affordable. Companies asked to cut emissions need a practical path to do so, and efforts to improve energy efficiency, waste management and production processes must take economic realities into account. Otherwise, she cautioned, compliance will remain a paperwork exercise that produces polished reports with little real-world effect.
She said Pakistan’s environmental situation makes the shift urgent. She cited worsening air and water pollution and noted that Pakistani cities, Lahore in particular, regularly rank among the most polluted in the world. Companies, she said, are having a heavy negative impact on water and air, and environmental performance can no longer be separated from economic and corporate policy.
She contrasted the absence of a comprehensive national plan in some areas with the rapid change in the energy sector, where solar growth has been largely driven by the public. Over the past five years, Pakistan has imported more than 50 GW of solar panels worth close to US$18 billion, reshaping the energy landscape. Net metering and falling panel prices, she said, created the conditions for this transformation, which shows that people do not always wait for governments.
The broader lesson for ESG, in her view, is that resilience and sustainability cannot come from government alone. Communities, businesses, investors and consumers should become stakeholders in the policies they will have to live by, and rather than waiting for punitive action they should define their own goals and press for what they want.
She urged businesses and technical experts to work with Parliament before laws are finalised, instead of waiting for rules to be imposed. They should sit down together, explain their needs and come prepared with technical groundwork.
She asked the private sector to bring policymakers at least three workable options rather than merely listing problems, along with clear proposals for how ESG data can be transparently verified and independently scrutinised. It is not a legislator’s job, she said, to do the sector’s technical homework. She wants options, willingness and public backing from the sector.
She suggested that companies and industry groups develop their own performance indices and measurable benchmarks, identify priority areas for legislation and show where incentives could speed up compliance. Once this groundwork is laid through real stakeholder engagement, she said, Parliament can help move the legislation forward.
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Concluding, Senator Rehman said ESG should be seen not as a narrow reporting task but as part of Pakistan’s broader shift toward a cleaner, more resilient and globally competitive economy. She said parliamentarians interested in the issue are ready to help draft a law rather than wait until circumstances force the country’s hand.
She closed by stressing that resilience comes from people rather than governments. Government can set the framework, Parliament can pass the law, regulators can define standards, and business can supply innovation and investment, but unless all of them become stakeholders in the transition, she said, ESG will stay a report rather than a reality.
Sohail Majeed is a Special Correspondent at The Diplomatic Insight. He has twelve plus years of experience in journalism & reporting. He covers International Affairs, Diplomacy, UN, Sports, Climate Change, Economy, Technology, and Health.
