ESG: the future of employment in Pakistan

Sahar Iqbal
Akhund Forbes, Karachi
sahar.iqbal@akhundforbes.com

The social aspect of ESG in Pakistan

In a 2022 press release, the Pakistan Stock Exchange (PSX) encouraged listed companies to report on environmental, social and governance (ESG) compliance, particularly regarding female worker empowerment. Additionally, the PSX included female empowerment as one of the six minimum sustainable development goals (SDGs) requirements for its top 25 companies awards. Social responsibility, especially in terms of gender equality, has gained prominence in Pakistan in recent years. By advocating for gender equality, diversity and inclusion, companies can access a larger talent pool and create employment opportunities for women.[1]

The Securities and Exchange Commission of Pakistan (SECP) recently held a symposium on women’s empowerment through the lens of ESG, in collaboration with the United Nations (UN). The symposium emphasised greater equity for women in the workforce and encouraged socially responsible, sustainable business practices.[2]

The extent to which the PSX and SECP ESG guidelines affect employment in Pakistan
In Pakistan, the adoption of ESG standards has garnered importance as part of the nation’s corporate and investment strategies. Regulatory bodies like the SECP and the State Bank of Pakistan have taken proactive measures to integrate ESG into businesses. For instance, the SECP introduced the Corporate Social Responsibility (Voluntary) Guidelines in 2013, while the Pakistan Stock Exchange recently joined the UN’s Sustainable Stock Exchanges initiative, urging listed entities to establish an ESG policy and disclose information on its implementation.

The impact of mandatory ESG standards on employment can be multifaceted; it could spur job creation in sectors dedicated to sustainable practices and responsible governance, resulting in roles such as sustainability officers or ethical sourcing managers. On the other hand, companies adapting to these standards may require restructuring, which could lead to job losses in sectors slow to adopt sustainable practices. However, in the long term, the incorporation of ESG standards could attract foreign investment due to the global trend towards ethical investing. This potential influx of investment could stimulate business growth and, consequently, employment in Pakistan.

Since the ESG phenomenon in Pakistan is in its nascent stages, it is currently difficult to determine the impact it has had on employment.[3]

How environmental policies and practices will impact employment in Pakistan

Despite ranking eighth on the Global Climate Risk Index (2021), Pakistan is one of the few countries to achieve its SDGs. The country has implemented climate–sustainable practices and issued guidelines, even though the nation accounts for only 0.9 per cent of total emissions.[4]

Policies have been enacted and measures have been taken to promote the environmental aspect of ESG compliance in Pakistan. The State Bank of Pakistan’s 2017 Green Banking Guidelines provide a comprehensive list of proposed measures for banks to ensure climate–sustainable business practices. Banks now offer financial incentives to businesses that adopt eco-friendly practices.

Investors have also started to consider companies’ ESG practices before investing, making compliance with international conventions on the environment and social responsibility mandatory from a competitiveness perspective.[5]

If the government introduces more prudent and mandatory environmental regulations and reporting requirements, businesses may need to hire additional employees to ensure compliance. This could create jobs in areas such as environmental auditing, risk management and legal services.

Eco-friendly businesses often operate in emerging industries, such as renewable energy, sustainable agriculture and waste management. As these industries grow, new market opportunities arise, creating demand for skilled workers in various roles like research, development, installation and maintenance.

However, as businesses shift towards more sustainable practices, some traditional jobs in polluting industries may be displaced; jobs in the fossil fuels industry might decline as renewable energy gains prominence. Existing employees may need to acquire new skills to remain relevant in the changing jobs market. For example, workers in the automotive industry might need to learn about electric vehicle technology, as the demand for electric cars grows.

Conclusion

The emerging importance of ESG factors in the global business landscape has begun to shape the future of employment in Pakistan. As the country moves towards promoting gender equality and diversity, new employment opportunities are being created for previously underrepresented groups. Furthermore, the implementation of climate–sustainable practices and regulations is expected to create jobs in emerging industries.

However, the shift towards ESG compliance may also lead to the displacement of some traditional jobs in polluting industries, and Pakistan must invest in retraining and upskilling programmes for workers in these sectors to equip them with the necessary skills to thrive in the evolving jobs market.

The integration of ESG factors into the Pakistani business environment holds great promise for the future of employment in the country. As the country continues to adhere to ESG principles, it can expect to see growth in new industries, increased investment, and a more inclusive and sustainable workforce. To fully realise the potential of ESG-driven growth, the government, businesses and individuals must work together to create a definitive and mandatory legal framework that encourages sustainable development and bolsters employment opportunities in the country.