ESG: Adapt or be left behind.

Due to a deal between the European Parliament and the Council of the European Union, all businesses based in the European Union (EU) countries will be required to report on the imported products that are 'carbon emission-intensive'.

In addition, the new regime requires that all carbon emissions be 'financially offset' from the year 2026 onwards. Renewable energy has emerged as a new trade barrier for Pakistan's export industries. The Carbon Border Adjustment Mechanism (CBAM) will impose carbon fees on all imports into the EU from non-members. Under the CBAM, importers into the EU of carbon-intensive goods (mainly cement, electricity, fertilizers, iron and steel, aluminum, and hydrogen) will be required to pay a charge for the carbon emissions embedded in those products. This charge will be gradually phased in from 2026 to 2034. This means a completely changed business landscape for the stakeholders.

The solution to climate change is becoming clear, i.e., adapt or be left behind. Nations that are reshaping the various economic sectors according to the various environmental and social challenges have a fighting chance against the inevitable consequences of natural environmental degradation. As the planet's climate changes, the world is adapting by creating a new green generation of businesses based on the ideology of ESG (Environmental, Social, and Governance).

ESG is a framework for sustainability management, ethical practices and conscious consumerism that is gaining widespread popularity in the business world. The roots of this ideology can be traced back to 2004, in which the United Nations Global Compact and the Swiss Federal Department of Foreign Affairs published a report named 'Who Cares Wins', in which the term ESG was coined.

It is defined as 'a set of environmental, social, and governance factors considered by companies when managing their operations, and investors when making investments, in respect of the risks, impacts, and opportunities'.

The 'E' in ESG stands for Environment and it revolves around the idea that organizations rely on natural resources and physical assets to perform their business operations. Products and business operations may directly or indirectly impact the environment adversely. ESG calls for increased environmental responsibility and accountability as part of daily business operations. Organizations' connection with various issues such as climate change, carbon management, resource depletion, loss of...