the esg is a failing framework
The Failure of ESG: How the Framework is Making Things Worse
In a recent article for the Stanford Social Innovation Review, Rajeev Peshawaria, CEO of Stewardship Asia Centre, delivers a scathing critique of the Environmental, Social, and Governance (ESG) framework. Originally designed as a regulatory system to track and promote sustainability, ESG has, according to Peshawaria, failed to deliver meaningful progress. Worse still, it has fostered a "sustainability as a quota" culture, reducing complex global challenges to mere checkboxes.
The Problem with ESG
Peshawaria argues that the ESG framework's primary flaw is its reliance on superficial compliance rather than fostering a fundamental shift in values. He suggests that by turning sustainability into a bureaucratic exercise, the framework inadvertently encourages companies to prioritize appearance over substance. As a result, the environmental and social crises we face remain unresolved, while businesses focus on meeting minimum requirements rather than embracing genuine transformation.
A Long History of Missed Opportunities
The deeper issue, however, extends beyond corporate governance. Society at large has repeatedly chosen short-term convenience over long-term sustainability. For centuries, industries have ignored the harmful effects of their practices. Petrochemicals, for instance, replaced quality materials despite early warnings of their environmental harm. The petroleum industry itself thrived even after evidence emerged of its detrimental impact—thanks in part to corrupted scientists and complicit authorities.
This systemic failure is not new. In earlier eras, those responsible for damaging public welfare might have faced harsh consequences. Yet, modern societies have instead enabled and perpetuated these destructive behaviors under the guise of scientific progress and economic necessity.
The Cultural Roots of the Problem
This critic fails to touch on the cultural mindset underpinning these failures. It does not point out that much of modern Western society was shaped by a worldview that separates humanity from nature—a perspective rooted in religious traditions. This reductionist approach treats environmental stewardship as a peripheral concern rather than a core value.
This cultural detachment has led to the commodification of sustainability. Rather than addressing root causes, ESG has created a system where companies treat social and environmental responsibility as a checklist. This mindset overlooks the interconnectedness of human and ecological well-being.
Real Change Requires a Different Mindset
True change, Peshawaria argues, comes from valuing principles over quotas. However, he also acknowledges the difficulty of fostering such a mindset within organizations that have never been trained to think differently. This raises a critical question: How can companies or societies that have long operated within rigid frameworks suddenly adopt innovative and holistic approaches?
The reality is that most people are not taught to think outside the box. Educational systems prioritize conformity and standardized knowledge over critical thinking and creativity. Without addressing this foundational issue, it is unrealistic to expect a sudden cultural transformation.
Leadership Beyond Labels
Peshawaria concludes by promoting the idea of "Steward Leadership," a concept he believes can drive meaningful change. However, there is a case to be made that true leadership requires no such rebranding. Throughout history, genuine leaders have embodied responsibility and vision without the need for new terminology. What is required is not a new label but a renewed commitment to ethical and forward-thinking leadership.
Moving Forward
If the ESG framework is to be effective, it must transcend the checkbox mentality and foster a culture where sustainability is an intrinsic value, not an external obligation. This demands a shift in how society educates, rewards, and holds its leaders accountable.
The challenge is profound—but so is the cost of inaction. As long as sustainability remains a superficial metric rather than a deeply embedded principle, the world will continue to grapple with the same crises, regardless of how many regulatory frameworks are put in place.