The role of businesses in society has never been more dynamic, or more scrutinized. In the past, companies were judged solely by their ability to generate profits. Today, judgment exists on a far broader scale: how does a company treat its employees? How does it impact the environment? How does it contribute to the community in which it operates? What values does it uphold in its daily operations? Granted, this judgment creates considerably more demands and pressures on a business, but there are significant benefits to becoming responsible; for a company, for its employees, for its clients, and for society as a whole.
Why Responsible Business?
What was once considered ‘good corporate behavior’, going above and beyond, is now treated as a baseline. Companies are no longer asked ‘if’ they are contributing to society; they are now expected to answer how much, how effectively, and how transparently. Businesses have had to rethink their priorities, adopt more inclusive and sustainable practices, and take greater responsibility for the communities they touch. This is certainly great news for the larger public. But it goes beyond. These efforts are not just about doing the right thing – they are also good for long-term business outcomes. Companies that lead with purpose are finding themselves more trusted by customers, seen more attractive to employees and investors, and overall, prove to be more resilient in the face of adversity.
What Responsible Business Looks Like
Responsible business is built on three pillars: environmental stewardship, social equity, and good governance. Environmental responsibility is about using resources wisely to create lasting value. Social responsibility focuses on fostering inclusive workplaces and contributing to local communities. Governance ensures transparency and ethical practices, building trust both internally and externally. These principles apply across all industries, from sustainable sourcing in manufacturing to ethical labor practices in retail and data privacy in technology.
Practicing ethical business is not just about supporting a cause; it is about strategically, and comprehensively, integrating ethics into business operations. Focusing on sustainability and fair labor practices resonates with consumers, and boosts employee motivation, with staff reporting higher engagement. Fair treatment of suppliers helps businesses drive social good while remaining profitable, and companies that carefully align their social and environmental efforts with their core business values prove that responsible business practices drive success.
The Banking Sector’s Role
While these principles apply to all sectors, the banking industry plays a particularly influential role in driving sustainable growth and societal progress, particularly in financial inclusion. Banks are more than institutions that manage money; they are enablers of economic development, providing financing for businesses and projects that shape the future of industries and communities. Given this wider enabler role that banks play within an economy, integrating ESG factors and practices into banking operations should not be treated as just a passing trend. It needs to be looked at as a necessity for the long-term sustainability of banks and the larger sections of society it influences.
By adopting ESG practices, banks can better manage risks, make more informed investment and lending decisions, and stay ahead of regulatory requirements. Moreover, these practices help banks build stronger reputations, attract capital, and meet the evolving demands of customers and investors. In Pakistan, the State Bank of Pakistan (SBP) has been at the forefront of promoting responsible business practices within the banking sector. SBP’s initiatives, such as Green Financing guidelines, encourage banks to fund projects that contribute to environmental sustainability. Through the National Financial Inclusion Strategy (NFIS), SBP aims to broaden financial access for underserved communities, promoting social equity. SBP's Banking Conduct and Consumer Protection Department ensures transparency and consumer fairness, safeguarding the interests of customers. Banks that integrate these practices will be well-positioned to lead in both profitability and social impact, contributing to a more sustainable and equitable financial ecosystem.
Looking to the Future – with Boards Leading the Way
A recent survey by Thomson Reuters revealed that 75% of C-suite and functional leaders agree or strongly agree that leading in ESG is an important part of being a good corporate citizen, and 71% agree or strongly agree that the role of ESG in corporate performance will grow in the future. 60% of large corporations surveyed are willing to invest in ESG to create a competitive advantage, with 56% of companies reporting a consensus among leadership on the high value of ESG investment.
As businesses begin to recognize the long-term value of these practices, there is a growing awareness that sustainability, social equity, and governance are not just buzzwords; they are essential for future success.
Awareness must translate into Action
A recent survey by the Pakistan Institute of Corporate Governance (PICG) found that 86% of businesses in Pakistan are aware of ESG, but only 25% of companies have established key performance indicators (KPIs) to measure their ESG performance, and more than half of them do not adhere to any formal ESG reporting standards. Clearly, opportunity exists to drive progress, and with continued leadership – particularly from boards, regulators, and businesses willing to invest in long-term sustainability – we can build a thriving ecosystem where responsible business practices are not the exception, they are the expected norm.