SAIRIN LUPIA: Responsibility or Reputation? The ESG Reporting Question

The concept of Environmental, Social, and Governance (ESG) reporting and disclosure is not new within the fields of finance, management, and corporate governance.

ESG rose to prominence as a proposed solution to long-standing concerns around corporate responsibility, sustainability, and ethical conduct, promising benefits not only for shareholders but also for management, consumers, and society at large.

At its core, ESG was envisioned as a framework to measure a company’s sustainability, long-term impact, and accountability beyond financial performance.

While the relevance of such a framework is undeniable, ESG remains a relatively young concept, and debates surrounding its effectiveness, credibility, and purpose continue to intensify.

Although ESG is a much-needed idea in principle, its practical implementation reveals significant shortcomings.

One of the most fundamental issues lies in the reliance on self-disclosures and the thin line between meaningful action and reactive compliance. Unlike traditional accounting standards, such as IAS 38, which provides clear and enforceable definitions for intangible assets, ESG reporting leaves substantial room for interpretation.

This flexibility allows companies across different sectors to define sustainability and responsibility on their own terms, resulting in inconsistent reporting and limited comparability. When organizations are asked to evaluate themselves and disclose their own performance, self-reporting bias becomes unavoidable. There is little external control or verification to distinguish genuine impact from selective storytelling.

Furthermore, many ESG disclosures are forward-looking promises rather than evidence of tangible outcomes. A significant portion of ESG reports are framed around aspirations, statements such as “we aim to achieve net zero by 2030” or “we are committed to diversity and inclusion”, without clear accountability mechanisms or measurable interim targets.

As a result, ESG often functions more as a declaration of intent than a robust assessment of present performance. This raises serious concerns about whether ESG frameworks truly measure resilience and responsibility or merely reflect what companies want stakeholders to hear.

The reactive nature of many ESG initiatives further undermines their credibility. Corporate priorities within ESG reporting frequently shift in response to prevailing social or political trends.

For example, diversity and inclusion became central themes in ESG disclosures following global social justice movements, only for some of these initiatives to be quietly deprioritized once public pressure subsided. Despite abandoning or diluting these commitments, many companies continue to perform strongly financially, facing few consequences for deviating from their stated ESG goals.

This disconnect raises an important question: if ESG commitments can be ignored without repercussion, what real function do these disclosures serve beyond reputation management?

Moreover, ESG reports often rely on broad, unverifiable claims like “zero tolerance for child labor”, even when companies lack direct oversight or enforcement mechanisms across their supply chains. These reports are frequently launched in high-profile forums, far removed from the communities most affected by corporate operations.

Farmers, factory workers, and local communities-the very stakeholders ESG claims to protect-are rarely part of the conversation. This disconnect exposes a deeper issue: ESG reporting often appears to be designed for investors, regulators, and elite audiences rather than those bearing the real social and environmental costs of business activity.

Ultimately, while ESG reporting as a concept holds significant promise, its current execution risks reducing it to a public relations exercise rather than a genuine accountability tool.

Without standardised metrics, stronger verification, and a shift from reactive disclosure to measurable impact, ESG may continue to serve image management more effectively than meaningful change. This raises a critical final question: if ESG reports do not reliably reflect real-world outcomes, who are they truly for, and what purpose do they ultimately serve?