By Kalnisha Singh, Development Economist and Director of KD Strategies
Over the past decade ESG has moved steadily from the margins of corporate discourse into the centre of boardroom conversations. Sustainability reports have multiplied. Disclosure frameworks have expanded. The consulting industry is booming.
Yet within many organisations ESG is still treated as a peripheral compliance function. It sits alongside reporting obligations and regulatory requirements. In practice this often means ESG becomes a matter of measurement and disclosure. Data is collected, indicators are tracked, and reports grow thicker each year. Somewhere in the organisation a team patiently translates operational realities into the language of frameworks and scorecards.
This work is important because transparency and accountability matter. The difficulty arises when the reporting mechanism begins to look suspiciously like the purpose itself.
The original impulse behind ESG thinking was far more structural. It emerged from a recognition that markets and institutions have a tendency to become rather confident in their own brilliance. When things are going well organisations may begin to assume that their success is entirely the result of excellent judgement. Positive outcomes are attributed to strategic genius. Signals of risk are politely explained away.
Human beings, it turns out, are very good at convincing themselves that everything is under control.
The global financial crisis of 2008 remains a vivid reminder of what can happen when this dynamic goes unchecked. Financial institutions created increasingly complex instruments that were widely believed to be stable and profitable. Risk models produced reassuring outputs and confidence expanded.
Meanwhile the assumptions supporting those models went largely unexamined and were quietly eroding.
The crisis revealed deeper weaknesses in governance, risk perception and institutional discipline – perhaps even in our perceptions of truth, power and economic certainty. It reminded the world that systems can appear robust while quietly accumulating fragility, and that building upon weak foundations or unchecked assumptions can lead to collapse.
Frameworks that now fall under the ESG umbrella began to evolve in part as a way of widening the field of vision through which organisations evaluate their activities. Environmental degradation, labour practices, governance failures and community dynamics represent forms of risk that may develop slowly before revealing themselves in rather dramatic ways.
Seen through this lens, ESG functions less as a reporting exercise and more as a form of institutional self-awareness. It asks organisations to recognise that financial performance does not exist in isolation from the environmental and social systems within which economic activity takes place.
Defining sustainable development
We recognise that ESG has evolved significantly over the past decade. Yet, much like many overnight successes, the foundations were laid almost forty years ago.
In 1987 the World Commission on Environment and Development (the Brundtland Commission) published Our Common Future, a report that introduced what has since become one of the most widely cited definitions of sustainable development. Development, the report argued, should meet the needs of the present without compromising the ability of future generations to meet their own.
The phrasing was simple. The implications were profound.
For much of the twentieth century economic progress had been measured primarily through productivity, industrial expansion and financial return. Environmental systems and social structures were often treated as external to the economic model. Their deterioration rarely appeared within investment calculations.
The Brundtland Commission reframed this relationship by recognising that economies exist within a web of interdependence. Natural systems provide the resources upon which industries depend. Social systems provide labour, knowledge and institutional stability. Governance systems create the rules that allow complex societies to function.
In other words, the economy is not a self-contained machine. It behaves more like an ecosystem. Ecosystems are intricate, adaptive and occasionally unpredictable. They also tend to react quite strongly when key elements are pushed beyond their limits, as nature has repeatedly reminded us.
Over time this sustainability thinking began to influence policy, finance and corporate governance. Environmental regulation expanded. Institutional investors began paying closer attention to non-financial risks. ESG frameworks emerged as a practical way for markets to observe how companies manage these dynamics.
Yet as ESG travelled through the machinery of financial reporting, something curious happened.
What began as a framework for understanding the deep interdependence between economic activity and the systems that sustain it gradually evolved into a collection of indicators, benchmarks and disclosure templates.
Useful tools, certainly. Yet tools alone rarely redesign systems.
This is where the conversation becomes more interesting.
Read the full article and find out why you need to embed ESG at the structural level
