Environmental, Social and Governance (ESG) frameworks are increasingly central to sustainability strategies across Africa where the stakes are particularly high due to the continent’s rich natural resources, rapid urbanization and pressing development challenges. These frameworks are often heralded as solutions to global issues such as climate change, economic inequality and resource governance. Questions persist about whether ESG can genuinely drive transformation, avoid tokenism and balance the diverse needs of stakeholders, particularly in Africa’s resource-dependent economies.
ESG embeds sustainability into decision-making aligning corporate profits with environmental and social goals. Across Africa, advocates see ESG as a pathway to foster transparency, reduce environmental harm, and improve equity for communities often impacted by extractive industries. Mindful of Africa’s key role as a global supplier of natural resources, these frameworks could redefine relationships between resource-rich nations and importing economies. ESG remains a contested space with skeptics highlighting its conceptual and practical shortcomings in addressing Africa’s unique challenges and opportunities.
A significant concern is “green washing” where companies focus on optics rather than impact. Critics argue that ESG initiatives often allow corporations to appear sustainable while continuing harmful practices. Modest environmental improvements can overshadow over-extraction and unequal profit-sharing with local communities. Is ESG transformative or a tool for preserving the status quo?
Robyn Eckersley at the University of Melbourne warns that integrating environmental goals into profit-driven systems risks commodifying sustainability and reinforcing the systems ESG seeks to reform. Bertrand Hassani and Yacoub Bahini describe “cross-washing” as a form of green washing where companies invest in sustainable activities to boost ESG scores while neglecting unsustainable operations excluded from ESG assessments. To counter green washing, ESG must prioritize substantive changes over symbolic gestures, using independent accountability mechanisms rather than self-reporting.
Another challenge is applying ESG equitably across diverse contexts. Critics argue that marginalized local stakeholders often lack representation in ESG processes, particularly in the extractive sector. Large-scale projects sometimes displace communities, degrade ecosystems and fail to deliver lasting benefits.
Karin Bäckstrand at Stockholm University advocates for improvements to the democratization of global governance to include non-state actors and local communities. Without inclusivity, ESG risks perpetuating inequalities, especially in resource-dependent economies with power imbalances between multinational corporations and host governments. Genuine community participation is crucial for ESG’s efficacy, legitimacy and sustainability.
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The fragmented and inconsistent nature of ESG frameworks presents further issues. Steven Bernstein at the University of Toronto has extensively examined the challenges posed by the lack of standardized metrics in global environmental governance. In a paper co-authored with Maria Ivanova at Northeastern University they examine how institutional fragmentation can hinder the effectiveness of governance frameworks. Their analysis underscores the importance of developing cohesive and standardized approaches to enhance the efficacy of global governance initiatives. Tariq Fancy, former Chief Investment Officer for Sustainable Investing at BlackRock, criticizes ESG as a marketing tool with little real-world impact that misaligns corporate initiatives with global governance goals. The extractive sector illustrates the enforcement challenges ESG faces across jurisdictions with varying regulatory environments. Addressing these disparities requires greater coherence and harmonized standards that balance global aspirations with local realities.
Systemic vs. Incremental Change
Frank Biermann at Utrecht University has developed a substantial body of work examining the ways ESG frameworks fail to address the systemic changes required for true sustainability. While ESG drives incremental improvements, it often overlooks structural issues including overconsumption, resource dependency, and global economic inequalities.
In resource-rich regions, ESG initiatives focus on mitigating environmental harm and improving local relations, but neglect the “resource curse” where dependence on natural resources stifles economic diversification and governance reforms. Addressing these systemic challenges demands the alignment of short-term actions with long-term transformative goals.
Balancing Competing Interests
ESG must navigate competing priorities among environmental conservation, economic growth, and social equity. Economists Oliver Hart and Luigi Zingales note that companies pursuing ESG goals often face trade-offs between shareholder interests and societal objectives complicating alignment with institutions that prioritize long-term sustainability over short-term profitability.
How can ESG frameworks ensure environmental goals do not hinder economic development in low-income countries? How can they prevent economic growth from undermining environmental and social objectives? Resolving these tensions requires an integration of diverse perspectives and fostering stakeholder dialogue.
Challenges to Measuring ESG Success
Assessing ESG initiatives is hindered by inconsistent metrics, complex global contexts and evolving sustainability priorities. Colin Mayer at the University of Oxford argues ESG often focuses on compliance and metrics at the expense of deeper structural reforms needed for sustainable development.
Reliance on self-reported corporate data, which varies in quality and transparency, undermines ESG assessments. Moreover, ESG outcomes are typically long-term and multi-dimensional involving economic, environmental and social factors that resist quantification within traditional reporting systems.
Despite its shortcomings, ESG remains a vital tool to address contemporary challenges. Its potential lies in bridging sectors, disciplines and geographies. To realize this potential, ESG must evolve to address its current limitations through robust accountability mechanisms, inclusive governance processes and alignment with systemic change. ESG must move beyond voluntary compliance and symbolic commitments. Strengthening international institutions, harmonizing standards and fostering genuine partnerships among states, corporations and communities is essential. Addressing the criticisms can transform ESG from a fragmented set of ideals to a cohesive force for global sustainability and equity.
The stakes for Africa could not be higher. As the continent grapples with the twin crises of climate change and socioeconomic inequality, ESG offers a framework for addressing these challenges while promoting sustainable growth. Success hinges on robust accountability mechanisms, inclusive governance and harmonized standards that resonate with Africa’s realities. For ESG to move beyond ideals and become a force for sustainability and equity, African nations, corporations and communities must take ownership of these frameworks to ensure they serve as catalysts for systemic change and lasting development.
