For businesses, ESG should be understood as a strategic choice rather than a regulatory burden
For many, ESG, which stands for Environmental, Social, and Governance, sounds like a corporate buzzword: polished, technical, and distant from everyday realities. It is often associated with glossy sustainability reports, investor presentations, or international conferences rather than with communities, workers, biodiversity conservation, inclusion, or gender equality. These concerns are frequently perceived as the responsibility of donor-funded organisations, not of businesses themselves.
Yet this perception overlooks a deeper shift. Across companies, financial institutions, and markets, ESG is increasingly shaping how risk, responsibility, and long-term value are understood. ESG officers are no longer symbolic appointments; they reflect a growing recognition that environmental and social performance is inseparable from business success.
At its core, ESG is about accountability. It asks a simple but uncomfortable question: Can a business truly be considered successful if it generates profit while degrading the environment, excluding communities, or operating without transparency and fairness? Climate change, widening inequality, eroding trust in institutions, and repeated governance failures suggest that traditional growth models have reached their limits.
In this context, what makes ESG especially relevant today is that it reframes sustainability as an economic issue, not merely a moral one.
Environmental degradation, unsafe labour practices, community conflict, and weak governance all carry direct financial consequences. Floods disrupt supply chains, social unrest delays projects, poor governance erodes investor confidence, and reputational damage can take years to repair. As these risks become increasingly visible and measurable, higher standards are demanded out of necessity rather than idealism.
Globally, ESG practices reflect different paths towards the same conclusion. In the Western world, ESG has been driven largely by capital markets and regulation, with environmental and social risks increasingly treated as material financial risks that shape investment, insurance, and lending decisions. The EU is leading on setting standards and a narrative that ESG is not a constraint on economic activity, but a framework for safeguarding long-term competitiveness, resilience, and trust in an interconnected global economy. Through initiatives such as mandatory sustainability reporting, climate risk disclosure, and sustainable finance regulations, the EU has embedded environmental and social considerations directly into how companies raise capital and manage risk. In Southeast Asia, countries such as Singapore and Indonesia have linked ESG to competitiveness, infrastructure development, and energy transition, using sustainable finance frameworks to attract long-term capital while managing environmental and social volatility. In South Asia, regulatory intervention has played a stronger role, with India's mandatory sustainability reporting and Bangladesh's labour compliance experience demonstrating that ESG is now closely tied to market access and investor confidence.
Nepal sits at the intersection of these experiences. Like Southeast Asia, it depends heavily on natural resources, infrastructure, and foreign investment. Like South Asia, it faces development pressure, climate vulnerability, and governance constraints. Importantly, Nepal is not starting from zero. Nepal's policy and regulatory framework has progressively integrated environmental and social considerations into economic and financial decision-making.
The urgency of ESG becomes clear when viewed through Nepal's development trajectory. Sectors such as hydropower, tourism, manufacturing, and private equity are attracting more investment alongside rising expectations for responsible conduct. Hydropower, in particular, is central to Nepal's growth and energy security. Yet projects that ignore community engagement, biodiversity protection, or labour standards frequently face resistance, delays, and financial losses.
Nepal's ambitious hydropower plan depends heavily on international investment, yet access to long-term foreign capital is inseparable from investor trust. Global investors today assess how environmental risks, community impacts, labour standards, and governance are managed throughout a project's lifecycle.
ESG frameworks provide the language and structure through which this trust is built. Projects that demonstrate credible environmental safeguards, meaningful community engagement, minimise climate risks, transparent decision-making, and effective grievance mechanisms are seen as lower-risk and more bankable. For Nepal, embedding ESG principles into hydropower development is therefore not only about meeting external expectations, but about securing the long-term investment needed to translate its energy potential into sustainable growth.
From community forestry to cooperative movements, Nepal has long traditions of collective responsibility. The challenge is not whether ESG fits Nepal, but whether these values can be institutionalised within modern economic systems.
For businesses, ESG should be understood as a strategic choice rather than a regulatory burden. Companies that integrate ESG into their core strategies are better equipped to manage risk, attract capital, and adapt to uncertainty.
Nepal cannot afford to treat ESG as a passing trend or a donor-driven concept. It is a practical roadmap for balancing economic growth with environmental protection and social equity. As global standards evolve, countries that adapt early will be better positioned to attract quality investment and protect citizens from avoidable risks.
The choice is clear: Nepal can shape this transition thoughtfully, grounded in local realities, or delay and be forced to catch up later at a far higher economic, social, and environmental cost. Responsible business is no longer a future aspiration. It is a present necessity, and ESG provides the framework to move forward with clarity and confidence.
Chhetri is an ESG expert