By Professor Dato Dr Ahmad Ibrahim
Let me start with a confession that most corporate leaders won’t make in public: ESG is making them miserable. Not because they hate the planet or don’t care about fairness. But because the job of leading on environmental, social, and governance issues has become an impossible tightrope walk. One day you’re being attacked by an activist investor for spending too much on solar panels. The next, you’re in a Senate hearing for not spending enough. Meanwhile, your head of sustainability just quit from burnout, and your latest ESG report—all 200 glossy pages of it—is being called “greenwashing” on social media.
Here is the hard truth that data now confirms: Over 90% of large companies publish an ESG report, but fewer than 20% are on track to meet their own climate commitments. We have more metrics, more frameworks, more chief sustainability officers than ever before. And yet, real progress is stalling.
Why? The answer is uncomfortable but simple. We don’t have a data problem. We have a leadership problem.
Most leaders today are managing ESG like a compliance exercise—checking boxes, hiring consultants, and hoping the controversy passes. That approach never worked, and now it’s actively dangerous. The companies that will survive the next decade are not those with the thickest sustainability reports. They are those whose leaders have the courage to navigate paradox, embrace conflict, and redefine what business success even means.
This paper is my attempt to name that shift. Drawing on recent research and real-world cases, I will lay out three archetypes of ESG leadership—only one of which works. I will name five tensions that no leader can resolve, only manage. And I will offer practical, sometimes provocative, recommendations for boards, CEOs, and even middle managers who are tired of pretending that incrementalism is enough.
The Three Faces of ESG Leadership.
Let me introduce you to three people you’ve probably met in corporate life. They are archetypes, but you will recognize them.
First, there is The Compliance Manager. This leader treats ESG as a risk to be mitigated, not an opportunity to be seized. They produce beautiful reports. They attend conferences. They hire the right auditors. But deep down, they believe that shareholder value is the only real north star, and ESG is just a tax on doing business. When push comes to shove—when a supply chain scandal hits or quarterly earnings dip—the Compliance Manager cuts the ESG budget first. The result? Reputation protection at best, greenwashing at worst. Volkswagen before Dieselgate was a Compliance Manager. So was every bank that signed the Net-Zero Banking Alliance and then quietly doubled down on fossil fuels.
Second, there is The Integrated Strategist. This person is smarter. They see that ESG can drive efficiency—less energy, less waste, lower costs. They tie sustainability goals to executive bonuses. They launch circular economy pilots. The Integrated Strategist is not a cynic; they genuinely believe in win-win. And for a while, they deliver. Energy bills drop. Investor surveys improve. But here is the limit of integration: It works only when ESG aligns with short-term profit. When the two diverge—when paying a living wage in Bangladesh raises product costs, or when shutting down a coal plant angers a local community—the Integrated Strategist often defaults to the same compromise as the Compliance Manager. They delay, obfuscate, or find a loophole.
Then there is a third figure, rarer and harder to emulate: The Transformative Steward. This leader does not ask, “How do we do ESG without hurting profits?” They ask, “What business should we be in to begin with?” Transformative Stewards accept that trade-offs are real and unavoidable. They lead with purpose, not as a marketing slogan but as a governance constraint. They are willing to sacrifice short-term earnings, lose some investors, and face lawsuits—because they believe that long-term resilience requires fundamentally different business models.
The best example is Ørsted, the Danish energy company. Ten years ago, it was one of the most fossil-fuel-intensive utilities in Europe. Its leadership made a conscious choice to sell off oil and gas assets and bet everything on offshore wind. The transition was brutal—profits fell, share price tanked, and legacy employees fought back. But the board held the course. Today, Ørsted is the most sustainable energy company in the world, and its total shareholder return has outperformed almost every fossil-fuel peer over the past five years. That is Transformative Stewardship.
The lesson is uncomfortable but clear: If you are not willing to lose something for ESG, you are not leading. You are managing.
Five Tensions That Break Most Leaders.
Why is Transformative Stewardship so rare? Because ESG leadership is not about solving problems. It is about holding tensions—permanent, unresolvable contradictions that would make any reasonable person want to quit. Let me name five that I see destroying even well-intentioned leaders.
First, the tension between short-term and long-term. Your quarterly earnings call is in two weeks. Your net-zero target is 2030. The market will punish a missed quarter immediately but reward a decarbonized portfolio only years from now. Most leaders resolve this by prioritizing the short term and greenwashing the long term. Transformative Stewards resolve it by restructuring incentives—for example, tying executive stock to ESG milestones with five-year vesting schedules, so there is no way to cash out before the hard work is done.
Second, the tension between shareholders and stakeholders. You have a fiduciary duty to your investors, but your employees are demanding you take a stand on Gaza, and your community wants you to stop a plant closure, and your suppliers in Vietnam need a higher minimum wage. There is no magic algorithm that balances these perfectly. The only honest move is to stop pretending that shareholder primacy is the law (it isn’t, legally speaking) and instead build formal governance mechanisms—like stakeholder advisory panels with real veto power—that force trade-offs into the open.
Third, the tension between global standards and local realities. Your headquarters in London wants a uniform living wage policy. But a living wage in Bangladesh is different from one in Alabama. Universalists will call you hypocritical. Relativists will call you colonial. The only way out is not to pretend consistency but to adopt what I call “absolute minimum floors”—policies that set a hard, non-negotiable baseline below which no worker anywhere falls, while allowing local variation above that line.
Fourth, the tension between transparency and competitive secrecy. Investors want full supply chain disclosure. Your competitors would love to see your supplier list. Radical transparency is noble, but it can also be naive. The leadership move here is selective radical transparency: disclose everything that matters for ESG risk, even if it hurts, but keep genuine trade secrets locked down. Patagonia does this brilliantly—it shares its entire environmental footprint publicly, including the bad parts, while protecting its proprietary fabric technologies.
Fifth and finally, the tension between inclusion and performance. You want a diverse leadership team. You also need to hit numbers. Sometimes these align. Sometimes a well-intentioned diversity hire fails, and the backlash is brutal—both from those who say you lowered standards and from those who say you set that person up to fail. The only sustainable answer is to stop treating diversity as a separate HR metric and start integrating it into operational team goals. Not “hire more women,” but “by 2026, our engineering team will have at least 40% women in senior roles, and we will measure retention and innovation output alongside diversity.”
None of these tensions go away. The job of leadership is not to solve them. It is to hold them without flinching.
What the Data Actually Says
If you doubt that leadership style matters, look at the numbers. In 2024, the London Stock Exchange Group found that firms with a dedicated ESG committee at the board level had a cost of capital 40% lower than their peers. That is not a small edge. It is a structural advantage. Meanwhile, PwC reported that CEO compensation linked to ESG goals rose from 15% of companies in 2019 to 58% in 2024. But here is the catch: most of those metrics are laughably easy to game. A CEO can hit a “renewable energy percentage” target by buying cheap unbundled certificates that do nothing to actually build new solar farms. Real leadership means demanding audited, material, non-financial KPIs—like absolute emissions reductions, not intensities.
Perhaps the most striking recent finding comes from MIT Sloan in early 2025: firms where the Chief Sustainability Officer reports directly to the CEO, not to the general counsel or head of communications, outperform their peers on total shareholder return by 4-6%. That number is huge over a decade. It suggests that ESG is not a drag on returns when led correctly. It is a source of alpha.
But let me also add a caution. The same research shows that charismatic, heroic ESG leaders—the kind who give TED Talks and go on magazine covers—often underperform in the long run. They make bold promises, attract enormous scrutiny, and then quietly leave when targets are missed. The most effective ESG leaders, according to a 2024 study in the Journal of Business Ethics, are humble facilitators. They say “I don’t know” often. They bring conflicting parties into the same room. They distribute credit and absorb blame. That is not the Silicon Valley founder model. It is something rarer: adult supervision.
What Boards and CEOs Should Do Now.
Enough diagnosis. Here is what I would tell a board of directors tomorrow.
First, stop treating ESG as a committee-of-the-whole where everyone has an opinion and no one has expertise. Appoint one lead director with genuine, audited competence in sustainability—not just a former politician who likes the environment. That person should have the power to veto CEO bonuses if ESG milestones are missed for subjective, excused reasons.
Second, mandate an “ESG dissent channel.” This is a secure, anonymous system where any employee—from the supply chain manager in Vietnam to the analyst in New York—can report greenwashing or implementation failures without fear. Most boards will resist this because it creates liability. That is precisely why it works. If you are afraid of what your own people might say, you are already failing.
Third, audit your incentives. If any executive has a bonus metric that rewards short-term ESG optics—like “number of sustainability reports issued” or “percentage of suppliers who signed a code of conduct without verification”—remove it immediately. Replace it with trailing metrics: year-over-year absolute emissions reductions, third-party audited living wage compliance, and diversity retention rates at five years.
For CEOs, I have three harder asks.
Spend 30% of your time on external ESG engagement. Not speaking at conferences. I mean sitting in community meetings, talking to activists who hate you, and negotiating with regulators. If you are not uncomfortable at least twice a week, you are not leading.
Adopt what I call pre-competitive collaboration. Your biggest ESG problems—supply chain deforestation, modern slavery, Scope 3 emissions—cannot be solved by one company alone. Call your three biggest rivals and agree to co-invest in shared solutions. It feels counterintuitive. It is the only thing that works.
Finally, make a public accountability milestone that actually costs you. Say this: “If we miss our 2026 Scope 3 target, I will forfeit my entire bonus for that year and donate my base salary to a climate compensation fund.” Do not hedge. Do not add “subject to market conditions.” If you are not willing to put your own money on the line, why should anyone believe you?
The Future and the Unanswered Questions.
Let me end by looking forward and admitting what we do not yet know.
We do know that regulation is coming. The EU’s CSRD is already here. The US SEC climate rules, even if weakened, signal a direction of travel. Voluntary ESG is becoming mandatory. Leaders who see this as a burden will lose. Those who see it as a chance to reset competitive advantage will win.
But we do not yet know how ESG leadership works across different cultures. Is a Chinese state-owned enterprise leader the same as a German family business owner or an American public company CEO? Almost certainly not. That is a massive research gap.
We also do not know the psychological toll. Early evidence suggests that sustainability leaders have alarmingly high rates of burnout, cynicism, and depression. They see the gap between promise and reality every day. They are asked to do impossible things with insufficient authority. We need better support systems—mentorship, peer coaching, even therapy—for the people carrying this weight.
Conclusion: The Courage Paradox
Let me return to where I began. ESG is not a technical problem. It is a leadership problem. And leadership is not about having the right answers. It is about having the courage to hold the right questions.
The Compliance Manager asks, “How do we avoid looking bad?” They will fail.
The Integrated Strategist asks, “How do we make money from doing good?” They will do some real good, but they will stop at the edge of profit.
The Transformative Steward asks, “What kind of company must we become to deserve a future?” That question is terrifying. It has no single answer. It demands trade-offs, losses, and genuine sacrifice.
And yet, the evidence is now overwhelming that only the Transformative Stewards will survive the next twenty years. Not because they are nicer. Because they are more realistic about how the world is changing—and because they have the one quality that no algorithm, no framework, and no consultant can replace.
Courage.
The question is not whether your company has an ESG policy. The question is whether you, as a leader, are brave enough to mean it.
Acknowledgement
Paper is based on research from Eccles & Klimenko (2019), Wijen (2014), Hijazi et al. (2024), as well as recent reports from PwC, LSEG, and MIT Sloan.
The author is affiliated with the Tan Sri Omar Centre for STI Policy Studies at UCSI University and is an Adjunct Professor at the Ungku Aziz Centre for Development Studies, Universiti Malaya
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