Asian businesses stand at a crossroads.

With a new administration in the US – the world’s largest economy – sustainability initiatives are facing major pullbacks. On the environmental front, there is a retreat from climate change regulations while on the social front, the attack is on diversity, equity and inclusion policies.

This trend began even earlier. Two years ago, Larry Fink, chief executive officer of BlackRock, the world’s largest asset management company, said he would no longer use the term “ESG” (environmental, social and governance) because it had been politically weaponised.

Even before the recent political shifts, big oil companies were facing shareholder pressures to focus on growth and profit, a tension further amplified by US President Trump’s “drill, baby, drill” mantra.

Against this backdrop of “backpedalling” on ESG, the key question is how businesses can navigate the increasingly complex and turbulent terrain. For Asia, in particular, how should businesses chart their course into the volatile future?

The Asian conundrum

The Asian business context is notably unique.

First, the continent is home to many large developing countries that will grow even more significantly in the coming years. Second, much of what Asian businesses produce are part of the global supply chain that serves developed countries, especially those in North America and Western Europe.

These twin factors place a burden on sustainability, which is more critical than ever before and indeed than any other regions of the world. Asia must pursue economic development – yet it must do so sustainably, even amid rising ESG tensions.

I witnessed first-hand the Asian predicament when I delivered the masterclass for the 60th anniversary of NUS Business School amid its diamond jubilee celebrations this August. Titled “Shaping the Next Sustainability Era in Asia”, my class with business leaders and university students examined how the sustainability burden on Asia has been unfair and whether Asian businesses should seize this “opportune” time to abandon ESG.

As I shared at the class, there are five aspects of the Asian conundrum.

  • Challenge of net zero

The concept of net zero emerged in the early 1990s at the United Nations Framework Convention on Climate Change where policy leaders and scientists sought to moderate climate change by reducing greenhouse gas emissions. Subsequently, it became a centrepiece of the Paris Agreement in 2015.

Net zero in simple terms means that an organisation or country tries its very best to reduce its emissions until a point where it is difficult to do so. Then it can offset the residual emissions to zero through carbon credits, normally attained by projects that reduce greenhouse gases.

While the residual emissions allowed for offsetting may depend on the context such as industry sector, net-zero standards such as British Standards Institution, International Organization for Standardization, and Science Based Targets initiative typically require 10 per cent as the threshold.

A related concept is carbon neutrality, which allows the organisation or country to offset at any point as long as the final balance is zero.

Often viewed as a Western notion, net zero is too demanding an expectation for developing Asia. It places an unfair burden on the region, which may need to adopt carbon neutrality first.

  • Asia in transition

Much of Asia is in transition, not only in terms of economic development but more in the sustainability journey.

Take coal for example. For many years, the two countries with the highest amount of coal generation are China and India, according to the Statistical Review of World Energy 2025. When I presented the global chart of coal production in class, one participant posed this question on coal: Who is China and India emitting carbon for?

The class suggested we should adjust coal production by population and across time. If coal is calculated on a per capita basis as well as a cumulative basis since pre-industrial time, China and India are actually the lowest two producers among major countries, according to Carbon Brief, which had earlier included both adjustments for the period 1850 to 2021. And as it turns out, the top two in the list are Canada and the US.

So the issue of fairness arises. In climate transition based on carbon emissions, it is imperative that developed countries assist the developing ones. We should be talking about a just transition – one that is based on climate justice.

  • Recasting ESG as EESG

What we are seeing is not an abandonment of ESG but rather a shift in emphasis. To understand this, we should recast the notion of ESG as “EESG”, where the first E stands for economics.

All business decisions must balance economic viability with environmental, social and governance factors. From this perspective, the current backlash or backpedalling is not a rejection of the framework but a swing in focus towards the first “E”.

The US administration and sceptical businesses have probably swung it almost completely to economics, often at the expense of ESG.

Asia will have to find its own balance – the sweet spot where ESG is well calibrated with economics to achieve both growth and sustainability.

  • Asia as problem and solution

The crux of the problem is carbon emissions where developing Asia is being severely challenged. But Asia also holds the solution – transition is one part. The other part is natural assets.

For example, Indonesia, particularly the province of Kalimantan, has a critical concentration of tropical forests which constitutes an important carbon sink supplying carbon credits.

But the solution cannot lead to even more problems. In my class, an Indonesian student shared the real plight on the ground when villagers have to sacrifice their agriculture-based livelihoods to keep the forests for the rest of the world.

This highlights the daunting trade-offs Asia faces as it pursues sustainability: balancing the economic and social needs of its people with broader environmental and governance goals.

  • Transformation over time

Asian businesses will need to traverse the journey of transformation while appreciating the transition imperative. It is more than just keeping to renewable energy as in the usual transition. It is about offering sustainable products and services together with sustainable logistics.

It may not be possible to instantly expect full-blown transformation as time and flexibility will be needed. For Asia, the way forward is realistic sustainability with deliberate pacing and spacing.

Weighing in economics

Asian businesses can learn from the value factors of diamonds if they want to be forever. A diamond’s value is determined by its carat – a measure of its weight. For Asian businesses pursuing ESG, this “carat” can be a metaphor for their economic weight. “Carat” also serves as an acronym for the five aspects I’ve outlined above.

Indeed, to attain the longevity of a diamond, Asia should not just maintain its economic weight – it should punch above it.

The article was first published in The Business Times.