Written from a risk and governance lens, rather than a sustainability operations lens

What began as an attempt to reshape how organisations create value over the long term has steadily merged into something far more familiar: compliance. Today, sustainability is practiced with the same procedural discipline once reserved for financial reporting. Large organisations now manage, on average, close to a hundred ESG key performance indicators, while global reporting rates exceed 90% in many markets.

However, this volume of data acts as a smoke screen. Assurance follow-up has risen sharply, yet most remains limited in scope, focused on the consistency of disclosed data rather than the validity of underlying outcomes. Similarly to the nature of Risks, Sustainability is a living entity of controlled uncertainties. Yet the way it is “checked” has become bolted; organisations are emptying their pockets for an incomplete assurance. The result is a structural mismatch: while exposure changes continuously, verification remains episodic and narrow.

The Paradox of Disclosure

This is not a failure of assurance in principle, but of its ability to keep pace with systems that do not behave linearly. This is where the danger sets in. Not in regulation itself, but in the false sense of security it creates. There is a quiet belief that because we have all the right certifications and we report based on the standard, then we are acting sustainably.

This belief has measurable consequences. Studies covering thousands of firms show that companies with strong ESG disclosure scores are not necessarily less likely to experience environmental, social, or governance controversies. In some cases, higher scores even predict greater future controversy exposure, driven by disclosure-based scoring methodologies and media attention dynamics. This suggests that high scores may reflect a mastery of the reporting “game” rather than a reduction in operational risk. These same indicators often migrate inward, becoming management targets rather than descriptive signals, further entrenching form over outcome.

This is morality doping – ethics on steroids. Several organisations have even adopted strategies where impacting the world is “okay,” opting for carbon offsetting instead of insetting. Carbon credits increasingly function as moral currencies, allowing organisations to compensate for continued emissions without materially changing the systems that generate them. Let’s look at oil major, Shell, or tech giants like Disney and Gucci, who heavily relied on forest protection credits that were later revealed to be chocolate coins. The repercussions of these actions are not just regulatory; they trigger severe reputational hit with accusations of greenwashing, and immediate investor scepticism that drains brand equity.

Meanwhile, carbon markets remain volatile. Major international investigations, such as the landmark 2023 exposé by The Guardian, show that a significant share of offset credits deliver questionable or unverifiable emissions reductions, raising concerns about whether “neutrality” claims reflect reality or mere accounting convenience.

The Structural Blind Spots

The contradictions become obvious once attention drifts beyond the report. This is Strategic Transparency, a term where organisations “play chess” on what to disclose. They become highly proficient at identifying what needs to be disclosed under prevailing frameworks, but far less comfortable reporting what is needed to understand real impact.

• The Office Inefficiency: During the COVID-19 pandemic, empirical analysis showed that full-time remote work can reduce work-related carbon emissions by approximately 54%. By contrast, hybrid work models deliver marginal reductions, often below 5%, because office buildings maintain baseline energy consumption regardless of occupancy. Yet sustainability disclosures rarely interrogate this inefficiency because building utilisation falls outside commonly reported metrics.
• The Electrification Narrative: Electric vehicles (EVs) emit significantly less greenhouse gas over their lifetime – around 50-55% less under average conditions. But those gains are highly sensitive to the carbon intensity of electricity grids and the emissions embedded in battery production. Critically, lifecycle assessments show that battery manufacturing alone can account for up to 40% of an EV’s total lifetime emissions. Without parallel decarbonisation of energy systems, electrification risks becoming a transfer of emissions across geographies rather than a net reduction.
• The Cosmetic Shift: Visible gestures like plastic straw bans follow this pattern. One study found paper and bioplastic straws producing up to two-and-a-half times the climate impact of plastic equivalents, while reusable metal straws derived nearly 85% of their annual emissions from washing alone. The environmental burden does not disappear; it merely shifts.

Systemic Durability and the Governance Pivot

The outcome of this “chess game” is paradoxical: companies produce award-winning sustainability reports while continuing to face material ESG incidents. Large-scale empirical studies show that ESG controversies consistently erode firm value and increase risk, regardless of how strong reported ESG scores appear on paper. Disclosure mitigates reputational fallout only marginally; it does not substitute for structural change.

This logic applies to the social dimension as well. Humanitarian acts, like food drives, play a role, but sustainability is defined as the ability to maintain systems without depletion over time. One-off interventions do little if agriculture is not developed, housing is failing, and infrastructure is non-existent. We educate, but where is the application for that knowledge when the infrastructure for jobs is a pipe dream? True sustainable development demands capacity-building: not just giving fish, but designing fisheries that endure. Social performance is currently judged by cosmetics rather than by the durability of the systems left behind.

To break this cycle, governance must move beyond mere compliance and toward systemic durable mechanisms. If we are to bridge the gap between flawless reports and rising controversies, three shifts are required:

• From Consistency to Validity: Assurance must move from a backward-looking consistency check to a forward-looking validation of underlying outcomes. Boards should demand risk-based, impact-led auditing that interrogates the validity of the data, not just its alignment with a reporting framework.

Audit and Risk Committees must stop treating ESG reports as mere compliance checklists. Directors should explicitly task internal audit teams or independent third-party validators, to perform stress tests on sustainability assumptions. Instead of “Is this KPI aligned with GRI standards?”, the Board must ask “Is our data collection methods flawed? what critical business risk are we blindly carrying?”

• Beyond the “Chess Pieces”: Decision-makers must look beyond the maneuvers of Strategic Transparency. This means interrogating hidden inefficiencies – such as the waste of underutilised hybrid offices and accounting for the 40% embedded emissions in “green” technologies.

The Board must expand its oversight beyond the executive suite’s curated “chess pieces”. This requires the Sustainability or Nomination & Remuneration Committee to tie executive compensation not just to the achievement of a high ESG score, but to the reduction of structural inefficiencies. Directors must actively challenge management on lifecycle assessments (LCAs) before approving major capital expenditures on “green” tech upgrades.

• From Signals to Systems: Social and environmental indicators must cease being descriptive signals and become management targets that measure system change. We must stop measuring through moral currencies like offsets and start measuring the material transformation of the systems that generate emissions in the first place.

Boards must steer strategic planning away from buying offsets and toward deep operational in setting. If management presents an offset-heavy strategy, the Board’s role is to push back, treating offsets as a liability or a temporary last resort rather than an operational achievement, ensuring the company invests in long-term asset resilience instead.

The Tidal Reality

Formalising sustainability was meant to strengthen accountability, and in many respects it has. But it has also made sustainability safer, narrower, and easier to perform without being transformative. As reporting obligations expand, attention flows toward compliance readiness rather than systemic contribution. We become ethics high, organisations become morally confident, and yet we remain increasingly disconnected from outcomes.

Sustainability is tidal. It requires the willingness to engage with trade-offs that refuse to fit into standardised templates. Until organisations break away from alignment focus and start to invest in actual change, sustainability will continue drifting toward compliance and away from relevance. Where efforts cannot show how underlying systems have changed, they should be read as signals of compliance maturity, not evidence of sustainable performance. If sustainability assurance does not detect strategic transparency, what risk are boards actually insuring against?

The article was written by Adley John Fisher Mangkiu.

Photo by TaruF on Unsplash.