Analysing the Complexity of ESG Integration in Emerging Economies: An Examination of Key Challenges

Purpose: ESG indices serve as vital tools for investors to measure a company’s sustainability performance, reflecting its economic, environmental, and social standings. However, integrating ESG faces numerous constraints, particularly in emerging economies. This study aims to identify the key challenges of ESG integration in emerging economies. Methodology: Systematic search and reporting framework following a five-stage iterative process, encompassing: (1) formulating the research question, (2) identifying pertinent studies, (3) selecting studies, (4) organising data, and (5) compiling, summarising, and presenting the findings. Findings: Several important factors including the lack of quality and availability of non-financial data, underdeveloped regulatory frameworks, technological constraints, difficulties in supply chain integration, cultural and social barriers, financial constraints, and a general lack of awareness and understanding of ESG issues. An unbalanced approach to ESG compliance, with companies often focusing primarily on societal issues while neglecting environmental aspects. Despite these challenges, the research contributes to the discussion on the significant benefits of ESG integration, including improved risk management, access to new markets and capital, and enhanced reputation. Implication: Overcoming these challenges requires concerted efforts from governments, businesses, and international organisations to develop supportive policies, develop inclusive capacity-building systems, and raise awareness of ESG issues. Limitation: The scope of available literature and the inherent biases within selected studies. Future research: Future studies could analyse deeper into case studies, and comparative research to better understand how ESG integration operates in emerging economies and to evaluate how effective the strategies implemented are in tackling the challenges that have been identified.