The Slow Adoption of ESG in ASEAN — and What It Could Cost the Region's Competitiveness

Ask a leadership team in Jakarta, Kuala Lumpur or Bangkok about ESG and the answer is usually a polite deferral: it matters, but not yet. Reporting is treated as a formality, timelines slip, and the working assumption holds that cost-competitive manufacturing and commodities will always find a buyer. That assumption deserves scrutiny — because the buyers are changing what they ask for, and the deadline has a date attached.

This is not primarily a compliance story. It is a positioning story. ESG increasingly decides which suppliers can prove their claims at the moment the customer must justify the purchase to its own regulator, its own lenders and its own customers. A region that adopts slowly is not merely late on reporting; it is quietly surrendering the right to be chosen.

The picture on the ground

Start with the good news, because there is some. Among the world's largest companies, Singapore and Malaysia rank among the highest sustainability reporting rates, and 87% of the top-100 listed companies in the Philippines report (KPMG analysis, 2023). On breadth, ASEAN's large caps look respectable.

But breadth is not depth. A July 2022 study by the Global Reporting Initiative and NUS's Centre for Governance and Sustainability found that around 70% of ASEAN-listed companies reported on climate — while gaps remained in exactly the parts that matter: disclosing risks and setting targets. Companies describe what they do; far fewer can evidence what could go wrong and what they have committed to fix.

Commitments remain thin where it counts. A PwC and NUS Business School survey of 700 Asia-Pacific companies (2025) found 53% had net-zero commitments — but only 18% had targets verified by the Science Based Targets initiative. A 2023 GoNetZero survey of Asia-based corporates found 67% had set net-zero targets, yet the remainder had no concrete actions planned for the next 12–18 months; the most-cited barrier, at 53%, was simply not knowing how to decarbonise.

Capital tells a similar story. Europe held 85% of the world's sustainable fund assets at the end of 2023 — €2.2 trillion, with sustainable funds now 19% of the entire European fund market (ALFI, 2025). Globally, sustainable funds reached roughly $3 trillion (Morningstar); ASEAN's markets are individually too small for the global trackers to break out, lumped instead into an “Asia ex-Japan” aggregate. On bonds, ASEAN+3 sustainable debt stood at $798.7 billion at end-2023 — growing fast, but still just 20.1% of the global market against the EU-20's 37.7% (ADB, February 2024).

And the energy under all of it moves slowly. The IEA expects electricity demand across Southeast Asia to double by 2050, with continued reliance on imported fossil fuels even as renewables deploy. Even Singapore, the region's most advanced market, announced a mandatory climate-disclosure phase-in in February 2024 — then extended the timelines in August 2025, citing an uncertain global economic landscape. The direction is right; the pace is the problem.

Why adoption is slow

The ASEAN Taxonomy for Sustainable Finance — the rulebook that decides what counts as “green” — only came into being in 2021. Version 2 arrived in March 2023; Version 3, adding screening criteria for transport and construction, followed in March 2024. Alongside it, Thailand, Singapore, Indonesia and the Philippines have each built national taxonomies of their own — and the Taxonomy Board itself names regulatory fragmentation as a challenge it is still working to reduce. When the definition of “sustainable” differs by border, every cross-border claim becomes a negotiation.

Capability is the second brake. In the GoNetZero survey, companies cited insufficient knowledge of decarbonisation approaches, unclear measurement and reporting frameworks, difficulty securing internal budget approval, and limited affordable renewable-energy options. Intent, in other words, is not the constraint; capability and cost are.

Ownership structures play their part too. Much of the region's corporate power sits with family-controlled conglomerates, where governance change moves at the founder's pace. Academic research covering Indonesia, Malaysia, Singapore and Thailand from 2015 to 2023 found environmental and social disclosure improving steadily — while governance, the pillar that touches ownership directly, improved far more gradually.

And enforcement is thinner than disclosure. SGX rules allow listed companies to publish sustainability reports without independent assurance of the claims — a gap the ICIJ's “Deforestation Inc.” investigation (November 2023) put under the spotlight when it questioned the green credentials of a Singapore-listed palm oil group. In December 2023, Singapore's advertising watchdog issued its first-ever greenwashing ruling, against an air-conditioner campaign promising to “save the Earth”. In March 2024, Grab was accused of greenwashing its carbon-neutral fee; the company denied the allegations. Vague claims still work often enough — which is exactly why verified ones remain rare, and therefore valuable.

Where the pressure will land

The clearest deadline is European. The EU's Carbon Border Adjustment Mechanism began its transitional reporting phase on 1 October 2023; from 1 January 2026, importers of covered goods must buy certificates priced on the EU carbon market. The sectors covered — cement, iron and steel, aluminium, fertilisers, electricity and hydrogen — map directly onto the export strengths of Vietnam, Indonesia, Malaysia and Thailand. An exporter's carbon cost will be priced at the EU border whether or not it was ever measured at home.

Behind CBAM sits a quieter mechanism: multinationals carrying their own emissions duties are cascading requirements down their supply chains. A supplier who cannot produce credible data is not argued with; it is replaced. That is my interpretation rather than a measured effect — but every procurement director now accountable for their own Scope 3 understands it intuitively.

Capital compounds the effect. With 85% of the world's sustainable fund assets sitting in Europe, the money that wants to fund transition is largely not here. Companies that can evidence their position can reach it; those that cannot compete for whatever capital remains, on whatever terms it offers.

What slow adoption could mean for competitiveness

The risk is not that ASEAN becomes uncompetitive in the old sense. Cost advantages remain real, and the counter-case below is genuinely strong. The risk is subtler: a two-tier market forming in which price decides nothing, because proof decides first.

When buyers must justify a purchase — to a regulator, a lender, a sustainability report — unverifiable suppliers drop off the shortlist before price is discussed. I saw the identical pattern in property: where developers build no reputation, buyers choose on the only signals left, price and location. Substitute “emissions data and assurance” for “brand” and you have the predicament taking shape across ASEAN's export economy: competing on the factors that are easiest to copy, while the factor that compounds — credibility — accrues elsewhere.

There is also a reputational layer at the regional level. Every greenwashing ruling and investigation raises the discount buyers apply to all regional claims, including honest ones. Scarcity of trust is a tax, and it is paid by the companies least equipped to prove themselves.

The counter-case: the momentum is real

Singapore published its Singapore-Asia Taxonomy in December 2023; Thailand published Phase 1 of its own in June 2023; Indonesia and the Philippines followed in February 2024. Malaysia's corporate governance reforms have helped make it one of the region's strongest reporting markets. The ASEAN Taxonomy's “Amber” tier — which deliberately accommodates fossil-linked transition activities — is easy to criticise and hard to dismiss: it reflects the region's starting point rather than Europe's end state.

Indonesia is the sharpest paradox. The world's largest nickel producer is using ore-export bans to force battery-grade processing investment onshore — a genuine claim on the electric-vehicle supply chain, built on processing that analysts at Brookings describe as particularly carbon-intensive. Progress, with an asterisk.

The pattern across all of it: ASEAN is not ignoring ESG. It is building the machinery slowly, on its own terms. But machinery is not the same as market position, and other people's regulators are not waiting.

The positioning opportunity

For individual businesses, the slow regional pace is an opening. When most competitors cannot evidence their claims, credible proof becomes scarce — and scarce things command premium and preference. The repositioning discipline I apply elsewhere applies directly here: diagnose what your buyers must now prove and what your market will believe; decide the position you can own with evidence rather than aspiration; redesign how that proof is packaged — reporting, assurance, certifications, the story a buyer can repeat internally; rebuild the route to market around the buyers who now require it; and relaunch with measurement, not messaging.

For investors and acquirers looking at ASEAN assets, the same gap is a diligence lens. As with the heritage manufacturers I examined recently, an operating business with real strengths and weak market visibility — including weak ESG visibility — is either a risk or an opportunity, depending entirely on whether the fundamentals survive scrutiny.

ESG adoption in ASEAN will accelerate, because it must — the deadlines are set by other people's regulators. The interesting question is not when the region catches up, but which companies use the transition period to get chosen first. For those who move early, everyone else's slow adoption is a positioning gift.

Note: Figures in this article come from published sources: KPMG sustainability reporting analysis (2023); GRI and NUS Business School Centre for Governance and Sustainability, Climate Reporting in ASEAN (July 2022); PwC and NUS Business School Asia-Pacific net-zero study (2025); GoNetZero survey (November 2023); ALFI European Sustainable Investment Funds study (February 2025, data to end-2023); Morningstar Global Sustainable Fund Flows (Q4 2023); ADB AsianBondsOnline ASEAN+3 Sustainable Bonds Highlights (February 2024); IEA Southeast Asia energy analyses; ASEAN Taxonomy Board Versions 1–3 (2021–2024); European Commission CBAM guidance; SGX and ACRA climate-reporting announcements (February 2024 and August 2025); Brookings Institution on Indonesia's nickel sector (September 2022); ICIJ Deforestation Inc. (November 2023); The Straits Times and Eco-Business on the ASAS greenwashing ruling (December 2023).

Note: Interpretation, not reported fact: buyer substitution of unverifiable suppliers, capital-pricing effects, the two-tier market argument, and all recommendations. Two caveats on the figures: the PwC/NUS net-zero survey covers Asia-Pacific rather than ASEAN alone, and the GoNetZero survey covers largely multinational corporates based in Asia. No quantified per-country CBAM exposure estimate is given here. Published 25 September 2026.