Amidst the usual rhetoric, one can discern some futurist trends in companies’ outlook and performance as part of a philosophy of ‘Creating Shared Value.’

Apparently, companies are beginning to realise that they have to shed their exclusive focus on financial performance and adding to the shareholders’ value. And that they need to go beyond maximising shareholders’ wealth to account for the concerns of other stakeholders.

One can witness a significant move in this direction by the Pakistan Stock Exchange (PSX) for evolving an extended criteria for the Top 25 Companies Awards 2022. That includes Environmental, Social and Governance (ESG) factors, which PSX sees as becoming more and more important for the future.

In addition to financial success, companies were assessed based on their social responsibility, governance practices and environmental effects. This was stated to be in line with the global trend in which the stakeholders and investors placed a higher value on businesses that use sustainable and ethical business practices. Specifically, 10 per cent of the total weight was earmarked for the criterion of ESG/Sustainability for qualifying for the award.

Companies are beginning to realise that they have to shed their exclusive focus on financial performance

Businesses that support diversity in leadership and cultivate a welcoming environment at work have been recognised for their dedication to equality and social responsibility. Hence, diversity and inclusivity reporting carried a weight of 3.5pc marks in qualitative criteria.

To quote PSX’s Chief Marketing & Business Development Officer Raeda Latif, overall, the evolving criteria reflect a broader understanding of what constitutes business success in a rapidly changing world. More broadly, she added, the focus on ESG will continue to increase in the future.

Nestlé Pakistan reported that it had extended a corporate contribution worth Rs5 million to support SOS Children’s Village in its endeavours as part of its philosophy of ‘Creating Shared Value’.

Yet another trend picking up in the market is towards adopting innovative ways and using the latest technologies to reduce dependence on costly imports.

The PSX believes environmental, social and governance factors will become increasingly important in the future

Official data shows that Pakistan imported vehicles worth $50 billion in 30 years and repatriated $10bn to their principals abroad. However, the Indus Motor Company recently announced it had invested over $100m to manufacture the first ‘Make-in-Pakistan’ hybrid electric car for local production of the fourth generation of Corrola Cross hybrid.

Even foreign companies producing consumer items, including processed foods, have started to maximise the use of local ingredients owing to the higher cost of imported inputs that had started squeezing their margins. Hit by the low purchasing power of the rupee, depreciating wages/incomes and unemployment, consumers are shifting to affordable, cheaper local products.

It is also interesting to note that only one initial public offering was witnessed in PSX in 2023. A sum of Rs435m was raised by Symmetry Group — Pakistan’s first publicly digital technology firm focusing on the digitalisation of consumer-centric functions of organisations.

With 326 companies, the IT sector emerged in October as the front-runner in the incorporation of new firms with the Securities and Exchange Commission of Pakistan.

Research by the United Nations Economic and Social Commission for Asia and the Pacific suggests that a 1pc increase in digital trade value is associated with a 0.8 percentage point rise in the growth rate of an economy’s real GDP per capita. But these positive trends have yet to gather critical mass to make a real difference.

Owing to economic uncertainty, low growth and ongoing political flux, foreign investors appear to be shy in investing in new mega projects, while only a couple are acquiring stakes in selected running businesses.

The latest is a Chinese firm which has agreed to buy 30pc stakes in Pakistan Refinery and invest $1.5bn to double its capacity from 50,000 barrels per day (bpd) to 100,000 bpd. Foreign investors prefer to acquire stakes in IT firms. Substantial foreign direct investment inflows depend on a pickup in domestic private investment.

The level of private sector investment is indicated by State Bank data that showed its debt retirement of Rs45.8bn from July 1 to Nov 17 recorded by conventional banks alone this year, as against a net borrowing of Rs161.7bn in the same period of the previous year.

The banks are reportedly reluctant to extend loans to the private sector as they fear that high interest rates will increase the chances of default, which may add to their non-performing loans.

As it is, some companies have also decided to delist their scrips from the PSX either because they did not earn enough to pay dividends to their shareholders or to retain their earnings to fund their operations due to high cost borrowings from banks and the economy’s slowing down.

To navigate the complex and changing economic landscape, says former minister of state for finance and revenue Dr Aisha Pasha, Pakistan must proactively restructure its policies at various levels to ensure adaptability and resilience in these challenging times.

Citizens are pinning hope on fair and free elections, expecting that the voters’ mandate would serve as an impetus for moving in a direction where the fruits of economic development and growth are more equitably shared.

Published in Dawn, The Business and Finance Weekly, December 18th, 2023