ROLE OF LEGAL FRAMEWORK IN ESG INTEGRATION WITHIN CORPORATE GOVERNANCE: A COMPARATIVE ANALYSIS OF PRACTICES IN EMERGING MARKETS

Abstract

Another mission of this study is to examine how legal frameworks contribute to and to what extent they promote ESG factors in corporate governance mechanisms in emerging markets. While the world is moving to integrate ESG thinking, the extent to which ESG features in decision-making and investment is still early in many emerging economies. There needs to be more understanding of how these frameworks are taken up and implemented within these developing economies' specific economic, cultural and regulatory landscape. Using a comparative approach, the study uses data from 200 companies in various sectors, including finance, manufacturing, energy and technology. This research uses secondary data from industry reports, financial databases, and corporate disclosures. Using Ordinary Least Squares (OLS) regression, the study will analyze the impact of legal frameworks, market forces, and governance structures on ESG integration practices. These findings combine several key practices for successful ESG integration, including developing robust legal and regulatory support for ESG practices, ensuring transparent ESG reporting mechanisms, and promoting active stakeholder engagement. The regulatory frameworks, particularly the strong legal  mandates, drive companies towards adopting ESG as they become committed to ESG as mandated by law. However, weak regulatory enforcement, cultural resistance to change, and lack of quality ESG data are persisting barriers. The study also confirms that the integration of ESG practices is not homogenous geographically − Asian companies demonstrate the highest level of ESG integration compared to companies from Eastern Europe, thus suggesting the impact of legal structures in governance. A pro-ESG legal systems focus is adopted to learn how emerging markets can tailor corporate governance codes to international sustainability standards, which is paramount when comprehending the research.