The Institutionalization of ESG in Global Business Strategy

International Academy
Dec 3, 2025
10 min read

Author: Alex Rahman — Affiliation: Independent Researcher

Abstract

Over the past ten years, Environmental, Social, and Governance (ESG) frameworks have quickly changed the way businesses around the world do business. They have gone from being voluntary corporate social responsibility programs to mandatory, standardised, and strategically integrated parts of corporate governance. ESG started as a way to address moral concerns about sustainability and responsible business practices, but it is now firmly established in regulatory environments, investor expectations, supply-chain governance, and management practices across industries. This article offers an exhaustive examination of the institutionalisation of ESG as a global strategic paradigm through three synergistic theoretical frameworks: Bourdieu’s capital and field theory, World-Systems Theory, and Institutional Isomorphism.

The research utilises a qualitative interpretive approach, integrating scholarly literature, policy advancements, and contemporary industry trends. The analysis shows that ESG's growth is due to both structural factors, like regulation, standardisation, and global value-chain integration, and field-level dynamics, where businesses strategically build up symbolic, cultural, and economic capital by aligning with ESG. Simultaneously, ESG practices persist as inconsistent across regions owing to systemic disparities between core and peripheral economies.

The article concludes that while ESG is becoming more institutionalised, it is not ideologically neutral. The significance, priorities, and distributive effects of ESG are influenced by power dynamics among stakeholders, the global economic hierarchy, and persistent contests over legitimacy and authority within the corporate sector. The paper suggests future research avenues centred on the tangible efficacy of ESG strategies, the democratisation of ESG governance, and the incorporation of artificial intelligence in sustainability reporting and oversight.

1. Introduction

In the last fifteen years, Environmental, Social, and Governance (ESG) considerations have moved from the periphery of corporate social responsibility to the core of global business strategy. Originally promoted by socially responsible investors in the early 2000s, ESG has since evolved into a comprehensive approach to defining, measuring, and governing corporate behavior in relation to the environment, society, and internal governance structures. Today, ESG strategies influence executive compensation, risk management processes, corporate disclosures, and capital allocation decisions.

The institutionalization of ESG has been driven by several parallel forces:

Regulatory expansion — major economies now require standardized sustainability reporting, climate-risk disclosures, human rights due diligence, and governance transparency.
Investor pressure — investment funds, asset-managers, insurers, and banks routinely evaluate firms using ESG metrics and integrate sustainability risks into financial decision-making.
Market expectations and consumer preferences — global consumers increasingly reward companies perceived as responsible or climate-conscious.
Professionalization — ESG has produced a new class of specialists, consultants, analysts, auditors, and sustainability managers who shape corporate norms and assessment criteria.
Technological change — digitalization and artificial intelligence have enabled large-scale ESG data analytics, automated monitoring, and improved measurement of sustainability indicators.

While this institutionalization is global, it is not homogeneous. The meaning and implementation of ESG are shaped by political cultures, economic structures, regulatory philosophies, and industrial capacities. In some regions, ESG is seen as a moral imperative and strategic necessity; in others, it is framed as an economic burden, political controversy, or a compliance checklist.

This article aims to provide a deep, theoretical, and empirical exploration of how ESG became institutionalized, why it evolved unevenly across regions, and what its implications are for global business strategy. In doing so, it contributes to the academic debate on sustainability by integrating multiple theoretical traditions—Pierre Bourdieu’s sociology of capital, world-systems theory, and institutional isomorphism from organizational theory—to offer a multi-layered explanation of ESG diffusion and entrenchment.

2. Background and Theoretical Framework

2.1 ESG: Definitions and Evolution

ESG encompasses three interconnected domains:

Environmental (E): climate change, carbon emissions, energy use, biodiversity, waste, water management.
Social (S): labor rights, diversity and inclusion, worker safety, supply-chain ethics, community wellbeing.
Governance (G): board structure, executive pay, shareholder rights, anti-corruption, transparency.

Historically, these issues appeared under the umbrella of corporate social responsibility (CSR). However, CSR was often voluntary and externally oriented, whereas ESG is structured, measurable, and embedded in financial logic. Modern ESG aligns sustainability with risk, opportunity, and long-term value creation.

The paradigm shift occurred as global investors demanded more transparency and as regulators recognized the systemic risks posed by climate change, social inequality, and weak governance. The outcome is not merely an ethical transformation, but an institutional transformation in how corporations operate.

2.2 Bourdieu’s Capital, Field, and Symbolic Power

Pierre Bourdieu’s sociology offers an insightful framework for understanding ESG as a field—a structured social space where actors compete for different forms of capital:

Economic capital: access to financial resources, investment, and profitability.
Social capital: networks, alliances, and relationships with stakeholders.
Cultural capital: expertise, qualifications, and knowledge—such as ESG reporting skills.
Symbolic capital: prestige, legitimacy, and reputation.

ESG practices enable corporations to convert cultural and symbolic capital into economic benefits. For example:

Firms with strong ESG reputations attract investment from sustainability-oriented funds.
Companies that disclose and reduce carbon emissions increase credibility.
Executives with ESG expertise gain internal influence and external legitimacy.

Bourdieu’s theory also reveals that ESG institutionalization amplifies inequalities. Large corporations with substantial resources can invest in sophisticated ESG systems, while smaller firms—especially in developing countries—struggle to meet rising expectations.

2.3 World-Systems Theory: ESG in the Global Core–Periphery Structure

World-Systems Theory, originating from Immanuel Wallerstein, explains global inequalities through a hierarchical system composed of:

Core economies: highly industrialized nations with technological and financial dominance.
Semi-peripheral economies: emerging markets with intermediate positions.
Peripheral economies: regions supplying raw materials and labor to the global system.

ESG institutionalization is profoundly shaped by this structure:

Core economies set the standards for ESG reporting, supply-chain audits, and climate-risk management.
Multinational corporations headquartered in core regions demand ESG compliance from suppliers in the semi-periphery and periphery.
Firms in peripheral regions face high compliance costs, weak institutional support, and limited access to sustainability technology.

Thus, ESG institutionalization reflects—not escapes—the structural inequalities of global capitalism.

2.4 Institutional Isomorphism: Coercive, Mimetic, and Normative Forces

Institutional isomorphism, proposed by DiMaggio and Powell, explains how organizations become increasingly similar over time. The framework identifies three forces driving convergence:

Coercive isomorphism: laws, regulations, and formal incentives.
Mimetic isomorphism: imitation of successful competitors under conditions of uncertainty.
Normative isomorphism: professional standards, best practices, certifications, and shared training.

All three forces play central roles in ESG diffusion worldwide.

Regulations require firms to disclose climate risks, publish sustainability reports, and monitor supply-chain labor practices.
Imitation leads companies to copy industry leaders’ sustainability commitments and reporting structures.
Professionalization produces sustainability certifications, ESG audit manuals, standardized reporting templates, and expert networks.

Institutional isomorphism helps explain why ESG reports often look similar across industries—even when underlying performance differs.

3. Method

This article uses a qualitative, interpretive methodology based on a narrative literature synthesis and conceptual analysis. Data sources include:

Peer-reviewed academic articles (2018–2025)
Books in sociology, sustainability, and organizational theory
Policy documents and sustainability standards
Corporate ESG and sustainability reports
Analyst reports and industry whitepapers
Verified empirical studies on ESG performance and strategy

The methodology emphasizes conceptual clarity over empirical measurement. The goal is to build a coherent, theoretically grounded interpretation of ESG institutionalization rather than to test hypotheses or provide quantitative models.

4. Analysis

4.1 ESG as a Strategic Imperative

Across industries, ESG is now framed as both a risk mitigation tool and a strategic opportunity. Corporations integrate ESG for several reasons:

Climate change impacts threaten supply chains and physical assets.
Social risks—such as labor disputes or discrimination—damage brand value.
Governance failures lead to regulatory fines and financial instability.
Investors increasingly reward ESG-aligned companies.
Consumers prefer brands perceived as responsible.

Consequently, ESG metrics are integrated into:

Enterprise risk management
Long-term investment planning
Corporate governance systems
Product design and innovation
Executive compensation packages

ESG is thus not an isolated initiative but a core part of strategic management.

4.2 Coercive Institutionalization: Regulation and Reporting

4.2.1 Regulatory mandates

The most powerful driver of ESG institutionalization is regulation. Across continents, governments and regulatory bodies have introduced laws requiring:

Climate disclosure
Sustainability reporting
Human rights due diligence
Supply-chain transparency
Anti-corruption controls
Board diversity and governance reforms

These laws vary by jurisdiction but share a common outcome: ESG becomes mandatory rather than voluntary.

4.2.2 Reporting standardization

Standardized reporting frameworks require companies to:

Measure their emissions
Assess environmental risks
Disclose diversity and worker-safety data
Provide governance structures
Publish sustainability strategies and results

The result is a shift from narrative CSR reports to data-driven, auditable sustainability disclosures.

4.2.3 Enforcement and penalties

Regulatory enforcement includes:

Financial penalties
Reputational consequences
Exclusion from public procurement
Restrictions on capital access

This deepens the institutionalization of ESG, as firms cannot afford non-compliance.

4.3 Mimetic Institutionalization: Competitive Imitation

Corporations often imitate industry leaders’ ESG strategies, especially in uncertain or competitive environments.

4.3.1 Benchmarking and peer imitation

If leading firms commit to:

net-zero emissions,
gender parity targets,
sustainability auditing,
ethical supply-chain programs,

other firms quickly follow. Mimetic pressure is particularly strong in industries with high public visibility, such as:

technology,
finance,
retail,
automotive,
energy.

4.3.2 Reputational competition

ESG is also part of reputation games. Companies compete for:

awards
sustainability index inclusion
media recognition
investor rankings

The quest for symbolic capital motivates imitation of perceived best practices.

4.4 Normative Institutionalization: Professionalization and Expert Systems

The ESG field now contains:

sustainability managers
ESG analysts
climate-risk modelers
auditors
consultants
certification bodies
training institutions

These professionals create consistent norms, best practices, and interpretations of what “good ESG” means.

4.4.1 Standardization of ESG education and certifications

Universities and training institutes offer:

ESG certificates
climate-risk diplomas
sustainable finance courses
governance audit programs

These credentials create a shared language and methodological toolkit.

4.4.2 The rise of AI in ESG governance

AI now supports:

automated ESG data extraction
prediction of climate risks
sentiment analysis in controversies
supply-chain monitoring
fraud detection in ESG disclosures

AI strengthens the institutionalization of ESG by embedding sustainability logic in digital systems.

4.5 ESG and Bourdieu: Capital, Fields, and Corporate Power

Bourdieu’s theory helps explain ESG as a field of power struggles.

4.5.1 Symbolic capital

ESG enhances symbolic capital by signaling responsibility, trustworthiness, and leadership.

4.5.2 Cultural capital

Executives and employees with ESG skills gain influence within organizations.

4.5.3 Social capital

Relationships with regulators, NGOs, and communities improve through visible ESG commitments.

4.5.4 Economic capital

Strong ESG performance correlates with:

better access to capital
lower financing costs
improved long-term profitability
reduced regulatory risks

However, the distribution of these capitals is unequal. Large corporations accumulate more ESG-related capital than smaller or peripheral firms.

4.6 World-Systems Analysis: ESG in Global Value Chains

ESG requirements diffuse through global value chains:

Core-economy multinationals demand ESG compliance from suppliers.
Suppliers in semi-peripheral and peripheral regions bear compliance costs.
Firms with strong ESG credentials gain access to premium markets.
Weak ESG performers risk exclusion.

This dynamic reproduces global inequalities:

Core economies shape ESG norms.
Peripheral economies struggle to comply.
Semi-peripheral economies seek competitive advantage through ESG upgrading.

ESG thus becomes both a barrier and a pathway to participation in global markets.

4.7 The ESG Backlash and Its Implications

In some regions, ESG has become politically contested. Critics argue that:

ESG oversteps corporate roles
ESG imposes costs on businesses
ESG is used for political agendas
ESG ratings lack consistency
ESG disclosures can be manipulated

Yet the underlying practices—risk management, sustainability planning, governance reform—continue to expand. This suggests that ESG is institutionally resilient even when the terminology becomes controversial.

4.8 AI, Data Quality, and the Future of ESG Measurement

The future of ESG will be shaped by:

automation of reporting
improved climate models
sophisticated social-impact monitoring
digital auditing of supply chains
real-time data verification
machine-learning predictions of controversies

AI increases efficiency but also raises ethical concerns about:

algorithmic bias
transparency
privacy
environmental impact of data centers

Thus, ESG governance must itself adopt ESG principles in the use of digital technologies.

5. Findings

5.1 ESG is structurally embedded in global business strategy

Across markets, ESG is integrated into:

annual reports
risk management
board governance
investment strategies
supply-chain policies
human-rights due diligence
long-term planning

ESG is now a durable institutional feature of global capitalism.

5.2 Institutional pressures operate simultaneously

Coercive, mimetic, and normative forces reinforce each other:

Regulations demand compliance
Competitors imitate industry leaders
Professionals codify best practices

This multilayered institutionalization explains ESG’s rapid diffusion.

5.3 ESG reconfigures corporate power and capital

ESG enhances symbolic, cultural, social, and economic capital for organizations that master sustainability frameworks. However, capital distributions remain unequal.

5.4 Global inequalities shape ESG adoption

Core economies dominate ESG standard-setting. Semi-peripheral and peripheral economies face higher compliance burdens. ESG risks reinforcing global hierarchies unless equity-focused reforms are implemented.

5.5 ESG can be transformative or symbolic

ESG has produced genuine improvements in:

governance standards
human-rights awareness
environmental risk management
supply-chain transparency

However, ESG can also serve as a symbolic display—“greenwashing”—when its institutional pressures prioritize appearance over substance.

6. Conclusion

ESG has become a central pillar of modern business strategy. Its rise reflects profound transformations in global capitalism, investor expectations, regulatory frameworks, supply-chain governance, and technological innovation. Through Bourdieu’s theory, we see ESG as a contest for capital and legitimacy; through world-systems theory, we observe how ESG reflects unequal global power structures; and through institutional isomorphism, we understand why ESG practices converge across organizations.

To ensure that ESG fulfills its transformative potential, future efforts must address:

Quality and transparency — ESG must focus on real impact, not merely reporting volume.
Global fairness — ESG frameworks must support, not penalize, firms in low-income regions.
Workforce participation — employees and communities should have a voice in ESG governance.
Responsible AI integration — automated ESG systems must be ethical, fair, and transparent.
Governance reform — ESG must be integrated into the core purpose of the firm rather than treated as a compliance task.

The future of ESG depends on resolving tensions between symbolic performance and substantive change. If these challenges are addressed, ESG can evolve from an institutional obligation into a powerful driver of sustainable, inclusive, and resilient global development.

Hashtags

References

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