When ESG fails: an Asia–Pacific perspective on the rising tide of criminal liability impacting the corporate sustainability landscape

Felicity Gerry KC
Libertas Chambers, London

Miranda Ching
Kobre & Kim, London

In February 2024, legal leaders from across Asia gathered at the Asia Legal Priorities 2024 event,[1] hosted by Thomson Reuters. One resounding message emerged: the role of the lawyer is transforming from corporate advisor to ethical gatekeeper and legal risk strategist. This conclusion echoes how lawyers are responding to environmental, social and governance (ESG) frameworks that have emerged as the blueprint for responsible corporate conduct. As ESG evolves from soft law guidance to enforceable obligations, an undercurrent is rising: the growing intersection between ESG failures and criminal liability. Around the globe, prosecutors, regulators and legislators are increasingly treating ESG breaches not just as ethical lapses or compliance failures, but as criminal offences.

This is new era for corporate actors, where greenwashing, labour exploitation, environmental destruction and corporate governance failures may trigger not just reputational damage, but also indictments. As ESG concerns move from the periphery to the centre of business, the associated legal risks accelerate the intersection between ESG and criminal law.

This convergence, wherein sustainability failures may lead not only to reputational or civil consequences, but also to criminal liability, is especially salient in the Asia-Pacific region, where regulatory frameworks are maturing rapidly and enforcement is sharpening.[2]

ESG failures as criminal offences

Across Asia–Pacific jurisdictions, regulators are testing the boundaries of corporate criminal accountability through an ESG lens.[3] In Australia, financial regulators have brought criminal investigations against pension funds[4] for misleading climate-related disclosures, a form of ‘greenwashing’ that led to multi-million-dollar penalties and may have the potential to trigger fraud provisions under criminal law.

Meanwhile, the Environmental Crime Directive,[5] adopted by the European Union in 2024, sets a pathway for environmental offences involving illegal land clearance or pollution.[6] In the Association of Southeast Asian Nations (ASEAN), environmental crimes have been linked[7] to financial offending. In Malaysia, discourse[8] has progressed on regulatory control, and the responsibility of individuals or companies who wilfully damage the environment. As environmental crimes continue to increase[9] and extend into diverse areas, including pollution, waste disposal, threats to flora, fauna and biodiversity, and illegal logging, ESG responsibilities of companies become questions of criminal law. The corporate scope of environmental crimes is shifting, and the regulation of environmental crime is shaping corporate and criminal law and environmental protection.

In Southeast Asia, ESG-related enforcement is further linked to human rights risks, including labour exploitation in supply chains and violations of indigenous land rights, all of which can trigger trafficking, corruption and abuse-of-power charges under national criminal codes.

A recent Asia in Focus: ESG Investing and the Business and Human Rights Agenda report[10] explored the state of ESG investment in Asia and its alignment with sustainable development and human rights goals. It found high investment by Asia-domiciled ESG funds, but low percentages in terms of the global sustainable fund market. ESG investment was linked with challenges around greenwashing, regulatory scrutiny and limited influence of minority shareholders. While investors, especially the young, can influence ESG practices, and opportunities to finance sustainable projects are recognised, the need for stronger standards to ensure credibility and impact was recognised, alongside the moves across Asia and ASEAN towards mandatory ESG reporting and fund labelling to combat greenwashing and improve transparency.

As ESG evolves from aspirational frameworks into hard law, the failure to implement or monitor ESG policies may lead to prosecution, particularly where the conduct harms people or the environment.

Prosecutors, defence lawyers and the ESG turn

This shift is already influencing criminal justice actors. Prosecutors are drawing on non-traditional sources of evidence, including corporate ESG disclosures, supplier audit trails and sustainability ratings, to build enforcement cases. Defence lawyers must, in turn, advise corporate clients on ESG-related risks[11] that could lead to investigation, prosecution or corporate criminal liability.

Cases involving greenwashing, supply chain abuses or health and safety failures highlight the growing need for lawyers to understand ESG beyond compliance. The stakes are high. ESG remediation efforts such as community reparations or sustainability overhauls may be weighed as mitigating factors in sentencing or used to argue against prosecution altogether. The International Bar Association (IBA) has noted that clients are pushing their lawyers to be upskilled, and to be able to advise them and help them navigate ESG frameworks and to understand where these obligations fit in the mesh of compliance necessary for global trade and how ESG fits into the regulatory climate.

Asia–Pacific in focus

The Asia–Pacific region is at the forefront of these developments. The Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) are both investigating greenwashing.[12] Japan has revised its Corporate Governance Code to emphasise sustainability.[13] India has mandated ESG disclosures through its Business Responsibility and Sustainability Reporting[14] framework. And across ASEAN, new laws including Thailand’s ESG disclosure regime[15] and Indonesia’s carbon markets[16] reflect a trend towards enforceability.

In many cases, these frameworks intersect with criminal law through existing legal tools, including fraud statutes, anti-bribery laws, environmental legislation and trafficking offences.

Why this Matters to the IBA Criminal Law Committee

At the International Bar Association’s April 2025 ESG Committee meeting, members from the Criminal Law, Business and Human Rights and Litigation Committees agreed that the convergence of ESG and criminal law requires joint guidance and interdisciplinary dialogue. Cross-cutting issues like whistleblower protection, prosecutorial discretion, corporate due diligence and sentencing policy emerged as shared concerns.

This growing legal frontier aligns with the IBA’s mission to uphold the rule of law, ensure access to justice and promote ethical standards in the legal profession. ESG-related criminal enforcement sits at the intersection of public interest, legal reform and global governance, making it a priority area for thought leadership.

By engaging with this issue, the IBA can support both criminal law practitioners and ESG specialists to navigate new risks, understand evolving obligations and promote fair and proportionate legal frameworks across jurisdictions.

The growing convergence of civil and criminal enforcement in ESG matters is also reshaping the regulatory landscape. In many jurisdictions, conduct that once triggered only civil penalties, such as misleading ESG disclosures, unsafe working conditions or environmental damage, may now lead to parallel criminal investigations, with prosecutors and regulators coordinating their actions and exerting pressure in regard to self-reporting and disclosure. This overlap reflects a broader shift towards more robust enforcement models, where the failure to meet ESG standards is treated not just as a breach of fiduciary duty, but as potential fraud, negligence or abuse of power. In response, jurisdictions are exploring or expanding the use of deferred prosecution agreements (DPAs), mechanisms that allow companies to avoid criminal conviction if they meet strict conditions, including internal reform, fines and cooperation with regulatory authorities. DPAs are particularly relevant in ESG cases, wherein systemic failures may be better addressed through reform and remediation than through prosecution alone. However, the growing use of DPAs also raises critical questions about transparency, proportionality and corporate accountability; issues the legal profession, and the IBA, must help the industry to navigate.

Looking ahead

The future of ESG is not just about what companies report, it’s about what happens when they don’t. Non-disclosure, false disclosure or the negligent implementation of ESG commitments is no longer a matter for internal compliance alone, it increasingly carries the risk of regulatory investigation and, in serious cases, criminal prosecution. In the Asia–Pacific region, where legal systems are adapting rapidly to rising ESG expectations, we are seeing a clear shift: prosecutors are testing the limits of existing laws to address environmental destruction, social harm and corporate misconduct; defence lawyers are being asked to advise clients not only on ESG strategy, but also on criminal exposure; and courts are beginning to grapple with new forms of liability based on systemic failures in regard to sustainability governance.

For legal practitioners, corporate leaders and regulators alike, the ESG–criminal law nexus is no longer a niche concern. It demands fresh legal thinking, new forms of collaboration and careful reflection on how justice systems can respond proportionately to complex, transnational harm. This is especially critical in the Asia–Pacific region, where supply chain abuses, climate-related risks and governance failures are at the forefront of both commercial risk and public concern.

The International Bar Association is uniquely placed to lead in this emerging area. By convening expertise across jurisdictions and disciplines, including environmental law, human rights, corporate governance and criminal justice, the IBA can shape the legal frameworks that govern ESG enforcement globally, advocate for fair and balanced accountability and support the legal profession in meeting the challenges of this new era.