Across boardrooms today, the pressure to deliver short-term financial performance continues to overshadow long-term energy transition goals. Investment decisions, executive incentives, and performance metrics remain largely centred on quarterly or yearly returns. As a result, companies struggle to prioritise low-carbon investments. This misalignment remains one of the most under-discussed barriers to effective corporate energy transition.
Yet, a short-term focus is not irrational. Businesses are designed to remain financially viable, generate shareholder returns, and ensure continuity. In many emerging markets, including Nigeria, firms must constantly balance growth ambitions with operational survival and constrained access to capital. In this context, prioritising short-term profitability is necessary. The challenge, however, is structural. When corporate systems are built entirely around short-term financial outcomes, they are not intentionally deprioritising investments whose benefits are long-term, uncertain, or difficult to quantify. This is where the real environmental, social and governance (ESG) gap lies; not in corporate unwillingness, but in the absence of systems that balance immediate performance with long-term value creation.
Executive Incentives and Regulatory Weaknesses
This misalignment is evident in executive incentive structures. In many firms, compensation remains heavily tied to metrics such as revenue growth, cost efficiency, and quarterly profitability. Energy transition investments typically are capital-intensive. It involves high upfront costs, and delivers returns over extended periods. With this, firms often treated sustainability as a compliance obligation rather than a core business priority. This dynamic is further reinforced by weak regulatory enforcement. For example, in Nigeria, penalties under environmental regulations such as the Environmental Impact Assessment (EIA) framework remain relatively low and often fail to serve as effective deterrents, typically ranging between ₦1,000,000 and ₦2,000,000 at the corporate level. In practice, this creates an environment where non-compliance can become economically rational. Until enforcement mechanisms are strengthened and sanctions reflect the true environmental and financial costs of violations, sustainability commitments whether in reporting or net-zero pledges will remain inconsistent.
Reconciling Profit and Sustainability
The question no longer is whether companies should prioritise profit or sustainability, but how both can be reconciled in a commercially viable way. The starting point is a shift from purely short-term performance tracking to multi-year transition planning. Companies must begin to integrate financial and ESG outcomes within their strategic framework. This does not require abandoning profitability; rather, it recognises long-term competitiveness tied to sustainability performance. However, strategy alone is insufficient without leadership capability. A 2025 study by the United Nations Global Compact in collaboration with Accenture found that while 96 per cent of CEOs acknowledge the importance of sustainability, fewer than 15 per cent feel equipped to implement it. This gap between ambition and execution highlights a critical issue: sustainability is not just a strategic priority; it is a leadership competence. Where sustainability is understood at the executive level, it is embedded into decision-making. Where it is not, it is often reduced to compliance or sidelined altogether.
Aligning Incentives and Capital Allocation
Aligning incentives is essential. Linking a meaningful portion of executive compensation to measurable transition indicators, for example, emissions reduction, energy efficiency improvements, or clean energy adoption, can help shift behaviour without undermining financial discipline. Companies that have successfully done this demonstrate that sustainability and profitability are not mutually exclusive. Some companies such as Mars, which has tied executive pay to emissions reductions while growing revenue- demonstrate that aligning incentives with measurable sustainability targets can support both environmental progress and financial performance. As a Wall Street Journal report noted, “You want lower emissions? Try attaching it to pay,” says Mars’ sustainability chief. However, in many firms, these incentives still represent a relatively small share of total compensation. Beyond incentives, capital allocation processes must also evolve. Firms need to incorporate structured transition frameworks into investment decisions, including climate scenario analysis and alignment with long-term decarbonisation pathways. With these, energy transition is treated as a core financial consideration.
Value Creation and Local Realities
At the same time, sustainability must be reframed as a driver of value creation. As Magali Delmas and David Colgan highlight through the concept of the “green bundle,” adoption accelerates when sustainability delivers tangible private benefits—such as cost savings, improved product quality, better health outcomes, or enhanced brand value—alongside environmental impact. In other words, sustainability succeeds not when it demands sacrifice, but when it improves everyday outcomes for businesses and consumers alike. Lastly, transition strategies must be grounded in local realities. In emerging markets like Nigeria, where capital constraints persist and fossil fuel dependency remains significant, a phased and pragmatic approach is essential. Hybrid energy systems, incremental efficiency improvements, and gradual decarbonisation pathways allow firms to align with global expectations while maintaining financial stability. Companies that resolve the tension between short-term performance and long-term sustainability will not only remain competitive; they will define the next phase of economic leadership.
