Friday Dec 01


The varied environmental, social and governance efforts in the business world that go under the name ESG are facing increasing attacks from the Right. Attorneys general in red states have sought to prevent public pension funds from doing business with investment managers promoting sustainability. Groups that successfully dismantled affirmative action in higher education are now targeting diversity programs adopted by corporations.

Public officials such as Florida Gov. Ron DeSantis bash what they call woke corporations to score cheap political points. Vivek Ramaswamy’s candidacy for the Republican presidential nomination grew out of his publications attacking ESG, including a book titled Woke Inc.

In the face of this opposition, some large corporations are backing away from ESG-type initiatives or at least are keeping quieter about them. References to ESG are reported to be disappearing from the earnings calls companies have with analysts and investors. Some companies are exiting from alliances created to accelerate the movement toward net-zero greenhouse gas emissions.

The ease with which conservative ideologues have brought about this retreat is a sign of the shortcomings of ESG. Although companies have presented these as high-minded initiatives, they are often little more than public relations ploys.

Much of ESG originated decades ago in the practice of greenwashing—the attempt by large companies facing pressure over their environmental impact to give the impression they were changing their ways. Eventually, some large companies went from placating critics to presenting themselves as the vanguard in bringing about change. For example, in the early 2000s oil giant Chevron launched an advertising campaign with the tagline Will You Join Us urging the public to emulate its supposed green behavior.

Companies followed the same pattern on other issues, depicting themselves as proponents of reform after being pressured by progressive shareholder activist groups such as the Interfaith Center on Corporate Responsibility and As You Sow.

Along with being an attempt to undercut activism, ESG amounted to an effort to weaken government regulation. Proponents did this by promoting voluntary initiatives in lieu of legal mandates. Companies could decide which environmental and social goals to pursue and how to do so. They could also decide how to measure success. For example, many companies based claims about reductions in their carbon footprint on little more than the purchase of dubious carbon offsets.

Although there were later efforts to standardize practices and metrics, ESG remained largely under the control of corporations seeking to use it to paint themselves in the best possible light.

Seeing ESG under attack presents a dilemma for those of us who have long pressured corporations to change their behavior. We have no sympathy for those rightwing ideologues who are targeting ESG as part of an agenda that includes preservation of the fossil fuel industry and reversing progress in racial equity. Yet it is difficult to rush to the defense of what was often little more than corporate PR.

The challenge is to separate the valid issues ESG purports to promote—sustainability, racial justice, fair labor practices, consumer protection, etc.—from the self-interested companies and investment managers pursuing their own agenda.

One way to start is with changing the vocabulary. Initially, the business world embraced the term corporate social responsibility, but that morphed into the vague and cryptic ESG. A better term is corporate accountability. This reinforces the idea that big business is the problem, not the solution with regard to many of the challenges facing the world today.

Another step is to change the way we assess corporate behavior. Evaluations of companies should be based on independently verifiable data rather than self-reporting and on compliance with government regulation rather than voluntary initiatives. When judged by these metrics, as the data in Violation Tracker make clear, most large corporations can hardly be considered paragons of social responsibility.

Take the example of State Street Corporation, one of the big investment management firms the Right has sought to make into a major ESG villain. In 2021, State Street paid a $115 million criminal penalty to resolve federal charges that it engaged in a scheme to defraud its clients by secretly overcharging for expenses related to the bank’s custody of their assets.

But most important is to remember that those working from outside the executive suite—environmental groups, community organizers, labor unions, public interest advocates, corporate accountability activists—are the real agents of change in the business world.

Whether or not ESG survives the rightwing assault, the movement to bring about true corporate accountability will continue.

PHILIP MATTERA heads the Corporate Research Project in Washington, DC, and writes the blog Dirt Diggers Digest.