The triadic ‘Environment’, ‘Social’, ‘Governance’ criteria or ‘ESG’ is swiftly gaining popularity amongst businesses, employed as an ethical compass for advancing strategy, communications, and corporate cultures. ESG initiatives orient companies towards their long-term responsibilities in the world. The implications of their carbon emissions are considered, for example, alongside those of properly diversifying their workforces. Whilst ‘Environment’ refers to contemporary issues surrounding climate change, biodiversity, and water usage, ‘Social’ emphasises the rights and wellbeing of both internal and external stakeholders, with ‘Governance’ focusing on effective management and business structures.
The growth of ESG’s popularity follows a broader imperative for societies to subsist on more sustainable practices; those that consider the health of the planet and those that are mindful of the extreme disparities in human living standards, both globally and locally, alike. In 2015, the UN published seventeen ‘Sustainable Development Goals’ as part of its 2030 Agenda. These are specific targets that aim to increase peace and prosperity for both humanity and the planet and include ‘No Poverty’, ‘Reduced Inequality’, and urgent ‘Climate Action’, amongst others. Additionally, the Paris Agreement, first implemented in the same year, constitutes an international treaty on climate change, seeking to limit global warming to limit global warming and reduce the average surface temperature to two degrees below pre-industrial levels.
The existence of ESG practices is an undeniably important step towards kinder corporate practices. They encourage businesses — for better or worse, the powerhouses of our economies and cultures — to think beyond their short-term profits, prioritising more responsible investment, energy-efficient practices, and human care. There are numerous success stories. Patagonia, for example, puts environmental and social issues at the forefront of its workings. 98% of the company’s products are made with recycled materials, garments have been made available more economically through second-hand ownership and rentals, and work is underway to approve the rights of workers; specifically, those in developing countries who are manufacturing garments or sourcing their materials. Similarly, Microsoft, which has been carbon neutral since 2012, has committed to be carbon negative by 2030. The business is one of the world’s largest purchasers of renewable energy, their products are increasingly manufactured using eco-friendly materials, and low-carbon practices are promoted and achieved through cloud-enabled technologies.
However, as with any new movement, ESG is not without controversy. Questions have been raised about the authenticity of related claims and statistics; especially in recent years where the Covid-19 pandemic and various social movements have exposed the businesses whose gleamed communications have either lacked integrity, or failed to reconcile with their practices and culture. In 2017, PepsiCo’s ‘end racism’ advert with Kendall Jenner was criticised for its implicit idealisation of activist movements as being less essential for tackling systematic inequality than they are ‘trendy’ or even ‘trivial’. Jenner is shown to hand a police officer a can of Pepsi, seemingly instigating peace and reconciliation between the police force and the advert’s diverse group of activists. The same day as its release, Bernice King, Martin Luther King Jr’s daughter, tweeted ‘If only Daddy would have known about the power of #Pepsi’. Furthermore, PepsiCo has been accused of complicity in illegal rainforest destruction, and, more recently, has been acknowledged by Greenpeace to be one of the world’s worst plastic polluters, neither having developed any reusable packaging nor reported that any aspect of its portfolio is designed for reuse.
In 2021, having worked as co-chief Sustainability Officer for BlackRock, a multinational investment firm, Canadian entrepreneur Tariq Fancy dropped out of the position, claiming to have realised that ESG criteria were ineffective both for business returns and positive real-world impact. He claimed that government-led reform and regulation was required, that the private sector could not be wholly trusted to front environmental and social change. A subsequent report for The Economist, headed by journalist Henry Tricks, concluded that the broad combination inherent in ESG led to incoherence; the formation of a complex and confusing set of aims which are ultimately inefficient in dealing with the issues that they claim to address. For Tricks, believing ‘Environment’ to be the most pressing of ESG’s criteria, the three imperatives should be split apart. Each concern should be treated in isolation, with initial focuses being homed on reducing carbon emissions. This latter point might be achieved through a government tax on carbon, for example, which would combine Fancy’s imperative for politically-led change with corporate autonomy.
Uncertainty follows. Whilst ESG principles are likely most often developed and implemented with good intentions, and almost certainly constitute some step towards healthier corporate practices and cultures, the risk that they might exacerbate companies’ lapse into performative activism or greenwashing, alongside that of them problematising business more broadly, remains. As noted by Tricks, the trio of concerns might be too broad for effective action. Perhaps tighter emphases with more precisely measurable aims are requisite. In any case, ESG remains a phenomenon to be watched – varying with each company, a station on the path to, if not somewhere better, then at least somewhere else.
