In this chapter argues that the ethics of Environmental, Social, and Governance (ESG) must be understood as inseparable from the modes of responsibilization that have preceded it, which refers to developments in business ethics, Corporate Social Responsibility (CSR) and corporate sustainability. Focusing primarily on ESG as a heading for corporate responsibility policies and practices within the context of EU regulation, the chapter considers ESG as a supplement to prior conceptions rather than a stand–alone concept. After outlining the foundational, societal and environmental accomplishments of the three preceding constructs, the chapter argues that the defining, supplementary feature of ESG is that it is informational and that it has emerged as a concept that binds together the information needs of investors and other stakeholders, corporate disclosures, and government regulation. Thus, the ethics of ESG must be understood in terms of its ability to put greater and more obligatory demands on corporate responsibility through standardized reporting, standardized methods, and standardized data and performance measures.

The notion of corporate success lies at the heart of directors’ duties in many corporate laws. Freedom of incorporation conferred considerable discretion on companies to determine the nature of their success and create financial value for their investors, subject to conforming with laws and regulation. However, this increasingly came into conflict with the interests of other stakeholders, in particular employees, supply chains, the environment and societies, and addressing the problem through specific regulatory rules proved inadequate to the task. This raises questions about the nature of the financial incentives that drive and resource corporate activities, namely profits, and the need to align these with the role of business in solving not creating problems for others. In the absence of such an alignment then markets fail and competition can intensify rather diminish the failures. There are three aspects to addressing the problem. The first is the use of corporate law to require companies to consider the interests of stakeholders other than their shareholders. This is already a feature of many corporate laws. The second is corporate governance codes that promote corporate purposes of profiting from solving not causing problems for others. This too is already a feature of some countries’ corporate governance arrangements. The third is the adoption of international standards and firm specific measures of performance that promote accounting and reporting on corporate social and environmental benefits and detriments. These are in the process of being established but need to be more closely related to accounting for specific firm measures of performance that ensure profits derive from solving not creating problems for others.

Critics of environmental, social, and governance (ESG) investment have argued that business managers should be concerned with maximizing profits rather than getting involved in politics. Defenders of ESG have responded by arguing that investors are free to put their money wherever they like, and so ESG investment practices represent an ordinary exercise of commercial freedom. This simple response glosses over an important complication, which is that the relationship between investors and business managers is mediated by a set of agency relationships, between investors and fund managers, and between fund managers and corporate boards. These agency relations are not completely open-ended but rather are subject to constraints. A question arises about whether any of the political demands associated with ESG investment practices exceed the proper limits of these agency relationships. This chapter assesses this question in order to determine whether ESG leads agents to violate any duties arising from their relations to principals.

Firms operating in environmentally vulnerable contexts will inevitably face difficult cases where long-term profits clash with environmental values. This remains true even with enlightened management and strong regulation. Yet, business models fail to acknowledge this inconvenient truth. This chapter explains why current business models reach an "outer boundary" in their ability to incorporate intrinsic values such as environmental integrity. It introduces two key concepts: the efficiency model and the value gap. Efficiency models use terminology designed either to optimize the allocation of scarce resources toward measurable future goals or to explain the optimal achievement of past goals. A value gap arises when ideal social corporate action diverges from ideally efficient corporate action. The presence of large, recurring value gaps in extractive industries signals the need for fundamental changes – both in corporate decision-making and in the business models that shape it.

Today many have predicted the death of environmental, social, and governance (ESG). Alas, even amidst such predictions, there remains considerable confusion about ESG’s meaning. Some view ESG as synonymous with corporate social responsibility or stakeholderism, others view ESG as a mechanism for assessing risks; some characterize ESG as political, others view ESG as inextricably aligned with business goals. The lack of consensus around ESG’s meaning makes assessing its demise complex. On the one hand, any future version of ESG will be incompatible with alternative – and strongly held – conceptions of ESG, confirming predictions of ESG’s demise while ensuring that ESG’s future will be plagued by controversy and discontent. Nonetheless, there is a version of ESG that is both sustainable because it focuses on economic risks and opportunities, and also beneficial because it may move the needle on improving shareholder value while positively impacting critical social issues.

This chapter argues that fundamental problems limit ESG’s potential benefits for society and can be traced back to ESG’s initial conceptualization in the early 2000s in the advent of the United Nation’s Global Compact initiative. ESG from the very beginning has been built, on the one hand, on the premise of promoting institutional investors’ interests at the expense of critical stakeholders’ concerns and, on the other hand, on quite idealistic assumptions about the proper functioning of markets and states. Drawing from the theory of deliberative democracy, this chapter develops suggestions of how ESG could become more beneficial to people and planet by making the ESG investing system, understood as an organized set of actors and procedures, more inclusive, argumentative, and consequential with a view on societal rather than investors’ benefits. The chapter proposes that incorporating deliberation in the governance structure of rating agencies specifically is one way to do so.

The incorporation of environmental, social, and governance (ESG) criteria into corporate strategies has become a prominent feature of the modern business landscape. As part of this movement, there is an increasing trend toward the monetary valuation of sustainability impacts. While the intention behind assigning monetary values to ESG-related impacts may be to provide a quantifiable basis for decision-making, it raises profound ethical concerns. This chapter explores the ethical dilemmas surrounding the monetary valuation of sustainability impacts, especially within the broader context of ESG performance measurement, in three problem dimensions: (1) the commodification of life and nature, (2) unequal power dynamics and neocolonial features of ESG and valuation, and (3) the marginalization of unquantifiable impacts and intrinsic values. The chapter ends by exploring the moral hazards that come with ignoring these ethical problems, and how corporate responsibility and accountability mechanisms can take these into account.

Unlike previous approaches to sustainable investing, focused primarily on excluding companies from problematic sectors such as tobacco, the aim of environmental, social, and governance (ESG) integration is to incorporate the assessment of ESG characteristics within mainstream investment analysis. This aim has given rise to claims that ESG integration is not about value judgments but focuses only on neutral risk–return calculations. Against such framing, this chapter argue that various ethical concerns inevitably arise when considering the quantification process underlying the generation of data used in ESG integration approaches. Drawing on the literature related to quantification and commensuration, the chapter identifies four areas in which ethical concerns can arise: (1) the strong focus on financial materiality; (2) the aggregation of disparate and often incommensurable ESG data; (3) ESG measurement problems; and (4) the treatment of ESG data as a private good. The chapter shows how quantification processes in these four areas give cause for ethical concerns related to which aspects of sustainability are rendered visible or invisible; how power relations between different field actors are structured by quantification; and which organizations have access to the opportunities that prevailing processes of quantification afford.

Despite its explosive growth, there is considerable disagreement about the fundamental purpose of ESG. Two types of policies associated with ESG metrics and mechanisms give rise to at least two opposing views of their purpose: “profit-maximizing policies” versus “normative sustainable policies.” This chapter advocates the second type of strategy, arguing that corporate leaders who embrace ESG should be open to adopting a purpose that may undermine or even intentionally sacrifice shareholder wealth. In defending this view, the chapter considers the question of who has the legal, political, and moral authority to decide on ESG purposes. The chapter argues that business leaders already retain a great deal of legal autonomy in deciding whether or not to adopt some version of an ESG purpose as part of the firm's overall purposes. The chapter then discusses the challenges posed by what the authors call the Political Liberal Problem, which seems to suggest that corporate leaders should refrain from promoting a particular view of the good on behalf of their constituents or stakeholders. The chapter contends that a normative sustainable view of ESG purpose depends crucially on the ability to defend the relatively autonomous moral judgment of business leaders in setting ESG strategy.

This introduction situates the volume within contemporary debates surrounding Environmental, Social, and Governance (ESG). It traces the historical evolution of the ESG movement—originally conceived as a voluntary form of regulation—from its origins in the early 2000s, associated with the launch of the UN’s Who Cares Wins initiative, to current developments marked by political backlash in the United States and regulatory consolidation in Europe. The authors argue that the widespread tendency to reduce ESG to issues of financial materiality—a view they describe as “mainstream ESG”—risks undermining its ethical and social foundations. Against this backdrop, the book advances the claim that ESG cannot be meaningfully developed without serious ethical reflection. The second part of the introduction presents the chapters included in this collection along three main lines: debates about the purpose(s) of ESG; discussions concerning the tensions between profitability and sustainability; and analyses of ESG as a form of voluntary or mandatory disclosure.