What Is the Purpose of ESG?

doi:10.1017/9781009594912.004

3 - What Is the Purpose of ESG?

Who Should Decide?

Published online by Cambridge University Press: 27 December 2025

Eric W. Orts and

Edited by

Andreas Rasche and

Valentina Gentile: Affiliation:
Luiss University of Rome
Eric W. Orts: Affiliation:
Wharton School, University of Pennsylvania
Andreas Rasche: Affiliation:
Copenhagen Business School
Alan Strudler: Affiliation:
Wharton School, University of Pennsylvania

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Summary

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.

Keywords

ESG corporate purposes pluralism sustainability moral judgment

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Type: Chapter
Information: The Ethics of ESG
Critically Assessing the Environmental, Social and Governance Movement
, pp. 75 - 110

DOI: https://doi.org/10.1017/9781009594912.004 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2026

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