Executives switch to alternatives like ‘responsible business’ to describe corporate initiatives
By Chip Cutter and Emily Glazer of The WSJ. Excerpts:
"Many companies no longer utter these three letters: E-S-G.
Following years of simmering investor backlash, political pressure and legal threats over environmental, social and governance efforts, a number of business leaders are now making a conscious effort to avoid the once widely used acronym for such initiatives.
On earnings calls, many chief executives now employ new approaches. Some companies, including Coca-Cola, are rebranding corporate reports and committees, stripping ESG from titles. Advisers are coaching executives on alternative ways to describe their efforts, proposing new terms like “responsible business.” On Wall Street, meanwhile, some firms are closing once-popular ESG funds as interest fades.
The shift in messaging reflects a reality: “ESG is complicated,” said Daryl Brewster, a former Kraft Foods and Nabisco executive who now heads Chief Executives for Corporate Purpose"
"Many CEOs stress that they continue to follow sustainability commitments made years ago—even if they are no longer talking about them as often publicly."
"In lieu of lofty pronouncements, advisers are telling CEOs to be more precise and to set goals that can be achieved. Saying as little as possible is recommended."
"Brad Karp . . . who advises a number of CEOs. [said] “Most companies are moving forward operationally with their ESG programs, but not publicly touting them, or describing them in different ways.”"
"SG became even more politicized following a spat in 2022 between Disney and Florida Gov. Ron DeSantis. That opened the door to sharp commentary on ESG efforts broadly by more than a dozen other state officials and a pullback by some asset managers."
"In the fourth quarter of 2021, 155 companies in the S&P 500 mentioned ESG initiatives; by the second quarter of 2023, that had fallen to 61 mentions."
"Corporate diversity programs, often part of an ESG agenda, face new scrutiny following a Supreme Court decision on affirmative action and legal challenges from largely conservative groups."
"The fiercest critics of ESG say they welcome less discussion of it. “If this trend is decreasing, these CEOs must have realized that this puts them at greater legal risk and costs them customers,” said Texas Attorney General Ken Paxton, who has pushed back against ESG policies, in a statement."
Here is an excerpt from The Wealth of Nations found at The Library of Economics and Liberty.
"Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society."
"But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."
So Adam Smith did not think much of the idea of a business intentionally operating for the common good.
In 1970, Milton Friedman said stockholders interests. See A Friedman doctrine‐- The Social Responsibility Of Business Is to Increase Its Profits.
In fact, he thought it would be harmful if CEOs worked for stakeholders
interests, that is, tried tried make their companies act based on
social responsibility. (One of my related posts below, "Should CEOs serve stockholders' interests or stakeholders' interests?" has some quotes from the Friedman article).
Related posts:
Wall Street’s ESG Craze Is Fading (2023)
ESG Investing Can Do Good or Do Well, but Don’t Expect Both (2022)
The hidden costs of corporate social responsibility (2021)
Why the Sustainable Investment Craze Is Flawed (2020)
C.E.O.s Are Qualified to Make Profits, Not Lead Society (2020)
ESG Investing in the Pandemic Shows Power of Luck (2020)
ESG Investing Shines in Market Turmoil, With Help From Big Tech: The strength of socially responsible funds suggests they have staying power; ‘ESG is not a fad’ (2020)
Funds that market themselves as sustainable investments aren’t necessarily focused on companies that fight climate change, develop wind turbines or promote diverse boards (2020)
ESG Funds Draw SEC Scrutiny (companies that pursue strategies to address environmental, social or governance challenges) (2019)
Is it a retailer’s job to keep shoppers from their vices? (or Adam Smith vs. CVS pharmacy) (2017)
Can You Find Virtue by Investing in Vice? (2006)
What if companies pledge to adhere to social and environmental accountability guidelines? (2015)
Conspicuous Consumption, Conspicuous Virtue, Thorstein Veblen (and Adam Smith, too!) (2007)
Data show that socially responsible investments can outperform the S&P 500 index (2017)
Is altruism a result of selfishness? (2017)
Do you have to be selfish to make more money? (2018)
Does collective self-deception mask selfish behavior? (2018)
Why Doing Good Makes It Easier to Be Bad (2019)
Businesses intentionally display their social and environmental performance in addition to their financial performance to stakeholders (2019)
Should you invest according to religious guidelines? (2017)
Companies Adapt to Activism by Athletes (2021)
For a humorous view of this issue see
A Snickers a Day Keeps the Doctor Away: Why does CVS want to make my migraine cures hard to find? by Joseph C. Sternberg of the WSJ (2017)
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