Let a Thousand ESG Certifiers Bloom

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The business world has recently seen a dramatic increase in the vogue for “socially responsible” rules of behavior. Companies are encouraged to make environmental, social, and governance (ESG) concerns central to their operations, tracking and disclosing, for example, how many women sit on their boards of directors, how many tons of greenhouse gases they emit, and how many days of vacation they award to employees. Finance-consulting firm Opimas earlier this year estimated that the annual market for ESG ratings and analysis alone will reach $1 billion by 2021.

Conservatives have begun to take notice of this trend as well. Once the province of environmentalists, diversity activists, and organized labor, ESG investing and its various “corporate social responsibility” variants have elicited a rapidly growing volume of serious commentary from right-of-center experts and commentators. Recently, National Review’s own Ramesh Ponnuru wrote a particularly interesting piece that provides a useful framing for the opportunities and threats that conservatives will be increasingly confronted with on this issue.

Ramesh takes a useful look at corporate behavior through the lens of free-market hero Milton Friedman’s famous defense of profit-making. Friedman, notorious among his critics for insisting that “the [only] social responsibility of business is to increase its profits,” has led some defenders of the market economy to assume that every single decision any corporation manager makes must be solely focused on immediate profits to be legitimate. Anything less, the Friedman-ite imperative supposedly insists, is to give in to Bolshevism.

That’s obviously not true, of course, as well over a century of corporate charity and attractive employee benefits from the nation’s most successful corporations demonstrates. Even hard-nosed corporate titans known for running tight ships never shaved every possible cent off of every transaction — especially not when, by being more generous, they built useful relationships and long-term goodwill with the partners they needed to be successful. Even beyond that sort of enlightened self-interest, however, many founders, CEOs, and boards of directors have invested resources and taken public positions on important issues that were dictated by ethical concerns rather than simply financial returns.

Read the full piece at National Review.