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.

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.

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.

Chapter 2 explores the drivers behind corporate governing, spanning internal organizational dynamics, and broader societal pressures. Within firms, Millennial and Gen Z employees have emerged as a force for change, leveraging social media to advocate for prosocial commitments and ESG priorities. Investors, increasingly treating ESG factors as financially material, have further reshaped strategic expectations. These pressures have begun to challenge shareholder primacy and expand the perceived boundaries of corporate purpose. This chapter also considers the influence of corporate political spending and lobbying in shaping public positioning. In Section B, attention turns to the cultural and political shifts of the mid-to-late 2010s. Movements like Black Lives Matter, #MeToo, the Climate Movement, and March for Our Lives heightened demands for corporate engagement, as did high-profile federal policies under the first Trump administration. Faced with polarization, institutional dysfunction, and declining government responsiveness, many companies stepped into policy vacuums – assuming roles once thought to belong solely to public institutions.

Various kinds of sustainable finance have grown rapidly after the 2015 Paris Agreement. But whether this allegedly “sustainable” way of investing can actually fulfill the crucial task of facilitating the mitigation of climate change depends very much on the concrete business schemes and investment practices that are adopted. This chapter conceptualizes ESG (environmental, social, and governance) as the infrastructure that underpins “sustainable” investing. It argues that ESG constitutes a particular set of market devices – data, ratings, and indices – that define the logic, structure, and outcomes of sustainable investing. Having historically emerged as market-driven private standards for governing how to invest “sustainably,” ESG investing was, as this chapter demonstrates, guided by the ways in which a small set of private actors defines its infrastructural arrangements. Consequently, a preference for a market-friendly and one-sided conception of sustainability exclusively focused on risks to investors’ portfolios (“single materiality”) was implemented by the actors that defined de facto standards. This setup of ESG creates what can be called an “infrastructural lock-in,” whereby this particular conception of “sustainable” investing – which is not utilizing all available transmission mechanisms to actively advance sustainability – becomes the baseline and the common standard for “sustainable” finance.

In the aftermath of the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, several corporations signaled their support for reproductive rights by announcing expanded abortion care coverage and/or travel stipends for employees who are forced to travel out of state to receive care, including abortion care. While such moves may be celebrated and recognized as a commitment to pro-choice politics, these decisions require scrutiny and suspicion. This article details why.

Part I of this paper will discuss the corporate response to Dobbs. It will discuss the type of benefits that corporations offered, and the class of employees these benefits were offered to (for instance, “independent contractors” were mostly excluded from availing of these benefits). Part II will discuss the movement for reproductive rights, some of the harms it reinforced, and the criticisms it received from the Reproductive Justice movement. Against this backdrop, Part III will discuss the possible intentions behind corporations conferring these benefits, including those related to staff retention, microeconomic logics, and DEI efforts. It will review them against large corporations’ histories of (not) providing reproductive supports, including a living wage, paid leave, sick leave, and childcare. It will also analyze some of the evidence in the public sphere that shows the roles some of these large corporations have played in supporting antiabortion agendas and politicians. Part IV will discuss the long-term harms that this new crop of workplace policies and benefits might create. Mainly, it will discuss how the provision of abortion care without other reproductive supports reemphasizes a reproductive rights approach despite its criticisms, which were highlighted by the Reproductive Justice movement. For instance, this section will discuss the expanding role corporations are assuming in providing healthcare, and how that may lead to the exclusion of certain historically marginalized classes of workers and people. It will also discuss the impact of these policies on the deprioritization of certain types of care, which have been overlooked for decades, including gender-affirming care and fertility treatments. Part V will suggest a few steps corporations can take to mitigate the harm created by Dobbs.

We introduce a novel sustainable capital instrument: the skin-in-the-game bond. With features inspired by contingent convertibles (CoCos), this bond is an alternative for the green, social, sustainability and sustainability-linked bonds available on the market. A skin-in-the-game bond is linked to the performance of a benchmark that relates to the broad concept of sustainability in at least one of its pillars, being the environment (E), society (S) or corporate governance (G). When the benchmark hits a preset trigger level, (part of) the bond’s face value is withheld and directed into a government-controlled fund by the issuer. The skin-in-the-game bond offers a higher yield to investors than a standard corporate bond, in order to compensate for the risk of losing out on (part of) the investment. Both issuer and investor have skin-in-the-game; the embedded financial penalty incentivizes the preservation of a favourable benchmark value. In this work, we elaborate on the general concept of a skin-in-the-game bond, as well as on a tailored valuation model, illustrated by two examples: the ESG and nuclear skin-in-the-game bonds.

Chapter 22 analyzes whether and to what extent sustainability can be integrated into EU fit and proper testing for members of the management body of banks, insurers and investment companies. It concludes that (prospective) members should indeed have sufficient knowledge, skills and expertise in sustainability, both as a collective and individually. The extent to which this knowledge is required depends on the institution and the specific role and responsibilities of the director. However, every director must have basic sustainability knowledge and expertise to adequately perform his or her role. It is argued that EU supervisors, including the ECB, should use the fit and proper test, or at least engage in serious dialogue with financial institutions, to ensure that there is sufficient ESG expertise in the management body. This is well within their mandate since core prudential values such as the solidity of the institution and stability of the financial sector may be at stake. To ensure a level playing field within the EU, it is recommended that EU regulators set out more specific requirements regarding ESG expertise in Level 1 or 2 legislation. This would also provide greater legal certainty for financial institutions and (proposed) members of the management body.

In this chapter, I analyse the main trade-offs between the economic value of the firm and its social value, exploring how they are solved through corporate governance and regulatory constraints. To begin with, I show how firms generate social value while also increasing their long-term value under the enlightened shareholder value approach. Thanks to organizational and technological innovation, firms are led to change their business models and organization to enhance environmental and social sustainability and increase long-term profitability. In addition, managers promote their firms’ sustainability in compliance with ethical standards which are part of corporate culture. In similar situations, generating social value may determine pure costs to the enterprise. I argue therefore that the perspective of instrumental stakeholderism appears too narrow, for situations exist where non-economic values are also relevant to the firm. The importance of ethics is especially underlined by CSR and stakeholder theory. Moreover, management studies emphasize the role of corporate governance and organizational theory in the promotion of social value. The board of directors should identify the ethical and cultural values of the firm and monitor their application at all levels. In addition, organizational purpose plays a fundamental role for the ‘intrinsic’ motivation of people in corporations. The international soft law on corporate due diligence further contributes to the design of corporate purpose and to the motivation of managers and employees. Once corporate due diligence is recognized by European hard law through the proposed Directive, specific obligations will arise for companies which will impact their governance and could become a source of civil liability. As a result, the corporate purpose orientation to sustainability will be reinforced by the regulation of environmental and human rights externalities and by the due diligence obligations deriving from it.

Toward Sustainability and Responsible Organizations addresses the purpose of business and social and environmental sustainability in the complex context of working across boundaries. State capitalism, shareholder capitalism, and stakeholder capitalism are compared. The chronological development of the concepts of sustainability and corporate responsibility is presented. Major corporate sustainability frameworks are identified. The United Nations’ 17 SDG’s, the Global Reporting Initiative, and the sustainable value framework are discussed. The relationship between ESG and financial performance is addressed. Involving and communicating with internal and external stakeholders are important aspects of navigating paradoxes associated with sustainable transformation. The common stakeholder–shareholder paradoxical tension that exists in sustainability management is discussed with an example.

Shareholder engagement is pivotal in corporate governance, evolving beyond formal resolutions to impact business decisions. This chapter unveils the typically undisclosed dynamics of board-shareholder engagement through a survey of 171 SEC-registered corporations, targeting corporate secretaries, general counsel, and investor relations officers. The survey was complemented by a review of the disclosure on shareholder voting and engagement included in proxy statements filed by Russell 3000 companies during the 2018–2022 meeting seasons. Larger and mid-sized companies more frequently engage than smaller organizations. Engagement, often with major asset managers, can take a confrontational turn, particularly with hedge funds at smaller firms. Topics include executive incentive plans, ESG metrics, GHG emission reduction, workforce diversity, pay equity, and political spending. The study reveals that engagement significantly influences corporate practices, leading to changes, withdrawal of proposals, alterations in proxy votes, and the inclusion of engaged shareholder-nominated directors in management slates.

Capital market, regulatory and technological developments have created investor appetite and capacity for engagement with public companies. Our paper explores key engagement mechanisms and techniques employed by public company shareholders. First, shareholder-company engagement is a multi-dimensional, evolving phenomenon. Shareholders use a range of techniques including shareholder meetings, behind-the-scenes interactions, public campaigns, and online technologies. Second, shareholders mix and match different engagement techniques to leverage governance influence. Third, shareholders increasingly undertake their engagement activities collectively, highlighting growing capacity to overcome traditional collective action challenges. Finally, the shareholder meeting remains an important engagement mechanism. Its formal, in-person and public nature sets it apart from other mechanisms and gives it unique potential as a forum for scrutiny and accountability. Although low attendance rates indicate that shareholders do not routinely utilise the meeting to maximum effect, it is better conceived as having contingent significance because its potential as an accountability mechanism can prove critical when a company experiences serious governance problems.