What Is the Purpose of ESG? Who Should Decide?

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.” In this chapter, we advocate the second type of strategies, 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, we consider the question of who has the legal, political, and moral authority to decide on ESG purpose. We argue 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 purpose. We then discuss the challenges posed by what we call the Political Liberal Problem (PLP), which seems to suggest that corporate leaders should refrain from promoting a particular view of the good on behalf of their constituents or stakeholders. We contend 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.