ALL businesses will soon be required to follow the UN’s Environmental, Social and Governance (ESG) standards. These are intended to measure the contribution of businesses to environmental and social issues, as well as whether their operations fulfil the requirement of equality for all minority groups, real or imaginary. In Europe, under the new EU Taxonomy, companies are forced to submit complex and detailed ‘sustainability’ reports. The requirements apply not only to the companies; they also have to ensure that their suppliers meet them. Initially, these reporting requirements will only apply to medium to larger firms, but it won’t be long before smaller businesses and even the self-employed will have to comply as well. As the ‘conspiracy theorists’ have it, our homes will be next.
The implementation of ESG standards is a lucrative opportunity for consulting firms specialising in advising executives and company owners on how to best to comply, or pretend to comply, with the standards, gathering data, and writing thick reports, often published on glossy paper and shelved unread until they end up in landfills.
Recently it was reported that Tesla, one of those at the forefront of the transition to green energy, scored only 37 out of 100 points in S&P Global’s assessment of its performance in the aforementioned categories. It seems to weigh heavily against the company that it is mostly controlled by white males, and its executives have not spent much time or resources supporting various activist groups, or selecting suppliers based on their location in developing countries rather than the quality of their products.
As more and more investment funds demand that the companies they invest in meet the standards, and banks also make such requirements to an increasing extent, those who fail the test may face difficulties with financing.
However, cigarette maker Philip Morris won’t have to worry about this. It scored 84 out of 100 in the latest assessment of its contribution to improving the world. This performance is not based on the company’s products, which are the main cause of untimely deaths in the United States and cut short more lives than alcohol, drugs, and traffic accidents combined. The carbon footprint of the industry is significant, and its overall negative environmental impact looms large. Tobacco farming is mostly carried out in developing countries, causing deforestation and erosion.
But none of this matters when it comes to the ‘positive impact on society, sustainability, and equality’ as measured by ESG standards. The company claims it ‘empowers’ female tobacco farmers, fights against ‘systemic racism’ (conveniently forgetting that black Americans are proportionally most affected by smoking-related diseases), and emphasises the importance of combating ‘microaggression’ and hiring from diverse backgrounds.
The ESG standards are a serious threat to the freedom of expression. To meet the requirements, companies must control ‘misinformation’ and ‘hate speech’ within their boundaries. Media outlets and social media companies that aim to meet the criteria must suppress discourse that does not align with the approved views of the authorities. The new action plan of the European Union against ‘misinformation’ is justified, among other things, by the ESG standards, but it implies that social and media platforms must silence opinions not favoured by the authorities.
In the early days of the corporate social responsibility movement, it mattered what the companies actually did. Tobacco companies were not popular among young MBA graduates at the turn of the century, and their interview invitations were usually turned down. Times change. Big tobacco, alcohol producers, and for that matter manufacturers of cluster bombs, poison gas and torture devices now have nothing to worry about because ESG comes to their rescue. Instead of real social responsibility, glossy reports are now all that’s needed. The real impact of companies’ operations is of no importance, as long as the indulgence certificates are purchased at list price. Pretence is all that matters.