Dirty little secret of ESG/CSR is that most forceful advocates of good corporate behaviour are implicitly most ardent supporters of putting screws to consumers, writes William Watson in the Financial Post. Below is an excerpt from the article, which can be read in full here.
By William Watson, February 22, 2021
It used to be businesses made widgets. If they made good widgets and sold them at a fair price, that was considered their social contribution. Yes, they’d make a profit from the widget trade — they’d have to if they were going to stay in it for the long run — but, if markets were competitive, they’d only make enough profit to keep them supplied in capital and entrepreneurship.
But now, in addition to providing whatever good or service is their specialty, businesses are expected to make a “social contribution,” in the form of who knows what good deeds — it seems almost anything will do — whether connected or not with whatever widgets the firm is in the business of providing. The overall rubric for such concerns is ESG/CSR (Environmental, Social, Governance/Corporate Social Responsibility).
So the question arises: assuming markets are still competitive, where does the money come from to finance these add-on activities and the new vice-presidents in charge of this or that good cause? In the old way of doing things, widget-makers used all the funds they could raise to make widgets, including better widgets as time went by. But now they’re doing widgets + ESG/CSR. Who pays for that?
One possibility is that it’s all self-financing, that all these activities are actually profitable for the company. They raise the company’s profile, which leads to greater public affection for the company’s widgets as consumers decide they’re not just buying the widgets, they’re buying the widgets plus the good things the company does.