Incorporating environmental, social and governance (ESG) principles into business practices and investment decisions has become increasingly popular. Companies ascribe to ESG principles due to pressure from both consumers and shareholders. Many in corporate leadership also support ESG. Even the CEO of Apple, Tom Cook, claims that “companies have a responsibility to use their innovation and agility to lead on the climate crisis.” Is this true? 

“Companies have a responsibility to use their innovation and agility to lead on the climate crisis.”
Tim Cook, CEO of Apple

Selectively true. True only in context. Partly make believe.

Companies can and should think about how their businesses affect our country and our world. And they are better positioned, thanks to the flexibility of the free market, to make changes than bureaucratically bloated governments are. But while free to do so, they do not have the responsibility to change their decisions in order to focus on addressing climate change or any other cause. Companies are in the business of making money and they should not try to score political points or virtue signal to the detriment of their fiduciary responsibilities. And even worse, companies shouldn’t embrace policies that virtue signal without making a meaningful change. We should celebrate that many companies are not abandoning their responsibilities to shareholders and investors to embrace political causes currently en vogue. 

In the case of Tim Cook’s comments, context is important: Many companies like Apple support net-zero climate policies. This is what he means when he says companies should address the climate crisis. And Apple has made progress toward that goal: they’ve cut their emissions by 40% in the last five years and are on the road to meet their goal of every Apple having a net-zero impact. But not all companies enjoy the massive popularity that Apple does and the general push towards embracing ESG will do little to address issues like climate change. And while Apple may be embracing net-zero policies, they continue to work alongside repressive governments like China to further their bottom line. So it seems that when it comes to corporate social responsibility, Apple is being selective. 

For many companies, incorporating ESG values is simply selling a new product: the good feelings that come along with the belief that one is, by funding certain companies and not others, making the world a better place, even when in reality it is just making the world more politicized and divisive. 

Incorporating ESG principles into business practice can be a good and admirable approach. Every firm, from Apple to Hobby Lobby, should be free to do business in accordance with a set of values and principles. Investment firms, too, should have this freedom. 

Companies, and investors, should not use ESG concepts to simply score political points or virtue signal that they are a part of a new “woke elite” in the U.S., but should carefully consider how their choices and business practices ultimately foster a prosperous, free and fair society.  

To learn more about ESG, read January’s policy focus “Environment, Social, and Governance (ESG): A Primer.