ESG Explained – The Business of Virtue
ESG — Environmental, Social, and Governance — was sold as the fix for capitalism’s worst abuses. Companies would be judged not just on profit, but on their impact on the planet and society. It sounded like accountability had finally arrived.
But ESG quickly became the business of virtue. Corporations discovered that ticking boxes and publishing glossy reports was cheaper than real reform. Diversity slogans, climate pledges, and governance buzzwords became tools to impress investors and regulators — while business as usual carried on behind the curtain.
What was meant to hold corporations to account became a shield for them instead.
Table of contents
The three pillars of ESG
Let’s start with the official breakdown:
- Environmental: how a company impacts the planet — carbon emissions, energy use, waste, and sustainability targets.
- Social: how it treats employees, customers, and communities — everything from diversity initiatives to supply chain ethics.
- Governance: how the business is run — transparency, executive pay, shareholder rights, and board structures.
Add these together and you get a score, supposedly showing how “good” or “bad” a company is. Investors then use these scores to decide where to put money. Simple enough, right?
The critique: what ESG really does
Here’s where it becomes interesting. ESG isn’t just about measuring responsibility — it’s about control.
Instead of parliaments and voters deciding on issues like climate change, diversity, or human rights, ESG hands that power to a handful of asset managers and rating agencies. BlackRock, Vanguard, and State Street — firms managing trillions — use ESG criteria to steer companies into making political commitments that no one ever voted for.
In short, ESG becomes a backdoor way of governing society through financial pressure.
Why ESG looks like a new religion
In his book Capitalist Punishment, Vivek Ramaswamy calls it a kind of “secular faith” — a belief system where certain causes (net zero targets, diversity quotas, governance rules) are treated as unquestionable. Companies that comply are rewarded with capital. Those that don’t risk being starved of investment.
The numbers and scores look objective, but they function more like rituals. They signal obedience to the creed, not real-world change.
The contradictions
Here’s the problem: ESG promises that you can have it all. Companies can keep growing, shareholders can keep earning, and society will magically improve. But reality rarely works that way.
Take oil companies. Many still make the bulk of their profits from drilling, yet they boost their ESG scores by funding small renewable projects. Or tech giants: they get high ESG ratings for progressive office policies, while their supply chains exploit cheap labour and strip natural resources.
ESG is meant to hold companies accountable — but often it lets them off the hook with symbolic gestures.
And here’s the kicker: ESG rules mostly shackle Western firms. In BRICS countries — Brazil, Russia, India, China, South Africa — the same financial giants invest freely without the ESG red tape. The result? Western businesses hobble themselves with box-ticking while competitors abroad carry on unbothered.
Who benefits?
The answer isn’t hard:
- Asset managers gain power by dictating corporate policy.
- Corporations gain reputational cover.
- Consultants gain endless work auditing and advising on ESG.
- Investors gain a comforting story about “ethical returns”.
Ordinary citizens? They gain little influence, even though the issues ESG reshapes — from energy policy to cultural debates — affect them most.
The backlash
Some politicians now push back, calling ESG “woke capitalism”. States in the US have even banned ESG criteria in public funds, arguing that it forces progressive politics onto businesses.
This reveals the paradox: ESG is sold as neutral, but it is inherently political. It takes sides — not through debate, but through the power of money.
Should you take ESG seriously?
Yes — but not as a saviour. ESG matters because it controls capital flows and shapes corporate behaviour. But to assume it’s purely about saving the world is to miss the point. It’s a tool of influence, wielded by financial elites, with little accountability to voters.
From Accountability to Alibi
ESG promised to hold corporations accountable. In practice, it gave them an alibi.
The scores, reports, and glossy pledges don’t reform capitalism — they rebrand it. Asset managers play governments, consultants cash in, and corporations wrap themselves in virtue while carrying on as usual.
The genius of ESG isn’t saving the planet or society. It’s convincing us that branding is progress and spreadsheets are morality.
👉 For a closer look at how ESG principles filter down into small business compliance, see our explainer: B Corp Certification Explained – Corporate Trap for Small Business.
👉 For the bigger picture of how corporations gained their power, visit The Power of Business & Corporations Explainer Hub.
👉 Want the full story on how virtue became a business model? Visit our ESG Explainer Hub to see how finance, branding, and compliance turned morality into a market.
FAQ
Q1. What does ESG stand for?
ESG stands for Environmental, Social, and Governance. It is a framework used to rate how responsible a company is in areas like sustainability, diversity, and corporate ethics.
Q2. Why is ESG important?
Supporters say ESG helps investors choose responsible businesses. Critics argue it often works as a PR shield, letting companies look ethical without changing harmful practices.
Q3. Who controls ESG?
Large asset managers, banks, and rating agencies dominate ESG. They set the criteria and decide which companies deserve investment, often without democratic oversight.
Q4. Why is ESG controversial?
ESG mixes finance with politics. It pushes social and environmental goals through investment policies, leading some to call it “woke capitalism”. Others see it as symbolic rather than real change.
Q5. Does ESG really help the environment or society?
Results are questionable. Many firms score well by making token pledges, while continuing business as usual. Real progress often takes a back seat to glossy reports and ratings.
Q6. What is the main criticism of ESG?
That it bypasses voters and uses financial power to impose values on society. Instead of open debate, unelected elites decide what counts as “responsible”.
