Another one of those ideas that just doesn't work
No, this wouldn’t do what is claimed:
All businesses should be forced to embrace the environmental, social and governance (ESG) movement, New Labour’s favourite think tank has argued in an attack on the profit motive.
A report by Demos, viewed as a key source of Labour policy in the Blair years, claimed that changing company law to “insert purpose into the heart of directors’ duties” would add £149bn to the economy.
If business were forced to do everything that is currently trendy then the world would be a better place. Well, by the standards of those who support what is trendy that’s no doubt true. But the claim is more than that. It is that businesses which do this grow faster, are more profitable, do better.
Just chew on that for a moment. The shareholder interest is in businesses which grow faster, are more profitable, do better. Therefore, a system of company law which prioritises the shareholder interest already forces companies to do those things which make the company grow faster, be more profitable, do better.
It is only if all of these other things - the stakeholder interests, the promotion of diversity, recycling and who knows, reparations for slavery and whatever - do not promote growth, profitability, better, is it necessary to have a law forcing a company to consider these things.
The very insistence that there outta be a law ‘baht it is all the proof we need that those promises of growth, profits, better, are not true. In fact, the insistence upon the forcing is an insistence upon shareholder interests being subsumed into what is trendy, with less growth, lower profits and not better.
That is, the new suggested law would make us all poorer. And why would we want to do that?
This is also a more general feature of such desires for new laws, new forcings. We often are presented with evidence - well claims, at least - that this or that will make the world a better place. Often enough backed by how it would be better for suppliers, producers, if these things were done. To which the correct response is, well, thanks for the information. If the claims are true then in the face of the new evidence people will adopt the new ways. But the moment there’s an insistence upon forcing this new and better way we gain the evidence that not even those promoting it do believe it’s better. For, they’re not willing to allow the betterness to be evident, even after their explanation, they’re insisting upon the forcing. And you don’t have to force people to make themselves better off. Explain to them how, maybe yes, but force, no.
That very insistence upon forcing ESG on all is all the proof we require to know that even Demos thinks ESG is a crock. So, err, why would we do that?