Whether they’re true believers or sinister liars, some American politicians are advocating a return to business practices that risk doing harm to the country and world.

Their argument is that there’s a vague, loosely organized plot to impose things called “woke” on the virtuous freedoms of their constituents. It’s an invented strawman that can include people, policies, or ideas that they don’t like, depending on the latest news cycle and the opportunity to score points.

When they apply it to capitalism, the only capital they’re talking about is their political fortunes.

The good old days of broke capitalism.

Most recently, they’ve attacked ESG investing. ESG stands for “Environmental, Social, and Governance,” and its underlying premise is that companies should include the costs and benefits of activities that previously were left off their balance sheets.

You see, back in the day, a company could dump pollution into the environment and not have to pay for its cleanup or effects. Hiring policies could exacerbate poverty and the economic health of entire communities, yet companies could shrug and outsource those costs to public services. Employees could be insulted or abused but had no recourse other than silence. A business might be well on its way to blowing up the planet in a decade (like Big Oil has been for, well, decades) but its governing leadership could consciously choose to turn a blind eye to those outcomes, too.

The impacts of such ESG-related decisions were conveniently considered “externalities,” and companies felt no obligation to even acknowledge them. The prevailing wisdom was that they only reported to their shareholders. If those co-owners didn’t like something, they’d hear about it from them.

Conveniently, there were no numbers available to even grasp let alone consider those externalities, so the risks and costs were left uncalculated and unknown.

All you have to do is look around to see that the thinking was “broke” on a good day.

It’s undeniable that capitalism has enabled amazing accomplishments and stunning improvements in our lives at the cost of environmental destruction, social chaos, and deference to planning a future that only looked as far out as the next three months.

But it’s not rocket science to consider ways to provide some metrics that companies could use to better express the breadth and depth of their impacts, and thereby give shareholders more data on which to make their investing decisions.

Do you like profits the come from destroying the climate? Here are your best options. Prefer companies that support individual and community empowerment? Choose from this list.

But a significant number of American politicians want to make sure that investors, such as public employee pension funds, can’t use ESG numbers to make their decisions (or simply ban them from investing in companies that provide them). Providing such visibility would mean imposing a “woke” agenda on capitalism.

Keeping people ignorant of that information would preserve their freedom.

ESG is imperfect. So is everything else.

I have huge issues with how the ideas the drive ESG reporting are interpreted and applied.

Much of my ire is directed at marketers and PR people who’ve been tasked with promoting the concepts; every big company has a similarly big, glossy propaganda campaign touting their successes at making the world a better place.

They generate annual sustainability reports that provide hundreds of pages of proof that they’re not responsible for any of the problems facing the world.

It’s spin when it isn’t outright bullshit, and marketers should be kept a thousand miles away from the topic. It gives ESG a bad name…and may even provide proof to suspicious politicians that its less about business reality and more about that political “woke” agenda they want to make real and then attack.

ESG metrics are another problem.

There’s a good reason why all of those “externalities” were left off of balance sheets: They’re really hard to define and price. Without standardized metrics that are recognized by all, companies are left trying to come up with tools on their own. This pushes ESG into the hands of marketers and PR people and leaves investors with no apples-to-apples bases for making decisions.

And no ESG metric is going to be perfect or wholly without influence from the prevailing mood of our times.

But that’s nothing new. Capitalism has always reflected the desires, intentions, biases, and imperfections of the society in which it functions. “Broke” capitalism was no more correct or pure in the past than the “woke” components that politicians are attacking today.

One person’s accuracy is another’s distraction or disinterest.

True capitalists embrace openness and change.

ESG reporting represents huge and hugely important challenges for business and investors alike.

Calculating the real costs of providing products and services means changing expectations for not just what gets sold but how much money companies make doing it.

The premise that a business should radically change things like energy use while still maintaining the same earnings it made when it polluted is simply a fiction.

Same goes for consumers who think products that only use sustainable ingredients should cost the same as preservative-laced products.

We should be encouraging companies to consider these options and communicate them clearly to their stakeholders, and then let us decide what we want or don’t want to support.

Informing and empowering the marketplace requires ongoing work to make it more comprehensive and transparent. It’s only free if its efficient. Striving toward that goal is what capitalists do.

But politicians who characterize this as the imposition of a “woke” agenda aren’t concerned about solving the problems that face their constituents or environment. If they were, they’d want to embrace the idea of ESG and join the hard work to make it real and useful.

They advocate a return to “broke” capitalism because they think it benefits them politically.

That’s the real conspiracy.

Categories: Essays