Corporate Social Responsibility, ESG, and Compliance

In 2019, the CEO and chairperson of BlackRock, the world’s largest asset manager, called for corporate leaders to embrace corporate purpose and create value for stakeholders, and 181 CEOs of the Business Roundtable committed to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. The idea that corporations should engage in socially responsible business practices (“CSR”) or initiatives relating to environmental, social, and governance matters (“ESG”) is gaining prominence, but remains highly contested. Deeper examination reveals that these terms—CSR and ESG—each lack a singular meaning. From aligning shareholder and stakeholder interests for shared value and risk management, to going beyond compliance and profit-maximizing strategies, there is no consensus on what socially-responsible activity entails and the rationale for its pursuit. This chapter aims to illuminate the landscape of CSR, ESG, and their connection to compliance. Varying usage and mixed empirical research reveals that CSR and ESG lack a clearly defined connection to compliance. This indeterminacy extends to (1) whether CSR and ESG are correlated with or refer to greater levels of legal compliance, as well as (2) what it means for a corporation to “comply” with CSR or ESG goals in light of the proliferation of standards and metrics pertaining to sustainability and social impact. Exploring these topics through the U.S. perspective reflects that the business world is in a state of flux regarding how companies take account of their impact on stakeholders and the environment, and laws are evolving on issues such as sustainability disclosures that could help us better understand existing practices