In recent years, corporations have started investing more heavily in environmental, social, and corporate governance (ESG) initiatives and have become increasingly focused on employing ESG standards in their operations.

ESG efforts align with the modern trend of corporate boards adopting a philosophy of "corporate responsibility," in which they consider the long-term impact of their operations and strive to advance the interests of a wider variety of stakeholders. Though often associated with preventing climate change and reducing carbon emissions, corporate ESG concerns actually are broader in scope and include focus on sustainability, diversity, equality, employee welfare, and cybersecurity protocol.

Companies are investing in ESG initiatives not only to strengthen their public image and respond to stakeholder priorities, but also because a demonstrated commitment to ESG initiatives is becoming a critical element of doing business in the modern age. For example, many lending firms and institutional investors are shifting their investments toward companies that meet their ESG standards, and financiers may even withhold financing for certain projects that fail to meet those standards. As a result, failing to develop strong ESG initiatives may result in limited access to capital and lost business opportunities.

See also:

• Treasurers' Role in ESG and DEI
• The Virtue Bubble Is About to Burst. Good Riddance.
• The Days When ESG Meant 'Warm and Fuzzy' Are Over
• How the SEC's Climate Disclosure Proposal May Trigger Insurance Coverage

Given the competitive advantages available to companies that take ESG issues seriously, some companies have resorted to exaggeration or making representations about their ESG efforts to investors and potential business partners that have no credible basis or cannot be supported by concrete evidence. This phenomenon has been coined "greenwashing," and it is starting to attract the attention of government regulators and the plaintiffs' bar.