Warren Buffett Just Snubbed The ‘Social Responsibility’ Craze. Here's Why He's Right

Business ethics should not be conjoined with ecological and social for many reasons.

Today’s corporate virtue signaling is the 1990s version of greenwashing given that the promotion of doing ‘good’ is superseding outcomes derived from it.

Nevertheless, the impetus for addressing environmental, social, and governance (ESG) issues, as depicted within the UN’s Sustainability Goals, is proving itself to be a global mandate for firms of all types. This is worrisome given the limited understanding of long-term implications or even proper forms of their application.

Warren Buffet, renowned investor and philanthropist, has even had reservations regarding ESG standards and just this week he opposed proposals for annual reports on climate change and diversity initiatives. His stance is running counter to Wall Street’s expectations given the growing attractiveness of investing in sustainable ventures.

The Sustainability Accounting Standards Board (SASB) and the World Economic Forum (WEF) support efforts for establishing “a globally accepted system for corporate disclosure” to report ESG information in addition to financial performance. The WEF attests that businesses are adjusting strategies according to environmental and social factors at a remarkable pace, and pressure for urgent action is mounting as the espoused ethos of the Great Reset promulgates and the setbacks from the pandemic unveil sustainability shortcomings.

The implementation of ESG metrics and the adoption of new tools for combating global challenges sounds admirable, but it is important to note that what benefits the planet and what benefits people rarely align in perfect harmony.

For instance, a community impact initiative that benefits the livelihoods of people (such as investing in irrigation systems for improving food security) could have an adverse environmental impact (disrupting the natural state of the water cycle). And it goes without saying that any initiative has an economic impact and so consideration must be given to resource constraints and opportunity costs.

Infamously, Patagonia’s Black Friday New York Times advertisement of “Don’t Buy this Jacket” perfectly highlighted the ethical dilemma of production practices by demonstrating the equifinality of a firm’s environmental impact.

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