Social Evaluations of Environmental, Social, and Governance Issues

Abstract As academic and practitioner interest in Environmental, Social, and Governance (ESG) issues expanded, a lack of historical context, theoretical grounding, and empirical data has undermined academic inquiry. Social evaluations of business impacts on stakeholders and society have a long history prior to the birth of the ESG movement, which provides insight into the political and institutional context of the ESG and anti-ESG movements. Rather than summarise facile research analysing any unconditional relationship between ESG issues and financial performance ignoring the simple fact that greater investments in ESG issues cannot always be performance-enhancing, this chapter offers theoretical guideposts to provide insight into where, when, and how such investments are financially material and when they are wasted. Such guideposts exist within the simultaneously burgeoning literature on social evaluations and stakeholder value-based strategy. Such an integration would demonstrate that the link between a firm’s reputation with its stakeholders on ESG issues and financial performance is contingent upon stakeholders’ rational, emotional, and moral assessment of the firms’ impacts; the firms’ response as between substantive, symbolic, and deceptive; and stakeholder’s ability to discern that response as well as to collectively punish opportunistic firm or stakeholder behaviour that undermines value creation or distribution. The chapter closes by highlighting the emerging building blocks for expanding upon such an integrated theoretical framework.