Gambling on Green

Chapter 2New Businesses and New Business Models

In this chapter, we'll look at two vastly different approaches that corporations have taken with regard to ESG. First, we'll look at a pair of corporations that mismanaged and misled consumers, regulators, and shareholders on ESG initiatives, and we'll investigate the reputational and financial damage that resulted when they failed to take responsibility for their company's actions. Then, we'll explore companies that experienced success in their ESG performance: what they did well, where there is still room for improvement, and what benefits were achieved both inside and outside the firm. But first, let's define exactly what companies should be responsible for as it relates to the environment and society.

The stakes are changing in terms of what companies were held “responsible for” in the past versus what consumers hold them responsible for now. Fifty years ago, Nobel prize–winning economist Milton Friedman championed a theory that has persisted for decades: he opined that a corporation's sole legal responsibility is the generation of profits for shareholders, without regard for other considerations such as communities, environment, and other stakeholders.¹ Business leaders around the world embraced the notion as a reason to relentlessly pursue profits at virtually any cost.

Contrast this with the growth and popularity of B Corps whose unique quality centers around ensuring groups other than corporate shareholders, like employees, ...