Sustainable Sustainability: Why ESG is not Enough

SAC's fourth book is a playbook to marry profit and purpose. The cry for a more inclusive form of capitalism is growing. But the irony is we are using the same tools that caused the excesses of shareholder capitalism, incentives and regulations to drive responsible behaviour.

Rajeev Peshawaria
CEO, Stewardship Asia Centre

30 November 2023

Eighteenth-century economist Adam Smith housepropagated profit maximization as the incentive for businesses to create goods and services that society needs. He argued that free-market competition would ensure consumers get the best quality product at the cheapest price.

200 years later, Milton Friedman agreed in his seminal 1970 New York Times op-ed that the sole responsibility of business is to maximize profits ‘so long as it stays within the rules of the game’. Incentives coupled with some regulations were to henceforth safeguard societal interests.

Instead, incentives created bad behaviour. Regulations were routinely bypassed with intelligent loopholes. Despite this—to encourage sustainability today—we are again using incentives and regulations. That’s predominantly what the ESG framework focuses on. And what do we see? Rampant greenwashing and box-ticking.

To address today’s existential challenges, we need innovation of the highest order. Innovation can neither be legislated nor driven by extrinsic incentives alone. We need a values-driven revolution. We need steward leadership—the ability to create a win-win-win future for stakeholders, society, and the environment. ESG must upgrade to ESL, where the ‘L’ stands for Steward Leadership. In ESL, ‘G’ is a subset of ‘L’.

Sustainable Sustainability lays out a practical, step-by-step playbook for any commercial entity that wants to succeed at marrying profit and purpose.

This book is published by penguin random house and is available at the following platforms: