The World Economic Forum (WEF) has been advocating a “great reset” to an equitable and sustainable world—from semi-capitalism to socialism—in the aftermath of the COVID-19 pandemic. One of the items in its agenda is making companies improve their performance on environmental, social, and governance (ESG) metrics. These include equity and diversity in the work force, net-zero greenhouse gas emissions, and stakeholder representation in companies’ boards.
The WEF claims that ESG performance, instead of profit maximization, is required to create long-term value for all stakeholders. According to Industry Today, ESG (or sustainability) reporting is necessary for companies “to become aware of their own impact and let investors and other stakeholders make the decisions that benefit, not harm, a sustainable future.”
The WEF is advancing its agenda. Initially voluntary, ESG reporting is becoming mandatory. The European Commission now requires it from all large public companies (almost 50,000 in Europe) and is developing comparable standards for small and medium-sized companies. The SEC has announced this is coming to the United States as well.
Some embrace the mandatory ESG disclosure as a welcome development that will force companies to curtail their “greed” for profits and to pursue non-financial goals. Others will resent it as another government regulation aimed at strangulating business.
Government regulations are coercive and should be called out and condemned as such. But in this case at least, the regulation could be turned into an opportunity to claim the moral high ground and defend business—instead of accepting, meekly or enthusiastically, the underlying false premise that business is an evil villain out to hurt people and the environment, unless restrained by regulations.
Many companies apologize for their profit making and tout their ESG credentials in their reports, such as how they fight climate change by shifting away from fossil fuels to renewable energy and improve lives in the developing world by donating solar panels (see BP’s ESG report). Coca-Cola went completely woke in pursuing diversity and telling employees to “try to be less white” in its online training program and hiring racially diverse (non-white) outside lawyers.
But there is a shining example of a company that turned its ESG report into an opportunity to proudly defend its industry and itself: Liberty Oilfield Services. In the report, Liberty states its mission to be “bettering human lives.” It is a self-described “technology pioneer of the shale revolution” that “has driven enormous improvements in both human well-being and environmental quality” while maximizing profits for its shareholders.
There are no apologies in Liberty’s report for its industry, for its carbon footprint, or for its own financial success. It refuses to accept the taken-for-granted premise that oil and gas industry is destroying the planet and that greenhouse gas emissions constitute a climate crisis.
Instead, the company presents the oil and gas industry’s record and its own performance (including in ESG) and defends them as moral. Since the report is accessible, I will only highlight what makes Liberty’s report so admirable:
The report places Liberty’s business and industry in the broader context: “Low-cost Energy as An Agent of Human Well-being.” It shows how the oil and gas industry and Liberty’s work benefit human life by reducing poverty and increasing prosperity – just by innovating and conducting their business well. It explains how the energy industry powers all other industries, and how the fossil fuel industry is the main source of abundant, reliable, cheap (and increasingly clean) energy today. Yet, energy poverty still afflicts a third of world’s people and cannot be solved with unreliable, expensive, and scarce alternatives. Therefore, the report concludes “the near-term disappearance of our industry is both highly unlikely and undesirable.”
The report also puts climate change in context: it is not a crisis but a problem that can be solved human ingenuity and technology.
The report is objective. It is based on facts and backs up every claim with data, rather than setting unrealistic targets without evidence (like BP’s 100% abandonment of fossil fuels and net-zero carbon emissions in less than 30 years).
The report uses an objective standard to assess the oil and gas industry and Liberty’s impact: the real human needs for living. Instead of using anti-human, non-objective standard of no human impact on the planet, the report discusses how the industry and Liberty meet the human needs for abundant, reliable and cheap energy, as well as clean air, water, and arable land.
The report covers both positive and negative impacts of the industry, allowing the readers themselves to conclude whether the positives outweigh the negatives or vice versa.
Although Liberty’s ESG report is not perfect (it features some conventional “giving back” initiatives to meet social metrics), it is an example of morally defending truly sustainable value creation – profit maximization stemming from continual pursuit of excellence and innovation – which we need to make human flourishing possible.
For more on Liberty, you can listen Alex Epstein interview its CEO Chris Wright in a Power Hour podcast.