ESG is the Chinese Social Credit System—for Corporations

By Michael Ashley and Robert Edward Grant

A high school dropout, Brian never went to college. At age 18, he began apprenticing as a painter while all his friends jotted off to university. A hard worker and naturally talented with a brush, he learned his trade on the job. While his better-off buddies jet-set across Europe, enjoying study abroad programs in far-flung locales, Brian kept his head down. His dream was to one day open his own painting business.

Living off Ramen noodles in his studio apartment allowed him to pile every dollar he saved into seed money. He even delayed dating so he could put all his time and (meager) savings into his startup.

Luckily, all his sacrifices paid off. 

Within a year, he leased a small office to act as his headquarters. He also bought equipment. With his remaining funds, he set up a bank account he used to pay the salary of his first worker. That first employee was soon joined by three others as Brian’s venture became profitable.

In less than a decade, Brian doubled his business, giving him the breathing room to finally marry and start a family. By now dozens of painters worked for him in multiple offices across the nation.

All was going well. Really well.

That is, until one of his workers showed him something online. Apparently, a year back, one of his staff posted a negative one-star review to a site like Glassdoor. “Unsafe working here,” wrote the disgruntled female named Nicole. “Got a big bro vibe. Stay away, ladies. Far away.”

I didn’t know Nicole worked long enough with us to decide we have a toxic culture, Brian thought as he remembered her tenure. She had missed her first day because she just didn’t show up. The second day she was scheduled to work, she was late by 30 minutes. When she was tardy the third, a manager brought it to Brian’s attention.

Brian asked the manager to give her another chance. “I was a goof-off myself in high school,” said Brian. “Maybe she’s a late bloomer like me.”

Nicole never bloomed. She never even returned to work.

But Nicole’s effects lingered. Soon after, a company specializing in collating data flagged her poor review, submitting it to a centralized rating platform impacting companies’ ESG scores. 

This baffled Brian who until now had never heard of this term. No matter. The low score, rightly earned or not, stood.

For the next year, Brian received offers from the same platform urging him to raise his score. One read: “If you conduct corporate culture sensitivity training you can easily get your metrics back in compliance.” 

Then Brian saw the price tag: $18,000 for a week-long program.

No thanks, Brian thought. I can’t spare the time or the funds.

Turns out Brian really couldn’t spare the expense. The following quarter, his bank ended his credit line—even though it had been in place for years and Brian had never missed a payment. “We regret to inform you that your ESG score exceeds our acceptable threshold,” the bank wrote him.

They weren’t the only institution to turn on Brian. One by one, every lender closed their doors to him. No bank would loan him the capital he needed to keep his locations running. Worse, his own bank informed him they would be closing his checking account too, due to his ESG rating. 

Everything Brian had worked so hard for crumbled before his eyes: his company, his stores, his people, his way of life. He worried he might not just lose his company, he might lose his home, too.

By the end of the year, Brian had a choice to make: shut down or get with the ESG program. No middle ground allowed.

---

Ask the average person if they know what ESG is, and they’re bound to shake their head. This is likely due to the fact the mainstream media rarely reports on this topic in depth. To the uninitiated, ESG stands for three broad categories of interest for “socially responsible investors.”

Environmental: pertaining to a company’s use of energy; for instance, around climate change initiatives.

Social: relates to a company’s relationship to its staff. It can also concern an organization’s customer relations, its mission, and political stances.

Governance: how a company is managed or led by its executive team.

In short, ESG is a rating that companies receive, grading them on their compliance using a carrot and stick approach similar to how China’s social credit system controls its people. This past April, Tesla CEO Elon Musk tweeted his thoughts about the rating system: “I am increasingly convinced that corporate ESG is the Devil Incarnate.” 

  Why might the world’s richest man say this? Because Tesla is already feeling the stick. Strangely, per the “E” in ESG, Musk’s Tesla should receive a high mark for its commitment to producing environmentally friendly vehicles.

Instead, according to CleanTechnica, Tesla has a worse ESG score than some oil companies. “Isn’t it odd that Tesla has a bad Environmental, Social, and Governance (ESG) score yet oil companies have good ones? When you look at what Tesla is doing for the environment and compare those actions with how oil companies are profiting off of poisoning our environment, it just doesn’t make sense,” writes Johnna Crider. 

Kim Iversen has a theory why. In April, back when she was cohost of The Hill’s Rising, she explained it this way: “The scoring system takes into account his eclectic personality, his tendency to tweet whatever he wants, his views on COVID, and his libertarian politics.”

In other words, Musk, like our fictional Brian, isn’t getting with the ESG program. After all, baked into any social credit system—personal or corporate—is the idea one should modify their behavior to comply with accepted standards or rules. What’s a synonym for modifying one’s behavior? Obeying.

But the ESG virtue signaling scam gets more preposterous. 

As Iverson reports, the weapons manufacturer Lockheed Martin, perhaps best known for producing bombs and missiles to rain death from the skies, also has a better ESG score than Tesla. “Why is that?” asks Iversen. “It’s because ESG scores are based on what neoliberal elites consider to be moral and good. It’s good to supply weapons to our so-called friends, they use them to kill ‘bad guys.’ Never mind the fact that they also kill children. But it’s bad to criticize COVID lockdown policies.”

 That’s not all. If companies don’t bend the knee to social pressure, they can expect to lose investors and access to capital for not playing along. More insidiously, according to Stacey Lennox writing for PJ Media, “Because the implementation of ESGs globally must not run afoul of the Constitution in the U.S. and similar protections throughout the West, extracting compliance through financial coercion on private businesses is the perfect vehicle.”

We would agree. 

ESG is ideal for centralized control aided and abetted by AI, big data, and other forms of tech advancing at a breathless pace. That’s why we write about this critical subject in our upcoming book Neuromined: Triumphing over Technological Tyranny (Fast Company Press, 2023).

If we do not push back against ESG now like some corporate leaders are thankfully doing, we can expect that in the coming years, more technocrats will enforce even stricter (corporate) obedience. Just ask Musk, who was kicked out of the S&P 500 ESG Index in May—even though his company makes zero-emission products.  

So far Musk hasn’t yet conformed to the ESG scheme. Now, how might a company like yours fare if you chose to make the same courageous stand? Now try to imagine what would happen if many, many companies stood up?

ESG just must go away. Here’s hoping that future comes to pass.