Irrespective of where we start, though, we need thoughtful people in government and policy circles — those who can think out of the box and call bullshit for what it is. It has to start there.

In his 1986 essay, ‘On Bullshit’, philosopher Harry Frankfurt defined bullshit as ‘the presence of insincerity, laziness towards details, and a half-heartedness… an indifference to truth.’ There have been several enthusiastic reports of late, announcing that firms committed to environmental, social and governance (ESG) benefits are doing better financially, compared to those that are not. In one instance, the international community congratulated itself when Larry Fink, CEO of Black-Rock, the largest hedge fund in the world, asked directors to not invest in firms that weren’t reporting on their climate goals. The private sector had finally been brought to heel.

At the same time, drumbeats pounding the need for national climate and environmental-related commitments have become louder. In 2015, 195 countries came together and committed themselves to climate action, agreeing they would voluntarily reduce their greenhouse gas emissions, to keep global temperatures down. This was the Paris agreement. These commitments among companies and countries are useful to show intention. But have they translated into action?

Fast forward to the present. Unfortunately, we are discovering that more than other sectors, the environmental and climate world are especially beset by a tendency for bullshit. For the private sector, this disposition is particularly significant. The Asian Development Bank (ADB) estimates that the ESG market has a global potential of about $23 trillion. Yet, on a closer look at how companies are investing in environmental impacts, two worrisome tendencies related to Frankfurt’s ‘bullshit’ can be found.

The first attribute of bullshit is that there is indifference to the truth. This is especially true among private sector firms. Hayley Stevenson, in his June 2020 paper, ‘Reforming global climate governance in an age of bullshit’, refers to some of these tendencies as well.

Net Output

First, most ESG companies verify their own investments. This is a clear and significant conflict of interest. Second, most companies measure only the dollar investments they are making (for instance, in solar panels or in energy efficient cookstoves). They don’t necessarily report net reductions in greenhouse gases. Third, there is a big difference between commitments and action. In their February 2020 study, ‘Do the Socially Responsible Walk the Talk?’, London School of Economics’ Aneesh Raghunandan and Columbia Business School’s Shiva Rajgopal, show that ESG companies have significantly more environmental violations than those that are not ESG. The former also spend more time and money lobbying politicians for subsidies.

The second attribute of bullshit is that there is insincerity and self-delusion. In the case of ESG goals, this delusion is also perpetrated by governments. Even if we were to believe that national commitments by 195 countries to greenhouse gas reductions will be sufficient to meet the climate goals for the world, an important problem gets frequently ignored: countries that have committed to Paris are also the largest subsidisers of fossil fuels.

So, what can we do? First, like Finland, Iceland and New Zealand, countries need to either dismiss GDP as a measure of well-being, or fix it.

GDP has many faults, but the greatest one is that it doesn’t price things that matter to most of us. This includes pricing environment, clean air and clean water, for example. Many have argued that pricing these goods will make us think they are substitutable — that $1 of clean water will be traded for $1 of fuel. Nonetheless, there is a good argument that we start here, since money is understandable and familiar to most of us.

Second, start collecting good data so that independent third-party verifiers, civil society, researchers and the media can do some intelligent calculations to understand the extent to which announcements and commitments by companies and countries are being realised. For credible ESG reporting, there must be externally set standards that examine greenhouse gas emissions over the life cycle of the technology that also consider spillovers and feedback loops.

Break the Mould

Third, build governance mechanisms that include independent verifiers who report and verify these environmental and social gains separately to a regulatory authority. Finally, recognise that good intentions are insufficient. Governments can help by making it easier to do the right thing —a ‘choice architecture’. Incentives, and taxes, can do some of this, but creating social norms for transparency and credibility is critical.

Irrespective of where we start, though, we need thoughtful people in government and policy circles — those who can think out of the box and call bullshit for what it is. It has to start there.

About the author

Dr. Jyotsna Puri is the former Head of the IEU. She currently serves as Director of Environment, Climate, Gender, Youth, Nutrition and Social Inclusion Division at the International Fund for Agricultural Development (IFAD). 

This article first appeared in the Economic Times on 20 November.

Photo: COP Paris 2015

Disclaimer: The views expressed in blogs are the author's own and do not necessarily reflect the views of the Independent Evaluation Unit of the Green Climate Fund.