The ESG Onramp: from Organized Hypocrisy to Normative Practice

Abstract ESG can be described as the environmental, social, and governance practices institutionalized by companies over time. Much of the previous literature in this area cites these “pro-social” corporate restructuring, re-branding, or policy changes as emerging from scrutiny, or pressures from a company's stakeholders, shareholders, peers, and the public to incorporate more transparency, equity, environmental protection, and social responsibility in its management and operations. We combine theoretical frames from the sociology of organizations, specifically the theory of organized hypocrisy, the sociology of human rights, and the World Society approach. We articulate how social, political, and economic pressures, both internal and external to a company, as well as its current position in society (such as its characteristics like assets, size, stakeholders, etc.), influence its location and trajectory vis-a-vis ESG. We use two-way fixed-effects analysis of over 3,600 US-based firms from 1991 to 2016. Our research suggests that there is an ESG “onramp,” which we argue signals a shift from organized hypocrisy to a progressively expansive normative practice.