The Normative Effects of ESG Expectations on Companies and their Directors

Most companies face a growing number of environmental, social and governance (ESG) expectations arising not only from their shareholders, but also from a wide array of stakeholders such as clients, investors, States, financial institutions and not-for-profit organisations. Even though a significant number of these expectations are not imposed by hard or soft law, they cannot be disregarded in view of the significant non-financial and potentially financial impacts they may have on companies’ operations, performance and reputation if they are not duly addressed. In this paper, we first classify these expectations depending on their nature (environmental, social or governance-related) and the persons expecting them to be complied with (e.g. shareholders, consumers and employees, or other stakeholders). We then suggest a legal characterization of these ESG expectations and highlight that, over time, they tend to get codified. But we also draw on well-established legal theories, notably…