In a recent piece, McKinsey addresses common criticisms of the current focus on environmental, societal and governance concerns (ESG), arguing that many miss the point of the effort entirely. Criticisms of ESG largely fall into four categories: it is a distraction, it is too difficult, it is not measurable, and it is not predictive of financial performance.
However, these claims fail to account for the importance of the social license, which McKinsey defines as the "perception by stakeholders that a business or industry is acting in a way that is fair, appropriate, and deserving of trust." While it is important for firms to make money, it is important for them to do so in a manner that does not cause harm to society or create what an economist would call 'negative externalities.'
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