Curious State of Corporate Responsibility Legislation

In recent years, the boardroom has become a new front in the culture wars alongside a cacophony of three-letter acronyms.

DEI, ESG and CSR. These buzzwords—short for diversity, equity and inclusion; environmental, social and governance; and corporate social responsibility—are the battle cries in the red vs blue fight over corporate behavior that is increasingly playing out in statehouses across the country.

The short version is that red-state politicians see DEI, ESG and CSR initiatives as affirmative action and an affront to assessing individuals on their merit, while blue-state politicos view them as essential to ensuring that big companies act fairly toward their communities.

In response, red states have moved to block these corporate policies, while blue states have tried to encourage them, creating yet another checkerboard of policies across the country.

Although interest remains high in legislation like this, passage of such bills appears to have slowed significantly this year.

Bills to Regulate Corporate Behavior Remain Popular with Legislators

CSR is a business model that accounts for not only a company’s profits but also its social and environmental impacts. The idea dates back to a 1953 book called Social Responsibilities of the Businessman, written by American economist and Grinnell College President Howard Bowen.

The idea of DEI was also born during the social justice movements of the 1950s and ‘60s. It could be looked at as a subcategory of CSR, a set of practices to create a more inclusive working environment for people of all races, genders and sexualities.

ESG is a newer concept, developed in 2004 to assess the sustainability and ethics of a corporation’s practices. You could consider DEI policies to be a cornerstone of the S in ESG. 

But while much corporate jargon is dismissed as merely trendy (or even silly), these ideas have become a flashpoint in the Left-vs-Right’s ongoing culture wars, which has resulted in them seeping into state legislation.

Back in May 2023, the LexisNexis® State Net® Capitol Journal™ reported on the rise of both pro- and anti-ESG investment legislation, which began roughly in 2022 and continued through 2023. At that time, 25 states had considered and eight had enacted anti-ESG measures, while 10 states had considered but none had passed pro-ESG measures.

A check of State Net® legislative tracking service data for 2024 finds that the number of ESG measures is noticeably down this year. What’s even more striking is the decline in the number of such measures being enacted.

Anti-ESG Bills Outnumber Pro-ESG Measures 

At least 21 states considered bills referring to environmental, social and governance, or ESG, this year. The majority of those bills were aimed at restricting the use of ESG policies in state investing and contracting. Four states enacted such measures.

Corporate Social Responsibility Bills Not Passing

The majority of the corporate responsibility-related legislation introduced in 2024 concerned DEI—arguably the buzziest of the corporate responsibility buzzwords these days.

The proposals attempted a number of reforms, including prohibiting the application of DEI concepts to public entities and restricting public investments, but most of them failed.

Only about a dozen bills concerning DEI concepts have been passed by state legislatures this year, according to State Net data.

Among those was an Alabama bill (SB 129) prohibiting public entities in the state from maintaining DEI offices or sponsoring DEI programs and a California bill (SB 1177) requiring public utilities to annually report their DEI policies.

ESG-related bills did even worse. Of the 21 states that considered bills referring to "environmental, social and governance," only four passed such measures, according to State Net data.  The majority of the bills were aimed at restricting the use of ESG policies in state investing and contracting.

Five months earlier in 2023, twice as many states had enacted such anti-ESG measures. In its review of state ESG activity earlier this year, the law firm Ropes & Gray suggested the drop in anti-ESG introductions and enactments might be tied to the widely reported “decline in global ESG fund flows beginning in 2022 and continuing through 2023.”

“Consequently, though the political rhetoric surrounding ESG investing continues, the perceived need for red states to act to slow the tide of ESG investing may have been less of a driving factor while state legislators were drafting bills for the 2024 session,” the firm’s report stated.

In other words, the battle over these corporate buzzwords continues in statehouses nationwide, but neither the Left nor the Right seems to be gaining much ground at the moment.

—By SNCJ Correspondent BRIAN JOSEPH

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