Brooklyn Journal of International Law


Ryan Brennan

First Page



Notions of corporate social responsibility (CSR) and more recently, environmental, social, and governance (ESG) have found their way into the boardrooms of the world’s largest corporations. The prominence of this trend has revived the timeless debate over the true function of for-profit business. Traditional theory calls for a corporation to maximize shareholder’s profits—a view known as “shareholder primacy.” A competing contemporary school of thought finds that corporate purpose naturally extends beyond generating return on the investment of a given shareholder to reflect social objectives and the many dependent constituents of a business. As it stands, US corporate law tracks the former theory, which naturally leads those who view corporate social action as a tradeoff to question the legality of ESG’s widespread integration into business. This uncertainty reveals the necessity for domestic regulation addressing ESG’s integration and its reporting. No matter how you fall on the legality of its integration, ESG should and must be implemented into business to attain crucial sustainability goals. To further its sustainability efforts, the EU’s corporate sustainability regime creates a “horizontal framework” that encourages ESG integration through due diligence mandates and improves its reporting under a single taxonomy. This Note advocates for domestic regulators to implement a two-step approach to align business with ESG that draws influence from the EU’s regime. First, this approach should objectify ESG reporting so that firms’ non-financial impacts are more comparable. Second, it should induce ESG integration directly through obligatory due diligence rules and indirectly through tools like director renumeration and shareholder engagement. Not only will this approach further sustainability efforts, but it will also define directors’ legal obligations to the corporation and its shareholders when considering non-shareholder groups, and thus, resolve the uncertainty surrounding the legality of ESG’s integration. A corporation’s purpose, despite how the law perceives it, is a living reflection of societal values. The pervasive capitalistic mindset of the US has largely rendered this reflection to be pecuniary in nature, making the shareholder the primary concern and non-shareholders fringe issues. In recent years, however, this mindset has shifted to accommodate for stakeholders under the ESG umbrella. How US regulators address this trend will define our nation’s sustainability progress.