Regulating ESG Using Labels - Kim and Morbee - ASWQ V3I2 - March 2025

In the paper "Regulating ESG Using Labels," Summer Kim and Katrien Morbee explore the role of regulatory labels in ESG (Environmental, Social, and Governance) practices. Labels, such as B Corporation certification, the EU SFDR, and the US Public Benefit Limited Partnership (PBLP), serve to signal companies' ESG commitments and subject them to various obligations. The paper discusses both the benefits and challenges of using labels, noting that while they offer clarity, they can oversimplify ESG complexities and lead to issues like greenwashing or greenhushing. Case studies from the EU and US illustrate how labels are used in different regulatory contexts. The authors emphasize the need for clear, standardized criteria to avoid misleading disclosures and compliance fatigue. They argue for ongoing refinement of ESG labels to ensure their effectiveness and minimize unintended consequences in regulatory design.