As I have already denounced on multiple occasions, the intrinsic limitations of the ESG – Environmental, social and corporate governance model, so fashionable in recent years, are plain to see for any intellectually honest professional. A widely held view currently maintains that companies ranked higher on the basis of ESG metrics will – for that reason alone – deliver better returns for shareholders: this belief is simply wrong. Certainly, as demonstrated by the celebrated work of Robert Eccles at Harvard, extensively validated by further subsequent scientific evidence, introducing ethical concerns into business at a strategic level benefits company profitability; I have discussed this at length in one of my recent monographs, and this truth has long ceased to be a matter of debate, at least in academic circles. The real issue, if anything, is a different one: ESG indices are centred on an entirely general outlook, detached from the particular circumstances and the specific history and practice of the companies under examination – in short, they represent yet another genuine classificatory mania, typical of the Anglo-Saxon world.

The example I often cite is that of a bank's environmental impact, which is not necessarily relevant to its economic performance: a sound policy of curbing harmful atmospheric emissions would score highly on ESG indices, yet would not significantly influence global carbon emissions; conversely, the bank's issuing of subprime loans that customers will be unable to repay, or worse the marketing of toxic securities, could have devastating social and financial consequences, as the news of a few years ago demonstrated. Despite this, ESG reporting has given banks credit for the former issue while culpably – or, worse, deliberately – overlooking the latter.

One possible response might be to encourage institutions to apply the already existing sanctions regime provided for non-financial disclosures in cases of violations in corporate accountability processes. Current legislation provides for fines of between 25,000 and 150,000 euros in such cases, depending on circumstances, but it appears never to have been concretely applied, not least because there is a clear lack of expertise on the part of the institutions responsible – in this case Consob, which should carry out the assessment and imposition of sanctions on the basis of sample checks, on which, paradoxically, no public report exists, with the result that the body tasked with overseeing correct reporting does not itself report. While waiting for the judiciary to find the resolve needed to enforce the law, and for the legislature to find good reasons to strengthen the regulatory framework – in spite of the questionable lobbying activities of business trade organisations, busy behind the scenes pressing, on the contrary, to consolidate the current laissez-faire – violations of the ethical and transparency pact that should bind companies and stakeholders are multiplying, to general indifference.

The fashion world: how to turn a blind eye and live happily

In a fine article published some time ago in the American magazine The Nation, Maria Hangeveld denounced how ethical certifications, particularly in the world of fashion, and specifically of fast fashion – the sector of companies that produce garments by adapting extremely rapidly to current trends – are inspired by financial auditing yet are strongly marketing-oriented: in practice, rather than being a tool for assessment and control, they are instead a goal to be achieved for the purposes of mere external communication, a certificate to "hang on the wall" and above all to circulate on social media and in press releases, despite the working conditions of labourers throughout the supply chain remaining questionable at best.

Journalist Meta Krese also addressed the subject, more recently, in the American magazine In These Times, recalling how Burkina Faso is, for example, the most important producer and exporter of cotton on the entire African continent: two hundred thousand smallholder farmers deliver seven hundred thousand tonnes of cotton every year to Sofitex, the Societé Burkinabé de fibres texiles, which ships it from the ports of Benin and Côte d'Ivoire to Asia, where it is processed and then resold – after being packaged according to the guidelines of European and American companies, apparently very attentive to sustainability – to Western fast fashion brands such as H&M, Gap and Zara. Sofitex pays farms a price of approximately 36 dollars per kilogram of cotton acquired, which translates into a wage of 360 dollars a year for the workers, roughly one dollar a day. The farmers try to use GMO cotton seeds in order to reduce pesticide use somewhat, given that sprayers are always in very poor condition and workers are therefore forced to breathe toxic substances when using them; however, Monsanto's GMO seeds produce increasingly shorter fibres with each generation, lowering the quality of the cotton and therefore the final sale price. Western companies, including green ones, care little or nothing about any of this.

In Bangladesh, where fabrics are made from Burkina Faso cotton, the situation is only marginally better: wages are around 90 dollars a month, and basic living expenses — food and rent for a home that is little more than a shack — come to around 73 dollars, leaving seamstresses, almost always women, with just 17 dollars a month to live on. Independent trade unionists active on the ground observe that if working conditions were to improve, with a decent wage increase, what would happen is that — under pressure from fashion multinationals unwilling to pay more for finished goods — production would be shifted to countries with lower labour costs, leaving hundreds of thousands of families destitute; for this reason, government officials and local factory owners work together to oppose any union initiative in favour of workers. A glaring example is H&M: the Swedish budget clothing multinational, which comfortably turns around two billion in profits a year, has an elaborate sustainability policy published on its website and even boasts the special low ecological-impact Conscious exclusive collection, with garments made from fabrics derived from pineapple leaves, hemp waste and so on, yet makes no mention of the issues linked to supply-chain oversight in its social reporting — and we as consumers are equally willing to turn a blind eye and ask no questions, perfectly happy to pay so little for affordable fashion items.

The same can be said of China, which produces twenty per cent of the world's cotton: in the Chinese region of Xinjiang, it is harvested and processed by an army of over half a million Chinese people belonging to the Muslim ethnic minority of the Uyghurs, treated as slaves in "work and re-education" camps. This is an enormous problem, given that cotton is the second most widely used fibre globally for clothing production after polyester, and that many fast fashion and sportswear brands — as well as luxury ones — source from companies operating in precisely this region. Among the institutional figures who have taken the clearest stance on this issue is ambassador and former Foreign Minister Giulio Terzi di Sant'Agata, president of the Global committee for the rule of law, an NGO working on international projects related to the rule of law: "It is incredible how many very well-known brands look the other way without taking a stand against these abuses promoted by the Chinese Communist Party, on the pretext that they buy from intermediaries and therefore do not know exactly where the cotton comes from. They do know, in reality, but perhaps find it convenient to turn a blind eye in the face of Chinese dominance." Much for the comfort of Western companies' ethical and Esg certifications.

Chile, meanwhile, has long become an international collection hub for second-hand and unsold clothing produced in China and Bangladesh, which passes through Europe, Asia or the United States before reaching South America, where in the Atacama Desert — a true natural paradise — around 40,000 tonnes a year of unsold or second-hand garments from the fast fashion sector are piled up in the open air: it is estimated that five hundred billion dollars are lost every year due to barely worn and rarely recycled clothing.

According to a 2019 United Nations report, the fashion industry is responsible for 20 per cent of total global water waste (making a single pair of jeans requires, for example, 7,500 litres of water), and "every second of the day, a quantity of textiles equivalent to a rubbish truck is buried or burned" as a result of the sector's industrial activities. At present — despite the efforts of recent years to reduce emissions — the fashion industry still shows a highly worrying trend in this regard, with projections indicating that the greenhouse gas emissions for which it is responsible — which already today are approaching ten per cent of global CO2 emissions! — will increase by a further third, reaching the enormous figure of 2.7 billion tonnes of harmful emissions released into the atmosphere by 2030.

Ethical certifications and Esg criteria: much appearance, little substance

There are apparently rigorous ethical certifications, such as SA8000, which requires among other things the verification of compliance with health and safety regulations, adequate wages and medical assistance whenever necessary — except that for auditing firms, profits appear to come before any genuine concern for the ethical standards so loudly proclaimed by clothing companies. Inspections are paid for by the very companies that commission them, and certification bodies have no particular interest in "contradicting their client." Not to mention that the reports — often misleading or liable to underestimate risks — are not accessible to the very people they are supposed to protect, namely the workers. Around ten multinationals compete for the lucrative ethical certifications market, including France's Bureau Veritas, Germany's Tuv, Britain's Interteck, and also Italy's Rina, Registro italiano navale, an organisation originally set up to classify and certify merchant vessels, which has since considerably expanded its business.

In general, for almost all certification bodies, the situation regarding the standards applied is fairly bleak, as these organisations appear willing to make many compromises in order to win a client. Cases have been documented — reports Hengeveld — in which inspections are widely pre-announced and "stage-managed", only a minimal portion of health and safety risks is included in the reports, report contents are sometimes copy-pasted from one inspection to the next, the number of employees is systematically underestimated, and even the basic figure of hours worked per day is falsified and reduced from the actual twelve or thirteen hours to the more acceptable eight. These and other factors are behind disasters such as that of the Ali Enterprises clothing factory in Karachi, Pakistan, where 250 workers died trapped on the first floor of the building, behind iron-barred windows, with emergency exits locked and no functioning fire extinguishers: the company had been SA8000-certified by Rina just a few weeks before the disaster. Facts such as these obviously raise many disturbing questions, and although Rina subsequently stated that it had revised its certification policies, the situation does not appear entirely reassuring.

Admittedly, progress has been made since those days, and SAI (Social Accountability International, the body that develops this kind of standard) finally released a revised version of the SA8000 certification guidelines two years ago, but the impression I nonetheless come away with is that the image of social progress and workers' rights projected by fashion companies — with the complicity of these certification bodies — is heavily distorted, ad usum Delphini, useful primarily to reassure citizens and customers who need peace of mind about the ethical profile of their purchases, in a green vein, so as to self-justify their own consumption choices. The predatory prices imposed by fashion multinationals on their suppliers further worsen the picture, wiping out any margin for improving workplace safety conditions and the quality of life of workers, both women and men.

A further useful angle from which to observe this phenomenon is offered to me by Cesare Saccani, an expert in certifications and promoter of Get It Fair, an ESG rating scheme that seeks to learn from some of the problems identified in the field of management system certification. "Today there is great attention paid to the assessment of ESG, or non-financial, risks, but we cannot afford to repeat the same mistakes that were already made in the past in the world of management system certification. It is necessary to focus attention on real risks, rather than on purely formal procedures. One thing is to verify whether a company has a maintenance system for its electrical installation; quite another is to verify whether the electrical panels are in order, whether the earthing circuit works, and so on. Moving from a mere compliance check of the company against the requirements of a management system to a genuine estimate of the degree of exposure to a risk is complicated. It is even more so when one has to meet a demand calling for risk assessments of a predictive nature, oriented towards the risks of events that could occur in the future. Looking at what has happened in the past, one must above all set the threshold of expectation clearly. A trivial example? For a company that makes cakes, a well-implemented quality management system should ensure that all the cakes produced by the company are exactly identical to the recipe originally conceived for the cake in question, but if the recipe for the cake is dreadful, an ISO 9001 management system will reduce the risks of process deviation from the planned standard and in doing so will only ensure that thousands of cakes will be dreadful in exactly the same way. And yet, the vulgate has spread across the world that a cake made by a company with an ISO 9001-certified management system is inherently good — and the same thing happens with the environment, safety or social res