Why ESG Responsibility Should Fall on Producers

Dr. Robin Dhakal

 As an economist, I keep seeing the same thing happen in discussions about Environmental, Social, and Governance (ESG) issues- all eyes always turn to the consumer. We’re constantly told to recycle more, shop sustainably, and use our wallets to vote for change. The idea seems simple: if everyone just made better individual choices, we could solve the world’s biggest ESG problems.

But let’s take a step back. Is it really fair to place that kind of responsibility on consumers? And more importantly, is it actually working?

This article challenges that consumer-first narrative. While well-meaning, it misplaces the real power to drive ESG progress. It’s not individual choices that move the needle- it’s the decisions made by producers. These are the companies that design, manufacture, and distribute the products we rely on every day. If we want real impact, the responsibility needs to shift from fragmented consumer efforts to the concentrated influence of corporations.

 The current narrative

Take plastic pollution. Consumers are encouraged to sort their recyclables, clean out containers, and hope they end up in the right bin. But that focus on individual behavior hides a much bigger issue: the sheer scale of plastic production. Since 1950, global plastic output has exploded from just 2 million tons to over 400 million tons a year. No matter how diligent individual recycling habits are, they’re completely outpaced by the amount of plastic being produced in the first place.

And it’s not just plastic. The fast fashion industry churns out tens of billions of garments a year, most designed to be worn just a few times before ending up in landfills. Electronics are built to be replaced, not repaired. In 2022 alone, the world generated 62 million tons of e-waste, and only a small fraction of it was properly recycled. The rest? Often shipped off to developing countries or dumped, causing serious environmental and health issues.

Meanwhile, the companies behind all this waste are rarely held accountable. Consumers are told to “buy less” or “reuse more,” while the true drivers of environmental damage- the producers- continue to operate unchecked. The economic model rewards them for pushing out more products, faster, and the environmental and social costs are pushed onto the public. That’s not just unfair; it’s a structural flaw in the market.

 Greenwashing

Companies know that consumers are paying attention to sustainability. And many have responded- not with real change, but with marketing.

Greenwashing is when companies highlight the small, positive things they do while quietly maintaining business as usual. Companies often put labels like ‘eco-friendly,’ ‘sustainable,’ or ‘carbon-neutral’ on products, creating an illusion of responsibility. For example, fashion brands like H&M and Zara promote “eco-conscious” collections, but their core business is still built on overproduction and disposable clothing. Fossil fuel companies run slick ads about their investments in renewable energy, but those investments are often tiny compared to their continued expansion of oil and gas operations. Shell, for example, has been accused of greenwashing by promoting its investments in renewables while continuing to expand its fossil fuel operations.

This kind of selective storytelling distorts how consumers view companies. It also messes with the market. Greenwashing gives companies a way to appear responsible without actually changing their practices. And because companies know more about their true environmental footprint than consumers ever could, they’re able to shape perceptions while avoiding accountability.

 Let’s talk economics

Here’s where economics comes in. When companies produce goods that cause pollution, generate waste, or create social harms, they often don’t pay the full price of those consequences. Instead, the costs- environmental clean-up, health impacts, and more- are pushed onto society. These are known as “negative externalities.”

This leads to what economists call a market failure. If prices reflected the true cost of goods- including their environmental and social impact- polluting products would be more expensive, and cleaner alternatives would be more competitive. But because those extra costs are hidden, the market sends the wrong signals. It encourages overproduction, overconsumption, and underinvestment in sustainability.

Fixing this means internalizing those costs- in other words, making producers pay for the impact of what they make. That gives them a real incentive to design better products, reduce waste, and invest in cleaner technologies. They have the scale, resources, and control to make meaningful changes. Consumers, on the other hand, can only do so much with limited budgets and incomplete information.

 What policies can do?

So how do we shift that responsibility in a real, lasting way? Policy is the answer- and one of the most powerful tools we have is Extended Producer Responsibility (EPR).

EPR laws require companies to take ownership of their products even after they’ve been sold. That means handling recycling, collection, and safe disposal. When companies are financially responsible for end-of-life product management, they have a direct reason to reduce waste at the design stage, invest in greener supply chains, and build smarter systems for reuse and recycling. For example, why design a product that’s difficult or expensive to recycle if you’re the one paying for its recycling? EPR pushes companies to innovate in product design, making goods more durable, reusable, repairable, and recyclable. This means less waste, fewer virgin materials, and a smaller environmental footprint.

Countries in Europe that have embraced EPR have seen recycling rates soar. In some places, packaging recycling exceeds 70 to 80 percent. In contrast, the U.S., which relies more on voluntary efforts and municipal programs, struggles to recycle even 10 percent of plastic. The difference isn’t about consumers- it’s about producers being held to a different standard.

But EPR isn’t the only policy option. Carbon taxes and cap-and-trade programs can make pollution more expensive, pushing companies toward cleaner alternatives. Material taxes on non-recyclable inputs can make sustainable materials more cost-effective. Product standards- like requiring a certain percentage of recycled content- can push companies to shift their practices. And transparency laws that require companies to disclose their ESG data make it harder for them to greenwash and easier for the public to hold them accountable.

Critics often say these policies will raise prices. And yes, that might happen — but those prices would finally reflect the real cost of production, including the impact on the planet. Plus, these policies can unlock innovation, create new industries, and lead to better products. In the long run, the benefits far outweigh the costs.

 The pushback

Not everyone agrees with producer-focused responsibility. So let’s address a few common criticisms.

Some argue that consumers still need to be part of the solution. That’s true. But consumers can’t fix what they can’t see or control. Most don’t have access to detailed information about how a product was made, nor the power to influence supply chains. Producers do. And without policy change, even the most eco-conscious consumer is stuck making difficult, costly, and sometimes ineffective choices.

Others say that these kinds of regulations will raise prices. And they might- at least initially. But in many ways, that’s the point. Cheap goods often carry hidden costs that don’t show up on the receipt: pollution, climate damage, health problems, and the long-term degradation of ecosystems. Consumers still end up paying- just not at the checkout. They pay through rising healthcare costs, the growing burden of disaster recovery, and even through contaminants like microplastics found in food, water, and air. Making producers bear those costs brings much-needed transparency and fairness to the system. Plus, studies of Extended Producer Responsibility (EPR) schemes have shown that while there may be some short-term cost increases, the long-term benefits- including higher recycling rates, lower landfill expenses, and greater resource efficiency- can help stabilize prices and lead to a more resilient, sustainable economy.

Some worry that regulation stifles innovation. But history shows the opposite. When faced with new rules, companies often invent better products, processes, and technologies. Think of how emissions standards spurred electric vehicles or how bans on certain chemicals led to safer alternatives. These innovations not only met regulatory requirements but also created new markets and competitive advantages. Forward-thinking companies already understand this; they see sustainability as an opportunity for innovation and market leadership, not just a compliance burden. Limits can push progress.

And yes, global supply chains are complicated. But producers are the ones who run them. They decide what goes into a product, where it’s made, and how it’s distributed. If anyone has the leverage to drive change, it’s them- and they shouldn’t be let off the hook because the problem is big.

 Final thoughts

The idea that consumers are solely responsible for fixing ESG challenges isn’t just wrong- it’s counterproductive. It distracts from the real levers of change and allows companies to avoid accountability. We need a system that puts responsibility where it belongs: with the producers. Through smart, fair policies like Extended Producer Responsibility, carbon pricing, and product standards, we can create a market where doing the right thing isn’t just good PR- it’s good business.

Markets work best when they reflect reality. Right now, they don’t. It’s time we corrected that- not by asking consumers to do more, but by demanding that the people who make, market, and profit from the products we use every day do their part.

That’s how we build an economy that truly serves people and the planet.

 References:

4Ocean. (n.d.). Unpacking the Problem: Plastic Waste in the Consumer Goods Industry. Retrieved from: https://www.4ocean.com/blogs/consumer-goods/unpacking-the-problem-plastic-waste-in-the-consumer-goods-industry

Changing Markets Foundation. (2020). Talking Trash: the corporate playbook of false solutions to the plastic crisis. Retrieved from: https://changingmarkets.org/report/talking-trash-the-corporate-playbook-of-false-solutions-to-the-plastic-crisis/

Tax Foundation. (2024, September 26). Extended Producer Responsibility (EPR) Policies. Retrieved from https://taxfoundation.org/research/all/state/extended-producer-responsibility-epr/

Dr. Robin Dhakal

Dr. Robin Dhakal is an Assistant Professor at UAGC. He earned an M.A. and a Ph.D. in Economics from the University of South Florida and a B.A. in Business/Economics and Mathematics/Computer Science from Warren Wilson College. His academic research focuses on development economics and political economy. He has been teaching Economics in colleges and universities for the past 12 years. You can reach him at robin.dhakal@uagc.edu.