Separating config using PGDATA does not seem to behave as described in the docs

https://www.postgresql.org/docs/15/runtime-config-file-locations.html

If you wish to keep the configuration files elsewhere than the data directory, the postgres -D command-line option or PGDATA environment variable must point to the directory containing the configuration files, and the data_directory parameter must be set in postgresql.conf (or on the command line) to show where the data directory is actually located. Notice that data_directory overrides -D and PGDATA for the location of the data directory, but not for the location of the configuration files.

$ sudo grep data_directory /example/postgresql.conf
data_directory = '/var/lib/postgresql/data'             # use data in another directory
$ sudo docker run -e PGDATA=/etc/postgresql -e POSTGRES_PASSWORD=foo -v /example/postgresql.conf:/etc/postgresql/postgresql.conf -v /example/postgresql-data:/var/lib/postgresql/data postgres:15.2
The files belonging to this database system will be owned by user "postgres".
This user must also own the server process.

initdb: error: directory "/etc/postgresql" exists but is not empty
initdb: hint: If you want to create a new database system, either remove or empty the directory "/etc/postgresql" or run initdb with an argument other than "/etc/postgresql".
The database cluster will be initialized with locale "en_US.utf8".
The default database encoding has accordingly been set to "UTF8".
The default text search configuration will be set to "english".

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Am I missing something? I'm trying to have postgres to look at my config file, see data_directory, and initialize a new DB in data_directory if it is empty, otherwise use it as-is.

Start by reproducing the exact postgres:15.2 Docker command with PGDATA, the mounted postgresql.conf, and data_directory described in the issue. Compare the observed initialization behavior with PostgreSQL's runtime configuration file locations documentation; done means establishing whether the image behavior or the documentation conflicts with the expected setup.