Abstract
Offering environmental, social, and governance (ESG) assessment and certification can invite organizations to adapt their activities to accommodate environmental, social, and governance concerns. Prior research points to shortcomings in accurately monitoring and assessing organizational sustainability performance. This contribution aims to highlight the role of ESG indicators as motivating organizations to prioritize sustainability goals. Theory and research elucidate that the definition of specific goals guides the degree of effort organizations invest, the priorities they set, and the persistence they display in pursuing targeted outcomes. The extent to which performance assessments of rating agencies specify and integrate ESG concerns thus impacts the likelihood that organizations will address each of these sustainability targets. The likely impact of ESG indicators was examined by consulting ratings, rankings, and indexes from 130 rating agencies included in the Reporting Exchange Platform. We identified and categorized 237 unique indicators in over 600 corporate ESG indicators. Results reveal that themes covered are less well specified in the governance domain than in the environmental and social domain. Further, different dimensions are emphasized depending on which stakeholder is addressed (investors, consumers, companies). Taken together, we conclude that this makes it more difficult for organizations to adopt a holistic approach to the achievement of sustainability goals.
Highlights
There is general awareness among businesses that they are responsible for their impact on society
The ways in which organizations contribute to achieving the Sustainable Development Goals (SDGs) is inferred from organizational activities that allegedly express their engagement in corporate social responsibility (CSR)
Based on theory and research on goal setting and motivation in organizations, we argue that the indicators that are assessed by ESG rating agencies—including the way these objectives are defined and specified—have implications for which CSR activities organizations attend to and prioritize
Summary
There is general awareness among businesses that they are responsible for their impact on society This is reflected in the increasing priority that companies give to contributing to the United Nations Sustainable Development Goals (SDGs) [1]. The abundance and complexity of indicators make it difficult to unambiguously evaluate the progress businesses make [3]. This stands in the way of consistent interpretation and comparability of these indicators as well as the organizational rankings and ratings resulting from them [3,4,5,6,7]
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