Improving ESG Scores with Sustainability Concepts

Abstract

ESG (environment, social, and governance) scores are becoming mainstream proxies for evaluating sustainability in organizations. In past years, scholars and managers used ESG scores to express the sustainable development of an organization and other types of sustainability. Meanwhile, increasing literature has shown that ESG scores do not measure sustainability in terms of sustainable development. The main reason ESG scores fail to measure sustainability adequately is that ESG scores are not designed to measure sustainability concepts, such as temporality, impact, resources management, and interconnectivity. Furthermore, ESG scores apply materiality concepts, but what they measure is not always quantifiable, and most agencies that produce ESG scores lack transparency. This research reviewed the challenges and issues associated with ESG scores regarding sustainability representation. Then, based on the sustainability literature, different themes and concepts that would add more sustainability consideration to an ideal ESG score are presented. Since ESG scores are increasingly popular, this paper presents concepts and ideas that would help ESG score agencies include more sustainability principles in their methodologies while redefining the expectations of scholars using them.

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