Corporate Sustainability Performance: Introducing an SDG Score and Testing Its Validity Relative to ESG Ratings

Connecting the Sustainable Development Goals to firm-level sustainability and ESG factors: The need for double materiality

“…The excessive use of aggregated indicators incorporating a large amount of diverse and weighted information (e.g., some of the aggregated global ESG indicators provided by rating agencies) has led to criticisms and mistrust of the validity of firm-level ESG metrics. For example, The Economist (2022) claims that a focus on ESG factors “that won’t save the planet” confuses investors (Pucker & King, 2022), as it does not lead to a meaningful impact on society and the natural environment (Pucker & King, 2022; van Zanten & Huij, 2022).…”

“…Companies must provide investors with information on these factors, as they are key for investors’ decisions. Since ESG factors were recognized as able to affect financial profitability, the financial materiality of ESG factors has gained increasing attention, which has spurred the proliferation of ESG data providers and metrics (van Zanten & Huij, 2022). Moreover, relevant stakeholders, such as non-governmental organizations (NGOs) and regulators (e.g., European Commission, 2019), have warned that a narrow notion of materiality focused solely on financial aspects is worrying, and that any such view should be supplemented with information on social and environmental impacts to ensure the achievement of global sustainability.…”

“…does not lead to a meaningful impact on society and the natural environment (Pucker & King, 2022;van Zanten & Huij, 2022).…”