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Environmental, Social, and Governance (ESG) is a fast-evolving discipline among policymakers, corporations and investors. Sustangibles explores a critical question: “Do companies’ ESG initiatives increase their competitiveness?” Many research studies on this topic exist, but conclusions remain far from unanimous.
Two conflicting theories - “value creation” and “shareholder expense” - have emerged, each generating a strong body of knowledge.
Given this context, Sustangibles reviewed nearly 50+ papers to analyze the underlying drivers evaluating economic, industry and company level drivers. Our study finds that each of these drivers has a varied level of impact on the company’s competitiveness. This problem is even more pronounced in emerging markets.
So the existing ESG ranking, ratings, and scorecards approach can at best provide a directional overview but they alone may not be comparable and comprehensive for addressing this question. The quality of data, consistency in reporting, and alignment of standards still need to mature before one can make informed decisions based on these approaches.
Sustangibles believes that a fundamental approach to ESG assessment can better uncover the themes that amplify ESG impact on companies’ performance, and help stakeholders make better decisions.
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