Why companies need their own ESG rating
A company’s ESG priorities rarely align with the priorities of ESG rating agencies or organizations. Companies should define their own ESG performance reporting.
September 2, 2021
Most ESG rating agencies or organizations emerged because of their focus on a specific aspect of ESG, namely Environmental, Societal or Governance issues. While they may consider many aspects of ESG, there is a priority that they place on certain issues over others.
As a result, different rating agencies may have varying ratings for the same company. Furthermore, since there is no consistency across agencies, there is no alignment with a company’s own ESG priorities.
“Organizations that publish ESG ratings have very, very different agendas, which means first of all, they cannot agree on an ESG rating. Second of all, you will probably have a different opinion about how to prioritize your own ESG performance.”
The result: companies should define their own ESG reporting. Relying on a third party ESG rating to communicate ESG performance will likely not be the best way for a company to report its position in ESG. The company’s own ESG rating is not an industry standard. It is rather a more comprehensive and persuasive way to communicate corporate ESG performance to all parties concerned.
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