Integrating ESG and Corporate Social Performance
Neuvonen, Aleksi (2024)
Neuvonen, Aleksi
2024
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2024052315174
https://urn.fi/URN:NBN:fi:amk-2024052315174
Tiivistelmä
This research investigates the integration of Environmental, Social, and Governance (ESG) factors into Corporate Social Performance (CSP), a subject of increasing relevance as sustainability becomes a priority for both individuals and financial service providers. Despite the growing demand for sustainable investment options, the challenge persists in accurately assessing a company's sustainability practices. The variability in ESG scores, the complexity of regulatory frameworks, and the prevalence of green hushing—where companies selectively promote their sustainability efforts— complicate the consumer's ability to evaluate corporate sustainability.
The research traces the development of ESG starting from its roots in Corporate Social Responsibility (CSR) and underscores the necessity of universal guidelines that increase the credibility and comparison of the ratings of ESG. It advocates for a nuanced, industry related view to governance considerations, recognizing that ESG is a crucial link between financial performance with environmental, social, and governance issues. The study emphasizes the importance of evaluating companies' sustainability practices through the lens of ESG, while acknowledging the challenge of creating a framework that is both inclusive of all business types and reflective of their diverse characteristics. Variations in ESG ratings are attributed to the distinct attributes of different industries, and the lack of precision in non-financial measurements is highlighted. To overcome these challenges, the thesis proposes that ESG must be tailored to industry specifics and maintain transparency to effectively direct capital towards the transition to carbon neutral and more sustainable business. The establishment of trustworthy metrics, akin to those in the ESG rating industry, is suggested as a means to foster ensuring equitable competition among businesses while prevent unwanted behaviours like greenwashing. This thesis concludes that the attention should rather be in developing specific criteria for business instead of adopting a one universal model, to ensure that ESG integration into CSP is both meaningful and effective.
The research traces the development of ESG starting from its roots in Corporate Social Responsibility (CSR) and underscores the necessity of universal guidelines that increase the credibility and comparison of the ratings of ESG. It advocates for a nuanced, industry related view to governance considerations, recognizing that ESG is a crucial link between financial performance with environmental, social, and governance issues. The study emphasizes the importance of evaluating companies' sustainability practices through the lens of ESG, while acknowledging the challenge of creating a framework that is both inclusive of all business types and reflective of their diverse characteristics. Variations in ESG ratings are attributed to the distinct attributes of different industries, and the lack of precision in non-financial measurements is highlighted. To overcome these challenges, the thesis proposes that ESG must be tailored to industry specifics and maintain transparency to effectively direct capital towards the transition to carbon neutral and more sustainable business. The establishment of trustworthy metrics, akin to those in the ESG rating industry, is suggested as a means to foster ensuring equitable competition among businesses while prevent unwanted behaviours like greenwashing. This thesis concludes that the attention should rather be in developing specific criteria for business instead of adopting a one universal model, to ensure that ESG integration into CSP is both meaningful and effective.