Challenges of Measuring and Reporting ESG Performance

Purpose/Objectives:The lack of universal standards for environmental, social, and governance (ESG) measurement and reporting can lead to discrepancies and confusion in interpreting ESG performance. This paper analyses the main challenges in measuring and reporting ESG performance. Methodology:A comparative study of the evaluation methodologies used by international profile companies was carried out. The chosen sample consisted of 50 energy sector companies, which were selected according to the level of market capitalisation, revenues, energy production, and environmental impact. Data on ESG scores was collected from 2022 sustainability reports, ESG rating agencies, government reports, and other sources ensuring a comprehensive analysis of these companies’ sustainability performance. Findings:Assessing social and governance aspects can be subjective and vary according to individual perspectives and values. Assessing ESG performance among companies in the energy sector is crucial for stakeholders aiming to promote sustainable business practices and mitigate risks. Implications:Evaluating ESG performance requires a long-term perspective, but markets often focus on short-term performance. This can undermine efforts to improve ESG performance for companies that focus too much on short-term results. Limitations:Lack of ESG scores for several companies and lack of access to more diverse databases. The rapid pace of change in the field of ESG and not reflecting the latest developments or trends. Future Research:Ways to integrate ESG criteria more effectively into investment and business decision-making processes, including the development of innovative tools and methodologies, and examining sustainable management and governance practices and their impact on the long-term performance of companies and society.