ESG Policy–Practice Decoupling: A Measurement Framework and Empirical Validation

Atta Guy Sylvestre Loko and Eduardo Schiehll ()
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Atta Guy Sylvestre Loko: Department of Accounting, HEC Montréal, Montréal, QC H3T 2A7, Canada
Eduardo Schiehll: Department of Accounting, HEC Montréal, Montréal, QC H3T 2A7, Canada

Sustainability, 2025, vol. 17, issue 3, 1-26

Abstract: As sustainability becomes more critical to corporate strategy and performance, firms, investors, and researchers must continue to refine methods for measuring and addressing the gap between rhetoric and reality. Closing this gap is crucial to ensuring that externally oriented ESG claims are supported by genuine internal actions that benefit both the firm and society at large. To address this issue, this study introduces a theoretically driven framework to assess the alignment (or lack thereof) between firms’ ESG policies and their actual implementation. By proposing a more granular and objective measure, we address a gap in the existing literature. Additionally, we empirically validate this framework using data from ASSET4, providing insights into the extent and persistence of this phenomenon using a sample of S&P 1500 firms from 2016 to 2022. Our results reveal that misalignment between internal actions and external endorsements in managing environmental and social issues is both significant and persistent across the years analyzed. Over 80% of the sample firms exhibit this misalignment, underscoring its prevalence within the sample. In more recent years, however, firms have shown a clear tendency to prioritize internal actions over initiatives aimed at externally endorsing their efforts. Building on the framework we propose to measure ESG policy–practice decoupling, along with the empirical analysis we conducted, we discuss its broader implications and outline several opportunities for future research.

Keywords: ESG; policy–practice decoupling; internal actions; external actions; investors; stakeholders; ASSET4 (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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