Assessing the Predictive Power of LEED Certification on ESG Performance: Limitations and Implications for Holistic Sustainability Measurement

Fay Abdulla Alkhalifa

Sustainable Development, 2025, vol. 33, issue 5, 7459-7473

Abstract: Over the past decade, businesses worldwide have increasingly incorporated Environmental, Social, and Governance (ESG) principles into their strategic frameworks, recognizing sustainability as a key driver of corporate responsibility and long‐term success. At the same time, Sustainability Assessment Tools (SATs), such as the Leadership in Energy and Environmental Design (LEED) certification, have gained prominence in the built environment by encouraging environmentally responsible design and construction. Despite their widespread use, the extent to which SATs align with ESG performance remains an area of limited investigation. This study examines whether LEED certification scores can serve as reliable indicators of broader corporate ESG outcomes. Through an analysis of 20 companies, regression and distribution models were employed to assess the correlation between LEED ratings and ESG performance metrics. The results indicate that LEED scores have little to no predictive power in explaining variations in ESG scores, accounting for less than 1% of the observed variance. While LEED certification may contribute to environmental improvements, it does not comprehensively address the social and governance components that are fundamental to ESG evaluation. These findings contribute to ongoing discussions on the effectiveness of sustainability certifications in corporate reporting, strategic decision‐making and advancing sustainable urbanism. The study underscores the necessity of adopting more holistic frameworks that integrate multiple sustainability indicators, offering valuable insights for policymakers, business leaders, and stakeholders committed to advancing sustainable urban development.

Date: 2025
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https://doi.org/10.1002/sd.3535

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Persistent link: https://EconPapers.repec.org/RePEc:wly:sustdv:v:33:y:2025:i:5:p:7459-7473

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