The fundamental problem with ESG? Conflicting letters

Christos Cabolis, Maude Lavanchy and Karl Schmedders

Chapter 15 in Advancing Corporate Governance Research, 2026, pp 309-323 from Edward Elgar Publishing

Abstract: The term ESG—short for environmental, social, and governance—is routinely used to capture organizations’ efforts to be more climate-friendly and socially inclusive and to employ sound governance practices and processes. Although ESG criteria are well-meaning, the term lumps together concepts that are profoundly different in at least three dimensions: (1) the excludability of the benefits of an action, (2) the temporal gap between investment and the realization of its returns, and (3) the uncertainty surrounding any given action's outcome. In addition to these differences, E frequently goes head-to-head with S (both within and across countries). We propose a path forward, on the way investigating the solutions that businesses can explore to build a more sustainable future.

Keywords: ESG; Excludability; Property rights; Sustainability; Temporal mismatch; Tragedy of the commons (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035324958
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