ESG Analysis: Methodological Approach for the Calculation of a Composite Indicator

Sandra Kendo, Qing Xu (), Ivan Terraglia and Oussama Kacemi
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Sandra Kendo: ICL, Junia, Université Catholique de Lille, LITL
Qing Xu: ICL, Junia, Université Catholique de Lille, LITL
Ivan Terraglia: University of Teramo
Oussama Kacemi: ICL, Junia, Université Catholique de Lille, LITL

Chapter 4 in Non-Financial Reporting and ESG Performance, 2026, pp 69-101 from Palgrave Macmillan

Abstract: Abstract This chapter operationalizes the ESG conceptual and regulatory foundations discussed in earlier chapters by proposing a structured methodology to calculate a composite ESG indicator. It responds to the persistent challenge of standardization in ESG measurement and the need for robust tools to assess corporate sustainability in a coherent, comparable manner. Recognizing the inconsistencies among ESG rating agencies, the chapter builds on existing literature and empirical critiques to construct a transparent and theoretically grounded indicator based on the Mazziotta-Pareto Index (MPI), a non-compensatory aggregation method. The proposed composite indicator evaluates ESG performance across SMEs’ three traditional pillars (Environmental, Social, and Governance). This design ensures that weaknesses in one ESG domain cannot be masked by strengths in another, preserving the integrity of multi-dimensional sustainability assessment. The chapter also outlines the challenges posed by divergent ESG rating methodologies, emphasizing the impact of measurement, scope, and weighting discrepancies. It reviews major rating systems (Bloomberg, MSCI, Sustainalytics, Refinitiv, ISS).

Keywords: ESG Composite Index; Ratings; PCA; SMEs (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psifcp:978-3-032-19092-5_4

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DOI: 10.1007/978-3-032-19092-5_4

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