Is It Time to Rethink ESG as a Single Framework?

Unbundling ESG could lead to more precise, measurable progress in each area.

• 60% of companies report challenges in addressing all ESG pillars effectively.
• 35% of firms excel in one area but underperform in the other two.
• Unbundling ESG may lead to more targeted efforts and clearer accountability.

What’s Happened

Over the past decade, ESG has grown into a catch-all framework, but cracks are starting to show. In recent months, industry leaders and policymakers have increasingly raised concerns about the framework’s effectiveness. In a recent survey of 500 global companies, 60% employees reported challenges in effectively addressing all three ESG pillars simultaneously, with a significant portion feeling that their efforts in one area were being hindered by the demands of the others. 35% of these companies admitted that they excelled in one pillar—environmental, social, or governance—while underperforming in the others.

Why This Matters

The bundled nature of ESG can make it difficult for companies to deliver real, measurable progress across all fronts. For example, a company might pour resources into reducing carbon emissions but fail to make strides in governance reforms or social equality. This spread-thin approach has led to 43% of businesses citing “lack of clarity” in ESG metrics as a core issue in their sustainability efforts. As ESG frameworks become more scrutinized, stakeholders are demanding more precise actions, suggesting that unbundling these areas could allow businesses to concentrate resources where they are most needed.

Sector-Specific Impacts

Sector-specific analysis shows how the one-size-fits-all approach falls short when it comes to ESG credentials. In energy companies, environmental performance is often the primary focus, yet 70% of these companies still struggle with governance issues like transparency and regulatory compliance. “We’re excelling in reducing our carbon footprint, but governance is a weak spot,” a senior executive from a renewable energy firm commented. In contrast, sectors like tech often focus more on social and governance reforms while lagging behind on environmental goals. By unbundling, each sector could focus more on its most relevant challenges and improve outcomes.

Targeted Solutions for Complex Issues

The ESG framework was initially designed to integrate sustainability into business models, but its broad scope may be holding companies back. By unbundling, businesses could target specific pillars—environmental, social, or governance—with dedicated strategies, yielding clearer, measurable outcomes. More granular reporting could also enhance accountability. Whether unbundling becomes the standard remains to be seen, but it’s clear that the conversation is shifting towards more tailored, data-driven solutions that could pave the way for better corporate responsibility.