The ESG Ratings Crisis: Too Many Scores, Too Much Confusion
From BlackRock to Bloomberg, asset managers and sustainability professionals are asking the same question: Can ESG ratings be trusted?
Despite their growing influence on investor decisions, boardroom strategies, and even public reputation, ESG scores from different providers often paint wildly inconsistent pictures of the same company.
A 2025 MIT Sloan study found correlations between leading ESG ratings providers (like MSCI, Sustainalytics, and S&P) to be as low as 0.46—compared to 0.99 for traditional credit ratings.
Why This Matters
- Investors use ESG scores to guide portfolio risk management
- Companies rely on ratings to benchmark sustainability performance
- Consumers and regulators expect transparency—but often see greenwashing
“The same company can score AAA with one agency and C- with another,” notes one sustainability manager. “That’s not just confusing—it’s risky.”
Case Snapshot: The ESG Ratings Gap in Action
Consider a multinational food and beverage brand:
- MSCI Rating: AA (Strong ESG performance)
- Sustainalytics Risk Score: 33 (High risk)
- FTSE ESG Rating: 3.4 out of 5
Why the gap?
Each provider uses different data sources, weightings, and methodologies:
- Some focus heavily on disclosures
- Others emphasize risk exposure or industry comparisons
- Few adjust for circular economy initiatives or value chain innovation
The Risk of Misalignment
This inconsistency has real-world consequences:
- Greenwashing accusations against firms with strong ratings but weak action
- Capital misallocation based on flawed ESG signals
- Compliance risks as regulators question rating validity
In response, regulatory bodies are stepping in.
In 2024, the European Commission proposed rules to standardize ESG rating transparency. The U.S. SEC has increased its scrutiny of ESG fund labeling and use of third-party scores. Meanwhile, Japan and Singapore are also pushing for greater disclosure from ESG ratings agencies.
The Call for Reform
Key proposals under discussion globally include:
- Transparency in methodologies and weightings
- Clear separation of ratings and consulting arms
- Alignment with international frameworks (like IFRS S1/S2, GRI, or CSRD)
- Sectoral comparability for fair benchmarking
The goal: make ESG ratings as reliable as credit ratings—while recognizing that sustainability is more context-specific and evolving.
The Role of Circular Economy in ESG Scores
One emerging trend is the integration of circular economy metrics into ESG scoring systems. These include:
- Waste reduction and closed-loop systems
- Product lifecycle extension
- Supply chain resource efficiency
Yet these practices are rarely captured in mainstream ESG ratings today—leaving innovation underreported and undervalued.
Two Training Programs to Navigate ESG Ratings and Reform
As expectations rise, companies need professionals who can both interpret ESG ratings critically and design strategies that go beyond them.
Online Certificate on ESG Ratings and Investments
This course empowers learners to:
- Understand how leading ESG rating agencies operate
- Deconstruct score methodologies and key indicators
- Align ESG performance with investor-grade disclosure expectations
- Improve internal data quality and governance
Ideal for:
- ESG managers and analysts
- Investor relations professionals
- Consultants and sustainability officers
Includes rating comparisons, regulatory updates, and tools to improve scoring outcomes.
Certified Circular Economy Professional
This program goes beyond traditional ESG to focus on:
- Circular economy principles and implementation
- Integrating resource efficiency into ESG reporting
- Designing business models around reuse, regeneration, and redesign
- Measuring circular KPIs and linking them to ESG strategy
Designed for:
- Product and supply chain leaders
- ESG and innovation teams
- Consultants working on sustainability transformations
Includes industry case studies, EU circular policy alignment, and reporting toolkits.
Q&A: ESG Ratings Reform and Circular Integration
Q1: Why do ESG ratings vary so much between agencies?
Ratings vary due to different data sources, issue weightings, and scoring philosophies. Unlike credit ratings, ESG metrics are not yet standardized—so the “truth” depends on who is measuring.
Q2: Can companies influence or improve their ESG scores?
Yes. By improving data quality, aligning with frameworks like SASB or CSRD, and enhancing transparency, companies can raise their ratings. However, true improvement comes from material sustainability actions—not gaming the system.
Q3: Will ESG ratings ever include circular economy metrics?
Likely yes. As circular economy practices become material to climate, waste, and supply chain goals, rating agencies are beginning to consider them. But until then, companies must self-report and explain these strategies clearly.
Final Thought: Ratings Aren’t Perfect—But Neither Is Ignoring Them
While ESG scores remain a work in progress, they are still powerful tools for communicating values, risks, and opportunities.
The professionals who succeed in 2025 won’t just know how to boost ratings—they’ll know how to challenge them, improve the underlying performance, and lead with integrity in a data-driven future.
“Ratings are just the starting point. Real sustainability lies in action.”