A Quadrant-Based Framework for Mapping the Interplay Between ESG Performance and ESG Controversies

Abstract

This study illustrates the complex interplay between ESG performance and ESG controversies integrating both dimensions into a quadrant-based framework of corporate ESG positioning. Within this framework, we identify four distinct ESG profiles: Crystal clear (high ESG performance and few ESG controversies), Rough diamond (high ESG performance and many ESG controversies), Sleeping guardian (low ESG performance and few ESG controversies), and Sinking ship (low ESG performance and many ESG controversies). We applied this framework using data from LSEG Data & Analytics for the years 2018, 2019, and 2022, covering companies operating across 20 countries. Our findings reveal that companies are predominantly concentrated in the Sleeping guardian and Crystal clear profiles. When examining how ESG performance influences ESG controversies, the expected shift (i.e., a decline in Rough Diamond companies and a rise in Crystal Clear companies) does not consistently occur over time across the sample countries. Differently, when considering how ESG controversies affect ESG performance, the expected shift (i.e., a decline in Sinking ship companies and a rise in Rough diamond companies) occurs in most, though not all, countries. The study contributes to both managerial and theoretical discourse on corporate sustainability by offering a comprehensive overview on the dynamic interplay between ESG performance and controversies. It also lays the groundwork for future research into how companies navigate this interplay.