"When a measure becomes a target, it ceases to be a good measure"
Any ESG system that uses a calculated number composed of many areas will quickly fall prey to Goodhart's Law. With an E, an S and a G to work on, the areas for change are numerous enough that Goodhart's Law holds even in a non-cynical world.
When an edict that "We need to increase our X score this quarter" is handed down, the real, living people who have to improve the ESG rating are likely limited in what they can do. A combination of pre-existing contracts and commitments, difficulty in changing large systems and problems with multi-department co-ordination means that most changes will be small and isolated, i.e. things where one department or small team can implement the entire change.
"When a measure becomes a target, it ceases to be a good measure"
Any ESG system that uses a calculated number composed of many areas will quickly fall prey to Goodhart's Law. With an E, an S and a G to work on, the areas for change are numerous enough that Goodhart's Law holds even in a non-cynical world.
When an edict that "We need to increase our X score this quarter" is handed down, the real, living people who have to improve the ESG rating are likely limited in what they can do. A combination of pre-existing contracts and commitments, difficulty in changing large systems and problems with multi-department co-ordination means that most changes will be small and isolated, i.e. things where one department or small team can implement the entire change.