Unpacking Environmental, Social, and Governance Score Disparity: A Study of Indonesian Palm Oil Companies

Abstract

This study investigates the inconsistencies in ESG scores assigned by different rating agencies. Focusing on two Indonesian palm oil companies, this paper examines the link between their reported sustainability performance and the resulting ESG scores. This study employs content analysis to assess how the companies disclose information around double materiality, stakeholder engagement, and certifications. Additionally, the methodologies used by two rating agencies are reviewed to identify potential misalignments. The analysis reveals discrepancies in the ratings, suggesting factors like differences in the level of engagement with each company and scoring methodologies might be at play. This highlights the need for standardized sustainability reporting and more transparent rating methodologies within the palm oil industry. While limited to two companies and two agencies, the findings can inform efforts to improve transparency both in sustainability practices and scoring methodologies. This would ultimately lead to more reliable ESG scores, benefiting all related stakeholders. To goal of this study is to promote responsible practices in the palm oil industry by emphasizing the impact of reporting practices.