A CEO approves a nine-figure investment based on traditional metrics like earnings per share. It feels like solid ground. It isn’t, and neither are the tools built to replace it.
Such metrics were never built to capture brand value or environmental cost, both of which matter more than they used to, so investors built ESG scoring to estimate what was being missed.
But ESG scores depend more on which agency assigns them than on how a company performs, so regulators worldwide raced to standardize them, some adopting shared global rules, others pulling back the rules they had only just introduced.
Each fix exists to patch the one before it, and all three are unreliable at once.
Ask yourself which of the three supported your last major decision. Whichever it was, the ground under it is already moving.
Metrics built for a different economy
Quarterly earnings per share, return on investment, and GDP-style aggregates were designed for an economy where value sat mostly on tangible assets, whether that meant factories and machinery or ships and hotel rooms.
That economy still exists, but it now sits inside a much larger one built on brand equity, software, data, workforce capability, and the environmental and social costs a company pushes outside its own accounts.
Harvard Business School’s Impact-Weighted Accounts Initiative, the research effort that ran from 2019 to 2022 before evolving into the International Foundation for Valuing Impacts, illustrated the problem with a blunt example.
An airline can report $100M in annual profit while creating $500M in environmental damage, and its financial statements will show only the first number.
The second number is real. It shows up eventually, through regulation, reputational cost, and the price of capital. It simply does not show up when the decision gets made.
Economists have a name for this: an externality, a cost or benefit that falls on someone other than the company generating it, so it never enters the price of the transaction at the time that matters.
Traditional financial metrics were not designed to capture externalities, because when they were built, few executives needed them to. They do now, and the tools built to compensate for that gap carry a credibility problem of their own.
When the scorecards disagree with each other
Faced with the limits of financial metrics, capital markets built an entire industry around ESG scoring: third-party agencies rating companies on environmental, social, and governance performance and distilling the result into a single number on which investors could act.
The trouble is that the number depends heavily on who assigns it.
Researchers at MIT Sloan’s Aggregate Confusion Projectexamined ratings from six major agencies covering the same 924 companies and found the average correlation between them was 0.54.
By contrast, credit ratings from Moody’s and Standard & Poor’s correlate at roughly 0.92, which is why two credit agencies rating the same company will almost always agree, while two ESG raters frequently will not.
The MIT team traced most of that gap to plain measurement disagreement: different agencies collecting different raw data for concepts that sound identical on paper, such as employee satisfaction or board independence.
That divergence carries real consequences. It has fed accusations of greenwashing, the practice of overstating or misrepresenting a company’s environmental or social credentials. In one widely publicized case, Deutsche Bank’s asset management arm DWS was fined €25M in 2025 by German prosecutors for misleading investors about its ESG credentials.
It has also fed the opposite reaction.
In 2025, more money left European sustainable funds than flowed into them for the first time since Morningstar started tracking the category in 2018. In the same period, more than 300 funds quietly removed “ESG” from their names to avoid the scrutiny now attached to the label.
Investors have not stopped caring about sustainability. They have stopped trusting the label that was supposed to prove it.
Rules built to converge, colliding instead
The obvious response to fragmented private scoring is public standardization, and that work has genuinely progressed.
The International Sustainability Standards Board is the leading example. Formed by the IFRS Foundation in 2021, it merged several competing disclosure frameworks into a single global baseline. Those included the Sustainability Accounting Standards Board’s industry metrics and the Task Force on Climate-related Financial Disclosures’ climate framework. It issued its first two standards in June 2023, and more than 30 jurisdictions have since moved toward adopting them.
The European Union chose a parallel, more demanding path with its Corporate Sustainability Reporting Directive.
It requires companies to assess double materiality: reporting not only how sustainability issues affect their own financial performance, but also how their operations affect the world outside the company. That is a wider lens than the ISSB’s standards apply.
That path has itself been rewritten mid-flight.
After mandating reporting for the first wave of large companies from 2024, Brussels responded to competitiveness concerns. In early 2026, it passed an Omnibus directive that raised the reporting threshold to companies with more than 1,000 employees and €450M in turnover. The directive also removed sector-specific standards and pushed later waves of companies back to 2028.
Greece offers a close-up view of what that looks like in practice.
An analysis of 52 Greek and Athens-listed companies found that 67% restated prior-year sustainability disclosures. Another 53% applied newly introduced modifications to their reporting standard, all within a single reporting cycle.
That level of restatement reflects companies trying to comply in good faith. The standard itself changed under them while they were still drafting the first version of the report.
Two more efforts add to this picture.
- The first, the World Economic Forum’s Stakeholder Capitalism Metrics, is a voluntary framework built with the Big Four accounting firms and launched in 2020.
- The second, the impact-weighted accounting work that began at Harvard and now continues at the International Foundation for Valuing Impacts, takes a different approach: it attempts to convert a company’s social and environmental effects into monetary terms and place them alongside revenue and profit.
Layer these efforts on top of the ISSB and the EU’srules, and a pattern comes into focus.
Every serious actor in this space, including standard-setters, accounting firms, academic institutions, and regulators, agrees the old measurement system is inadequate. None of them agree yet on what should replace it.
The systems working toward agreement keep getting interrupted by the ones still pulling apart.
The ground is still moving
Put the three threads together and the picture is consistent for any CEO weighing a capital allocation, a positioning statement, or a five-year strategic bet.
The financial metrics on the desk understate both the value and the risk actually in play.
The score meant to correct for that undercount depends heavily on which agency assigns it.
And the regulatory floor everyone was waiting to stand on has shifted twice in two years, each time in a different direction.
None of that means the underlying question, how a company actually creates value for everyone it touches, has gone away.
It means the instruments currently on offer were not built to survive the environment they are now being asked to operate inside.
But the decisions are not waiting for the measurement problem to resolve itself. They are being made anyway, on infrastructure that the people building it privately admit is still under construction.
SOURCES
1. Impact-Weighted Accounts Initiative / IFVI, “Announces Important Board Appointments,” 2022 — https://ifvi.org/news/the-international-foundation-for-valuing-impacts-ifvi-announces-important-board-appointments/
2. Harvard Business School, Initiatives & Projects (IWA timeline) — https://www.hbs.edu/impact-weighted-accounts/news/Pages/default.aspx
3. Berg, Kölbel, Rigobon, “Aggregate Confusion: The Divergence of ESG Ratings,” Review of Finance, 2022 — https://academic.oup.com/rof/article/26/6/1315/6590670
4. MIT Sloan Sustainability Initiative, The Aggregate Confusion Project — https://mitsloan.mit.edu/sustainability-initiative/aggregate-confusion-project
5. Watson Farley & Williams, “The rise of greenwashing amid growing ESG pressures,” 2025 — https://www.wfw.com/articles/the-rise-of-greenwashing-amid-growing-esg-pressures/
6. Impact Europe, “What Happened to ESG in Europe?” — https://www.impacteurope.net/insights/what-happened-esg-europe
7. Portfolio Adviser, “Have we reached peak anti-ESG?” 2026 — https://portfolio-adviser.com/magazine-article/cover-story-have-we-reached-peak-anti-esg/
8. IFRS Foundation, jurisdictional adoption update, June 2025 — https://www.ifrs.org/news-and-events/news/2025/06/ifrs-foundation-publishes-jurisdictional-profiles-issb-standards/
9. Council of the EU, “Council signs off simplification of sustainability reporting,” Feb 2026 — https://www.consilium.europa.eu/en/press/press-releases/2026/02/24/council-signs-off-simplification-of-sustainability-reporting-and-due-diligence-requirements-to-boost-eu-competitiveness/
10. PwC Greece, “Year 2 of CSRD reporting in Greece,” 2026 — https://www.pwc.com/gr/en/publications/greek-thought-leadership/csrd-reporting-in-greece.html
11. World Economic Forum, “Measuring Stakeholder Capitalism,” 2020 — https://www.weforum.org/publications/measuring-stakeholder-capitalism-towards-common-metrics-and-consistent-reporting-of-sustainable-value-creation/
This article was originally published in The CEO Foresight, the LinkedIn Newsletter of CEO Clubs Greece.
