Navigating the ESG ratings landscape

“Our ESG score dropped – what does this mean?”

"Our customer is requesting an EcoVadis silver rating in the new tender – what should we do? " 

ESG ratings increasingly influence how investors, lenders, and customers assess companies. But with dozens of rating providers, varying methodologies, and overlapping frameworks, strategy and sustainability leaders scramble to find answers to a set of key questions:

Do ESG ratings still matter for our business and stakeholders?

In today’s fast-evolving regulatory and market environment, ESG ratings are strategic levers to secure competitiveness, not just communication tools.

How has the purpose of ESG ratings evolved?

ESG ratings evaluate how companies manage environmental, social, and governance risks and opportunities. They offer a consistent benchmark to:

• Assess performance
• Identify areas for improvement
• Clearly communicate progress to stakeholders.

Investors and lenders increasingly use ESG ratings to assess risk and set financing terms. For example, MSCI research shows that companies with stronger ESG ratings enjoy significantly lower financing costs across both equity and debt markets, significantly contributing to their competitiveness. Similarly, a recent Deloitte survey found that businesses prioritising ESG transparency earn higher trust, command premium pricing, and secure longer-term contracts.

Companies that treat ESG ratings as a core component of their sustainability strategy protect value for business and shareholders. Specific examples where value is protected or created include:

• Protect revenues by securing B2B customer relationships and access to large tenders
• Support share price performance by retaining & attracting shareholders with good rating scores
• Signal competitive (out-) performance with your peer group
• Consider identified gaps in the annual rating process as “free” advice for continuous improvement of governance, data quality and disclosures
• Build credibility through transparent engagement with rating providers.

Different ratings. Different audiences. Which ratings to prioritise?

Any rating prioritisation needs to start with clarity on the desired targeted stakeholder group and the related outcome:

• Do we want to retain or attract shareholders?
• Do we want to participate in new tenders with large B2B customers?
• Do we want to influence how NGOs comment on our company?

The choice of ratings is often driven by the best outcome to relative workload ratio. Yet, the ESG landscape is complex with providers serving distinct purposes:

Behind the score: Methodology matters

Though ESG rating agencies collect similar data, their approaches vary widely:

• Some ratings, such as MSCI’s, are relative, ranking companies against peers
• Others, such as CDP’s, are absolute, scoring against fixed criteria
• Some rely mainly on public disclosures, while others require detailed questionnaires and documentation.
  

Focus enables value

The key is focus. Instead of chasing every rating, companies should invest in the ratings that matter most to their stakeholders and business model –thereby aligning your ESG efforts and competitiveness strategy.

ESG ratings advisory at Deloitte

We help companies navigate the ESG ratings landscape by identifying the most relevant assessments, preparing data and disclosures, and turning insights into measurable value.

Get in touch to learn how we can support your ESG journey.