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ESG Analysis: Methodological Approach for the Calculation of a Composite Indicator

In: Non-Financial Reporting and ESG Performance

Author

Listed:
  • Sandra Kendo

    (ICL, Junia, Université Catholique de Lille, LITL)

  • Qing Xu

    (ICL, Junia, Université Catholique de Lille, LITL)

  • Ivan Terraglia

    (University of Teramo)

  • Oussama Kacemi

    (ICL, Junia, Université Catholique de Lille, LITL)

Abstract

This chapter operationalizes the ESG conceptual and regulatory foundations discussed in earlier chapters by proposing a structured methodology to calculate a composite ESG indicator. It responds to the persistent challenge of standardization in ESG measurement and the need for robust tools to assess corporate sustainability in a coherent, comparable manner. Recognizing the inconsistencies among ESG rating agencies, the chapter builds on existing literature and empirical critiques to construct a transparent and theoretically grounded indicator based on the Mazziotta-Pareto Index (MPI), a non-compensatory aggregation method. The proposed composite indicator evaluates ESG performance across SMEs’ three traditional pillars (Environmental, Social, and Governance). This design ensures that weaknesses in one ESG domain cannot be masked by strengths in another, preserving the integrity of multi-dimensional sustainability assessment. The chapter also outlines the challenges posed by divergent ESG rating methodologies, emphasizing the impact of measurement, scope, and weighting discrepancies. It reviews major rating systems (Bloomberg, MSCI, Sustainalytics, Refinitiv, ISS).

Suggested Citation

  • Sandra Kendo & Qing Xu & Ivan Terraglia & Oussama Kacemi, 2026. "ESG Analysis: Methodological Approach for the Calculation of a Composite Indicator," Palgrave Studies in Impact Finance, in: Sandra Kendo (ed.), Non-Financial Reporting and ESG Performance, chapter 4, pages 69-101, Palgrave Macmillan.
    • Handle: RePEc:pal:psifcp:978-3-032-19092-5_4
    DOI: 10.1007/978-3-032-19092-5_4
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