Responsible Business Ratings: Features and Development Trends

The global transition to the principles of responsible business conduct is an important condition for the sustainable development of countries, regions and cities of the world. Responsible business conduct ratings and ESG-ratings allow investors, the states, bank and enterprise employees to assess the level of development of responsible business conduct using specific companies as an example and conduct a comparative analysis for their own sustainable development 1.

The historical prerequisites for responsible investment have a rich history in most industrialized countries and were closely related to a dominant religion in the country 2. The modern concept of ESG is based on the synthesis of the following economic science-based concepts that have common approaches to responsible investment: the concept of externalities 3, the UN concept of sustainable development 4, stakeholder theory and the concept of corporate social responsibility of business 5. The development of responsible investment concepts over time was prominent. Researchers often tried to examine how the understanding of responsible business practices have evolved over time, proving insights for their integration into modern business strategies 6. Before the most precise and fundamental definition of responsible business emerged, many authors debated about how exactly businesses should apply these concepts. The most discussed issue was the Corporate social responsibility (CSR) implementation strategies, its drivers and benefits for different businesses 7 8.

At the international level, ESG terminology was first used in the UN report ‘Who Cares Wins. Connecting Financial Markets to a Changing World’ in 2004, as part of activities to integrate sustainable development principles in the financial sector. This report was prepared by experts from more than 20 major international financial organizations. The purpose of the report was to involve financial market participants in solving accumulated environmental and social problems, as well as to improve the quality and transparency of corporate governance. In 2006, the UN approved 6 principles of responsible investment, the first of which are ESG principles 9.

Starting in 2018, the development of ESG has entered an active phase and the focus of this period is ESG-ratings and the formation of a methodology for assessing companies 10 11.

ESG-ratings emergence and development helped many authors to provide a comprehensive review of responsible innovation within businesses and to analyze various practices that integrate social and sustainable considerations into innovation processes. It provided an insight into the way companies can align their innovation strategies with societal needs and ethical standards 12. At present, international ESG-ratings are actively developing, increasing the number of participants and ratings themselves.

In the study of ESG transformation and sustainable development, the authors V.A. Kotova and M.I. Seredina outlined several prerequisites for the emergence of various ESG components 13. For example, the environmental component appeared at the time when humanity began to actively address existing global problems related to climate change and environmental pollution. The reasons for the emergence of the social aspect were various man-made global-scale disasters, which showed that companies should be responsible for their activities. The largest oil spill in history – the Deepwater Horizon (U.S.) oil spill on the British Petroleum (BP) platform in 2010 serves as an example. The management component became more relevant later, during the global financial crisis of 2008–2013. These events showed the world the need to increase the transparency of reporting and improve management structures.

As the main trends in the development of ESG now, the authors highlight the increase in demand for ESG investing, the transition to a circular economy, as well as the greater spread of CSR and ESG reporting. However, in Russia, ESG investing is only gaining popularity, while in the world it is already an established trend. The concept of a circular economy is also attracting increasing attention largely due to potential benefits for the economy and society, such as “... cost savings, the creation of new jobs in developing ‘circular’ markets and the introduction of sustainable innovations in business models and technologies”. The authors also note that many developed countries have long been actively implementing this concept, and some, such as Japan and the Netherlands, have achieved high results. Corporate social responsibility and ESG reporting, as the authors note, can relate to all ESG aspects and are characterized by specific actions of companies aimed at solving problems related to sustainable development. Despite the lack of uniform CSR requirements, there are industry practices that companies use. Many authors conclude that ESG transformation will continue to accelerate, and the global leaders will be companies that are able to successfully implement modern ESG practices 12 13.

In the study of the evolution of ESG principles in the context of sustainable development strategy 11, the UN concept of sustainable development is considered and the stages of transformation of ESG principles are highlighted. According to the authors, the sustainable development agenda initially assumed and now provides for an integrated approach, that is, interaction between business structures, science, and government authorities to solve common problems. The first stage of the concept formation began with the publication of the report ‘Our Common Future’ and lasted from 1987 to 2004. During this period, the general vector of the agenda development was set, the transition of the world’s major manufacturers to energy-saving technologies began, and the ideas of ‘social capital’ were formed. At the beginning of the second millennium, humanity began to realize that the social well-being of current and future generations is continuously linked to the environmental situation. In this regard, the second stage, which began in 2004, is characterized by the inclusion of the environmental component in the concept of sustainable development, the creation of ESG principles directly. During this period, the emphasis was placed on the development of green technologies and the consolidation of the social component as mandatory. In addition, at the present stage, the leading role in implementing the agenda is given to the state, which forms the necessary regulatory framework. The work 13 also pays attention to the sustainable development agenda in Russia. It is noted that the country initially lagged global trends, but since the 2000s it has begun to actively engage and, for example, its own regulatory framework was created. However, the authors of this paper concluded that the case of the Russian Federation is unique, requires more study, and when implementing ESG standards, the country’s characteristics and its governance should be considered.

Sustainable development and responsible business conduct are modern global priorities. CSR has been actively growing over the last decades, interest in the scientific community is constantly growing, and a large number of papers on this topic have already been published 14. However, the concept of responsible business conduct does not have a single clear definition but includes a wide range of business practices aimed at the sustainable management of impacts that arise from economic activities 15 16. Despite the growing importance of CSR supported by the efforts of international organizations and individual governments, primarily members of the Organisation for Economic Co-operation and Development (OECD), we cannot speak about the homogeneity of priorities of these practices or the existence of objective exhaustive metrics to measure this phenomenon 17 18.

In recent decades, the ideas of CRS, originating in the middle of the 20th century, have been significantly transformed into the concept of sustainable development. A defining event in this process was the adoption of the UN Sustainable Development Goals (SDGs) in 2015. SDGs, which formed the basis for the formation and implementation of international sustainable development policies, were a defining event in this process. SDGs have been actively integrated into the development strategies of governments and the corporate sector. Environmental, social and governance – ESG – practices have also become significant indicators of such integration, and the relevant company ratings are widely used in financial markets and investment decision-making. National governments play an important role, and influence positively on the development of CSR. For example, in India the process of CRS implementation started officially from 2018 at a national level 19.

In Russia, CSR and sustainable development are still not clearly understood and the disparate conceptual apparatus continues to be streamlined. This is taking place against the backdrop of efforts to form target benchmarks and develop metrics that would allow objective assessment and monitoring of the responsible behavior of companies.

Unlike many OECD countries that are considered leaders in forming state agenda that stimulates CRS integration, CSR is not mandatory in Russia and is not enshrined in legislation. However, many Russian companies voluntarily implement social and charitable initiatives, as well as publish reports that disclose information in the field of sustainable development and CSR 20. They also participate in various Russian and international ESG-ratings. This fact is confirmed by the data of the UN report on the Sustainable Development Goals for 2024. According to the report, the actions taken to achieve the SDGs are insufficient, and without significant investments and actions, the goals may not be achieved by 2030.

It’s also worth noting that in recent years of significant geopolitical and geoeconomic turbulence, revision and radical changes in international trade routes made during the globalization, the attention paid to ESG from both governments and large companies is decreasing.

For study and comparative analysis, we selected international ESG-ratings with the largest number of participants: ISS, S&P, CDP, LSEG, MSCI and FTSE ESG-ratings. To analyze responsible business conduct in Russia, we selected a national rating, the EPS-rating, with more than 7 million companies participating.

1. What are the current trends in the development of ESG ratings?
2. What are the similarities between the EPS-rating and international ESG-ratings?
3. What are the differences between the EPS-rating and international ESG-ratings?

The ISS Corporate International ESG-rating evaluates companies according to the same ESG criteria for all participants, as well as in individual areas, depending on the industry to which the participating company belongs. The participants’ questionnaires are compiled using up to 100 indicators (the total number of questions from which the questionnaires are compiled includes about 700 indicators), and they consider possible characteristics of small and medium-sized businesses. As a result of the testing, companies can receive excellent ESG status (Prime Status) from ISS, confirming the company’s outstanding achievements in terms of transformations towards sustainable development.

As of 2021, the rating covered about 9700 companies, and their number is gradually increasing every year. A scale from A+ (for the best in its class) up to D- (similar for the weakest) is used to evaluate information about the sustainability of companies. Sources of information about companies’ activities are the media, interviews with stakeholders, documentation provided by companies, and other available sources.

The S&P Global ESG Score international rating evaluates the activities of responsible businesses based on information disclosed by the company itself, analysis of data received from the media and stakeholders, modeling and in-depth interaction with the company within the framework of the S&P Global Corporate Assessment (CSA), which includes 62 industry questionnaires. After passing special industry surveys, the company also fills out a questionnaire in three main areas: the corporate aspect (the maximum number of points a company can receive for this aspect is 30), the environmental and social aspects (both have 35 maximum points). According to the data for 2024, more than 13 thousand companies participated in the survey. The points received are summed up (the survey participant can score from 1 to 100), after which the company can review the results and receive a document confirming participation in the S&P rating.

CDP⁵ (Carbon Disclosure Project) is a charitable non–profit organization founded in 2000, which is engaged in disclosing information about the environmental activities of investors, companies, cities, states and regions and managing their environmental impact. Each year, CDP evaluates companies and cities based on their disclosures and achievements in environmental transformation. As of 2023, more than 23 thousand were included in the rating, rated on a scale from A (disclosing the most complete, accurate and reliable information, the quality of which is documented) to D (started disclosing information about ESG indicators or did not score enough points as a result of answering questions and providing the necessary documents). Depending on the industry, for each company their own research is conducted, evaluating its business strategy, supply chain features, environmental friendliness of production, and many other factors that demonstrate the sustainability of a responsible business.

The LSEG⁶ ESG-rating is based on the previously existing Thomson Reuters rating, which provided an extensive database and the number of firms participating in the survey 21. LSEG is one of the ratings that belongs to the category of data providers, that is, in the evaluation process, such ratings use publicly available information from the websites of companies and public organizations themselves, as well as from annual reports on corporate social responsibility. Currently, more than 12 thousand companies take part in surveys and thanks to the survey, each rating participant can score from 1 to 100 points (while the environmental aspect is assigned 37 points, the social aspect – 33, and the aspect related to corporate responsibility – 30).

The MSCI⁷ ESG-rating is one of the largest in terms of the number of participants. It has been in existence since 2010. It is a comprehensive rating that has its own methodology for evaluating ESG indicators and, when assigning points, takes into account comprehensive information obtained not only from open sources and the media, but also provided by the government, as well as sent by companies upon request. More than 8500 companies participate in the rating. The main objectives are to assess the company's resilience to ESG risks and identify the most and least susceptible companies, both depending on the industry in which the company operates and independently of it. The assessment is based on more than 30 ESG factors on a scale from CCC (the lowest indicator showing lagging companies) to BBB (companies with an average level of resistance to ESG) and AAA (the highest level showing leaders in their industry in terms of resistance to ESG risks).

FTSE ⁸ Russell, like others, assesses how well the company implements its ESG policy. However, unlike others, the FTSE rating consists of two elements: a basic assessment (Pillars) and a thematic assessment (Thematic), which deals with certain aspects of ESG and takes into account the industry division. In total, more than 300 indicators in 14 thematic blocks are used for both aspects of the assessment. The methodology takes into account not only the sector in which the company operates, but also the geographical coverage, that is, the countries of the company’s presence and their specifics in relation to ESG. The sources of information for both parts of the rating are only publicly available resources. The basic score is set on a scale from 0 to 3, while the score for the thematic part is set on a scale from 0 to 5.

It has been established that the global market for ESG-ratings and information has now emerged and is likely to continue to expand. The global ESG-ratings market is mainly composed of large international companies such as S&P Global or MSCI ESG Rating. There are also smaller agencies and their ratings, concentrated mainly on one area or specific regions. This paper analyzes the most well-known and largest international ESG-ratings.

1. The assessment uses data obtained from companies’ annual reports and their non-financial statements.
2. Different approaches, methodology and scales are practiced.
3. Business participation in the world’s leading ratings is paid.
4. Jurisdiction of all ratings studied is designated in the United States.

The high frequency of mergers in the international ESG-ratings market is a defining characteristic of this sector. An analysis of market dynamics reveals that major U.S.- and EU-based rating agencies have undergone significant consolidation.

For example, S&P Global acquired UK-based Trucost in 2016 and Swiss-based Robecosam AG-ESG-Ratings Business in 2019. ISS Ratings expanded its portfolio by acquiring a unit of another Swiss rating agency, South Pole, in 2017, as well as Germany’s Oekom in the same year. Similarly, MSCI strengthened its position by acquiring Carbon Delta in 2019.

Source: compiled by the authors based on Larcker D. F. et al. ESG-ratings: A Compass Without Direction, Billio, M et al. Inside the ESG Ratings: (Dis)Agreement and Performance 21 22, ISS ESG, S&P Global, CDP, LSEG, MSCI rating, MSCI rating, Bursa Sectorial Series FTSE ESG URLs.

The driving force behind these mergers is the extensive pool of companies participating in ESG assessments 23. Many of the ratings involved in these consolidations already had an established base of companies receiving questionnaires 24, and these companies became key participants in subsequent mergers. This trend suggests that international ESG-ratings operate not merely as voluntary corporate initiatives but as a structured market shaped by the interests of various stakeholders, including state institutions.

1. Environmental (‘E’ in ESG ratings – E in EPS-rating)
2. People (‘S’ in ESG ratings – P in EPS-rating)
3. State (‘G’ in ESG ratings – S in EPS-rating)

 In Ecology, companies’ actual performance in terms of environmental impact is assessed. If an organization has had a negative impact on the environment, this fact is recorded, and as a result an organization is obliged to pay a fine 25 26. This section of the rating uses such indicators as the degree of environmental impact, use of the best available technologies, and the implementation of environmental projects 27.

In Personnel, the company’s social and demographic achievements are assessed, with an emphasis on saving people’s lives, improving people’s health and well-being, and supporting the family. In this direction, such indicators as the level of remuneration, the companies’ social and demographic programs, and charitable projects are assessed.

In State, the business’ reputation in external interaction is evaluated: tax history of the company, social investment in regions of presence, interaction with business associations, etc.

It is worth noting that participation and consulting in EPS-rating is free of charge for all companies.

A comparison of the concepts and methodologies of the EPS-rating with global ESG-ratings (Figure 1) shows that they share a common goal: to rank companies according to the criteria of responsible business conduct, taking the known ESG factors as a basis. The priority of modern international ESG-ratings reflects the global dominance of the green agenda and the attention of government and business to environmental issues 28 29. Figure 1 also shows that in most international ESG-ratings, the environmental and social aspects carry the most weight, while the governance aspect remains important but carries less weight.

Source: compiled by the authors on the basis of LSEG, MSCI, ISS, S&P Global, FTSE Russell, EPS-rating 

However, the comparison also revealed significant differences: while international rankings are most interested in promoting and maintaining the environmental agenda, the EPS-rating considers the environment to a much lesser extent than factors related to human resources (the social component of the EPS-rating) and the state (Fig. 2). The design of the EPS-rating methodology means that the Russian employer is a potential subject of influence on the demographic situation in a region 30 31.

The presence of a block of indicators on the interaction of business with the state also distinguishes the EPS-rating from a few international ESG-ratings. World ratings consider only indicators of management quality in companies, in rare cases indicating the presence of interconnection with the state (mainly the success/non-success of management for climate change and the increasing complexity of environmental problems). The social indicators of the EPS-rating have also been modified: they focus on the social policy within the company and show the level of its corporate responsibility 32 33.

Source: compiled by the authors on the basis of EPS-rating  

In contrast to global ESG-ratings, EPS-rating metrics are more narrowly focused and specific, allowing for a more accurate assessment of a company’s contribution to the well-being of its employees.

The EPS-rating methodology differs from accepted international practice by a two-stage assessment. At the first stage, the company is evaluated based on the data received from state authorities (Federal Tax Service, etc.). This practice is not represented in international ratings with an exception of China. At the second stage, the company provides data for evaluation. This stage is like a generally accepted international practice. The questionnaire survey covers not only large, medium and small businesses: individual entrepreneurs are also included, which currently makes up to 7 million participants of the EPS-rating.

The findings of this study highlight significant differences between international ESG-ratings as they use different methodologies, approaches and scales, and this conclusion is confirmed by previous researchers 34 35 36. At the same time, global ESG-ratings have a common factor such as the focus on environmental indicators in companies’ assessments 36. The Russian EPS-rating stands apart from them, and the most notable distinction is that EPS-rating prioritizes social indicators, aligning with Russia’s national objectives, such as demographic growth and workforce well-being. A key observation is that international ESG-ratings heavily rely on self-reported data and public disclosures 37, while the EPS-rating incorporates government-provided data (Federal Tax Service, Accounts Chamber, etc.), ensuring a more objective evaluation. This difference raises questions about the reliability of international ESG-ratings, as companies may selectively disclose favorable information while omitting unfavorable aspects. In the case of the Russian Federation, data accuracy is ‘guaranteed’ by state inspections and expertise. Another critical finding is the cost of participation. International ESG-ratings typically require companies to pay for inclusion and evaluation, potentially limiting access for smaller firms. Moreover, paid consulting services aimed at improving a company’s position raise questions about the transparency and independency of the ratings. In contrast, the EPS-rating is free for all Russian companies, making it a more inclusive and representative tool for assessing corporate responsibility. Additionally, the study identifies a trend of increasing consolidation in the ESG-rating industry 38, with major rating agencies acquiring smaller ones. This trend suggests a move toward standardization but also raises concerns about market concentration and potential conflicts of interest.

The limitations of this study are related to the fact that not all the world’s leading ESG-ratings are included in current analysis due to their methodology not being openly available. In addition, insufficient information does not also let this research investigate ratings of Russian credit rating agencies.

Overall, the results suggest that while international ESG-ratings play a crucial role in global financial markets, the EPS-rating offers an alternative model that may better reflect national priorities and may provide a more objective assessment framework. Further research could explore how these differences impact investor decisions and corporate behavior across different jurisdictions.

Leading international ESG-ratings share common characteristics. Their assessments are based on data provided by companies, with environmental indicators playing a dominant role in the rating methodology. Participation in the world’s leading ESG-ratings typically requires payment from businesses, and most rating agencies have headquarters in the United States.

The EPS-rating, a national responsible business rating developed in Russia, has several similarities with leading international ESG-ratings. It evaluates companies in three key areas: environment, human resources, and governance. The assessment process consists of two stages, one of which, like international ratings, involves a questionnaire. However, the EPS-rating differs in significant ways. It is specifically designed to align with the characteristics of Russian businesses and national priorities, including demographic considerations. Unlike international ESG-ratings, it incorporates data from state authorities in its evaluations. Additionally, participation in the EPS-rating is free for companies, as it operates on a non-commercial basis, and government support measures are available to companies that achieve high rankings.

Currently, under the conditions of anti-Russian sanctions, the possibility of participation of the Russian Federation and its business representatives in international ratings is seriously limited. The creation of the EPS-rating was a form of response to the sanctions against Russia. Nonetheless, Russian companies continue, whenever possible, to participate in international ESG ratings and to increase their positions within national EPS-rating. These two processes are not contradictory – EPS-rating participation opens opportunities to receive government support while participation in international ESG ratings positively influences companies’ reputation on a global scale.

Another notable observation is the frequent mergers and acquisitions among international ESG-rating agencies. Meanwhile, Russian companies successfully participate in both the national EPS-rating and international ESG-ratings.

The findings of this analysis can serve as a foundation for developing ESG policies within Russian companies and contribute to further research on sustainable development and ESG practices.