Rethinking ESG Credibility: Conceptual Gaps, Normative Assumptions, and the Future of Sustainable Capitalism

Abstract

Environmental, Social, and Governance (ESG) frameworks have become central to sustainable finance and corporate accountability, however, their credibility remains contested. This paper critically examines the conceptual gaps, normative assumptions, and empirical challenges that undermine ESG’s capacity to drive substantive sustainability outcomes. Drawing on recent literature, we identify four core credibility challenges: definitional fragmentation across rating providers and regulatory regimes, measurement heterogeneity that prevents meaningful comparability, pervasive greenwashing enabled by disclosure-oriented rather than impact-oriented metrics, and embedded market-centric assumptions that privilege voluntary compliance over mandatory verification. Empirical evidence demonstrates that mandatory reporting requirements significantly reduce deceptive disclosure practices, while rating divergence and symbolic compliance persist under voluntary regimes. We propose a multi-level governance framework integrating harmonized taxonomies, outcome-based metrics, mandatory third-party audits, and ecocentric principles that extend beyond anthropocentric stakeholder models. This synthesis contributes to ongoing debates about ESG’s role in sustainable capitalism by articulating pathways from symbolic to substantive implementation and identifying priority areas for regulatory reform, corporate practice, and future research.