Journal of Sustainable Economies

Database Selections and Search Terms

The study examined ESG metrics, carbon disclosure, and net-zero targets, with a primary focus on the ethical aspects and policy alignment. It also covered systematic reviews, bibliometric research, and empirical studies as the main types of academic literature. In this study, a systematic literature review predominantly used three databases: Web of Science, Scopus, and Google Scholar databases, which were selected as the premier sources for global academic literature (Aghaei Chadegani et al., 2013). The following keywords were employed to search the selected databases:

1. “ESG Metrics” and “Climate Policy”

2. “ESG Metrics” and “Corporate Commitments”

3. “ESG Metrics” and “Ethical Challenges and Best Practices for Carbon Disclosure”

Criteria for Selection of Publications

The papers in the consideration list were supposed to be either peer-reviewed articles or conference papers. As such, journals, reports, and books were excluded from consideration. The publication should have been done between 2014 and 2024. In the first stage, 80 papers met these conditions; however, during screening, 34 papers were excluded due to lack of relevance, duplication, or insufficient focus on ethics or climate alignment, so the study was based on 46 papers.

Systematic Literature Review

A systematic literature review (SLR) is a methodical approach to gathering and evaluating contemporary knowledge in a specific field of study. It involves the systematic collection, summarisation, interpretation, explanation, and integration of relevant literature to gain a comprehensive understanding of the subject matter (Okoli & Schabram, 2010). The multidisciplinary study approach is diverse and well-established. It has been adapted to incorporate the plan, performance, and report procedure within our specific environment (Sony & Naik, 2020). Figure  illustrates the systematic procedure, which yielded 46 publications for the systematic review.

Source : Developed by the Author

Ethics of Carbon Disclosure

The review identifies persistent ethical weaknesses in carbon disclosure practices. Foley et al. (2024) claimed that the actual point is not the frameworks themselves but the way companies, frequently, that is, inconsistently, and occasionally, unethically, apply them. Thereupon, ESG disclosures have been doubted, more so when they are linked to net-zero objectives. Two issues are more prominent, namely the lack of transparency and non-uniform metrics. If these are absent, then it is impossible to cross-check reports from different companies or sectors (Widyawati, 2019). While ESG reporting has expanded, disclosures remain inconsistent, particularly for Scope 3 emissions, which are often incomplete or methodologically unclear. Data quality issues, double counting, and limited verification undermine comparability across firms and sectors (Hettler & Graf--Vlachy, 2023; Robinson et al., 2018).

Carbon offsets and renewable energy credits are frequently used to compensate for emissions, but are often poorly documented, increasing the risk of greenwashing (Sneideriene & Legenzova, 2025; Liu et al., 2023). ESG ratings do not always match real-world sustainability outcomes. This can happen because rules differ across regions, cultures approach sustainability differently, and companies vary in their openness about their practices (Lucarelli & Severini, 2024).

The ESG financial focus has been a significant factor in the ESG problem, where ethics are often marginalised. In such a case, firms can pursue a rapid increase in the financial side, leaving sustainability goals behind, so the gap between what firms say and what they actually do will increase in magnitude (Widyawati, 2019). Stakeholders need dependable, standard, measurable ways to see how each field is doing. Without these, it is hard to tell if ESG efforts are really changing things (Ilori et al., 2023). The absence of standardised reporting frameworks weakens stakeholder confidence and limits the ethical credibility of corporate climate claims. For instance, small enterprises are hindered by disorganised information and a shortage of funds, making it very difficult for them to complete the ESG report (Tsang et al., 2023; Suta et al., 2025).

Ethical Gaps in ESG Climate Metrics

Despite the growing number of ESG frameworks, significant ethical gaps remain across the design, reporting, and interpretation of ESG climate metrics. Variations in transparency and consistency across ESG measurements reduce their reliability and hinder meaningful comparison (Lucarelli & Severini, 2024; Widyawati, 2019). Many ESG ratings operate as opaque “black boxes,” offering limited transparency regarding methodological assumptions (Lucarelli & Severini, 2024). The dominance of financially oriented indicators further marginalises ethical and environmental substance.

Such a lack of clarity undermines the integrity of ESG metric outcomes, a practice in which companies exaggerate their environmental performance or selectively disclose only favourable information (Foley et al., 2024).

The cited literature documents that ESG is often understood solely from a financial perspective, with ethical issues overlooked (Landi & Sciarelli, 2019; Widyawati, 2019). This emphasis on financial performance can prioritise short–term gains over long-term sustainability, thereby reinforcing ethical gaps in ESG implementation (Chouaibi & Chouaibi, 2021). In addition, factors such as differing ESG regulatory standards, geographical distance, and cultural traditions, as well as varying corporate attitudes towards disclosure (Lucarelli & Severini, 2024; Suta et al., 2025). Lastly, the lack of standardised, verifiable, and sector-relevant metrics makes it nearly impossible for stakeholders to assess the actual value of corporate ESG engagement, leading to reduced commitment and trust (Ilori et al., 2023; Tsang et al., 2023).

The literature underscores the importance of standardisation in ESG metrics as a key priority. Lastly, industry-by-industry indicators show that ethical issues arising from ESG measures exhibit sectoral heterogeneity. Industries with high carbon content, such as oil and gas, face increased complexity in reporting Scope 3 emissions, and industries in water management still struggle to develop effective indicators of long-term sustainability performance (Christy et al., 2023; Sharaf-Addin, 2024).

Corporate Best and Worst Practices

Corporate reactions to ESG metrics and climate risk disclosure are incredibly varied, with clear examples of best and worst practices. Companies that incorporate ESG into their core business strategies, demonstrate moral leadership, and engage in dialogue with stakeholders are more likely to become sustainable in the long run and make a positive contribution to society (Eccles et al., 2014; Friede et al., 2015). Such organisations embed sustainability into their stewardship frameworks, thereby garnering more robust stakeholder confidence and achieving better alignment with international climate targets.

Compared to the above, worst practices are often associated with ESG controversies, superficial disclosures, and greenwashing, which not only weaken corporate credibility but also erode investor trust (Nirino et al., 2021; Elamer & Boulhaga, 2024). These controversies can significantly impact the company’s performance. Nevertheless, strong governance structures and well-established ESG systems may not only help alleviate these risks but also turn the company’s reputation problems into an opportunity (Elamer & Boulhaga, 2024).

Corporate governance and leadership diversity are important aspects of disclosure quality and ethical behaviour, as they inform an organisation’s accountability and transparency in its reporting (Hettler & Graf--Vlachy, 2023). Nevertheless, the relationship between ESG practices and financial performance remains difficult to untangle, depending on the circumstances. Some markets highly appreciate and reward sustainability initiatives, while in others they remain undervalued (Landi & Sciarelli, 2019). The results emphasise that real ESG integration cannot be limited to controlling reputation alone, but must be ingrained so deeply in the corporate culture that it becomes the norm, perpetuating change over time.

Best practices are observed in firms that embed ESG principles into governance structures, engage stakeholders, and align disclosures with long-term strategy. In contrast, worst practices are associated with symbolic reporting, selective disclosure, and ESG controversies. Strong governance mechanisms, including board diversity and independent oversight, play a critical role in mitigating ethical risks.

ESG Alignment with Climate Policy Goals

The alignment between ESG metrics and climate policy frameworks remains uneven. While references to the Paris Agreement and IPCC pathways are increasingly common, practical implementation varies widely across sectors and regions. Regulatory fragmentation and conflicting financial incentives limit effective translation of policy goals into corporate action (Kolk et al., 2008; Busch et al., 2016; Okereke et al., 2011). Nevertheless, a substantial gap exists between high-level, informative guidance and practical implementation; the extent of integration varies across sectors and regions (Doan & Sassen, 2020; Sullivan & Gouldson, 2017). In this regard, carbon-intensive sectors, such as oil and gas, generally face structural and regulatory challenges, with ESG implementation often delayed. At the same time, service-based sectors appear to be more adaptable in their climate-aligned reporting (Liesen et al., 2015). Additionally, the gradual incorporation of climate science into corporate strategies reflects the ongoing tension between short-term financial priorities and long-term sustainability imperatives (Widyawati, 2019; Velte et al., 2020).

The imposition of specifications, the necessity for disclosure, and the consistency of policy frameworks could improve comparability and reliability of ESG metrics not only for Sectors but also across countries (Busch et al., 2016; Vaio et al., 2025). In the absence of these, ESG risks become a mere symbolic gesture rather than a driver of substantial climate action. The working collaborative directions also encourage embedding evidence and objectives into corporate decision-making, ensuring that ESG reporting is not only compliant but also holds organisations to account (Ben-Amar et al., 2015; Hummel & Schlick, 2016). To sum up, the reconciliation of ESG activities with the global climate targets is not only a matter of regulations, but also an important avenue for corporate endurance and stakeholder loyalty in the long run.

Corporate Accountability to Net-Zero

Corporate net-zero goals are the basis of climate governance; however, the majority of those roadmaps remain vague, insufficient, or not fully aligned with scientific criteria. Research demonstrates that there is a gap, which, although recurrent, is gradually shrinking, between the emission-reduction targets announced by companies and their actual output, i.e., decarbonisation. The primary reasons for this gap are the non-exhaustive disclosure of information, the use of offsets, and weak accountability mechanisms (Anderson & Peters, 2016; Green, 2021). The moral aspects of the risk disclosures related to the transition are also barely touched upon, while the companies, in most cases, supply only fragments of data, these data being unfeasible to verify, and so they form the base for a lack of trust, too (Hettler & Graf--Vlachy, 2023; Borghei, 2021). The distrust is felt by the shareholders most when organisations issue containing leadership in climate action statements or otherwise giving a net-zero impression. However, any such progress cannot be checked or verified (Rogelj et al., 2021).

The results of a weak or delayed climate action will not just cause a bad public image to the company, but also will lead to various consequences such as regulatory penalties, financial risks, and a drop in the company’s competitiveness in those markets where the sustainability criteria are becoming more stringent (Krueger et al., 2020; Sato & Grubb, 2019). For effective accountability to be achieved, it is necessary to have strong governance structures that include different and independent boards, which are associated with better-quality sustainability disclosures and higher climate performance (Ben-Amar et al., 2015; Xu et al., 2025). Consistent regulatory frameworks, detailed standards for a particular sector, and the involvement of a third party for the assurance of the correctness of information are among those factors that are getting more and more attention as being necessary to eliminate the trust gap and to ensure that corporate emission reductions are in accordance with the Paris Agreement and national climate policy goals (Dietz et al., 2021; Kölbel et al., 2020). Thus, transparency and moral integrity, as key elements of corporate culture, are essential to making net-zero pledges not only believable but also achievable.

Corporate net-zero commitments frequently lack detailed transition pathways and measurable milestones. Heavy reliance on offsets, combined with limited third-party assurance, raises concerns about credibility. Weak accountability mechanisms expose firms to reputational and regulatory risks and undermine trust in climate leadership claims.