ESG Rating Divergence, Stakeholder Trust, and Sustainable Decision-Making: Evidence from a Mixed-Methods Study

Abstract

This study examines how Environmental, Social, and Governance (ESG) rating divergence affects stakeholder trust and sustainable decision-making. Rating agencies assign different ESG scores to the same company due to differing methodologies, indicators, and weighting systems. Using a mixed-methods design, we analysed quantitative survey data from 250 stakeholders using Partial Least Squares Structural Equation Modelling and gathered qualitative data through 20 semi-structured interviews. Results show that ESG rating divergence negatively affects stakeholder trust, corporate legitimacy, and sustainable decision-making. Stakeholder trust partially mediates the relationship between divergence and decision-making. Furthermore, institutional influence positively affects corporate legitimacy and sustainable decisions. The qualitative findings confirm that conflicting ratings reduce confidence in ESG information and compel stakeholders to seek additional sources before making decisions. The study contributes to stakeholder, legitimacy, and institutional theories by providing primary evidence on the behavioural effects of ESG rating inconsistency. The findings suggest that standardising mandatory corporate disclosure inputs, rather than proprietary rating methodologies, can strengthen stakeholder trust and support informed sustainability decisions.

Keywords: ESG ratings, ESG divergence, stakeholder trust, sustainable decision-making, PLS-SEM, corporate legitimacy