Integrated life cycle model to support ESG Ratings of companies: the case of Carel Group

Sustainability has recently become the driving force of many political actions and initiatives. As a matter of fact, the European Commission issued the Corporate Sustainability Reporting Directive (CSRD), which requires companies to report on their sustainability by next year. A tool used to report on the sustainability of companies is ESG ratings, which are sustainability metrics able to measure the sustainability performance of a company. However, these metrics are affected by many problems. Firstly, there are too many ESG ratings. In fact, the literature review carried out in this study highlights the presence of nearly 500 ESG ratings. Furthermore, the number of indicators assessed by ESG Ratings is huge. As a matter of fact, the analysis of the 7 ESG ratings carried out in this study highlighted the presence of 1085 indicators. Additionally to these issues, each ESG rating presents its own methodology. All these issues are related to the fact that no standards have been released for ESG ratings. To overcome these issues, this study proposes the use of other sustainability metrics, characterized by a standardized procedure and structure. A sustainability metric presenting this feature is the life cycle model, whose structure and procedure are standardized by ISO 14040 and ISO 14044. Therefore, this study applied the standardized structure and procedure of the life cycle model to ESG ratings and investigated the support that ESG ratings and the life cycle model provide one another. Particularly, this investigation has been carried out in Carel Industries, an Italian company specialized in the production of control solutions for heating, ventilation, air conditioning, refrigeration, evaporative cooling and humidification. This company is suitable for the investigation because it is subject to report on its sustainability performance using ESG ratings. Furthermore, Carel has adopted the life cycle model approach to assess the sustainability of one of its products and of the Organization itself. The results of this study shows that the 7 ESG ratings of Carel respond to the standardized structure of the life cycle model. However, the overall support provided by the life cycle model to the 7 ESG ratings of Carel amount to 2,24%. On the other hand, the overall support provided by Carel’s ESG rating to the life cycle model amounts to 36,07%.