Practice or Principle?

What is ESG and

how do we do it?
An Exploration of Current Trends, Responses, Challenges,
and Opportunities in the world of ESG

Master of Science in Business Studies and Communication Studies

Written by:

Emil Heiberg Simonsen - 66914 - emhesi@ruc.dk

Geoffrey Peter Oakley - 69668 - gpo@ruc.dk
Supervisor: Mikkel Bøhm - mboehm@ruc.dk
Number of pages: 75
Hand-in-date: 04-04-2022

Roskilde University
Characters (with spaces): 190.000
Summary
Environmental, social, and governance (ESG) is emerging and is taking the financial world by
storm. The combination of ESG issues and investors' need for profit has made way for a new
wave of responsible investment. Where your ESG compliance metrics and certifications can
make or break the future for your company.

As organizations are scrambling to adapt to this new way of investing and doing business, not
to get left behind in the dust led us to ask the question:

How is ESG methodology currently being implemented, and how are

organizations and ESG practitioners responding to this implementation?

Our goal in this research is to explore how ESG is implemented and what issues organizations
and ESG practitioners face when rolling out on the Danish market.

To reach an answer to our research question, we collected our primary data by interviewing
nine prominent ESG managers, all chosen based on their expert knowledge of ESG in Denmark.
Our secondary data is collected by finding relevant studies that will be used throughout the
thesis to support or oppose the primary dataset. We believe that our mix of methods and
theories can shine a light on how ESG is impacting the Danish market and how a
comprehensive understanding of the issues can provide organizations and us an opportunity
to withstand the complex environment it creates.

The findings in this thesis show us some of the issues and difficulties that have manifested in
the Danish market. While the interviewees all have experienced different problems dealing
with ESG, there is an overall positive consensus on the current state of ESG. However, as ESG
is currently lacking any sort of 'best practice' and standardization, the environment will only
become more complex. As we explore in this research, the complex environment rejects
forcible organizing through traditional leadership.

To counter the rejection, we explore the possibility of ESG managers adopting the
characteristics of the enabling leader from Complexity Leadership Theory to be able to combat
the complex nature of ESG and the environment in which they operate.

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Table of Contents
List of Abbreviations 4
List of Tables 5
1 Introduction 6
2 History of ESG 13
3 Current State of ESG 15
4 Research Design 19
4.1 Complex Adaptive Systems 19
4.1.1 Adaptive Space 22
4.2 Complexity Leadership Theory 23
4.3 Methodology 27
4.3.1 Ontology & Epistemology 27
4.3.2 Social Constructivism 28
4.4 Method 30
4.4.1 Semi-Structured Interviews 30
4.4.2 Analyzing the interviews 31
5 Intro to Analysis 33
5.1 Discussion of Our Process for Interviewee Selection 33
5.2 Discussion of Whom We Interviewed 35
5.2.1 Alexandra Morge Rochette 35
5.2.2 Anne Katrine Bjerregaard 35
5.2.3 Catherine Valentin Hemmingsen 36
5.2.4 Frederick Rementorp 36
5.2.5 Jake Woodward* 36
5.2.6 Jane Williams* 37
5.2.7 Katrine Juhl Jespersen 37
5.2.8 Michael Jones* 37
5.2.9 Rick Davis* 37
6 Analysis 38
6.1 Thematic Analysis 38
6.1.1 Credibility 38
6.1.2 Transferability 39
6.1.3 Dependability 39
6.1.4 Confirmability 39
6.1.5 Audit Trails 39
6.1.6 Reflexivity 40
6.1.7 Summary of Thematic Analysis Discussion 40
6.2 Themes Identified in the Study 41
6.3 Difficulty of Data Collection 43

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 6.4 Organizational Change 45
6.5 Pressure of ESG Adoption 47
6.6 ESG Prioritization 48
6.7 ESG as Complex and Uncertain 50
6.8 ESG and the Future 51
6.9 ESG in Organizations 52
6.9.1 ESG as a Complex Adaptive System Within Organizations 52
6.9.2 Complex Leadership Theory, ESG, and Adaptive Space 57
7 Discussion 64
7.1 Enabling Leadership and Operational Leadership 64
7.2 Contributions of Research Findings 65
7.3 Limitations 67
7.4 Recommendations for Future Research 70
8 Conclusion 71
9 References 73
10 Appendix Overview 79

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List of Abbreviations

Term Meaning
AUM Assets Under Management
CAS Complex Adaptive Systems
CDP Carbon Disclosure Project
CFA Chartered Financial Advisor
CLT Complexity Leadership Theory
CSR Corporate Social Responsibility
CSV Creating Shared Value
D&I Diversity and Inclusion
ESG Environmental Social and Governance
ESMA European Securities and Markets Authority
EU European Union
FSAB Financial Standards Accounting Board
GAAP Generally Accepted Accounting Principles
GASB Governmental Accounting Standards Board
GDPR General Data Protection Regulation
GHG Green House Gas
GRI Global Reporting Initiative
GSIA Global Sustainable Investment Alliance
GSIR Global Sustainable Investment Report
IFRS International Financial Reporting Standards
IOSCO International Organization of Securities Commissions
ISSB International Sustainability Standards Board
KPI Key Performance Indicator
OECD Organization for Economic Co-operation and Development
PCAF Partnership for Carbon Accounting Financials
PRI Principles for Responsible Investment
PRI UN Principles for Responsible Investment
SASB Sustainable Accounting Standards Board
SASB Sustainability Accounting Standards Board
SDG Sustainable Development Goals
SHSP SharpSpring Environmental Social & Governance Data
SRI Socially Responsible Investing
SSP Supplier Sustainability Performance
TCFD Task Force on Climate-Related Financial Disclosures
TCP Test of Corporate Purpose
UNEP-FI United Nationals Environmental Program Finance Initiative

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List of Tables

Table Page
Table 1: List of Major ESG Rating Agencies 8
Table 2: GRI Universal Standards 2021 11-12
Table 3: List of Interviewees 34
Table 4: Phases of Thematic Analysis and Means of Establishing 40
Trustworthiness
Table 5: Themes in Our Thematic Analysis 42

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1 Introduction
ESG stands for “Environmental”, “Social”, and “Governance”. The field of ESG has been a
dynamic and constantly evolving one since its inception. There is currently much debate about
how exactly these three core pillars are measured and standardization across industry and
governments and reporting requirements. Many investors have now placed additional
emphasis on ESG reporting in order to determine what sorts of companies they wish to include
in their portfolios; according to Cort and Esty, these investors have “been increasingly
demanding better corporate sustainability information often framed in terms of ESG metrics”
(2020, p. 492).

Our research aims to investigate how ESG is implemented within an organizational context.
Our main research question is, in essence:

How is ESG methodology currently being implemented, and how are

organizations and ESG practitioners responding to this implementation?

What piqued our curiosity in choosing to explore this area of research was that there did not
seem to be extensive existing research concerning this topic. In addition, there seemed to be
little broad consensus concerning several aspects of ESG implementation during our initial
inquiries and informational exploratory probes into the topic. As a result, we hope to provide
a clearer perspective on the current state of ESG reporting and organizational implementation;
we strive to illuminate an area of knowledge that has not been sufficiently studied.

Our study is focused on ESG practitioners within the Danish market economy who are actively
working to implement ESG standards, metrics, and methodology within their organizations.
We have included practitioners from a wide variety of industries, including Fashion, Non-
Profit, Energy, Transportation/Shipping, Investment/Pension, Health Care, and Consultancy.
These practitioners are implementing ESG into organizations ranging in scope from small,
medium, and enterprise-level.

ESG investments have been rapidly increasing over the past several years. One of the main
bodies that track global sustainable investment organizations is the Global Sustainable
Investment Alliance (GSIA); GSIA is “an international collaboration of membership-based
sustainable investment organizations around the world” whose “mission is to deepen the
impact and visibility of sustainable investment organizations at the global level” (GSIR, 2020,
p. 4). The report collects and synthesizes regional data from “across the United States, Canada,
Japan, Australasia, and Europe” (GSIA, 2020, p.4). According to the most recent report,

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investment has now reached a level of $35.3 trillion United States Dollars in “assets under
management (AUM), having grown by 15% in two years (GSIA, 2020, p. 4). To put this in
perspective, in 2016, GSIA had estimated that there was currently $23 trillion of assets under
AUM (Cort & Esty, 2020, p. 492).

With all of this attention and investment being focused on ESG, there has been a rush for
commercial entities into the marketplace to provide ratings. One of the main problems with
this is that many rating agencies provide different scores and grades based on the metrics they
choose to select in their evaluations. As there is no broad agreement across rating agencies,
organizations can pick and choose what they choose to publicly disclose when they present
themselves as practitioners of ESG methodology, emphasizing rating agencies that portray
them in the best possible light. A brief list of the main rating agencies follows:

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Table 1: List of Major ESG Rating Agencies

Agency Description
A large ESG research provider providing ratings and research on over
MSCI ESG Ratings 14,000 equity and fixed income issuers.
Sustainalytics' ESG A subsidiary of Morningstar with data on 40,000 companies and ratings of
RiskRatings over 20,000 companies and 172 companies.
Provides day on over 11,800 companies in over 100 countries, organized
into 2,000 fields. They rate companies based upon their overall level of ESG
Bloomberg ESG disclosure, covering climate change, human capital, and shareholders'
Disclosures Scores rights.
These ratings cover 7,200 securities in 47 developed and emerging
FTSE Russell ESG markets. They are based on an overall score derived from underlying
Ratings pillars, theme-based exposures, and scores.
ISS (Institutional Shareholder Services is majority-owned by Deutsche
Bourse Group and provides company, country, and fund ratings covering
ISS Ratings and climate change, human rights, labor standards, corruption, and weapons-
Rankings related issues. They also provide data and analysis on these issues.
CDP is a non-profit charity; it provides environmental data, research, and
tools. It utilizes a rating called “Climetrics” work to help investors identify
funds that invest in companies that focus on issues related to deforestation,
CDP Climate, Water, climate change, and water security. It rates over 20,000 funds, and its score
and Forest Scores results are public and free of charge.
S&P Global ESG Score rates over 7,300 companies based on S&P’s
RobecoSAM CSA (Corporate Sustainability Assessment) and publicly
available data. The CSA uses approximately 1000 data points in order to
S&P Global ESG Score assess firms that choose to participate.
This is a business unit of Moody’s Corporation. It provides ESG solutions,
including scoring, analytics, and review/certification services that utilize
Moody’s ESG Solutions Moody’s in-house data. This group includes ESG rating firm V.E (Vigeo
Group Eiris] and the climate data company Four Twenty Seven.
Data science company that combines “AI and machine learning with
human intelligence to translate big data into actionable research, analytics,
and risk metrics” (RepRisk, 2022, p. 1). They flag and monitor material ESG
risks and violations of international rules. They offer the RepRisk ESG Risk
Platform and claim to be the largest database of its kind, “covering
195,000+ public and private companies and 50,000+ infrastructure
projects of all sizes, in every sector and market. In addition, they daily
screen government agencies, NGOs, newsletters, regulators, blogs, print
media, Twitter, news sites, think tanks, and research firms to identify risk
RepRisk according to their AI algorithms (RepRisk, 2022).
The company provided “unbiased” Proxy Paper research and Viewpoint
proxy vote management solution, including ESG Scores and Data. It
provides a “snapshot view of key topics,” including “emission reduction
initiatives and the disclosures they provide concerning their environmental
Glass Lewis and social risks and performance.” (Sharma, 2022; Glass Lewis, 2021).
An index built out of the SMI Expanded, a Swiss stock index. The score is
derived for each company from a third-party research provider; the higher
SXI Swiss the score, the more sustainable the company, the highest-scoring 25 Swiss
Sustainability 25 companies are ranked according to the total score.
(Lovas, 2021; SICM, 2016, p. 1-7)

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There are many regional ESG rating agencies other than those mentioned above, and generally,
as mentioned before, “there is no single go-to rating for all investors” (SustainAbility, 2020).
In SustainAbility Rate the Raters 2020 report, they found that CDP, ISS, and RebecoSAM CSA
were often mentioned, along with MSCI and Sustainalytics, and Trucost ESG Analysis (a part
of S&P Global) (SustainAbility, 2020, p. 14). Other emerging rating agencies include Truvalue
Labs and S-Ray, which “utilize artificial intelligence (AI) to gather ESG data and insights”
(SustainAbility, 2020).

Aside from the vast and varied milieux of reporting agencies and companies vying to become
the de-facto industry standard, a broad assortment of government and industry institutions
attempt to provide guidance and leadership regarding responsible investment, examples of
which include the UN PRI. The UN PRI claims to be “the world’s leading proponent of
responsible investment,” working “to understand the investment implications of
environmental, social and governance (ESG) factors” (UN PRI, 2022). Furthermore, the PRI
claims complete independence and “encourages investors to use responsible investment to
enhance returns and better manage risks, but does not operate for its own profit; it engages
with global policymakers but is not associated with any government” and is supported by but
remains independent of the United Nations (UN PRI, 2022). It provides a broad framework
that encompasses its six Principles for Responsible Investment, which “were developed by
investors, for investors” and have a “global signatory base representing a majority of the
world’s professionally managed investments” (UN PRI, 2022):

Principle 1: We will incorporate ESG issues into investment analysis and

decision-making processes.

Principle 2: We will be active owners and incorporate ESG issues into our
ownership policies and practices.

Principle 3: We will seek appropriate disclosure on ESG issues by the entities in

which we invest.

Principle 4: We will promote acceptance and implementation of the Principles

within the investment industry

Principle 5: We will work together to enhance our effectiveness in

implementing the Principles.

Principle 6: We will each report on our activities and progress towards

implementing the Principles.
(UN PRI, 2022)

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The PRI began in 2005 when Kofi Annan, the United Nations Secretary-General, brought
together the world’s largest institutional investors to develop the framework: “A 20-person
investor group drawn from institutions in 12 countries was supported by a 70-person group
of experts from the investment industry, intergovernmental organizations and civil society”
(UN PRI, 2022). It currently has nearly 4000 signatories with nearly $120 trillion “Assets
under management” and $30 trillion “Asset Owners’ Assets under management” (UN PRI,
2022).

Another key organization within the ESG ecosystem is GRI, or Global Reporting Initiative.
According to the GRI mission statement:

GRI envisions a sustainable future enabled by transparency and open dialogue

about impacts. This is a future in which reporting on impacts is common
practice by all organizations around the world. As provider of world’s most
widely used sustainability disclosure standards, we are a catalyst for that
change. (GRI, 2022)

Founded in 1997 in Boston, Massachusetts, USA, after the public shock following the
environmental catastrophe of the Exxon Valdez oil spill, it introduced its first set of official
guidelines in 2001, with a membership program launched in 2003 (GRI, 2022). In 2013,
following the Rio +20 UN Conference on Sustainable Development, the GRI G4 Guidelines’
final version was launched; in 2015, the SDG framework was adopted, and in 2016, the GRI
Sustainability Reporting Standards were launched (GRI 2022). The Sector Program was
launched along with the Tax Standard in 2019, with the Waste Standard launched shortly
after in 2020; in 2021, the Revised Universal Standards were published (GRI, 2022). The
revised GRI Universal Standards consist of GRI 101: Foundation 2016, GRI 102: General
Disclosures 2016, and GRI 103: Management Approach 2016 and exist “to improve the
quality and consistency of sustainability reporting as well as how organizations use the
Standards to disclose their impact on the economy, environment, and people” (GRI, 2022). The
GSSB launched the project in 2019, and final approval was granted on 2 July 2021 and
followed the GSSB Due Process Protocol (GRI, 2022). The new GRI Universal Standards 2021
covers the following topics:

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Table 2: GRI Universal Standards 2021

GRI Universal Standards 2021

GRI Standard Title Disclosure Disclosure Name Section
Number Individual requirements ('a', 'b', 'c',
etc.) are not listed here
GRI 2: General Disclosures 2-1 Organizational details 1. The organization and
2021 its reporting practices

GRI 2: General Disclosures 2-2 Entities included in the 1. The organization and
2021 organization’s sustainability its reporting practices
reporting
GRI 2: General Disclosures 2-3 Reporting period, frequency, and 1. The organization and
2021 contact point its reporting practices

GRI 2: General Disclosures 2-4 Restatements of information 1. The organization and

2021 its reporting practices
GRI 2: General Disclosures 2-5 External assurance 1. The organization and
2021 its reporting practices
GRI 2: General Disclosures 2-6 Activities, value chain, and other 2. Activities and workers
2021 business relationships

GRI 2: General Disclosures 2-7 Employees 2. Activities and workers

2021

GRI 2: General Disclosures 2-8 Workers who are not employees 2. Activities and workers
2021
GRI 2: General Disclosures 2-9 Governance structure and 3. Governance
2021 composition

GRI 2: General Disclosures 2-10 Nomination and selection of the 3. Governance

2021 highest governance body
GRI 2: General Disclosures 2-11 Chair of the highest governance 3. Governance
2021 body
GRI 2: General Disclosures 2-12 Role of the highest governance 3. Governance
2021 body in overseeing the
management of impacts

GRI 2: General Disclosures 2-13 Delegation of responsibility for 3. Governance

2021 managing impacts

GRI 2: General Disclosures 2-14 Role of the highest governance 3. Governance

2021 body in sustainability reporting
GRI 2: General Disclosures 2-15 Conflicts of interest 3. Governance
2021

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GRI 2: General Disclosures 2-16 Communication of critical 3. Governance
2021 concerns

GRI 2: General Disclosures 2-17 Collective knowledge of the 3. Governance

2021 highest governance body
GRI 2: General Disclosures 2-18 Evaluation of the performance of 3. Governance
2021 the highest governance body
GRI 2: General Disclosures 2-19 Remuneration policies 3. Governance
2021
GRI 2: General Disclosures 2-20 Process to determine remuneration 3. Governance
2021

GRI 2: General Disclosures 2-21 Annual total compensation ratio 3. Governance

2021

GRI 2: General Disclosures 2-22 Statement on sustainable 4. Strategy, policies, and

2021 development strategy practices
GRI 2: General Disclosures 2-23 Policy commitments 4. Strategy, policies, and
2021 practices

GRI 2: General Disclosures 2-24 Embedding policy commitments 4. Strategy, policies, and
2021 practices
GRI 2: General Disclosures 2-25 Processes to remediate negative 4. Strategy, policies, and
2021 impacts practices
GRI 2: General Disclosures 2-26 Mechanisms for seeking advice 4. Strategy, policies, and
2021 and raising concerns practices
GRI 2: General Disclosures 2-27 Compliance with laws and 4. Strategy, policies, and
2021 regulations practices

GRI 2: General Disclosures 2-28 Membership associations 4. Strategy, policies, and

2021 practices
GRI 2: General Disclosures 2-29 Approach to stakeholder 5. Stakeholder
2021 engagement engagement

GRI 2: General Disclosures 2-30 Collective bargaining agreements 5. Stakeholder

2021 engagement
GRI 3: Material Topics 3-1 The process to determine material 2. Disclosures on
2021 topics material topics
GRI 3: Material Topics 3-2 List of material topics 2. Disclosures on
2021 material topics
GRI 3: Material Topics 3-3 Management of material topics 2. Disclosures on
2021 material topics

(GRI, 2022)

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2 History of ESG
The concept of ESG is like many other socially responsible ideas like CSR, CSV, and SDGs
originating from previous ideas and has a long history. In the first part of our literature review,
we will give a brief history or origin of how ESG has risen to where it is today.

Social consideration into investment decisions can be traced back to the nineteenth century
(1898) when faith-based organizations like the “Quaker Friends Fiduciary Corporation”
restricted and avoided what was known as “sin-stocks” (Eccles et al., 2020; Roselle 2016).
These stocks refer to their investment policy of “no weapons, alcohol or tobacco” to align with
their core values (Roselle, 2016). With time these investment policies evolved and were
adopted by a wider range of investors and slowly changed into “socially responsible investing”
(SRI) (Roselle, 2016).

The values and social concerns of SRI changed over time to adapt to the ever-changing political
landscape to include civil rights, women’s rights, the environment, and sustainability, to name
a few (Eccles et al., 2020).

While social concerns have to some extent been present in the corporate world for a long time,
it was not until the 1970s where the collection of data on the impact organizations had on
social and environmental issues was dragged into the limelight within the larger corporate
sphere. It can be argued that Milton Friedman’s essay in The New York Times, “A Friedman
Doctrine: The Social Responsibility of Business Is to Increase Its Profits,” brought up the idea of
Shareholder Value Theory (Eccles & Stroehle, 2018; Friedman, 1970). Friedman proposed the
idea that companies must look beyond just their profit margins. This can be argued to be the
early stages of Corporate Social Responsibility (CSR); however, Friedman emphasized that the
responsibility lies not with society but rather responsibility to its shareholders (Friedman,
1970). While Friedman’s doctrine has decreased in relevance over the years, especially after
the idea of Creating Shared Value (CSV) proposed by Michael Porter and Mark Kramer
(Agrawal, 2020; Porter & Kramer, 2011), Its relevance is still being discussed 50 years since
its original release.

Rounding back to the concept of ESG, the term was first coined in the United Nations Global
Compact report “Who Cares Wins – Connection Financial Markets to a Changing World”
(Global Compact, 2004). The report, under the invitation of UN Secretary-General Kofi Annan,
is a joint initiative of 20 financial institutions “to develop guidelines and recommendations on
how to better integrate environmental, social and corporate governance issues in asset

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 management, securities brokerage services, and associated research functions”(Global
Compact, 2004, p. i). The institutions that helped develop this report had over 9 trillion USD
under their management1 (Eccles et al., 2020; Global Compact, 2004). In 2005, the first
evidence of the relevance of ESG was discussed at length in the United Nations Environmental
Program’s Finance Initiative’s (UNEP-FI) “Freshfield Report” (Freshfields Bruckhaus Deringer,
2005). It can be argued that the two are the foundation of the creation of the Principle of
Responsible Investment, the UN-backed world proponent of responsible investment (Eccles et
al., 2020; Kell, 2018; PRI, 2022). Its mission is to encourage the adoption of the six principles
of responsible investment and to incorporate ESG issues into their investment practices (PRI,
2022). Later in 2011, the Sustainable Accounting Standards Boards (SASB) was launched to
create a standard for sustainability information within 77 industries about issues most relevant
to financial performance in each industry (Barnes, 2021; SASB, 2022).

As 2015 rolled around, the next big step for ESG came as the 17 Sustainable Development
Goals (SDGs) were adopted at the United Nations Sustainable Development Summit in New
York and the Paris Climate Agreement later in the year (United Nations, 2022). But the
growing awareness of ESG issues among investors the inclusions into their investment (Eccles
et al., 2020; Hayat et al., 2015).

As we come to 2022, the demand for ESG data has exploded. As a result, new ESG data vendors
have sprung into the market, and this makes it difficult for organizations to determine what
data works best for them. ESG data can differ from vendor to vendor, making it important to
have a solid understanding of some of the dominant sources of empirical ESG analysis and how
and why the data can differ (Eccles et al., 2020).

1
The financial institutes included large banks (as Morgan Stanley, Deutsche Bank, Goldman Sachs), asset managers
(as ISIS Asset Management & Henderson Global Inventors) just to name a few.

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 3 Current State of ESG
Part of the challenge when researching ESG is that the field is constantly evolving and often in
real-time. This is especially difficult when researching current trends and attitudes within the
field because the regulatory requirements are constantly shifting. Many ESG rating agencies
are vying to become the global standard for ESG ratings, but there is also a patchwork of
regulatory agencies, some international, some national, and some non-profit business-funded
organizations that are all wrestling with getting a handle on the issue. As Drempetic, Klein,
and Zwergel rightly point out, there is tension between voluntary ESG disclosure from a
company and the ESG information solicited from companies from rating agencies (2019). The
real tension lies in why would companies want to voluntarily provide more information than
required: “[…] why does a company use its own resources to provide information, for example,
by producing sustainability reports beyond legal regulations?” (Drempetic et al., 2019, p.
337). They conclude that CSR/ESG/sustainability reporting can be increasingly helpful in
elevating the organization's corporate reputation and that, as a result, more investment and
better financial performance will increase with a heightened reputation.

As mentioned in the introduction, the current state of ESG is a rather murky one, or as Senz
describes it, “The muddy landscape of ESG scores” (2021), with constantly changing
expectations and a myriad of different rating agencies and regulatory schemes. However, the
field is beginning to enter a more mature state, and there are broad trends and areas of
agreement emerging. The coalescing of these different vectors into a more cohesive single path
forward is now being discussed by many different practitioners in the field. Kevin Prall from
the CFA Institute2 notes that a consensus is forming in the business community that “An
enterprise focus on […] ESG […] matters can yield benefits to a company […] [including]
higher valuation and better financial performance as well as increased access to capital and
lower perceived operational and reputational risk” (Prall, 2021).

Given that the broader business community and investment community-at-large are now
realizing the importance of integrating ESG at the enterprise level, there are still significant
problems facing ESG implementation. While everyone wants to incorporate ESG into their
business strategy, the “[…] proliferation of ESG reports, associated ESG data and ratings, and
organizations trying to develop a more rigorous and systemic reporting of ESG information”
(Kotsantonis & Serafeim, 2019, p. 50) has essentially created something of a quagmire if
investors or customers are trying to find comparable information between the rating schemes.

2
The CFA Institute is a global, not-for-profit organization providing investment professionals with finance
education.

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As Kotsantonis & Serafeim rightly note, the key goal of ESG metrics is to measure in the most
accurate manner possible the performance of an organization on any particular ESG issue
(2019). This is crucial because it allows customers the information necessary to guide
purchases, for employees to choose the employers that align with their values, for regulators
when monitoring corporate performance and either incentivizing or sanctioning, and for
NGOs (Kotsantonis & Serafeim, 2019, p. 50). In their study, Kotsantonis and Serafeim (2019,
p. 50) identify four key problems with ESG data:
1. Data inconsistency is worse than you think it is.
2. Distortions are introduced by the mystic art of “benchmarking” (or defining
your peer group matters).
3. ESG data imputation can be a problem (or not all models are created equal).
4. ESG data providers disagree a lot (and even more, surprisingly, when there
is publicly available information).

As an example of data inconsistency in their study, when they selected a random sample of 50
large (Fortune 500) companies, they discovered “more than 20 different ways that companies
report their Employee Health and Safety data, using different terminology and, most
importantly, different units of measure” (Kotsantonis & Serafim, 2019, p. 51). As far as
benchmarking is concerned, it is crucial to understand exactly the peer group to which a
company is being compared. Is the company being judged based upon a universal peer group?
In such a scenario, certain industrial sectors are bound to perform much more poorly than
others; for example, car manufacturing companies will likely have a much lower
environmental score than, say, windfarm manufacturers. As Kotsantonis & Serafim point out,
“Regardless of how the peer group is defined […] the range of performance […] in a peer
group determines the final assessment of a company’s performance on an ESG metric” (2019,
p. 52). Since there is a wide range of industrial classification systems, an organization’s
placement into either one category or another can significantly affect how that organization is
measured and perceived relative to its “peers”. As Kotsantonis & Serafim conclude, “The lack
of transparency about peer group components and observed ranges create market-wide
inconsistencies in ESG metrics and undermines their reliability.

It is not all bad news at the moment, however. On February 3rd, 2022, the ESMA, the EU’s
securities market regulator, published a Call for Evidence regarding ESG ratings to understand
the market structure for ESG rating providers, specifically in the EU. The deadline for
submission by ESG rating providers, ESG rating users, and organizations whom ESG providers
rate was March 11th, 2022 (ESMA, 2022). This is another important step in adopting global
standards for ESG ratings. In addition, Huw Jones notes, “The unregulated nature of the sector
is becoming a more pressing issue for the authorities as new rules are being rolled out that

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mandate ESG disclosures by companies, which will increase the demand for ratings” (Jones,
2022).

In November of 2021, the International Organization of Securities Commissions (IOSCO)

published recommendations for all members to apply on a regular basis when working with
ESG (Jones, 2021a). Although stocks and bonds that are considered “green” are increasingly
popular with ethical investors, there is no regulatory system to determine the validity of the
efficacy of these ESG rating systems. Also, in November of 2021, a new international standards
body was launched in order to attempt to regulate and identify spurious climate claims
regarding environmental performance, also known as “greenwashing” (Jones, 2021b). The
new international standards body was named the International Sustainability Standards Board
(ISSB), whose purpose is to “build on and replace a patchwork of voluntary disclosure practices
[…] with ‘baseline’ global standards that companies could use to tell investors about the impact
of climate change on their businesses (Jones, 2021b). As demonstrated by these recent
developments, there is increasing pressure building, especially as the ESG investment has
grown so rapidly and expansively over the past 6-7 years. Greenwashing has emerged as a real
problem currently, with companies having the ability to pick and choose items that make their
performance look better than it really is. The IFRS (the ISSB’s parent organization) has
published prototype climate disclosure standards for the ISSB to review, and these prototype
standards are scheduled to be adopted in the second half of 2022. Huw Jones, when speaking
with Veronica Poole, global IFRS leader at Deloitte, quotes her as saying, “To be effective, the
standards will need to be brought into regulation around the world, together with associated
enforcement, monitoring, governance and controls, assurance, and training” (2021b).

In the United States, the SEC (Securities and Exchange Commission) is developing disclosure
rules for climate risk and other ESG-related metrics; however, ESG disclosures are not
regulated in the United States. However, there is current pressure to implement some sort of
regulatory framework, and the United States House of Representatives passed legislation in
2021 that would require all public companies to make quarterly and annual ESG metrics
declarations (Senz, 2021). Recent research by Dane Christensen, George Serafeim, and
Anywhere Sikochi has indicated that there are even more intriguing effects that a lack of ESG
metric standardization has enabled to occur. They found in their study that higher voluntary
disclosure from organizations for ESG performance increases the level of disagreement
between different rating agencies (Christensen et al., 2021, p. 3). They point out that “a
plurality of evaluations is likely to occur in newly emerging fields where rules and norms for
evaluation are less developed” (Christensen et al., 2021, p. 3). Their study used a relatively

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small sample size of rating agencies, as only MSCI, Thomson Reuters, and Sustainalytics were
included; however, they were able to compare data using “30,700 firm-year observations
across 5,637 unique firms between the years 2004 and 2016” and found “strong support […]
that greater ESG disclosure leaders to greater ESG rating disagreement” (Christensen et al.,
2021, p. 4). They also found that as Governance has matured more in the field of ESG, the
Environmental and Social pillars are the prime drivers of the “relationship between ESG
disclosure and disagreement”; they also observed a similar relationship when they examined
“the association between pillar-specific disclosure (e.g., social disclosure) and pillar-specific
disagreement (e.g., social disagreement)” (Christensen et al., 2021, p. 5). Clearly, the
correlation that they found indicates that there is a serious problem with ESG ratings. Senz
summarizes the results of the study as follows: “By moving from the 25th to the 75th percentile
in terms of ESG disclosure, firms saw the spread between their best and worst ESG scores widen
by as much as 31 percent” (2021). The study also suggested a focus on ESG outcomes rather
than blindly checking off boxes in order to comply with the official corporate policy; as
Anywhere Sikochi comments, “We’d rather see that a company has planted trees, instead of
seeing that they have policies about not destroying trees” (Senz, 2021).

The future of ESG increasingly will be shaped by increased global regulatory standards. Some
of these might include efforts by the IOSCO, ISSB, and ESMA, among other bodies. Also, non-
profit initiatives such as the GRI and CDP have been working for some time to serve as the first
significant initiatives working to pave the way for these global regulatory standards. As
Drempetic et al. conclude, citing various studies over the past ten years, reporting according
to the GRI tends to increase market value. This is because that positive ESG news in any form
(including greenwashing) helps to offset any negative ESG news, and thus any sort of positive
ESG news that a corporation can provide or make publicly available hedges against risk for
potentially negative news stories (2019). Thus, it becomes clear that because greenwashing
has greater potential for positive financial outcomes rather than negative ones, most companies
have some sort of incentive to portray themselves in the best possible light. The only way to
address this problem is to have global, transnational reporting and regulatory standards to
ensure that corporations use the same terminology and reporting methodology. This is where
the current state of ESG is trending; however, there is still no clear path forward at the moment.

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4 Research Design
This section seeks to build the foundation for our research and our overall research design.
First, the theories presented in the literature review will be explained in-depth. Then, the
theories will be followed by how the complexity perspective impacts the epistemological and
ontological assumptions within the thesis, as this plays a part in how our philosophical
approach to the thesis was formed. Finally, the philosophy will be elaborated on and
demonstrate why a postmodernist, specifically a social constructivist perspective, makes sense
to understand how the complex network of ESG and its implementation function.

The epistemological assumptions are based on our understanding of ESG and organizations as
inherently complex. They can be characterized as containing high levels of interconnectedness
alongside a continuous adaption based on external and internal factors. Therefore, the focus
of this chapter is to define the theories on which we will base our analysis of the interviews.
Throughout the last decade, it has become clear that the interest in the topic of complexity and
systems within the academic literature; however, it remains on the edge as a practical
evaluation tool (Walton, 2016). Complexity theory has risen to help face the challenges of
dynamic change and the uncertain nature surrounding organizations.
Complexity theory is a science of complexly interacting systems; it explores the
nature of interaction and adaptation in such systems and how they influence
such things as emergence, innovation, and fitness. (Marion & Uhl-Bien, 2001,
p. 389)

It is important to note that not every complex system is adaptive, and every emergent adaption
does not increase the system’s chance of ‘survival’ (Espinosa & Porter, 2011). As we are dealing
with ESG and organizations, we will be focusing on adaptive systems capable of improving an
entire system’s “fitness” through new emergent factors (Espinosa & Porter, 2011).

Alongside the importance of complex adaptive systems, it is important to view this approach
from a leadership perspective, as implementing ESG and its changes can lead to uncertainty
and conflict with organizations. Therefore, the importance of leadership during the
implementation and new processes is to manage the uncertainty and dynamism that arise
within a complex system (Marion & Uhl-Bien, 2001).

4.1 Complex Adaptive Systems

Complexity is seen as one of the most promising research areas within contemporary science,
as it can transcend disciplinary barriers and have implications on different levels. Investigating
complexity from a different point of view in an interdisciplinary corporation can help reach a
higher understanding of the concept (Mazzocchi, 2016). As complexity does not have a single

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agreed-upon definition, it is seen as a concept with different research approaches. One of them
is Complex Adaptive Systems (CAS) (Mazzocchi, 2016).

Complexity can be defined as something with “rich interconnectivity,” the addition of ‘rich’
within the ‘interconnectivity’ implies that when things interact within the system, they can
modify one another in unexpected and irreversible ways (Uhl-Bien & Arena, 2017). This is
what differentiates a complex system from a complicated system, wherein complicated
systems, changing one part of the system does not influence any other parts. Interactions within
a complex system happen within a network and are called “network interactions” and result
in “emergence” (Kristinsdóttir et al., 2020; Uhl-Bien & Arena, 2017).

Complexity is, by some researchers, seen as a way to combat the limitations of ‘reductionism’
(Mazzocchi, 2016). This is due to the reductionist approach to understanding systems, where
it focuses on its parts to understand the system as a whole. However, this is limited as the
approach only works on closed or isolated systems where interactions with its environment
are minimal or absent (Mazzocchi, 2016). This approach shows the severe limitations of
understanding systems, as it can be argued that systems will unenviably be interacting and
interconnect with their environment. The result of “complex interactions and adjustments”
(Mazzocchi, 2016, p. 1160) determines the systems ‘behavior’ and cannot be understood
without its context and can explain the rise of complexity as it tries to explain the organization,
relationship, and dynamic interactions between systems, their environment, and components
(Mazzocchi, 2016).

It should be noted that some scholars do not believe complexity has fully developed as the
previous tools provided have not been able to keep up with the shifting challenges complex
systems pose, as the abstract nature makes ‘real-world’ observations difficult (Barabási, 2012
in Mazzocchi, 2016). However, Barabási argues that due to technological advancements, a
large amount of complex data is available alongside more advanced computing systems that
allow for analyzing and accounting for the structure and dynamics of large networks
(Barabási, 2012 in Mazzocchi, 2016). This advancement has allowed the processing of
complex systems to be approached from a more mature field, namely, network theory. Network
theory provides us with an approach that is apt to study non-decomposable systems, as it
bypasses the methods of ‘decomposing’ systems alongside ‘idealized’ models, i.e. the use of
simplified and tractable version of a multi-layered systems (Mazzocchi, 2016). Barabási's
argument for the use of network theory can be summed up as such “Reductionism
deconstructed complex systems, bringing us a theory of individual nodes and links. Network

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theory is painstakingly reassembling them, helping us to see the whole again” (Barabási, 2012,
p. 15 in Mazzocchi, 2016). However, even with the fast development of technology, the
increasing amount of collected data and its ease of access. Mazzocchi summarizes valid and
important limitations, emphasizing this approach as the solution to complexity.

A fundamental part of this theory, data collection assumes that it is gathered directly from
‘reality,’ bypassing the human element. However, the idea of data being a simple reflection of
the world is an epistemological simplification as no data is ‘simple’ or ‘neutral’. The data will
to some extent, be under some scrutiny as complete objective observations are not possible.
While the data can be in the form of ‘hard’ numbers, the use or even the design of the
instrument to collect the data have been constructed based on theoretical assumptions and
emphasize an ‘uncritical’ realism in the network approach to complex systems, and this
‘realism’ is based on assumptions on both ontological and epistemological levels. It should be
noted that complex systems do not fit into the world view of distinct and isolated items like
closed and isolated systems (Mazzocchi, 2016). It is important to mention that complex
systems, unlike many other systems, are integrated with their environment and make it difficult
to distinguish between them. They evolve through constant interaction, making the separation
of the two impossible (Cilliers, 2005 in Mazzocchi, 2016).

Systems acting in line with CAS can be defined as not using a top-down approach but are
centered around networks to catalyze emergence. These networks connect ‘agents’ to interact
and respond to needs (Kristinsdóttir et al., 2020; Uhl-Bien & Arena, 2017). Within complex
systems, Espinosa and Porter (2011) define six attributes found in complex systems that allow
them to adapt in nonlinear and unpredictable ways. First is self-organization; this signifies how
a complex system’s elements can interact and rearrange with little to no top-down design or
control (Nishiguchi, 2001 in Espinosa & Porter, 2011). Within these systems, nonlinear
feedback is the central mechanism of self-organization. This refers to an agent’s ability to
receive, process, and relay responses to their own and others' behavior (Baum and Singh, 1994;
Porter, 2006a in Espinosa & Porter, 2011). In addition, co-evolution is an instrument to deal
with the mutualistic evolution of agents and systems from the non-linear feedback and joins
in Uhl-Bien and Arena’s thinking of the need for information flow and networks (Kristinsdóttir
et al., 2020; Uhl-Bien & Arena, 2017). In complex systems, novel patterns, structures, and
properties emerge, cleverly named ‘emergence’, leading to “relatively simple higher-level
order from relatively complex lower-level processes” (Sawyer, 2005, p. 3 in Espinosa & Porter,
2011). Path dependence shows how new emergent changes are directly tied to a specific
system and its history and cannot be taken as universal truths (Espinosa & Porter, 2011). Lastly,

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according to Palombo (1999, in Espinosa and Porter, 2011), emergent adaption and innovation
are happening at the ‘edge of chaos,’ the transition point between order and chaos, and is the
most active space for emergent innovation (Espinosa & Porter, 2011), which is further agreed
upon by Uhl-Bien and Arena (2017).

It should be mentioned that emergent adaption does not always correlate with a system’s
increased chance of survival. However, if this new emergent order helps improve the system’s
fitness, it is adaptive. Lastly, we find it important to note that an organization's ability to be
adaptive does not necessarily correlate to competitive success (Espinosa & Porter, 2011, p. 57).

4.1.1 Adaptive Space

Complexity occurs when an interaction between networks leads to increased interconnectivity
across sectors and contexts, creating an increased information flow that drives change in
unprecedented ways (Uhl-Bien & Arena, 2017).

As previously stated, CAS is not operating as a hierarchy. At the same time, the organizations
are bureaucratic and, therefore, contradictory to ‘self-organizing’ in the current state of the
world; it is more important than ever for organizations to be able to adapt to the changing
needs of the environment (Uhl-Bien & Arena, 2017). A mantra within complexity theory is “it
takes complexity to beat complexity” (Uhl-Bien & Arena, 2017, p. 10). However, there is a
trend for organizations to instead respond with order and force complexity under a traditional
top-down hierarchical approach. The issue with forcing ‘order’ into chaos is traditional
leadership theory has shown to be highly ineffective and, in some cases, can lead to direct harm
to the organization (Uhl-Bien & Arena, 2017).

In cases of complex organizations, they instead need to be able to respond adaptively to

changes. This adaptive response is instead capitalizing on the collective intelligence of groups.
As a result, organizations should distance themselves from a top-down approach and instead
focus on emergence and networks (Uhl-Bien & Arena, 2017).

CAS is “self-organizing, continually adapting and changing in relation to environmental

conditions” (Uhl-Bien & Arena, 2017, p. 11). However, no matter how flat a hierarchical or
circular structure an organization is, Uhl-Bien and Arena (2017) argue that organizations do
not have the natural ability to self-organize as organizational charts and management systems
inhibit it.

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To combat this issue, they argue that organizations need to enable the emergence of an
‘adaptive space’ (Uhl-Bien & Arena, 2017). The adaptive space “allows agents to interact in
ways that generate emergence and new adaptive order for a system” (Uhl-Bien & Arena, 2017,
p. 11).

Enabling the creation of the adaptive space, an organization needs to be understood as two
systems: the operational and entrepreneurial (Uhl-Bien & Arena, 2017). The operational
system consists of the traditional bureaucratic and formal structure; the entrepreneurial system
occurs in the organization's informal structures and systems that push for change (Uhl-Bien &
Arena, 2017). The two systems are opposites as the operational system pushes for control
while the entrepreneurial pushes for flexibility and experimentation.

It is within the conflict between ‘order’ and ‘chaos’ that the adaptive space is created, and if an
organization is adaptable, leaders within can capitalize on this conflict to foster innovation and
change; as the adaptive space allows for ‘closed’ networks to link and foster innovation and
change as:
[The] bureaucratic organizing is designed to shut down the informal system and
its challenges to authority and status quo, adaptive space is needed to open these
channels back up and allow ideas from the informal (entrepreneurial) and
formal (operational) systems to interact and connect in productive ways. (Uhl-
Bien & Arena, 2017, p. 12)

4.2 Complexity Leadership Theory

As bureaucratic organizations are often highly hierarchical, they often struggle with complex
environments filled with unpredictability. Surviving in this complex environment,
organizational adaptability is needed; therefore, the implementation of Complexity Leadership
Theory (CLT) comes into play. For organizations to adapt to the constantly changing
environment that complex systems create, they need, as previously mentioned, to create an
adaptive space that, in turn, needs a new form of thinking and approach to leadership (Uhl-
Bien & Arena, 2017).

In this part of the thesis, we will explore how leaders within complex systems should approach
the complex dynamics inside the organization and present a framework for complexity
leadership theory developed by (Marion & Uhl-Bien, 2001; Uhl-Bien et al., 2007; Uhl-Bien &
Arena, 2017).

Marion and Uhl-Bien recognized the critical networks within an organization as a tool to adapt
to the external environment as this approach allowed them to understand the broader view.

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They further stated that to respond to complexity, the organization needs to be able to tackle it
on both a macro and micro level (Marion & Uhl-Bien, 2001).

A complexity theorist demands leaders to approach the usually interpersonal angle of

leadership more holistically, as leadership creates a link to emergent structures (Marion & Uhl-
Bien, 2001). Leaders should create an interconnective space by connecting isolated networks
and encouraging reflective behavior for this to occur. While social encounters can be set up
and encouraged by a leader, it is essential to know when to take a step back when the networks
do not require ‘forced’ interactions to foster new emergent structures, as too much oversight
and top-down pressure can negatively affect the process (Marion & Uhl-Bien, 2001). Marion
and Uhl-Bien further argue that a complex leader needs to accept that they are not in control
as complex systems are unpredictable, and neither should they try to force control, but rather
enable actors within the networks (Marion & Uhl-Bien, 2001).

Leaders should help enable the adaptive space by facilitating the generation and movement of
ideas across the system. This is helped by two network structures: brokerage and group
cohesion (Uhl-Bien & Arena, 2017). Brokerage bridges the gap between groups, facilitating
ideas and amplifying them through the system. Group cohesion can be defined as how well
connected an agent is with another group and provides a ‘safe’ environment for testing and
iterating ideas to scale them across the system (Uhl-Bien & Arena, 2017).

How brokerage and group cohesion can create adaptive space conditions can be explained by
‘complexity dynamics’ (Uhl-Bien & Arena, 2017). Two key dynamics that make complex
systems adaptive are: conflict and linking up. Conflicting occurs when agents co-create in a
cohesive group or entrepreneurial leaders try to spread ideas across different networks (Uhl-
Bien & Arena, 2017). Linking up happens when independent agents have enough common
perspectives to link up to trigger novelty and amplify emergence (Uhl-Bien & Arena, 2017).

As mentioned, hierarchical organizations can resist change and turn against those attempting
to initiate it. Therefore, complexity in organizations is often perceived as pressure. Uhl-Bien
and Arena (2017) named this pressure complexity pressure and is a cause for the adaptive
space to be opened (Uhl-Bien & Arena, 2017).

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Complexity pressure can be described as a force to disrupt current patterns in an organization
that usually consists of: (Uhl-Bien & Arena, 2017, p. 14)
1. A need for a new novel solution as the existing operational patterns in the
organization will not work.
2. New partnerships between agents that have not worked together before
3. Conflicting perspectives as the new partnership often brings along different
needs and diverse experiences
4. Interdependence based on mutual survival.

Therefore, it is in a leader’s best interest to respond effectively by enabling the adaptive space
and capitalizing on the situation new network structures to create an adaptive response in the
organization.

As complexity theory evolved, the role of a leader in a complex system became more evident
as the previous way of thinking would, in essence, reduce the leader to something comparable
to a ‘matchmaker’ for networks. While this was not an incorrect approach to leadership within
CASs, Uhl-Bien and Arena expanded on the role of the leader by introducing the complexity
leadership framework, defining three leadership types: the operational, entrepreneurial, and
enabling leader, to describe how leaders can enable organizations to operate within a CAS. As
mentioned in the last chapter, organizations on a macro scale consist of two main networks:
the operational and the entrepreneurial, and it is the conflict between the two that opens an
adaptive space that can cultivate innovation and effectiveness (Uhl-Bien & Arena, 2017). In
the conflict between the two, Uhl-Bien and Arena found the need for an enabling leader to be
a catalyst between the two systems and their leaders. That is not to say a leader within an
organization cannot have mobility and wear several hats, and fill more than one if not all roles.
However, for clarity, each leadership type will be presented separately to understand the
different responsibilities better.

While focusing on the complexity within an organization, it can be easy to forget that there is
still a need for a traditional operational system to generate efficiency and results; this is where
the operational leader comes into play. The operational leader’s role is to put structure into the
innovation process and cultivate a more efficient process. However, it is not in the interest of
the operational leader to stifle the entrepreneurial and enabling leader; instead, accommodate
them to drive change into the system (Uhl-Bien & Arena, 2017). Although Uhl-Bien and Arena
observed that this accommodation is necessary without proper oversight and an operational
leader to ground an entrepreneurial leader, their initiatives can get idealistic and infeasible if
implemented throughout the system. Operational leaders can use a tool to convert emergent
ideas from the other leaders into the organizational structure and system via ‘sponsoring’.

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Sponsoring is done by taking ideas from the adaptive space and positioning them within the
formal system of the organization. This combat one of the most resistant problems innovative
proposals often meet within organizations, the ‘brick wall’ – “the seemingly automatic reflex
of the operational system and its leaders to say no when approached with innovative ideas or
suggestions for new ways of doing things” (Uhl-Bien & Arena, 2017, pp. 15–16).

On the opposite side, we have the entrepreneurial leader. “Entrepreneurial leadership is the
creation and development of novelty (e.g., ideas, innovative solutions, new products or
services) in ways that help an organization adapt to pressures or capitalize on opportunities”
(Uhl-Bien & Arena, 2017, p. 16). The role of the entrepreneurial leader allows them to identify
and realize ideas and how to implement them, as one of the challenges entrepreneurial leaders
face is to keep the spirit and energy alive in a system that, as a standard, does not accommodate
novel ideas. In addition, entrepreneurial leaders are tasked to create group cohesion in a
collaborative environment as creativity is a collective process and benefit from a calm,
understanding, and enduring leader in a ‘hostile’ environment (Uhl-Bien & Arena, 2017).

Lastly, enabling leader is tasked to support and sustain the adaptive space. The role of an
enabling leader has come in response to complexity; however, Uhl-Bien and Arena argue that
this role has existed for longer and is practiced by a lot of people within complex systems, but
due to a lack in the traditional conceptualization of a ‘leader’s’ role and lacking language
within leadership theory, have gone unnoticed and unrewarded for a long time. Enabling
leaders perform in a supportive capacity adjusting to different situations, and helping direct
energy in employees under entrepreneurial leadership to innovate and, in general, helps all
employees to recognize new emerging ideas (Uhl-Bien & Arena, 2017). They operate in a
difficult space, and an excellent enabling leader must show a degree of humility to take a step
back and allow others to take a step forward alongside the conviction to take risks and thrive
in situations marked by high tension to pressure the organizations’ aim of being adaptive. This
might sound like a thankless job; however, the enabling leader plays a crucial role in an
organization’s ability to adapt, as they catch ideas at their emergence and link people to
capitalize on the innovation while forwarding the idea to the operational leader for
implementation (Kristinsdóttir et al., 2020; Uhl-Bien & Arena, 2017).

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4.3 Methodology
This sub-chapter will present the reader with the philosophical basis this thesis has been
constructed around and will include our understanding of reality within the context of the
thesis and how knowledge is produced, alongside how our data was collected and analyzed.
Finally, based on those assumptions, we will reflect on the chosen theories, CAS and CLT, within
the context of social constructivism.

4.3.1 Ontology & Epistemology

This chapter will briefly explain ontology and epistemology.

Ontology is the study of the “being” or essentially what is (Scotland, 2012). Ontology can be
explained from objectivist and subjectivist viewpoints (Hatch & Cunliffe, 2013). Both
viewpoints refer to an individual’s assumption of reality or phenomenon. The objectivists see
reality as something “unmovable” by human influence and will remain unchanged through
independent observation. The subjectivists see reality as something that wholly exists due to an
individual’s observation and would not be observable without the individual present (Hatch &
Cunliffe, 2013).

These different viewpoints or assumptions can lead to an argument between different fields of
study as natural science would prefer to see the world as something tangible and measurable,
while social science sees the world and its reality as something that is socially constructed
(Hatch & Cunliffe, 2013; Scotland, 2012).

Epistemology is the study of the generation of knowledge, how it is created, acquired, and
communicated, or in layman’s terms, what it means to know (Scotland, 2012). An individual’s
understanding of reality is determined by ontology, which is the basis of the epistemological
assumption made by the individual regarding how knowledge is created. Epistemology has two
main assumptions: positivist and interpretivist (Hatch & Cunliffe, 2013). Positivist
epistemology based its knowledge generation on the assumption that the “truth” can be
discovered through scientific methods and measurements. Interpretive epistemology opposes
this assumption by basing that knowledge generation is solely based on an individual’s point
of view, and different realities co-exist simultaneously based on when and who is observing
(Hatch & Cunliffe, 2013).

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 4.3.2 Social Constructivism
The following sub-chapter will expand on the philosophical basis within the confines of social
constructivism and define how we perceive our research question. First is the concept of ESG
and sustainability in general; secondly, ESG and organizations as complex adaptive systems.
Our ontological and epistemological approaches and our understanding of these phenomena
will be expanded upon within the confines of social constructivism.

4.3.2.1 Ontology
Defining a phenomenon is not straightforward, as the understanding and creation of these are
dependent on what philosophy of science a researcher subscribes to and through what eyes it
is ‘perceived’. Within social constructivism, a phenomenon is ever-changing as it shapes and
forms itself based on its cultural and historical background (Collin & Køppe, 2014; Egholm,
2014). With the rise of ESG and sustainability in general and academic circles, these concepts
have become muddled as they have a different meanings to different people as the complex
nature of the phenomena conforms to the beholder. In understanding phenomena from the
complexity perspective, there is a need to include the context, which aligns with the
constructivist approach (Walton, 2016). When operating within a CAS, each agent's subjective
background and context grant a different perspective of the phenomenon, and when different
perspectives are brought together, conflict can arise. The fluid, ever-changing state of a
phenom co-aligned with complexity theorists' understanding as complexity rejects the linear
cause-and-effect perspective on phenomena and instead perceive it as non-linear, organic, and
characterized by uncertainty and unpredictability (Regine & Lewin, 2000 in Marion & Uhl-
Bien, 2001).

Alongside the ontological assumptions of ESG and sustainability in the literature, our
assumptions of reality need to be included as it affects how we approach data collection in the
thesis. For example, the people we contacted for interviews were made on the assumption that
they worked with ESG and sustainability, which we assume equipped them with the tools and
knowledge to be of use to our research.

4.3.2.2 Epistemology
Within social constructivism, knowledge is seen as changeable. Knowledge generation occurs
through social context and how meaning is ascribed to phenomena (Egholm, 2014). This way
of understanding ‘knowledge’ is present in ESG, and sustainability is understood and echoed
in CAS and CLT theory.

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 The importance and implementation of ESG vary from company to company; even within the
same company with subsidiaries in different countries, the way ESG is handled can differ. The
same can be said for the ESG metrics, as the weight of different metrics and what is considered
a metric differs widely from different ESG data vendors. Understanding how knowledge about
sustainability and how to measure its profitability and impact varies among big data vendors
like KLD and Innovest can be argued to arise from the different social and corporate contexts
within the different companies (Eccles et al., 2020). The differences in knowledge generation
between the two lead us to the assumption that no objective knowledge exists, as knowledge
differs from different realities, the social context within a social collective, as ESG and
sustainability can differ from organization to organization, we understand the organization as
a meso-collective, consisting of smaller micro-collective, operating within the macro-
collective of society. The knowledge generation within the CAS of organizations happens with
the emergence between agents and the knowledge are originating from a specific position,
based on its social confines; this aligns with Berger and Luckmann’s argument that “knowledge
must always be knowledge from a certain position” (Berger & Luckmann, 1966, p. 22)

4.3.2.3 Social Constructivism

Construction within social constructivism can be explained by a process in two stages:
externalization and internalization (Egholm, 2014). Externalization is defined by the process
of defining a phenomenon through “habits, routines and interpretations” (Egholm, 2014, p.
150) until these slowly become known as facts within society; however, only through
internalization do these facts become truths to the collective. Berger and Luckmann state that
institutions play a significant role in facts becoming truths, as the social pressure exerted by
them makes it difficult for society to deviate from the institutions ‘truth’ (Egholm, 2014). The
pressure institutions can put on society to accept the perspective of a phenomenon align with
our understanding of the difficulties of implementing and understanding ESG within a CAS, as
the varied interpretation of ESG within organizations and data vendors does not allow for one
‘truth’.

Understanding why social constructivism when investigating organizations can, to some

extent, be tied to Michael Foucault’s view on knowledge and power as a basic structure in
social relationships (Egholm, 2014). As previously mentioned, conflict is one of the main
driving forces for innovation and effectiveness; however, the adaptive space created by the
conflict needs to be managed to reach space for bottom-up empowerment of ideas (Uhl-Bien
& Arena, 2017). While the enabling leader allows for some of the hurdles for innovative ideas
to reach the ear of the operational leader, Espinosa and Porter (2011) argue that these bottom-
up created ideas and the decision to implement them rely on a top-down process.
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To further understand how CAS reacts in response to ESG measures, examining the language
of our interviewees gives us insight and an expert’s understanding of how ESG is implemented,
talked about, and the organizational response.

4.4 Method
This chapter will explain the methods used to explore our research question. The methods have
been chosen based on our ontological and epistemological assumptions, supporting our social
constructivist approach to our research.

Our primary data have been collected through semi-structured interviews, and the secondary
data collected have been to provide a detailed understanding of the topic, providing context
and establishing its origin.

As mentioned, the data in the thesis are divided into two, primary and secondary data. Primary
data is an original data source actively collected by the researcher. In the thesis, we conducted
a series of qualitative semi-structured interviews with people working with ESG and
sustainability. Marion and Uhl-Bien (2001) support using qualitative data collection when
exploring complexity as it allows the researcher to explore the deeper layers of complexity
within the interview. Although collecting qualitative data is usually very time-consuming, it
allows the questions to be answered from the chosen methodical assumptions (Hox & Boeije,
2005). Secondary data has been collected earlier by other researchers, such as academic
journals, books, or information found on relevant, reliable websites.

4.4.1 Semi-Structured Interviews

In determining what interview technique to utilize to gather the data for our study, we
carefully considered the interview technique that would yield the most relevant responses.
There are three main qualitative research interview techniques: structured, unstructured, and
semi-structured (Dudovskiy, 2022). As mentioned earlier, the field of ESG is rapidly evolving,
dynamic, and in a state of constant flux. In selecting our interview technique, we determined
that the semi-structured interview would yield the most benefit, as it gives us the flexibility to
ask additional clarifying questions or follow-up questions. This is especially useful if the
interviewee presents us with new information or perspectives that we had not anticipated prior
to designing our interview research questions. The additional benefit is that, unlike a
structured interview, it allows for a more natural conversation flow while still guiding the
interviewee to answer questions of direct relevance for our research purposes. In semi-

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structured interviews, the results are not skewed in a particular direction because it allows the
interviewees to present new information and not be forced into responding to targeted
questions that do not allow them the space or ability to extrapolate. For this reason, we
purposely designed the interview questions to be more open-ended. This worked well because
using this technique, the interviewees, considered experts in their fields, could have the
freedom to provide crucial insight, shedding light and unique perspective on the developing
field of ESG (Hesse-Biber and Leavy, 2011).

We spent several weeks discussing what questions would be the most relevant to yield the best
data for our research; as Anne Galletta notes:
Formulating questions and ordering them requires considerable time and trial
and error . . . each interview question should be clearly connected to the
purpose of the research, and . . . should reflect the researcher’s deliberate
progression toward a fully in-depth exploration of the phenomenon under
study. (2013, p. 45)

The semi-structured interview questions moved gradually through three main segments. We
began by “creating space for a narrative grounded in participant experience” (Galletta, 2013,
p. 46). We then moved into questions that were more specific in nature. The logic behind this
rationale was this: after the initial warm-up questions and a first, broad opening question, we
would have already gained important knowledge and background of the interviewee. The
middle segment of the interview was designed to build upon the comments and insights that
had already been provided and to elicit “data of greater specificity and […] broader contextual
levels” (Galletta, 2013, p. 49). Finally, we moved to the close-out segment of the interview,
where we asked the interviewees to reflect on the broader future of the field of ESG and their
thoughts on further developments. We also gave them the opportunity to circle back and reflect
upon particular areas that they had touched upon during the interview that they wanted to
revisit or thought were of particular relevance. The interviewer and interviewee collaborate in
a generative knowledge-making process; we “engage the participant in clarification, meaning
making, and critical reflection” (Galletta, 2013, p. 51).

4.4.2 Analyzing the interviews

We decided to go with a thematic analysis of our qualitative data to analyze our interviews.
Thematic analysis is the method for identifying themes and analyzing repeating patterns within
the data (Braun & Clarke, 2006; Kiger & Varpio, 2020). Thematic analysis is highly flexible
and can be adapted to suit our specific research. Themes within the data can be described as a
“patterned response or meaning” (Braun and Clarke, 2006, p.82 in Kiger & Varpio, 2020, p.
3) based on the data concerning the research question (Braun & Clarke, 2006). The themes in

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our dataset have been identified using a deductive approach, as the themes were discovered to
help us explain our research question. A deductive approach uses “pre-existing theory,
framework, or other researcher driven focus to identify themes of interest” (Braun and Clarke,
2012; Varpio et al. 2019 in Kiger & Varpio, 2020). This approach produces a more detailed
and specific perspective on the data to help support specific research it is used in, and the case
of the thesis, helps us narrow in meaningful themes that can provide insight into our research
question.

Braun and Clarke (2006) defined six steps for analyzing the data: Familiarizing yourself with
the data, Generating Initial Codes, Searching for Themes, Reviewing Themes, Defining and
Naming Themes, Producing the Report/Manuscript (Braun & Clarke, 2006).

In preparation for analyzing the data, the interviews were transcribed through the online tool
Otter.ai, then finalized by manually correcting any mistakes and leading us into the first step,
familiarization. During this step, the data set was thoroughly read to transcribe and further
familiarize us with the data to build a foundation for all subsequent steps (Braun & Clarke,
2006; Kiger & Varpio, 2020).

The researcher can start coding and organizing the data in the second step. The generated
codes are guided by our theories and research question (Braun & Clarke, 2006) and can be
used to link the data with the theories.

The third step is where the analysis starts to form; when the data has been coded, the generation
of themes can start. This is done by collecting all the codes and looking for broad themes, then
thinking about the relation between the different themes and codes found within (Kiger &
Varpio, 2020). This leads to the fourth step, reviewing the themes. While reviewing the initial
themes generated in the previous step, we consider whether a coherent pattern has been found
and if the data correctly supports it or if some themes are too broad or diverse (Kiger & Varpio,
2020). Step five consists of defining and naming the final definitive themes as these are the
ones that will be used in the written analysis, as the themes will be honed in on the more
important aspects of creating a coherent narrative and the reason for them to provide a unique
insight into the research question (Braun & Clarke, 2006; Kiger & Varpio, 2020). Lastly, the
final step is writing the analysis by creating a cohesive and concise account of how the themes
provide relevant information for the thesis, as it is not only describing the final themes and
codes but how and why they are important to the research using narrative descriptions and
representative data excerpts (Kiger & Varpio, 2020).

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5 Intro to Analysis
5.1 Discussion of Our Process for Interviewee Selection
Special consideration was given to the selection process for interviewees. After considerable
discussion, we decided that the most effective and elegantly efficient way to generate a
potential pool of interviewees from whom to conduct our qualitative data collection was to
utilize LinkedIn (a service owned and operated by Microsoft). Part of the rationale behind our
decision was based upon the fact that we were limiting our target interview group specifically
to industry experts and professionals who work within the field of ESG within the Danish
marketplace economy. In addition, LinkedIn is by far the most popular and widely used
business social media application in the Danish marketplace. As of February 2022 (the most
recent data available), there were approximately 2,970,000 LinkedIn users in Denmark,
accounting for 50.7% of the population, with 81.8% of users between the age of 25-54
(NapoleonCat, 2022).

As ESG is a dynamic and rapidly evolving field, and the vast majority of the Danish business
community uses LinkedIn regularly, we postulated that this would be a reasonable pool from
which algorithmic logic for sorting; it is generally accepted that results are sorted when
searching for topic subjects in LinkedIn according to users who are the most active on the
platform. Therefore, we surmised that this might be a good indication of how active people in
the field of ESG were, generally, in communication with their colleagues and peers, thus more
likely to provide nuanced and relevant insight into the field.

We contacted via LinkedIn a total of 26 potential interviewees, in total. Of the 26 people we

contacted, we received 12 responses (46%), and of those 12 responses, we were able to conduct
a total of 9 interviews (75%). The interviews ranged from 20-46 minutes, and all interviews
were conducted virtually in order to protect the health and welfare of both the interviewer and
the interviewee due to the current COVID-19 conditions in Denmark. In total, we ended up
with more than 300 minutes of interviews which yielded more than 85 pages of transcripts.
In addition, all interviews were conducted by the same research team member. This conscious
choice served as a limiting constraint to reduce the potential for amplifying potential bias
within the interviews. The rationale was that if the same person were conducting the
interviews, it would be easier to identify potential areas where biases might have affected the
interviews when looking at the aggregate when analyzing the transcript data.

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Below is a basic overview of who was contacted. In addition, several people requested that their
names or companies be anonymized when mentioned in the paper. Those who requested
anonymity are noted with an asterisk beside their name and/or company.

Table 3: List of Interviewees

Number
Name Title Company Industry of Years Gender
Employees
Alexandra
ESG Fashion /
Morge Konges Sløjd > 19 5 Female
Manager Textile
Rochette
Maersk Mc-
Kinney Moller
Anne Katrine ESG Strategy
Center for Zero Non-Profit > 45 12 Female
Bjerregaard Lead
Carbon
Shipping
Catherine
Sustainability EnergyWerx*
Valentin Energy > 6000 6 Female
Advisor A/S
Hemmingsen
Frederik Senior ESG Transport /
Maersk > 83,000 8 Male
Rementorp Manager Shipping
Head of ESG
PensionWerx Investment
Jake Jones* and Chief > 350 5 Male
A/S* / Pension
Legal Officer
Head of
Jane HealthWerx
Sustainability Health Care > 6000 10 Female
Williams* A/S*
of ESG
Senior
Consultant,
Katrine Juhl Sustainability >
PwC Consultancy 2.5 Female
Jespersen Advisory & 270,000
Assurance
Services
Michael ESG GreenWerx
Energy > 19 8 Male
Jones* Manager A/S*
InvestmentWerx Investment
Rick Davis* Head of ESG > 75 6 Male
A/S* / Pension

Four of the nine interviewees requested that we not use their names and remain anonymous,
and five of the nine interviewees requested that we anonymize their company. We had a
roughly equal distribution of respondents by gender, with five women and four men included
in our interview sample. The average length of time that our respondents have been working
in the ESG field was 6.9 years. We have selected a generic name for the anonymized companies
that indicates, broadly and generically, what industry sector the company is part of, without
being overly specific so that the company's anonymity is protected, as requested, per GDPR

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rules and regulations.

We ended up with a good sample of organizations that work with ESG. They include small,
medium, and enterprise-scale organizations, as well as a non-profit entity as well.

5.2 Discussion of Whom We Interviewed

Of course, the crux of our research rests upon the individual SMEs that we interviewed.
Therefore, it is important to present each respondent and provide a brief biographical sketch
to indicate their background and subject matter expertise within the ESG field. This helps shape
our data analysis and make the results more relevant. We hope these brief biographical
vignettes will help flesh out the drive, motivation, experience, and expertise that the
respondents have provided.

5.2.1 Alexandra Morge Rochette

Alexandra currently works at a small firm, Konges Sløjd, a company entrenched in the textile
industry, producing sustainably sourced children’s clothing, especially for infants and
toddlers. A prior company that she founded worked with the design of games with an
ecological, educational focus for small children to introduce them to modern concepts of
sustainability and social responsibility. Alexandra is an ESG Manager at Konges Sløjd and bears
primary responsibility for ensuring that ESG is properly implemented within the organization.
The focus is on compliance, evaluation, and integration of ESG methodology. Originally hailing
from France, she now lives in Denmark and has studied at Berkeley Law Executive Education
focusing on Sustainable Capitalism and ESG and holds a Master of Science from Sciences Po
Bordeaux in Political Science & Communication.

5.2.2 Anne Katrine Bjerregaard

Anne currently works as the ESG strategy lead for Mærsk Mc-Kinney Møller Center for Zero
Carbon Shipping. The organization focuses on independent research to accelerate the push
towards a transition to a NetZero future for the maritime shipping industry. Much of their
work focuses on governance (the “G” in ESG) and regulatory change (ZeroCarbonShipping,
2022). The main focus of the research center is the decarbonization of the global shipping
sector, and as such, they work collaboratively with industry leaders to adopt best practices to
enable this change. Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping is a non-profit
with no commercial connection with Mærsk. Prior to her work at the institute, Anne worked
as a Senior Innovation Portfolio Manager at A.P. Møller - Mærsk, Head of Green Ship of the
Future, and a Project Manager for the Maritime Development Centre of Europe. One of the key
daily challenges is the struggle to integrate ESG methodology within a larger corporate
organization. Anne holds a Master of Arts in English Business Communication, and American

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Studies from Copenhagen Business School, has studied at UC Berkeley College of Engineering,
and recently completed an Executive MBA at DTU (Master in Management of Technology).

5.2.3 Catherine Valentin Hemmingsen

Catherine works at EnergyWerx*, a Danish firm in the Energy sector. Her focus is primarily
on ecology and climate change, biodiversity, and ecosystem issues and how they integrate and
are implemented regarding corporate sustainability. She currently works as a Sustainability
Advisor and is formerly a PwC consultant in the Risk Assurance department as part of the
Sustainability Solutions team. Her specialization in that role was primarily with strategy and
assurance, monitoring and working with current ESG trends, reporting frameworks,
benchmarks, and target-setting. Catherine holds a Master of Science in Biology and Ecology
from the University of Copenhagen. She has specialized experience in her research with port
operations at the Port of Tema, Ghana, specifically regarding the area's adverse impacts on
vegetation, heavy metal concentrations, and nitrogen content.

5.2.4 Frederick Rementorp

Frederick is a Senior ESG Manager at A.P. Møller - Mærsk. Prior to his current role, he worked
for PwC, focusing primarily on Sustainability & Governance, ESG reporting, CSR, and non-
financial assurance. He has also worked extensively as a communication consultant to ensure
that proper messaging regarding ESG benchmarks, metrics, and methodology and effectively
disseminated to the broader community. Frederik holds a Master of Science from Roskilde
University in Business Studies and Public Administration and has studied at the Yale School of
Management World Business Council for Sustainable Development Leadership Programme,
“Communicating Sustainable Development and Reporting to Stakeholders” in 2018.

5.2.5 Jake Woodward*

Jake* is the Head of ESG and Chief Legal Officer of a Danish pension/investment firm,
PensionWerx*. He has worked for another Danish bank as well and has held a position as a
financial, legal advisor for the Danish government. He has extensive experience in negotiations
and holds a Master of Laws (LL. M) from a well-respected Danish university. As per Jake’s
request, we are not providing detailed information to maintain his anonymity. He is, however,
a specialist in the ESG field, and his insights and contribution to our research were very helpful.

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5.2.6 Jane Williams*
Jane* currently works as Head of Sustainability & ESG at a Danish healthcare company,
HealthWerx*. Prior to her work as Head of Sustainability & ESG, she had a role working in
Sustainability for a Danish manufacturing company that focuses on environmentally friendly
additions and modifications. Jane has extensive experience in the European Parliament as well
as the Danish government and holds a degree in Political Science from a well-known Danish
university. As per Jane’s request, we are not providing any detailed information to maintain
her anonymity.

5.2.7 Katrine Juhl Jespersen

Before her current role as a Senior Consultant for Sustainability Advisory & Assurance Services
at PwC, Katrine worked as a Sustainability Consultant at KPMG. She also worked on a project
on Danish-South African Cooperation on Smart and Sustainable Cities in Pretoria as part of
Udenrigsministeriet. She holds a Master of Arts in International Negotiation Relations from the
University of Southern Denmark and is keenly interested in the data collection and reporting
aspects of ESG.

5.2.8 Michael Jones*

Michael* works as an ESG Manager for GreenWerx*, a small company that focuses on building
sustainable solar energy solutions combined with agriculture in Denmark. He holds a Ph.D. in
Agriculture and Natural Resource Management from a major Danish university and a Master
of Science in Agricultural Development. He has worked extensively in South Africa, focusing
primarily on agriculture, sustainability, and programmatic evaluations. He is a leading
researcher in his field but would prefer to remain anonymous to protect his organization’s
interests.

5.2.9 Rick Davis*

Rick* is currently the Head of ESG at InvestmentWerx*, a large Danish investment/pension
company. He is primarily a business economist but has extensive experience in international
development program work and project management in Asia and Africa. His primary focus
has been on sustainable supply chain management, worker’s rights, and ESG for much of his
career. He is a Board Member of several non-profit organizations that focus on Environmental
and Social issues and has been a guest lecturer at Copenhagen Business School for the past
eight years. He holds a Master of Science in International Business and Development Studies
from a major Danish University. We are not providing further detail to protect his anonymity,
as per his request.

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6 Analysis
6.1 Thematic Analysis
After we finished conducting the interviews with our nine respondents, we were left with the
challenge of decoding each of the interviews. In order to do this, we went through the steps of
conducting a thematic analysis. We took a qualitative approach in working with our data, and
utilizing a thematic analysis seemed the most logical course of action. In order to provide
valuable knowledge when conducting a thematic analysis, readers must clearly understand the
process that researchers had used to analyze their data and any underlying assumptions that
they took into account when they began the process of decoding (Nowell et al., 2017, p. 2).

Because fundamentally thematic analysis provides a wide degree of theoretical freedom, its
“highly flexible approach can be modified for the needs of many studies, providing a rich and
detailed, yet complex account of data” (Nowell et al., 2017, p. 2). However, to establish
“trustworthiness”, the thematic analysis must have six key features: Credibility, Transferability,
Dependability, Confirmability, Audit Trails, and Reflexivity (Nowell et al., 2017, p. 3). Briefly,
we will discuss what exactly is meant by each of these terms. Much of the foundational
research regarding qualitative research, especially in terms of thematic analysis, rests upon
Guba and Lincoln’s 1989 work, Fourth Generation Evaluation, and Lincoln and Guba’s 1985
work, Naturalistic Inquiry.

6.1.1 Credibility
Credibility is gained when other researchers or readers, when presented with an experience,
can easily recognize it as something that makes sense, and as such, it “addresses the ‘fit’
between respondents’ views and the researcher’s representation of them (Nowell et al., 2017,
p. 3). According to Lincoln and Guba, an important aspect of increasing credibility is to include
activities in the data collection process such as “prolonged engagement” and “persistent
observation”; they also recommend “data collection triangulation” and “researcher
triangulation” as possible methods for increasing credibility as well. According to Hales,
incorporating the concept of triangulation from mathematics into a more sociological
methodology occurred in the 1970s, when, “In 1978, Norman Denzin identified four basic
types of triangulation” (Hales, 2022, p. 13). These were data triangulation (using multiple
sources of data in a study), investigator triangulation (using different researchers or
investigators in order to study a particular issue, theory triangulation (using multiple theories
to interpret the results of the study that has been conducted, and methodological triangulation
(or using multiple methods in order to conduct a study) (Hales, 2022, p. 13). In our study, we
satisfied the credibility test as we used multiple sources of data, we are two researchers
studying the same phenomenon, and we have used multiple theories in order to interpret the

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results of our study. We have not satisfied methodological triangulation, as we only used a
single semi-structured interview methodology to conduct our study; however, in the aggregate,
we believe that our study is credible.

6.1.2 Transferability
What is meant by the term transferability is the ability to generalize the field of inquiry. In
other words, this refers to whether or not a study can be transferred to others who can use the
findings that have been provided as valid data with which to base their research (Nowell et al.,
2017, p. 3). While researchers cannot anticipate how future researchers will transfer the
findings into their research, they are responsible for providing detailed descriptions to
streamline the process. Our study has passed the bar of transferability.

6.1.3 Dependability
We have established a “logical, traceable, and clearly documented” research process (Nowell
et al., 2017, p. 3). We have clearly documented the process in which we conducted our sample
of interviewees and have provided the template for the semi-structured interview process, the
recordings of our interviews, written transcripts of the interviews, and outlined our rationale
for the way in which we made our decisions throughout this study. As such, we have passed
the dependability threshold.

6.1.4 Confirmability
When the credibility, transferability, and dependability thresholds have all been achieved, then
we have also achieved confirmability, in the sense that we have established that our research
interpretations and findings have been “clearly derived from the data, requiring the researcher
to demonstrate how conclusions and interpretations have been reached” (Nowell et al., 2017,
p. 3). In our study, we have achieved confirmability.

6.1.5 Audit Trails

In terms of audit trails, what is meant is that readers have “evidence of the decisions and
choices made by the researcher regarding theoretical and methodological issues throughout
the study” (Nowell et al., 2017, p. 3). To establish this evidence, Nowel et al. suggest “Keeping
records of the raw data, field notes, transcripts, and a reflexive journal” in order to “systemize,
relate, and cross-reference data” (2017). We have passed this threshold and have evidence in
our appendix to prove that we have audit trails.

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 6.1.6 Reflexivity
We have kept notes regarding the research process, including internal and external dialogue.
Much of this is archived through our text messages and online communication between us as
we worked through different aspects of the research process, as well as a record of dialogue
regarding the “daily logistics of the research, methodological decisions, and rationales and to
record the researcher’s personal reflections” (Nowell et al., 2017, p.3).

6.1.7 Summary of Thematic Analysis Discussion

To summarize, there are essentially six phases that we encounter when conducting a thematic
analysis: (1) Familiarizing yourself with your data, (2) Generating initial codes, (3) Searching
for themes, (4) Reviewing themes, (5), Defining and naming themes, and finally, (6) Producing
the report. We have briefly included a summary from the Nowell et al., 2017 study in the table
below:

Table 4: Phases of Thematic Analysis and Means of Establishing Trustworthiness

The phase of
Thematic Means of Establishing Trustworthiness
Analysis
Phase 1: Prolonged data engagement, data triangulation, document theoretical and
Familiarizing reflective thoughts, document thoughts concerning potential codes/themes,
yourself with well-organized data storage, storage of data field notes, transcripts, and
your data reflexive journals.
Phase 2:
Peer debrifing, researcher triangulation, reflexive journals, coding
Generating
framework, audit trails, documentation of team meetings.
initial codes
Phase 3: Researcher triangulation, diagramming to make sense of thematic
Searching connections, notes concerning development and hierarchies of concepts
for themes and themes.
Phase 4:
Researcher triangulation, vetting of themes and subthemes by team
Reviewing
members, testing for referential adequacy by revisiting the raw data
themes
Phase 5:
Researcher triangulation, peer debriefing, developing team consensus on
Defining and
themes, documentation of team meetings regarding themes, documentation
naming
of theme naming.
themes
Member checking, peer debriefing, describing the process of coding and
Phase 6:
analysis in detail, thick descriptions of context, description of the audit
Producing
trail, and report on reasons for theoretical, methodological, and analytical
the report
choices throughout the study.

(Nowell et al. 2017, p. 4)

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6.2 Themes Identified in the Study
After thoroughly reviewing, reading, and re-reading the transcripts of the nine interviews we
conducted, we began to see thematic connections between the interviews and the responses
that we received to our semi-structured interview questions. As part of this process, we also
rewatched or reviewed the original interviews to determine if there were more nuanced
responses to our line of questioning that might not be reflected in the written transcripts. We
also reviewed the transcripts and, at times, made the decision to do some light editing for clarity
and in order to make the quotes that we have incorporated into our analysis flow a bit better.
Examples of the editing included the decision to remove extra instances of a word when
repeated if it was clear that it was a manner of speaking or searching for a word when
responding to our interview questions. Also, we decided to make grammatical corrections. As
these interviews were all conducted in English, and English is not the native language of any
Danish ESG practitioners we interviewed, we thought this was reasonable.
Broadly, our thematic content analysis can be divided into six main categories based on our
coding of the data. The way that we approached the coding of the data was two-fold. Firstly,
we created a spreadsheet and looked for keywords throughout each interview. That allowed
us to understand our data better and, systemically, provide us with a basic framework for
sorting through our data and developing themes. We then identified keywords that we had in
common throughout the interviews to determine broad themes. After developing these
overarching themes and developing connections between the different concepts through the
process of diagramming, we went back through and reviewed the interviews to reconfirm that
our initial coding made sense within the context of the interviews. It also gave us the
opportunity for prolonged engagement with our data and to further refine our themes. Below
is a brief outline of our thematic content analysis:

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Table 5: Themes in Our Thematic Analysis

Theme Description
Difficulty of
Data Challenging to obtain valid and timely data
Collection
Specific difficulties in obtaining data with regards to the Social aspect of
ESG
Difficulties in measuring, choosing, and establishing benchmarks
Difficulty in defining the scope of organizational reach
Data validity: data is reliant on the 'observer' (data vendors, weight of
different metrics, etc.)
Organizational Making appropriate organizational changes in order to incorporate ESG
Change methodology and metrics
Difficulties in getting organizations to accept change in fundamental
operational ways to streamline the incorporation of ESG methodology
Generally, organizations experience more pressure from external forces
Pressure of (customers, investors, governmental regulation) than internal forces
ESG Adoption (employees, managers, etc.)
ESG Generally, organizations place a greater emphasis on the Environmental
Prioritization aspect of ESG rather than on the Social and Governance aspects
Organizations also tend to focus on whatever aspect of ESG makes them
look good in the public eye
Generally, there is a mature view on Governance within organizations
ESG as
Complex and ESG targets are constantly changing
Uncertain
Depending on the size of the company, target metrics may be
unreachable due to the resources required to dedicate to ESG reporting
and compliance
With no definitive global framework, companies can "cherry-pick" or
"greenwash" by only choosing to use rating schemes that make them look
favorable
ESG and the ESG fundamentally will increase future profitability for organizations
Future
ESG is widely regarded as important and necessary
Importance of aligning ESG with organizational future business strategy

We will analyze each of these themes and specifically relate the themes we have identified to
the data (interviews) we are utilizing in our study.

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6.3 Difficulty of Data Collection
Issues regarding the quality and ability to collect valuable data were a common theme that
emerged throughout the interviews and the difficulty in defining the scope of organizational
reach. As Catherine Hemmingsen from EnergyWerx pointed out early in her interview, “It’s a
logistics problem data collection, especially mainly looked [at] from the environmental side”
(C. Hemmingsen, personal communication, 18 February 2022, p. 3, 03:57 – 07:08). However,
it is not just a logistics problem of obtaining environmental data. Hemmingsen notes that:
[…] because of GDPR, it’s very difficult to collect and obtain data on your
employees as actually, it’s illegal to have in Denmark […] we’re not allowed to
store data on . . . your racial background, where you’re born, your upbringing,
political views […] I think the fear is that you might expose someone . . . and the
kind of sharing [of] information that you shouldn’t share on them. So that’s one
of the major hurdles that I think most Danish companies right now are facing
when it comes to . . . socially and responsibly reporting on D&I. (C.
Hemmingsen, personal communication, 18 February 2022, p. 3, 03:57 - 7:08)

Others also identify the problem of data accessibility validity. For example, Michael Jones from
GreenWerx states, “I don’t know if you’ve looked at sustainability reports from companies […]
or ESG data, go and take a look at the climate data. There’s no standard way of doing it. It’s
very, very tricky” (M. Jones, personal communication, 27 January 2022, p. 8, 27:57 – 32:58).
Clearly, there is a real tension here that encompasses not only the Social side of data collection
by the Environmental sphere as well. For example, Jake Woodward from PensionWerx speaks
extensively of the challenges that his organization has faced when trying to obtain data as well:
[…] the real problem was data and access to data. So, if I want to monitor how
is the developed carbon footprint of biodiversity, gender equality, or whatever
ESG component, you […] need quality data. And that […] has been and
continues to be a huge challenge. (J. Woodward, personal communication, 8
February 2022, p. 3, 07:35 – 08:54)

Woodward goes on to extrapolate further, as he mentions that PensionWerx has over 350
billion Kroner currently under management and that:
[…] you need data on a line-by-line item, then data needs to be either real data
coming from a company having been assessed somehow quality, [or] you need
approximated data that’s robust […] But getting your hands on […] data that
you can then import into your systems, and you can then start working with
that in a sort of structured way. That is a true, real challenge. (J. Woodward,
personal communication, 8 February 2022, p. 3, 09:07 – 12:33)

It is an incredibly complex problem because the differences between the approximated and
actual raw data that can be verified and have full system integration are very challenging.
Woodward explains that it is much easier to access data on listed companies under
management. However, even then, “maybe 25% of that is estimated data” so often you end up
using proxies for companies that don’t report out their ESG data, and then when you move into
the realm of unlisted companies or private equity investments, “[…] it’s just a huge challenge,

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there’s nothing. And so, what you have today is […] access to approximations, primarily, where
you use listed equity as a proxy for unlisted equity work […]” (J. Woodward, personal
communication, 8 February 2022, p. 3-4, 09:07 – 12:33). For Woodward, the most prominent
challenge, despite every other challenge, external and internal, regardless of data collection, is
a fundamental problem of data collection, data evaluation, and determining whether that data
is valid. Much of that depends on the choice of different vendors and the weight of different
metrics assigned to the data (J. Woodward, personal communication, 8 February 2022, p. 3-
4, 07:35 – 12:33). Jane Williams from HealthWerx also corroborates this analysis during our
discussion, “[…] I think the challenge for us and for many companies is getting the data
collection and data foundation in place. And then of course, also to set ambitions targets to
make sure that we will actually drive progress” (H. Nielsen, personal communication, 21
January 2022, p. 5, 11:43 – 12:25). She continues later in the interview to again stress the
importance of getting baselines established and data collection:
So, we are on a journey. Now we really [are] establishing the foundation for
making sure that we actually will deliver on our targets, getting the baseline in
place, getting the accounting policies in place, getting the data in place, and
make sure that we can track progress. (J. Williams, personal communication, 21
January 2022, p. 6-7, 20:33 – 21:45).

Katherine Juhl Jespersen from PwC also mentions the importance of data and mentions that
one of the main areas that she spends her efforts working on is developing methods to make
calculations based upon what data they can obtain:
[…] the whole data aspect, data reporting, data collection, [and] what types of
metrics is relevant […] I’m also doing a lot of work on carbon footprint in
carbon calculations, developing these carbon footprints for companies that I’ve
been involved in, in carbon offsetting calculations as well. (K. Jespersen,
personal communication, 20 January 2022, p. 3, 03:51 – 05:30)

Much of what Jespersen has to say concerning the issues surrounding data corroborates what
the other ESG subject matter experts we interviewed have also mentioned. She notes that it is
difficult often to decide precisely what it is that your organization wants to report on and that
in the beginning, there can be a tendency to cherry-pick items that people think are relevant
before the organization has a fully developed ESG strategy:
First of all, is what do we want to report on, identifying the types of information
that is material, we do see a lot of organizations in the beginning just cherry-
picking things that they think is relevant. And then a few years after, when they
get a strategy sorted, and everything, the whole foundation done, then they can
actually make it work, material and relevant, they’re fine. But in the beginning,
we see them just picking something that they like from their best guess to able to
report themselves into without having the strategy and governance in place
before it. (K. Jespersen, personal communication, 20 January 2022, p. 3, 05:48
– 8:17)

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Williams also describes the challenges that HealthWerx in defining the baseline and the scope
and issues in determine exactly what is important to measure and what is not critical, as well
as choosing what KPIs are relevant for reporting purposes:
[…] we have […] had the same challenges as a lot of other companies have,
making the baseline, defining the scope, making sure that we are measuring the
right things […] we are standing now with the solid baselines for our ESG
framework and will for the first time published an ESG table, you know, [a]
sustainability report with the KPIs and the targets. (J. Williams, 21 January
2022, p. 4, 09:44 – 11:36)

To summarize, we found broad thematic support that a large number most of our respondents
identified regarding the difficulties around ESG data collection, including the associated
problems with defining the scope of data collection and the access to and availability of the
data, and the difficulty in determining the validity and applicability of the data once it had
been collected.

6.4 Organizational Change

Another core theme that we identified as we went through the interviews was that
implementing organizational change into the structure of your company or corporation is
quite challenging, as it often requires change on an enterprise level and in what some refer to
as the organization’s DNA. Jane Williams alludes to this when she speaks of ESG as being “[…]
part of our DNA with the services we [HealthWerx] provide” (J. Williams, personal
communication, 21 January 2022, p. 5, 15:41 – 17:12) and continues on later to reemphasize,
that the “[…] DNA of the company is to wake up every morning and help the people to save
lives and improve the health and well-being” and continues that due to the nature of
HealthWerx and their organizational mission it’s “[…] natural also to have a […] clear
sustainability profile with the targets. So I think it corresponds very well with the wishes of our
employees as well” (J. Williams, personal communication, 21 January 2022, p. 6, 17:27 –
18:13). Companies already aligned internally with goals consistent with the values and
principles that are part of ESG methodology will have a much easier time implementing the
organizational change necessary for a successful ESG roll-out.

Alexandra Morge Rochette from Konges Sløjd discusses a similar need to fully redefine ESG as
part of the fundamental purpose and mission of the organization, “[…] you cannot … just
[keep] saying that you will launch initiatives. And you will have one or two dedicated
programs, people want to have a strong commitment that is really in the purpose of the
company itself” (A. Rochette, personal communication, 21 January 2022, p. 5, 09:47 – 11:29).
She also notes that due to growing pressure from big institutional investment firms like
BlackRock:

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 […] is pushing all companies toward a more integrated way of seeing ESG. That
means that you cannot just have one or two small projects, you need to redefine
it from the purpose of the company, using SDGs, of course, but you need to go
deep into the company and align a full agenda, a full program, we will prove
from targets reporting […] it’s about really rethinking the old purpose of the
company, and how you can drive the future growth in a very consistent way.
(A. Rochette, personal communication, 21 January 2022, p. 5, 09:47 – 11:29)

According to Rochette, enterprise-wide organizational change, while a significant challenge

for large companies, is an even more especially daunting task for small and medium-sized
companies “[…] because they usually don’t have the human resources to excel in such a
challenging and wide topic” (A. Rochette, personal communication, 21 January 2022, 09:47
– 11:29). Anne Katrine Bjerregaard from the non-profit Maersk Mc-Kinney Moller Center for
Zero Carbon Shipping observes that “the individual companies […] really need that system
change across the supply chain to make it relevant […] So, it’s a big and daunting task” (A.
Bjerregaard, personal communication, 18 January 2022, p. 6, 16:33 – 17:25). Having a
willingness to incorporate ESG within the organization and working incrementally to
implement ESG is also crucial for enterprise-scale change to occur, “[…] you finally have like
five or six [targets] that you know and develop a little bit year by year, but then after you’ve
done it the first one or two times it’s actually the processes that are tiresome” (C. Hemmingsen,
personal communication, 18 February 2022, p. 6, 16:59 – 19:03).

As many respondents pointed out, the fundamental challenge of implementing organizational

change is essentially a strategic one. Successful organizations will properly synchronize their
ESG strategy with their overall corporate strategy:
But I would say that one of the immediate challenges that we faced in the end,
which we are in the middle of right now is that we need to merge the ESG
strategy with the actual corporate often the actual […] [central] strategy. And I
think that that might be a challenge that many corporates encounter because it
becomes more and more integrated. And that's not necessarily easy. (A.
Bjerregaard, personal communication, 18 January 2022, 02:51 – 03:37).

In summary, the key to successfully implementing organizational change is to take a holistic

view of ESG implementation. Most of our respondents, at various times, pointed out that it was
important not to merely have ESG siloed off in one department with only one team of people
working on the issues, but that broader education and awareness were crucial within the
larger organization. Through the interviews, it also became clear that aligning broader
corporate strategy with their ESG strategy was of utmost importance and would provide the
best possible environment for successful adoption.

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6.5 Pressure of ESG Adoption
Nearly all respondents reported that pressure to integrate ESG came from various sources, both
internal and external. However, the main pressure to incorporate ESG seemed to come from
external institutional investors and the public or their customers asking for more detailed
information. BlackRock, for example, has been pushing to have TCP reporting and using SASB
standards,
[…] reporting against all these very specific international frameworks. So, they
were questioning that from their companies that they invest in […]” and
continues “[…] it’s not necessarily the big ones pushing down, but more the
different kinds of stakeholders pushing in the companies, and asking them to
join the club basically. (K. Jespersen, personal communication, 20 January
2022, p. 4, 08:41 – 10:41)

Conversely, Jane Williams reports that at HealthWerks, most of the pressure is internal, as they
try to ensure that they “[…] are living up to our own […] vision and what we do with
sustainability. So that’s been […] definitely a push inside” and that “it corresponds very well
with the wishes of our employees as well” (J. Williams, personal communication, p. 5., 15:41
– 17:12). Frederik Rementorp from Mærsk describes a blended situation where there is
pressure both internally within the organization as well as externally:
So, we are super fortunate to have a management team and a board of directors
that is really driving this from the top and they can see how strategically
important it is to get it right. And that is also why we have scaled up so
significantly […] we established a […] team in January, where we now have
[…] more than 60 FTEs working purely on this. (F. Rementorp, personal
communication, 13 January 2022, p. 4, 14:00 – 17:43).

He describes later that regulators are also pushing the company to do more, and a desire from
customers to see action regarding sustainability as well as investors. It also serves to attract the
best talent because the best and most talented employees are gravitating toward working with
companies with a strong ESG performance record: “[…] it’s also part of our value proposition.
When we talk about building our employee brand, it is an absolute must and need […] that we
have a strong ESG profile, to actually be able to attract and retain talent […] there’s a lot of
push […] internally” (F. Rementorp, personal communication, 13 January 2022, p. 5, 14:00 –
17:43). Jane Williams nicely synthesizes two of the themes we have been discussing, the
Pressure of ESG Adoption as well as Organizational Change, when she observes: “[…] we’ve
seen an interest internally to be more outspoken about what we do and to set targets that are
living up to our own […] vision and what we do with […] sustainability. So that’s been a […]
push inside” (J. Williams, personal communication, 21 January 2022, p. 5, 15:41 – 17:12).

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Broadly, the pressure for ESG implementation is coming from myriad directions, both
internally and externally. The pressure comes not only from external sources, such as
investment firms, customers, and regulators but also from internal sources, such as internal
leadership and employees. Companies with a strong ESG profile generally tend to have
sponsorship within the executive level C-suite or Board of Directors and a strong push from
organizational management to prioritize ESG.

6.6 ESG Prioritization

When we asked our respondents whether their organizations spent more time on any
particular aspect of the three pillars of ESG, we broadly found that they reported the most
emphasis and resources were given to the Environmental aspect. The next area of emphasis
was the Social aspect, especially in areas of D&I. However, as we mentioned in our discussion
of the difficulty of data collection earlier, it is far more difficult in the current political
environment to obtain good data regarding the Social aspects of ESG, in large part due to GDPR
requirements, as Catherine Hemmingsen mentioned. Perhaps when GDPR was initially rolled
out, those who advocated for it did not realize the second and third-order effects that it might
have on programs that push for social justice.

We also found that organizations tend to focus on things that are more directly relevant to
their business model. For example, companies that have a large environmental footprint tend
to prioritize their Environmental scores over Social or Governance, as Frederik Rementorp
notes:
[…] decarbonization, it really is front and center [and] what we do […] most.
But I would say that it cannot stand alone, there’s a reason why it’s ESG […] we
need to be able to provide solutions for them that they [customers] need,
meaning that it’s a climate neutral transportation, but we need to do that in a
responsible way as well. (F. Rementorp, personal communication, 13 January
2022, p. 3, 08:03 – 11:56).

Rementorp also emphasizes that all aspects of ESG have to be part of an integrated global
strategy, which has been a recurrent theme throughout all the interviews, as we have
previously mentioned. Jane Williams also says that at HealthWerx, they spend much more
time, energy, and resources focusing on the Environmental and Social pillars; however, ideally,
they try to give weight and set targets for all three areas: “We have actually put targets for all
parameters, environmental, social, and governance. I think the heavier ones are within the
environment […] I think we put weight to all three aspects […] The impact is probably most
heavy now within environment and social” (J. Williams, personal communication, 21 January
2022, p. 5, 13:05 – 14:52). Katrine Jespersen also notes that right now, their focus is on the

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Environmental aspect; however, the Social aspect is garnering much more attention, especially
due to the recently proposed EU draft directive on human rights: “[…] I would say the
E[nvironmental] is right now, the focus and the second topic is the S[ocial] is becoming the
new next topic, focusing on human rights, focusing on developing, attracting and retaining
employees” (K. Jespersen, personal communication, 20 January 2022, p. 5, 12:19 – 14:37).

There is a great variety of reasons and rationale that companies focus more on one area.
However, there does seem to be a general consensus among the respondents that Governance
takes much less prominence at the current time, largely because the Governance aspect of ESG
is quite mature and developed. Companies make choices based on what is material to them and
also what sorts of issues leadership sponsors and advocates for, as Alexandra Rochette from
Konges Sløjd recounts:
I think that’s really company dependent. From a certain point of view, of course,
the first point of view is that the focus you need to have is on what is material to
your company. So that varies a lot, of course, depending on the company. And
also, there’s a strong element that is culture. (A. Rochette, personal
communication, 21 January 2022, p. 5, 13:02 – 15:55).

She goes on to elaborate in greater detail on how leadership at the executive level is
fundamental to how ESG is weighted, using as an example her current company, and also
observes that Governance is quite a bit easier to implement than the other two aspects of ESG:
And you can always feel that at the executive level, there are some topics that
people are more keen on than others. And I would say in our company […] I
know that the social part is more sensitive to our CEO because that talks to her,
right? So I know, it’s not that I put more emphasis on that, I know that this is
[an] easier topic to move forward with. Because that resonates. And I would say
that governance is it’s not for me so much challenging in the way that it’s about
deciding on things and organizing and writing down procedures and processes
[…] you need the executive level commitment, from the very beginning […] this
is true for all ESG strategy. If you don’t have an executive level commitment,
you will do nothing. You will indeed do a few small projects, but you will not be
able to fully integrate it. (A. Rochette, personal communication, 21 January
2022, p. 6, 13:02 – 15:55).

Alexandra’s observation excellently incorporates several of the themes we have been

discussing, as it demonstrates how sponsorship and the integration of strategy into the
organization are crucial in which aspects of ESG gain prominence within an organization. In
addition, the ability of executive-level leadership to steer the strategy in a given direction
cannot be overemphasized. Indeed, in some organizations, the corporate strategy is often
almost a carbon copy of the strategy of one specific leader that reverberates throughout every
team and department, as every member of the organization understands that a specific issue
has been given high prioritization.

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6.7 ESG as Complex and Uncertain
The notion that ESG is complex and uncertain is something that we have mentioned
throughout. When we first began reviewing the literature regarding ESG, we realized that
there were many different sources in conflict, from rating agencies to practitioners, regulators,
and often, even theorists. In addition, there is still great debate as to whether ESG is
fundamentally good for profitability, with many more “traditional” business executives who
are cut more from the Milton Friedman cloth arguing that ESG has no benefit if it does not
fundamentally increase the profitability of an organization for its shareholders. As Frederik
Rementorp observes, ESG:
[…] is really complex, and just a complete mess of a landscape when it comes to
the ESG rating agencies. And that is also something at we have navigated in, of
course, and as part of developing our ESG strategy, where we really want to
raise the bar and set ourselves out there and, and claim ESG leadership, then we
of course, also need to be perceived as leaders externally. (F. Rementorp,
personal communication, 13 January 2022, p. 6, 20:46 – 22:52)

Many of the leaders who are deeply involved in ESG care passionately about it and are vocal
and visual advocates often tend to find it frustrating when working to move the field forward.
As Michael Jones from GreenWerx, who has been working with ESG as an academic researcher
for more than eight years, observes:
[…] it’s a wild west of standards or non-standards, or rules, or whatever it may
be, and getting your head around that is just it’s almost impossible, I would say.
And I spend quite a lot of time trying to work out […] when you start working
with companies, that haven’t worked with ESG before […] where do you start
with all this? […] my immediate approach is to say […] let’s look at what
frameworks we can use and use them. (M. Jones, personal communication, 27
January 2022, p. 6-7, 22:56 – 27:54)

Though we understand how complex the ESG environment is, there is hope, as Michael alludes
to. There are some frameworks that though not universally adopted, have broad acceptance
within ESG that can serve as a starting point or baseline for beginning to develop an ESG
implementation strategy:
[…] the GRI is a super important framework [that I use] […] we are not, at least
this year, or next year going to be […] officially reporting to GRI. But the
framework, and the whole set of standards offers something that you can use
[…] But yes, it’s flipping difficult to get your head around. (M. Jones, personal
communication, 27 January 2022, p. 7, 22:56 – 27:54)

Boundary setting also adds another layer of complexity to the ESG landscape. There are
fundamental questions that an organization needs to address of where their responsibility as a
company ends and then becomes the responsibility of another organization. Are you
responsible for every single supplier in their supply chain? Does the scope of their

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responsibility rest on the carbon footprint of their building, or does it include all of the
employee vehicles that drive to and from their company’s offices or headquarters? If a supplier
reports that they have excellent ESG ratings, are they responsible for doing the due diligence
to audit their suppliers and ensure that their sub-suppliers also have excellent ESG ratings?
Obviously, an organization’s scope of responsibility can vary greatly, especially depending
upon the size of the company and the corresponding resources that the company has available
to dedicate to ESG. As Jones discusses:
[…] you can sit in front of your investors, or your business partners and say,
you know, we are doing what we think we are, we know all the issues within
operations. And we have some sort of a program to address these issues. And we
are implementing, and we are doing something. I think that’s what’s expected
[…] some of the real challenges I’ve had with these frameworks is also
boundary setting. I think [it’s] a really, really big issue, you know, where is your
responsibility? (M. Jones, personal communication, 27 January 2022, p. 8)

There is broad recognition among practitioners that the ESG environment is a complex one. It
seems to be the general consensus that everyone is hoping that a more unified set of generally
accepted reporting standards and methodologies will soon emerge that can be adapted
globally. Such a global standard would do much to reduce much of the complexity of the field
of ESG as it currently stands.

6.8 ESG and the Future

Finally, the last major theme is the future of ESG. There is a consensus among every ESG
practitioner that we interviewed that ESG implementation will fundamentally increase future
profitability for organizations. In fact, the general feeling was that organizations that fail to
roll out a successful, integrated ESG implementation strategy will fail to maintain profitability
and will fall further behind peers. There is also a generational shift that is putting pressure on
companies to implement ESG, according to Catherine Hemmingsen, noting that companies
have a strong ESG commitment will be more profitable because:
[…] I think you know, generational shifts, has really shown that each
generation cares more and more about especially the environment and social
aspects, and you know, behaving ethically, I would say, across the board and a
company’s value chain, and also the direct operations, I think if you don’t have
a strong issue profile, depending on the sector, obviously, but if you don’t have a
strong issue profile, you will be set aside compared to a company that does. (C.
Hemmingsen, personal communication, 18 February 2022, p. 7, 21:36 – 22:56)

There is broad agreement on the importance of ESG and complete organizational integration.
For example, Jane Williams very much agrees that ESG is crucial for profitability, especially if
it is properly implemented and strengthens the overall position of the organization:

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 Especially if you connect what you do within your environmental, social and
governance area, to your overall strategy […] it’s not something on the side, but
it’s something that is integrated in your business and the way you work. And I
think when […] companies really do that, then that makes the company a lot
stronger. Having both economic, social, environmental, […] and making sure
that it’s actually supporting each other. And it’s connected to the overall
business strategy […] I think companies that have a clear stand on these
environmental, social and governance [are] […] more future proof, and we’ll
have a bit of business going forward. (J. Williams, personal communication, 21
January 2022, p. 8, 27:10 – 28:09)

There is currently a dearth of academic research on the field of ESG, as it is rapidly evolving,
and best practices are continuously emerging as the field matures. Moreover, much of the
existing research is not being generated through academic study but by industry practitioners,
often with little formal theoretical training regarding the origins and knowledge of the
development of the field over time. As Williams states toward the end of her interview: “And I
think it’s a really exciting journey that we focus on […] and I think research, like what you do
is also enlightening us all in this field and making sure that the targets and divisions that we
set […] [are] also backed up with the action” (J. Williams, personal communication, 21 January
2022, p. 9, 32:09 – 32:45).

6.9 ESG in Organizations

The themes defined in the last section focus on some of the challenges and issues the
interviewees face on a day-to-day basis. Understanding how the issues affect the organization,
the following section will try to identify the CAS within the field of ESG and how it affects the
organizations. To further explain how leaders within organizations are affected by ESG, we
will investigate how the three different leadership roles could play a role in diffusing the issues.

6.9.1 ESG as a Complex Adaptive System Within Organizations

As previously mentioned, there are six main characteristics of CAS:

• Self-organization
• Nonlinear Feedback
• Co-Evolution
• Emergence
• Path Dependence
• Edge of Chaos

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We will look further into how an adaptive space can be created within ESG and organizations
and play a vital role in understanding the concept of CAS in organizations working with ESG.

To analyze the data, we will go through the characteristics and see how they apply or do not
apply to understand the CAS better.

It should be noted that the characteristics of CAS were initially meant to be used on a purely
organizational level; however, we argue that CAS theory is transferable to the field of ESG, as
it operates between countless organizations making the systems inherently complex. It is also
important to note that these characteristics happen over the multi-layered system on a macro
and meso scale. Therefore, defining the characteristics of a singular organization or the system
as a whole is borderline impossible, and we will instead focus on how they are represented in
our data and further identify how they function in the CAS and what issues can arise.

CAS is self-organized; Porter and Espinosa’s (2011) definition of self-organization can be

explained by having the capabilities of information to flow unhindered throughout the system
and its agents, and this flow is supported by management. We see an example of it in our
interview with Rementorp:
[…] we are super fortunate to have a management team and a board of
directors that is really driving this from the top and they can see how
strategically important it is to get it right […] we established a teacup team in
January, where we now have, I think it's more than 60 FTEs [full time
employees] working purely on this. So, there is there is a desire and the will, and
the investment needed to really drive this agenda. (F. Rementorp, personal
communication, 13 January 2022, pp. 4–5, 14:00 -17:43)

While we do not get direct information about the organizational structure and how the
communication happens within the team and beyond, we will argue that a team of 60 FTEs
will naturally promote an unhindered flow of information. The size allows the organization to
receive and transmit knowledge to and from the external environment, i.e., other agents and
organizations within the CAS. Furthermore, the unhindered flow of information allows for
knowledge to easily flow between different agents that are in close proximity to one another
within the system and for one organization to better understand the challenges ESG presents
for others; which is further supported in Bjerregaard’s interview:
[…] we work with partners, that's key part of our operating model, and our
partners are challenged with the ESG agenda every day. So, in order to truly
understand the challenges that they face, we sort of felt that we needed to jump
right into it, and sort of face the same challenges as they do. (A. K. Bjerregaard,
personal communication, 18 January 2022, p. 4, 08:28 - 11:08)

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This leads us to the following characteristic, nonlinear feedback. It allows agents to adapt to
others’ internal and external behavior and play a central role alongside co-evolution to foster
the unhindered flow of information seen within self-organization (Espinosa & Porter, 2011).

Looking at nonlinear feedback in a pure organizational sense, it can be seen as communication

that takes place outside of official channels, such as the classic “water-cooler” talk where inter-
departmental issues and challenges are often aired and reacted to by employees not directly
connected to the department discussed. However, when it comes to nonlinear feedback within
the previously mentioned CAS, it plays out on a larger scale, and “unofficial” channels are no
longer discussed from person-to-person, but on an organizational level where they can seek
help or guidance from other organizations to adapt and conform to standards set by external
forces. So, for example, if a large company decides to enforce ESG reporting throughout their
supply chain, suppliers will have pressure from external forces to adapt to it; as Katrine
Jespersen says:
[…] in the case where you are a supplier to some of the big names. And since
you're supplying the leading companies will be requesting a lot of data from
you. And you will have to be able to deliver the data. And that's where you get
the pressure as a part of that supply chain. (K. J. Jespersen, personal
communication, 20 January 2022, p. 4, 08:41 - 10:41)

The importance of nonlinear feedback on a broader organizational level when working with
ESG becomes apparent as “[…] ESG and sustainability are very vague topics. So, nobody has
really an idea of what it actually means […]” (A. M. Rochette, personal communication, 21
January 2022, p. 7, 18:29 - 20:07). The vague concept of ESG limits how organizations can
adapt to bottom-up internal pressure. This can be attributed to how the concept of ESG and
sustainability is vague and arbitrary for a lot of people and can easily just be mistaken for a
simple ‘green initiative’ and not understood that the whole is different from some of its parts
(Kristinsdóttir et al., 2020). This makes internal pressure to push ESG within an organization
complex since the system the organization operates within is so complex; as Rochette explains:
I think it's a really good thing that it comes from external forces. Because
internally and I can see that from the not only from the company’s side, but
from old conversations I've had with other professionals is that everyone wants
it. Nobody knows what it means and how to organize it. So internal stakeholders
cannot be the one asking you from a methodology because they don't know
what they asked for. They want of course, proof of viability and reliability of
what you do. (A. M. Rochette, personal communication, 21 January 2022, p. 7,
18:29 - 20:07)

As mentioned, co-evolution and nonlinear feedback play a central role in self-organization.

Co-evolution happens when a mutualistic evolution of the agents and CAS spring from the
nonlinear feedback. One co-evolution found in the interviews is the acknowledgment of the

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financial sector’s influence on ESG and sustainability as they made it possible to materialize
data that can help quantify how ESG investing plays a role in the risk assessment of companies
with frameworks like TCP:
[…] because that framework is basically going in and say, Okay, what risks do
we have in the long term perspective, so getting that climate aspects into their
usual risk framework, because you will always in an annual report and
financial reports see a list of risks that have been identified. (K. J. Jespersen,
personal communication, 20 January 2022, pp. 6–7, 21:02 - 22:33)

Integrating ESG issues into their reports is “a really big shift in mentality” (A. M. Rochette,
personal communication, 21 January 2022, pp. 7–8, 20:11 - 21:48). It brings validity to the
topic and allows organizations to track their progress and ‘value’ their investment brings and
align themselves with the increasing importance put on sustainability by the newer
generations, and become a more ethical company in the eyes of themselves and the consumer.

In CAS, emergence can be described as the facilitation of how patterns, structures, and
properties emerge from within the system. However, as mentioned, defining where this occurs
in the CAS of ESG is difficult as it can happen on every level of the system.

As mentioned, ESG combines environmental, social, and governance. Each is creating its
unique patterns as the emergence of rating systems, metrics, standards, and regulations are all
influenced by their origin and differ widely.

Emergence describes the development of change as a bottom-up process, but it is further

argued that a top-down implementation is necessary for success (Espinosa & Porter, 2011).
This is true especially for ESG as it is not just a green initiative innovation that emerges from
inside the organization and is implemented inside-out, but rather there is a:
[…] need to merge the ESG strategy with the actual corporate often the actual
center strategy. And I think that that might be a challenge that many corporates
encounter because it becomes more and more integrated […] it cannot be
something on the side, it cannot stand alone in a in a sustainability department,
it has to be truly integrated across the entire organization. (A. K. Bjerregaard,
personal communication, 18 January 2022, pp. 2–3, 02:51 - 04:34)

However, beneath the surface, the issues covered by ESG are not as simple as labeling it as ESG.
The differences between environmental, social, and governance issues require different
approaches, making it highly resource-intensive. This high resource cost of ESG makes full
implementation of ESG into SMEs difficult; it is a new field for organizations to operate within
as it no longer just includes sustainability but is affecting every aspect of the organization.
Organizations will, therefore, often cherry-pick report metrics they find relevant in the
beginning as they find their footing.

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 […] we do see a lot of organizations in the beginning just cherry-picking things
that they think is relevant. And then a few years after, when they get a strategy
sorted, and everything, the whole foundation done, then they can actually make
it work […] But in the beginning, we see them just picking something that they
like from their best guess to be able to report themselves into without having the
strategy and governance in place before it. (K. J. Jespersen, personal
communication, 20 January 2022, p. 3, 05:48 - 08:17)

During the interviews, it became clear that in most cases, the focus of ESG was primarily on
the environmental aspect. Both Catherine Hemmingsen and Alexandra Rochette argue that
focus is very company-specific as:
[…] depending on the business, usually, two of the groups are favored. I think if
you know your company has a very large environmental footprint, people tend
to focus on that. Or you can also potentially say that some companies could
greenwash and if they know they have a really good looking and remnants of
footprint, they might focus more on that and that do not disclose too much of
their social footprint, or their governance structure for that sake. (C. V.
Hemmingsen, personal communication, 18 February 2022, p. 4, 09:13 -
10:10).

This aligns with the fifth characteristic of CAS, path dependence, as the CAS demonstrates that
its history influences the particular system's present behavior (Espinosa & Porter, 2011, pp.
56–57, 67). Each organization will have a different understanding of what is important, the
same as the two ESG data vendors, KLD and Innovest (both now acquired by MSCI), which
initially had two very different methodologies to understand the data (Eccles et al., 2020).
However, the path dependence for one organization does not represent one universal cause or
truth for why one aspect of ESG is more focused on than others. As seen in our interview with
Rick Davis:
[…] if things were up to us completely, and we could use to our priorities, then
in correspondence with the wishes and sentiments and values of our members,
we would lean more towards social issues. (R. Davis, personal communication,
24 January 2022, p. 3, 06:48 - 09:47)

However, even with a history and desire from both the organization and its members, they
have decided not to focus on the social aspects as their main point due to the social weight
climate change carries and emphasize that if they want to keep being within the ‘mainstream’
reporting on climate change, it requires a lot of resources. Therefore, they cannot push their
position on social issues as much as they want.

The last characteristic of CAS is the edge of chaos and can be defined as a site where conflict
and opportunity are greatest. For an organization to achieve innovation, it needs to accept new
chaotic behavior in the CAS and purposely allow for disruption of its existing structures

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 (Espinosa & Porter, 2011; Kristinsdóttir et al., 2020). Understanding the CAS in an
organizational context, the entire concept of ESG is balancing on the edge of chaos, as it is a
field of countless unknown factors, and uncertainty is almost assured. As Michael Jones put it:
[…] it's a wild west of standards or non-standards, or rules, or whatever it may
be, and getting your head around that is just it's almost impossible, I would say.
And I spent quite a lot of time trying to work out, you know, especially when
you start working with companies, that haven't worked with ESG before. this,
you know, where do you start with all this?” (M. Jones, personal
communication, 27 January 2022, pp. 6–7, 22:56 - 27:54)

This ‘wild west’ of uncertainty brings organization very close to the edge; as mentioned earlier
by Bjerregaard, implementing ESG is not something that can be done parallel to a company’s
core strategy as ESG needs to be seen as part of the core strategy and implemented across the
entire organization (A. K. Bjerregaard, personal communication, 18 January 2022).

6.9.2 Complex Leadership Theory, ESG, and Adaptive Space

6.9.2.1 The Adaptive Space in ESG
As previously mentioned, organizations working with a CAS like ESG will be experiencing
issues in how to manage the new complex space. Top-down traditional management solutions
are not only limited in their reach but can, in some cases, actively work against the
organization and what they could hope to get out of the interaction. To deal with the
contradictory approach to leadership from a top-down in traditional management strategies
to a bottom-up, self-organizing characteristic of CAS, organizations need to foster the creation
of an adaptive space.

The adaptive space is created in the operational and entrepreneurial system conflict. A remnant
of the conflict between the two systems can be seen in our interview with Frederik Rementorp:
I've worked in this space for eight years. Back then, we argued, all of us in the
field, [ sustatinability] was super important and everybody agreed [ the people
working with sustainability] that it was important, but it was it was still a nice
to have rather than a need to […] (F. Rementorp, personal communication, 13
January 2022, pp. 2–3, 03:40-07:47)

Now conflict within CAS should not always be perceived as direct opposition between the
entrepreneurial and operational systems. For example, both might agree on an issue, as we see
in the interview; both the entrepreneurial (Rementorp and other ESG managers) and the
operational system (upper management) agreed that sustainability was important. The conflict
arises in the difference of perceptions regarding the issue's importance, as the management
saw sustainability as a ‘nice to have’ rather than the ‘need to have’ as the ESG managers argued.
Luckily, through the adaptive space through this conflict, the importance of sustainability has

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 emerged. As a result, the concept of ESG is more accessible for investors and managers to grasp;
as Rementorp says:
[…] that has completely changed now, then there is a completely different
strategic focus on ESG […] there's an agreeing on the on the move into ESG.
That is something a language that both investors and senior leaders understand
much better than sustainability, it's much easier for them to relate to ESG
perspectives. (F. Rementorp, personal communication, 13 January 2022, pp. 2–
3, 03:40 - 07:47)

We will argue that the higher focus on ESG is a product of emergence within an adaptive space.
Within the conflict of ‘nice to have’ and ‘need to have’ neither side ‘wins’ the conflict, but
rather the entire concept of sustainability has been reframed to not only appease sustainability
managers; but also reframe it in a way so it is not only accepted by investors and managers to
be ‘good to have’ but as an important aspect in how to do ‘business’ as ESG is being
implemented into organization’s core strategy.

6.9.2.2 Leading in an Adaptive Space

While we can see the effects of adaptive space, the finer details of how it plays a role in new
emergent ideas cannot simply be explained due to the adaptive space. Therefore, we will be
taking a closer look at how the adaptive space can lead to change and innovation through CLT.

For a leader to support the adaptive space, they need to be able to make different networks
work together to innovate and for new ideas to emerge. The leader is dealing with networks
and not the system in its entirety because, for one, you cannot just divide a company down the
middle as operational and entrepreneurial. You have to understand that these systems are the
amalgamation of countless networks, and it is within the corporation between them that
emergence occurs. The question is, then, how to the leader interact with these networks to
support the adaptive space? As mentioned earlier, Uhl-Bien and Arena (2017) proposed two
ways to interact with the networks: Brokerage and group cohesion.

How a leader can broker between two networks can be found in Alexandra Rochette’s
interview:
You can always feel that at the executive level, there are some topics that people
are more keen on than others. I would say in my company, Konges Sløjd, I know
that the social part is more sensitive to our CEO, because that talks to her. So, I
know, it's not that I put more emphasis on that I know that [social] this is easier
topics to move forward with because it resonates. (A. M. Rochette, personal
communication, 21 January 2022, pp. 5–6, 13:02 - 15:55)

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The idea of brokerage is for a leader to bridge a gap between two systems to introduce new
ideas and amplify them. So Rochette is talking about can be understood as brokerage as she is
connecting two systems, ESG, and upper management, allowing her to act on new information
and push for more social aspects of ESG as she knows that the CEO is more receptive towards
these initiatives.

Alongside brokering, group cohesion plays an important part in accepting and implementing
ideas. The need for a leader and networks to be on the same ‘wavelength’ enables adaptability
as a certain level of trust and acceptance of a similar point of view positively affects learning
and risk-taking (Uhl-Bien & Arena, 2017). We can see cohesion in Michael Jones's interview:
This company has hired a ESG manager because they need ESG. So, they're very
strongly committed to, to supporting ESG and implementing it into the organization.
[…] I feel quite privileged because I've worked, worked in sustainability for so many
years. And it's always been such a hard, hard argument with directors and, and boards
about why they should spend money on doing this sort of thing, because it does cost
money. […] [and] the main goal of a company is to make profit, and they're always
looking at, you know, what influences profit. […] Now it’s investors [...] [that are
saying] what are you guys doing? And investors are basing decisions on this.” (M.
Jones, personal communication, 27 January 2022, pp. 4–5, 09:23 - 14:29)

While we cannot speak to the direct organizational culture and structure within the
organizations we interviewed, we can make an educated assumption of the impact of group
cohesion within an organization based on prior experience. From Jones’ interview, the
cohesion and collective goal between the management and the ESG manager makes the
implementation of ESG easier as support from management and investors makes it easier for
the ESG manager to receive the green light to be more ESG compliant. This line of thinking
aligns with ‘linking up’ as the common perspective between agents within the system as the
driver for amplifying emergence within the system.

We further argue that the role of ESG managers higher up in the organizational structure like
Jake Jones opens a unique situation where the ESG manager is well connected within the
management suite, allowing for a better understanding of the upper management's point of
view when brokering. However, the ‘integration’ of an ESG manager makes room for a more
‘free and safe’ space to discuss ESG issues without meeting the ‘brick wall’ mentioned in
Michael Jones's interview.

However, while brokerage, group cohesion, and linking are happening within the adaptive
space created by the conflict, the conflict must engage in the right kind of ‘diversity’ between
order and chaos. If the scale is tilted too far in either direction, the organization cannot initiate
the adaptive space as no common ground can be found (Uhl-Bien & Arena, 2017).

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To understand the complexity of the pressure experienced when working with ESG, we will
explain the four pressure points. One of the primary issues we observed through the interviews
is that the complex nature of ESG cannot be implemented using existing ways of operating.
While sustainability is not a new concept for organizations, ESG cannot be implemented as
many other sustainability initiatives.
We need to merge the ESG strategy with the actual corporate central strategy.
And I think that that might be a challenge that many corporates encounter
because it becomes more and more integrated. (A. K. Bjerregaard, personal
communication, 18 January 2022, p. 2, 02:51 - 03:37)

We argue that organizations need to implement ESG issues from a central organizational basis.
This requires a lot of resources as more human resources, and additional funding is needed.
Luckily, our interviewees say they have experienced increased pressure and support from
management and investors to focus on current ESG issues. This can be considered a new
partnership between investors, management, and an ESG department. While they are not
unknown to each other, there has previously been a hesitant from investors and management
to funnel resources into sustainability and sustainability-like initiatives; as Michael Jones
previously mentioned: “it's always been such a hard, hard argument with directors and, and
boards about why they should spend money on doing this sort of thing” (M. Jones, personal
communication, 27 January 2022, pp. 4–5, 09:23 - 14:29). However, as they have a somewhat
aligned understanding of the importance of reporting ESG issues brings not only cooperation,
but also a difference in perspective, and while both investors agree that ESG reporting is
important, the reporting can differ. Within organizations, you will often find the people filling
the positions dealing with ESG and sustainability are personally invested in sustainability and
want to reach the goal at ‘whatever the cost’ (Kristinsdóttir et al., 2020). We find it important
to mention that none of the people interviewed for this thesis shared the same ‘enthusiasm’ as
we found in prior research.

It speaks to how the conflict of investors' and ESG agents’ points of view has evolved as ESG
allows for a compromise of incorporating environmental, social, and governance issues into
an organization while still focusing on profitability. While we cannot speak to why investors
and management decided to invest in ESG, our interviewees provide us with their own opinion
on the importance of ESG in an organization’s survival.
I find it hard to see that a company that isn't mindful, with climate change or
ESG, in a broader sense, can continue to be profitable moving forward. (M.
Jones, personal communication, 27 January 2022, pp. 6–7, 29:53 - 32:28)

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 We assume that the move from investors to focus on ESG investing is based on the overall
survival of the organizations they invest in. This has to a degree, ‘forced’ investors and
managers to work together with and invest in ESG if they wish to be prepared to survive in a
world that is becoming more and more ‘woke’.

6.9.2.3 Complexity Leadership in ESG

We are returning to Uhl-Bien and Arena’s three types of operational, entrepreneurial, and
enabling leaders to understand how they play a role in ESG leadership. This analysis aims not
to identify occurrences of CLT within the organizations our interviewees work for but rather
to understand the complex nature of leading in a CAS with ESG. To quickly sum up the role of
each leadership style at the fundamental level when working with ESG.

Operational leadership assumes the role of what we would often associate with a leader in a
traditional sense. An operational leader is responsible for ‘keep the cogs turning’ and is focused
on efficiency and producing results.

Entrepreneurial leadership is tasked with developing new ideas and solutions to help the
organization adapt to pressures or capitalize on new opportunities.

Enabling leadership plays a supporting role in between the entrepreneurial and operational
leadership and helps in making the organization more agile when facing complexity.

Both the operational and entrepreneurial leader are not a new concept in leadership theory, as
the two defined leaders are both found in traditional leadership literature. However, what
becomes interesting is the inclusion of the enabling leader as the role defined by Uhl-Bien and
Arena’s are often not attributed to an organizational leadership position, thus making it remain
unrecognized.

The enabling leader works to nurture and enable the adaptive space by synthesizing the
emergence of new trends, being aware of new ways in which existing systems might
collaborate, and enabling connections organizations, both internally and externally, to push
for best practices and collaborations. It can be said that enabling leadership focuses on
communication and how information is transmitted between networks.

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 "You have to be able to communicate into understand every part of operations and
sales, because you are challenging everything. So, I don't think anyone working in ESG
can say they are if they don't have strong interest and capacity to listen and understand
every part of the chain of value within the company.” (A. M. Rochette, personal
communication, 21 January 2022, p. 4, 07:10 - 08:31)

An enabling leader works to bring operational and entrepreneurial leaders together to connect
networks and collectivize information and intelligence across organizations, both internal and
external, to “catalyze and energize networked interactions that enable emergence” and
“enabling network structures that trigger and amplify information flows in and across adaptive
space” (Uhl-Bien & Arena, 2017, p. 17). You can argue that an enabling leader assumes the
role of ‘cheerleader’ by “mobilizing and energizing others to act” (Uhl-Bien & Arena, 2017, p.
18) within the organization to amplify methods that work to ‘steer the ship’ away from
ineffective ideas and methods in CAS.

The practice of enabling leadership can be argued to fall outside of the customary practices of
leaders and understand how they interact and affect the CAS and the adaptive space.

For the enabling leader to affect the system, they need to understand it. So to understand the
system she was working in, Anne Bjerregaard was working in, they conducted an internal
assessment to understand what aspect of ESG would suit them.
We actually thought that going into this, we would focus on the environmental
side, but doing our materiality assessment and analysis of the ecosystem. And
also, based on the many talks and interviews we made internally, it actually
turned out that all three pillars was equally important. (A. K. Bjerregaard,
personal communication, 18 January 2022, pp. 3–4, 06:31 - 07:59)

Through the assessment, it became clear that even if their organizational focus is primarily
focused on working with environmental issues, implementing ESG required them to think
about the organization differently as the importance of social and governing topics would
affect how they would engage with them the environmental aspects.

Working with ESG is the same as being an enabling leader in a lot of ways. You need to
understand how to ‘read’ the overarching system of ESG to apply pressure, use conflicting, and
link up. They need to bridge the gap between the socially accepted morality and the importance
of ESG issues to the business and profit-minded investors and upper management.

The leadership traits previously mentioned in 6.9.2.1 and 6.9.2.2 can be summed up to be
some of the skill and enabling leader needs to possess and build the foundation of how ESG
leaders should interact with the system to adopt and comply with ESG issues. A clear example
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of how the role of an ESG manager needs to possess the ability Uhl-Bien and Arena are linking
to an enabling leader can be seen when Alexandra Rochette explains how an ESG manager
needs to convince the upper management investors to buy an ESG certification.
One of the key skills of an ESG manager is really to be able to convince financial
proof of ESG investing. A very concrete example if we invest to acquire a
certification. It is difficult because you need to go through a process, change the
way you do things, pay more for the materials for traceability reasons. There are
three key assets I need to explain. The first one is that in many countries allows
you not test for chemicals because due to the certification of you and your
supplier and this can decrease overall cost. The second one is in the long run;
customers will be more trusting in you and over time gain increased market
assets. Third, if you are dealing with certified goods, you have a lower risk of
production issues as your suppliers and partners become more reliable as they
have to pass an audit. […] This are three strong financial assets for going into
the field of certification and I put this in the communication I do [to investors
and upper management], even if I can’t put a specific number behind each asset
but communicating them are key to gain backing for ESG. (A. M. Rochette,
personal communication, 21 January 2022, pp. 9–10, 29:15 - 33:42)

For an organization to acquire the certification, the ESG manager needs to be aware of and
understand the CAS surrounding the ESG certification. The entire process of acquiring the
certification is long and highly complex as it involves several individual CASs wherein
everything covered in this thesis is applicable but then further interacts with one another.

Thus, the ESG manager as an enabling leader is crucial as the ESG manager can navigate several
different CAS and communicate the relevance and need for this process to be synchronized.
This means that the ESG manager must interact with multiple stakeholders at various echelons,
both internal and external, to ensure effective communication. Enabling leaders are only as
effective as determined by each interaction they have with others and whether or not those
interactions end up with a positive or negative outcome. However, we do not have detailed
descriptions of each individual interaction from the information collected from our interviews,
so naturally, some of our observations are drawn upon logical conclusions and inferences
based on the language and statements made by our respondents. When given the opportunity
to read through and analyze our interviews, we believe that other researchers would come to
roughly the same logical conclusions and inferences that we have made.

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7 Discussion
7.1 Enabling Leadership and Operational Leadership
As we have seen throughout the examples that have been presented thus far, the leadership
within ESG is of vital importance. In fact, without effective transformational leadership, it is
impossible to implement the ESG methodology effectively. When we speak of transformational
leadership, we are envisioning the sort of leadership that, in essence, works to transform an
organization’s “DNA” so to speak, so that every aspect of the organization embraces ESG
methodology.

Every single practicing ESG leader we have interviewed has key aspects of enabling leadership
as identified in CLT. The characteristics of enabling leadership are essential due to the emergent
nature of the field of ESG, as it has still not reached a state of maturation, and because of this
presents us with an inherently complex adaptive system. Enabling leaders possess the
knowledge, skills, and abilities to adapt to this rapidly changing and evolving environment.

Enabling leaders often have skillsets and organizational positions that also have operational
leadership elements. This is often dependent on whether the organization is small, medium, or
enterprise-scale. Typically, especially in smaller and medium-sized organizations, the
operational and enabling leaders occupy the same business function or position within the
hierarchy. However, due to resource constraints, they also have entrepreneurial leadership
elements. By incorporating elements of formal governance, leveraging existing structural
tissue, and sponsoring and generating new ideas and goals within the organization in terms of
ESG initiatives, a leader with elements of operational and enabling leadership serves as a
powerful advocate for change.

When we think of operational leadership, we might separate it into two distinct types of
functions. The first form of operational leadership focuses more on sponsoring projects and
ideas within the organization, ensuring the proper flow of resources into those projects, and
supporting the teams and groups working with ESG.

The second form of operational leadership actively promotes projects and advocates for the
implementation of new projects related to ESG at an executive C-suite level or as a member of
a board of directors. In this manner, an operational leader may be positioned in a role that is
more of a blend of operational and enabling leadership, as because of their positioning within
executive leadership, they have more influence in determining where resources are allocated,
what projects they are allocated to support, and the amount of resources that may be allocated.

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As seen with the operational and enabling leadership style of CLT, a leader can possess multiple
leadership styles. In a perfect world, we would want all leaders operating in CAS to possess the
characteristics of all three forms of enabling, operational, and entrepreneurial leadership,
especially the Head of ESG. However, organizations often ‘siloed’ structures tend to keep
leadership roles compartmentalized. The compartmentalization can be tied to the
organizational response of the organization becoming more and more complex as they grow.
Alongside the compartmentalization, we argue that the implementation of all CLT
characteristics in a leader is also affected by the human reaction to ‘formal’ power within the
organizational structure and the multi-faceted role all the leadership styles provide in most
cases, be quenched by bureaucracy and structure.

A leader can assume one or more CLT characteristics, and the best-case scenario is that they
can handle all three. However, organizations often ‘siloed’ structures compartmentalize
different leadership roles. This is often due to an organization becoming more complex as the
move from a primarily entrepreneurial structure to a more rigid one.
The difficulty for organizations to be adaptive even with enabling leadership and the adaptive
space. It can be argued that this is based on how people, in general, conform to ‘formal’ power
as the decision-making process in traditional leadership theory is often encouraged to be forced
upwards in the organization (not to be confused with idea generation that can be encouraged
from a bottom-up perspective).

While we would always want all leaders to possess the characteristics of all three forms of
leadership, enabling, operational, and entrepreneurial, as organizations are CAS, this is not
always possible. Ideally, the Head of ESG in an organization would possess all three skillsets;
however, as already mentioned, these different types of leaders are often siloed in large, mature
organizations. Furthermore, as organizations mature and grow, they tend to move from the
entrepreneurial sphere to the operational sphere, and this is when the knowledge, skills, and
abilities of enabling leadership become most critical.

7.2 Contributions of Research Findings

Our research into ESG implementation has generated new knowledge within the field.
Through our thorough, detailed interview process with current practitioners, we have gained
significant insights regarding current trends within ESG. The dynamism of the current
situation has posed significant challenges; however, as was discovered that significant changes
within the field were occurring as we were conducting our study. In this regard, our research

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is especially timely, as organizations are actively looking for new ways to find best practices
for ESG implementation.

There is broad consensus from all of the practitioners that we interviewed that there is a need
for global standards that can provide a relevant framework for comparison between
organizations. Moreover, these standards need to be transferrable between industries. The
difficulty in this, however, often involves a question of resources. For example, many of the
respondents indicated an inherent difficulty for small and medium-sized companies to comply
with arduous regulations due to the scarcity of resources within their limited organizations.
On the other hand, enterprise-scale organizations find it much easier to comply with
regulatory schemes due to their greater access to resources and organizational maturity,
especially concerning governance, protocol, and procedure.

One of the important aspects of our research was our identification of enabling leadership, as
part of complexity leadership theory as being key to ESG leadership and implementation. As
mentioned earlier, all the practitioners showed traits and characteristics of enabling
leadership. However, this is not to say that they also had leadership traits that were more
associated with operational leadership or entrepreneurial leadership.

There has not been much research regarding ESG implementation in organizations over the
years. We found no framework or guidelines for a successful plan of action, and from what
we gleaned from the responses from the ESG practitioners interviewed, organizations seem to
be actively searching for examples of successful implementation. Though there are dozens of
different ESG scoring agencies, organizations can pick and choose which ones they prefer to
use, as there is no regulation or legally binding compliance in force at the current time.

We constantly heard from our respondents that there was very little information or research
on ESG that they found relevant to their current situation, especially with regard to
implementation. As professionals, they were all keenly interested in reading the results of our
research to gain a broader view of the current state of ESG within Denmark.

We were also quite surprised to discover that, broadly, non-profit organizations tend not to
have a strong emphasis on ESG, and it appears to be much more of a concern for commercial
organizations. This was a bit unexpected, as non-profit organizations often apply pressure for
ESG implementation and adoption of the UN 2030 SDGs. This might lead us to infer that non-
profits believe that because of their status as non-profit entities, they necessarily adopt more

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sustainable practices and do not need to be held to the same measurement metrics as
commercial entities. Our interview with Anne Katrine Bjerregaard from the Mærsk Mc-Kinney
Møller Center for Zero Carbon Shipping was invaluable for providing us with this insight
concerning the broader non-profit community.

7.3 Limitations
We see complexity theory and especially the adoption of CAS and CLT as a foundational tool
and framework to understand ESG implementation and leadership in the future. This is because
the ESG space will continue to grow and become more and more complex, where we argue
that a way to understand the complex network is needed and be able to interact with the ever-
evolving system. However, we understand that CAS and CLT are not flawless and layout some
limitations other researchers and we experienced using the theories.

While complexity research is still a relatively new theory, there are thus some uncertainties
that arise as to how to apply it properly and the methodological approach best suited to achieve
the hoped results.

While Uhl-Bien et al. (2007), Marion and Uhl-Bien (2011) argue that complexity theory in
leadership can enable complex responses, as they argue this is the best way to respond to
complex problems. However, a limitation of this way of thinking is the uncertainty of how
dynamic leadership within relational responses emerges and remains unexplained as there is
not enough research performed from a complexity perspective.

Alongside the limitation of the purely theoretical approach to complexity, there is still no
agreed-upon best practice or framework for the methodological approach to complexity
theory. In our thesis, we see the constructed nature between social issues covered by ESG and
the consumer response to ESG investing align with the complex nature of the system created
by ESG and its associated metrics and standards.

While we argue that the implementation of CLT via enabling leaders within organizations is to
tool to interact with the CAS and the adaptive space, we acknowledge the limitations of this
approach; as mentioned in the literature, the enabling leader is often a role that is overlooked
within the organizational structure and lacks conceptualization within traditional leadership
literature.

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As mentioned, the information gained by conducting qualitative interviews with expert within
the field of ESG is that the data collected are affected by their subjective experience regarding
the topic, and all the data is self-reported, and we have to take them at face value.

However, we argue that the subjective data is reliable to understand what issues arise when
implementing ESG, as their respective organizations are well-versed in sustainability. We
consider the interviewees as experts on the topic of ESG.

When determining how to choose our representative sample, we have previously mentioned
that we decided on choosing LinkedIn to conduct our search and have outlined our rationale
for doing so. In making this choice, however, we may have excluded some individuals and
organizations from inclusion in our sample size. Though most of the Danish population uses
LinkedIn on a regular basis and most Danish companies and organizations have a LinkedIn
presence of some sort, many organizations do not. This limitation means that our choice of
utilizing LinkedIn has excluded a certain segment of the Danish business marketplace and ESG
practitioners that may choose not to have a LinkedIn presence or are not very active or slow to
respond when approached via the LinkedIn platform. Due to time constraints, we chose this
method to gather our representative sample because, due to our prior research experience, we
have found that directly contacting companies to contact specific representatives can be a
lengthy process, fraught with bureaucracy. Furthermore, often organizations, when directly
contacted, want to ensure that the responses that their representatives paint the organization
in the best possible light, and we did not want to obtain that sort of data, as this contributes to
the sort of “greenwashing” or “cherry-picking” that we have discussed earlier in our study.

Additionally, our results are limited in that they cannot necessarily be extrapolated to the global
state of ESG. As our respondents were only practitioners in the current Danish market
economy, their direct current experience with the state of ESG is limited by their geographic
location and the interactions and networks that they tend to have with other Danish
companies, regulators, and ESG practitioners within this environment. Several of our
interviewees did have prior ESG experience working in other markets; however, we do not
believe that, as a whole, the findings of our research are necessarily transferrable to all markets
globally. Due to the unique Danish cultural environment, ESG may be more widely accepted,
endorsed, and promoted than other markets with different cultural values and norms.

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Another limiting factor in our study is the sample size that we were able to obtain. A larger
sample size might have provided us with a deeper understanding of the field of ESG. However,
we believe that the variety of companies that we were able to obtain information about was
sufficient to provide a valuable functional snapshot of how ESG reporting is currently being
implemented in the Danish market economy. Furthermore, there are longitudinal issues that
have also limited our study. By this, we mean that we were limited due to the time we had
available to find, study, interpret and reflect upon our data. A more in-depth study over
multiple years would have given us a better opportunity to track how the implementation and
strategic rollout of ESG metrics and methodology performed over time. Due to this longitudinal
limitation, we were unable to gain direct information on the impact of CLT on the relational
interactions between different networks over time.

Semi-structured interviews, as a qualitative tool, have limitations as well. By the very nature
of the semi-structured interview, the interviewer is in some manner or form directing the
interviewee into answering and responding to questions that are focused on a particular topic.
A formal structured interview asking direct questions might have provided different results
rather than allowing the interviewee the opportunity to contribute and guide the flow of
information. In a social constructivist manner, the semi-structured interview allows the
opportunity to participate in knowledge-making and the development of joint understanding.
When an interviewee volunteers information that a researcher might not have been aware of
when composing the interview questions, that information provides the researcher with
valuable insights. However, these new insights can also affect how the interviewer approaches
following interviews, as they now have been given new information that they have (whether
consciously or not) synthesized into their way of looking at the topic.

One key limitation that could not be avoided was the choice of language. As the researcher
who was conducting the interviews is a native English speaker, and the course of instruction
for this study requires that English is used, we may have unknowingly misinterpreted our
interviewees' responses. Of all nine respondents, none of them spoke English as their native
tongue. Obviously, the risk of misinterpretation must be taken into consideration, as the ways
in which different languages describe phenomena can vary greatly.

An additional limitation is one of ethnography. Different cultural populations often look at the
same phenomena in very different ways. It is possible that the cultural experiences of our
interviewees might have affected their analysis of ESG methodology, implementation, and
measurement that neither they nor we may have been aware of. However, we hope that such

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possible differences in perspective are generally more minor and did not significantly impact
the quality of our findings.

7.4 Recommendations for Future Research

After reflecting on the limitations of our study and discovering areas where there are
significant gaps in the literature and research, we have identified several possible areas where
additional future research would be invaluable for the further development and maturation of
the field.

We propose that one such study might involve a deep exploration of how ESG leaders
communicate their target goals in a large organization. It would be deeply illuminating to see
what sorts of techniques and strategies leaders in large organizations utilize to facilitate the
transmission of their goals and objectives. Looking at the organization as a whole, one might
be able to map out how these ESG target goals are communicated to different departments and
how the key individuals responsible for driving those initiatives are chosen for each
department.

Another area that would be interesting to explore involves peer comparison. As we have
observed that every organization approaches ESG implementation differently, it would be
interesting to compare and contrast in detail the approaches that two or three different
organizations take when incorporating ESG. We have noticed that some organizations tend to
have small ESG teams, while others have large, dedicated teams. Exploring how these different
strategies perform and analyzing those results would generate valuable new knowledge in the
field.

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8 Conclusion
The need for comprehensive integration is necessary within ESG implementation. There
currently exists no global framework that has a regulatory mandate within the field of ESG.
The shifting nature of measurement metrics and standards and the vast variety and landscape
of reporting agencies and methodologies pose significant challenges for ESG practitioners.
Organizations that are actively engaged and working with ESG methodology and
implementation are faced with myriad problems because there are no clear rules or
regulations. In this complex, uncertain landscape, organizations attempt to find their footing
by latching on to whatever metric they can, often without conducting a comprehensive
analysis of their chosen metrics' efficacy, validity, or utility. Some organizations, unhappy with
the current slate of ESG rating agencies, choose to create their own ESG rating metrics and self-
report their own internal assessments to external stakeholders. This adds additional complexity
to the task of assessing organizations in relation to their peer group or in relation to
organizations of similar size and organizational maturity in other industries.

Comparing different industries is exceedingly troublesome. What to measure and how to

measure it is still open for debate. For example, a wind-turbine manufacturer for “green
energy” might have exceedingly good ESG ratings, dependent upon the scheme. However,
should a company that is heavily invested in the production of fossil fuels such as oil, natural
gas, and coal also receive positive ESG ratings if they are buying carbon credits to reduce their
perceived environmental impact? Or should they receive positive ESG ratings if they can show
that they are increasing the efficiency of their current extraction techniques to reduce spillage
and leakage? If this hypothetical organization has excellent Social and Governance scores, do
these offset the Environmental rating in their score?

All of the ESG practitioners believe that the time is ripe for a set of global reporting standards,
and they believe that the adoption of such standards will accelerate the facilitation of ESG
implementation in organizations. As mentioned early, there are currently efforts both in
Europe and the United States to work toward legally binding regulations that companies must
comply with; however, these efforts are still in their infancy. Broader trans-national
cooperation is necessary to ensure that investors, customers, and consumers can accurately,
efficiently, and quickly determine whether they wish to choose to engage with an organization.
In addition, global reporting standards with quantitative data would assist the public in
determining whether organizations really are living up and performing according to the values
stated and proclaimed in their “Mission, Vision, and Values” statements.

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Our research findings indicate that ESG methodology is currently being implemented in a very
haphazard way with no clearly defined framework. As a result, organizations and ESG
practitioners are responding to the push for ESG methodology using a variety of tactics,
techniques, and procedures. However, key to their response is the ability to act quickly and
rapidly in a dynamic, rapidly evolving environment, as ESG is currently in a state of emergence.
Based on our findings, successful ESG practitioners should embrace the role of the enabling
leader as described in Complexity Leadership Theory, and organizations who wish to
implement ESG successfully should leverage and utilize these practitioners and leaders in order
to generate valuable, beneficial connections in the Complex Adaptive Space that is the current
state of ESG methodology and implementation.

Our research has shed valuable light and insight on ESG implementation and has worked to
help coalesce knowledge of the current issues regarding the problems facing organizations and
ESG practitioners as they work to grapple with this complexity and uncertainty.

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10 Appendix Overview

10.1 Transcript with Frederik Rementorp

10.2 Transcript with Katrine Juhl Jespersen
10.3 Transcript with Alexandra Morge Rochette
10.4 Transcript with Jane Williams
10.5 Transcript with Rick Davis
10.6 Transcript with Catherine Valentin Hemmingsen
10.7 Transcript with Jake Woodward
10.8 Transcript with Anne Katrine Bjerregaard
10.9 Transcript with Michael Jones

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