Chapter 6: Assessing Firm's ESG Performance Using the TOPSIS

Environment, social and governance (ESG) criteria are a quantum of a company’s performance in the environmental, social and governance aspects. A company’s worth may be determined not only by its earnings but also by its knowledge and sensitivity towards its stakeholders and society. The study aims to rank the companies and determine which company is superior based on ESG criteria. The authors employed the Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) in this study. The companies are ranked with this standardized method comprehending which company is the best taking into consideration the various environmental, social and governance factors. The authors have evaluated four companies in the electric utilities and IPPs industry. The results of the study rank these four companies on the basis of ESG criteria. Interestingly, the rankings calculated for ESG criteria are identical to the rankings calculated by a well-known ESG rating agency. To the best of author’s knowledge, this work is among the first to use the TOPSIS method to find rankings of the companies on the basis on ESG criteria. The work provides practical implications regarding convenient to use when finding ESG rankings for companies. This might be the most effective way for investors or other parties to learn which firm is the greatest for sustainable investing.