ESG Sustainability Reporting Under Fire: Why Tesla's Lower Score Than Big Oil Sparks Debate

Tesla CEO Elon Musk recently reignited the ESG controversy by highlighting a striking inconsistency in how major corporations are rated on environmental and social governance metrics. According to sustainability reporting data, the electric vehicle manufacturer received an ESG score of just 37 out of 100, while Philip Morris—a tobacco giant—scored 84. Even more eyebrow-raising: fossil fuel companies like Shell and Exxon both outscored Tesla on ESG sustainability rankings.

The paradox has exposed fundamental flaws in the ESG rating methodology that governs billions of dollars in investment flows. With asset managers like Blackrock heavily promoting ESG-focused funds, capital has increasingly flowed toward companies with higher scores. This massive capital reallocation has incentivized firms to optimize their sustainability reporting metrics—sometimes at the expense of actual environmental or social impact.

The Core Problem: Gaming the System

Critics argue that the current ESG framework is fundamentally broken. How can a tobacco company—whose products cause millions of deaths annually—receive a near-perfect score? Or how can oil majors with decades of fossil fuel extraction maintain higher ESG ratings than a company actively revolutionizing transportation through electric vehicles?

The answer lies in how ESG sustainability reporting actually works. Rating agencies often compartmentalize scores across environmental, social, and governance factors. Tesla, despite leading the EV transition, struggles on governance and social metrics—issues that can be more easily manipulated or measured superficially than actual environmental impact.

Greenwashing Incentives

The misalignment has created perverse incentives. Companies now engage in “greenwashing”—adopting cosmetic ESG practices while maintaining harmful core operations. Board diversity initiatives, carbon offset commitments, and sustainability reporting frameworks can all boost scores without transforming underlying business models.

This dynamic has sparked growing pushback from investors and observers who question whether ESG investing has become ideologically motivated rather than fundamentally sound. For many, the current system represents a misallocation of capital that punishes genuine innovators while rewarding traditional corporations skilled at optics management.

What Comes Next

The debate signals a broader reckoning with ESG sustainability reporting standards. As more anomalies surface, expect increased pressure for rating methodology reforms and greater transparency in how ESG scores are calculated. The current system, despite its noble intentions, may be directing capital flow in precisely the wrong direction.