The ESG Paradox: Why Tobacco Firms Outrank Tesla on Sustainability Scores

The sustainability rating system has drawn significant scrutiny after a striking revelation: tobacco giant Philip Morris secured an ESG score of 84 out of 100, while Tesla—a company fundamentally reshaping the automotive industry toward electrification—received only 37. This inversion of values has sparked considerable debate about the credibility and methodology behind what is an ESG score.

Understanding ESG Scores and Their Growing Influence

An ESG score evaluates companies across three dimensions: environmental impact, social responsibility, and governance practices. As major asset managers like BlackRock increasingly channel capital toward higher-rated holdings, companies with superior ESG scores have become magnets for institutional investment flows. However, this metric-driven capital allocation has raised tough questions about whether the system accurately reflects real-world sustainability.

The Contradiction at the Heart of ESG

Elon Musk recently voiced sharp skepticism about ESG metrics, pointing to data showing that both tobacco manufacturers and fossil fuel producers—including Shell and Exxon—achieved higher ratings than Tesla. The irony is stark: Tesla manufactures electric vehicles to combat climate change, yet it trails companies whose primary products cause direct harm to public health and environmental degradation.

Critics argue that the ESG framework suffers from fundamental design flaws. Companies excel at “greenwashing”—carefully curating their public image and reporting practices to game the rating system—while their actual practices remain problematic. For skeptics, rewarding a tobacco company with an 84 score when its products contribute to millions of preventable deaths annually exposes a system that prioritizes optics over outcomes.

The Counterargument and Path Forward

Defenders of ESG investing counter that Tesla’s lower overall score reflects genuine governance and social governance shortcomings, even if the company leads environmentally. Yet for a growing number of investors and observers, this explanation feels insufficient when compared against companies profiting from demonstrable harm.

The debate reveals an uncomfortable truth: any scoring mechanism is only as sound as its underlying methodology. As ESG investing continues to shape capital flows across markets, stakeholders must grapple with whether current rating systems genuinely identify sustainable enterprises or merely reward effective self-presentation.