Why ESG Fails Inside Organizations: A Behavioral–Institutional Misalignment Perspective on Sustainability Implementation

ABSTRACT Although the world is urging organizations to implement environmental, social, and governance (ESG) standards, a large number of companies are still finding it difficult to convert ESG commitments into impactful actions. Existing studies describe the adoption of ESG as a result of resource availability, compliance motivations, or institutional pressures. However, these explanations overlook the fact that there are still many inconsistencies in the outcomes of implementations. The present article proposes the behavioral–institutional misalignment perspective, which combines and extends the existing knowledge by specifying the mechanisms through which and the reasons why the differences between the behavioral patterns of managers, cultural norms of organizations, and institutional expectations lead to the failure of ESG implementation in a systematic way. The proposed perspective combines the insights of institutional theory, behavioral leadership theory, and organizational sense‐making, thus moving beyond the traditional views of ESG implementation by emphasizing its interpretative and cultural nature, in contrast to the traditional views that focus primarily on the role of resources and compliance in ESG implementation, in order to account for the variance in ESG implementation across organizations facing similar structural conditions, thus advancing the discussion in the field of management research.