Global supply chains face increasing sustainability‐related risks, yet evidence regarding the financial benefits of environmental, social, and governance (ESG) initiatives remains mixed. We argue that these inconsistencies arise because ESG dimensions operate through different value‐creation mechanisms and because existing research pays insufficient attention to the organizational processes through which sustainability becomes economically consequential. Using Bloomberg ESG and financial data for 1830 firms across 80 countries, combined with country‐level political and institutional indicators, we examine whether operational efficiency mediates the relationship between ESG performance and profitability. Results show that environmental and social performance are positively associated with profitability, whereas governance performance exhibits weaker and less consistent effects. Operational efficiency partially mediates the environmental–performance relationship and serves as a significant pathway through which social performance contributes to financial outcomes. In contrast, governance performance demonstrates neither significant mediation nor robust direct effects. Although political‐institutional conditions are associated with firm performance, they exert limited influence on the operational pathways linking sustainability activities to profitability. These findings demonstrate that ESG dimensions create value through distinct mechanisms rather than through a uniform sustainability effect and identify operational efficiency as a central mechanism through which sustainability initiatives become financially material. The study contributes a process‐oriented explanation of how firms translate sustainability commitments into organizational resilience and sustained financial performance.
Sustainable development is increasingly reshaping corporate strategies, particularly in emerging markets such as India, where environmental, social, and governance (ESG) integration has become pivotal for long‐term value creation. This study examines the impact of ESG performance on firm outcomes for Nifty 500 firms over 2014–2024, considering both aggregated and disaggregated ESG dimensions, while assessing the influence of country‐level governance mechanisms. Using panel regression analysis, the findings reveal that robust ESG practices significantly enhance financial, operational, and market performance, underscoring their strategic relevance. At the disaggregated level, social (SOC) and governance (GOV) performance consistently improve profitability, efficiency, and market valuation, whereas environmental (ENV) initiatives exhibit short‐term negative effects, likely due to compliance and investment costs. Further, country governance indicators, including voice and accountability (VAA), political stability and absence of violence (PSV), government effectiveness (GVE), regulatory quality (REQ), rule of law (ROL), and control of corruption (COC), differentially shape the ESG–performance link. While VAA, PSV, REQ, and GVE enhance ESG's impact, ROL and COC constrain immediate gains, highlighting the role of governance quality in aligning ESG initiatives with firm‐level outcomes. The study provides critical insights for regulators, policymakers, investors, and corporate managers, emphasizing governance as a key enabler of sustainable growth in an emerging market.
Rizwana Khurshid, A. Islam· Business Strategy & Deve...· 0 citations
This study re‐examines the relationship between environmental, social, and governance (ESG) engagement and firm financial performance by moving beyond linear, net‐effect models toward a configurational perspective. Focusing on a global sample of 1380 non‐financial firms with high environmental maturity (CDP Climate Change score ≥ B), we investigate how sustainability‐oriented firms achieve superior operating profitability (return on assets [ROA]) under different combinations of organizational and contextual conditions. Using fuzzy‐set qualitative comparative analysis (fsQCA), we identify five distinct and equifinal configurations linking ESG dimensions, governance structures, innovation intensity, capital investment, firm size, institutional context, and market valuation to high profitability. The findings reveal pronounced equifinality and causal asymmetry: Strong ESG performance is neither a necessary nor sufficient condition for superior profitability. Instead, both ESG‐intensive and ESG‐compensatory pathways coexist, depending on how sustainability capabilities are combined with complementary organizational resources and institutional conditions. Across configurations, market valuation (Tobin's
Q
) appears as a consistent enabling contextual condition, reflecting external recognition of strategic coherence rather than a direct financial outcome. By integrating the resource‐based view, stakeholder theory, and complexity theory, this study demonstrates that the financial value of sustainability is configuration‐dependent. It further shows that ESG capabilities operate as part of broader resource bundles and that market‐based validation plays a critical enabling role. The findings provide a context‐sensitive framework for managers and policymakers, highlighting that financially successful sustainability strategies depend on internally coherent and externally validated configurations rather than uniform ESG prescriptions. Importantly, these findings apply specifically to firms with advanced sustainability engagement.
Daniel Yeung, Lingju Chen, Qingliang Tang· Business Strategy and the En...· 0 citations
This study investigates how Environmental, Social, and Governance (ESG) performance related to corporate performance among firms listed on Thailand Sustainability Investment (THSI) index from 2018 to 2022, that are part of the Stock Exchange of Thailand (SET). This research utilizes agency theory and stakeholder theory to assess the influence of ESG aspects on company outcomes through Partial Least Squares Structural Equation Modeling (PLS-SEM), emphasizing direct effects and the moderating role of governance. Findings reveal that Environmental, Social and Governance performance impacts firm performance in diverging directions. Environmental performance has a significant negative relationship with Return on Assets (ROA), reflecting the financial impact associated with environmental activities during the investigated period, whereas social performance shows substantial positive relations with ROA. Regarding governance, results show a positive direct effect on ROA, showing enhanced operational efficiency, on other hand, results indicate a negative influence on Tobin’s Q, indicating potential market concerns over monitoring costs. Crucially, significantly strengthening the positive influence of social performance on ROA, governance serves as a selective moderating mechanism. This implies that by reducing agency conflicts, strong internal control ensures social investments are efficiently translated into accounting returns. In contrast, the environmental pillar shows no moderating effect. These results emphasize the importance of dissection ESG indicators. Investors and government bodies should prioritize dimension-specific evaluations above overall rating in order to better align sustainability activities with financial performance.
Pakkamon Charoensuk, Chaimongkol Pholkaew, Kusuma Dampitakse· Asian Economic and Financial...· 0 citations
This study examines how corporate governance and sustainability mechanisms are associated with firm performance in the European food industry, focusing on whether their effects differ across performance dimensions. Using a panel of 602 publicly listed firms from 2014 to 2024 and a dynamic System Generalized Method of Moments (system GMM) approach, the results show that governance mechanisms generate systematic trade‐offs across performance measures. ESG engagement and ISO certifications are negatively associated with operational efficiency, while ISO certifications are positively associated with shareholder profitability. Board‐related governance mechanisms also show heterogeneous effects across ROE, EBITDA margin and PTB. This pattern reflects a governance paradox: practices that strengthen legitimacy, credibility or oversight may also generate coordination, implementation and compliance costs. In contrast, board meeting attendance is the only mechanism consistently associated with improvements in both profitability and operational performance. Overall, governance outcomes vary across performance measures and stakeholders. By analysing multiple governance mechanisms across accounting‐based, operational and market‐based indicators, the study helps explain why prior research reports mixed results. It also contributes to ongoing debates in business ethics by showing that governance and sustainability practices involve trade‐offs rather than uniform benefits. The results suggest that these mechanisms should be assessed across different performance dimensions, rather than through a single metric.
M. E. Neves, Rosana Marlene Rosário Vieira, Rui Guedes et al.· Business Ethics, the Environ...· 0 citations
This study examines the relationship between environmental, social, and governance (ESG) performance and firm value in the global energy sector, with a focus on the moderating effects of national culture and green innovation. It analyzes 1960 firm‐year observations from publicly traded energy companies in 35 countries from 2014 to 2023. Results show that ESG performance is positively associated with accounting‐based performance, while its impact on market valuation is limited. National culture plays a significant role: individualism enhances the financial benefits of ESG, whereas power distance and uncertainty avoidance reduce them. Green innovation improves operational performance but does not strengthen the ESG–firm value link, likely because of the short‐term costs of implementation and adjustment. The findings underscore the critical role of institutional context and organizational capabilities in driving value through sustainability initiatives in the energy sector. These results hold consistently across ESG measures, subsample analyses, and endogeneity tests.
Atar Derj, Adil Bami, Slimane Ed-dafali et al.· Corporate Social Responsibil...· 0 citations
This study examines whether carbon strategy enhances corporate sustainability performance and whether this relationship depends on green innovation and governance conditions. Specifically, it investigates the mediating role of green innovation and the moderating roles of institutional ownership and gender‐inclusive governance in shaping firms' ESG performance. Using panel data from publicly listed firms in the ASEAN‐5 over the 2017–2024 period, the study employs the two‐step System GMM estimator to address endogeneity and unobserved firm heterogeneity. The results indicate that carbon strategy is positively associated with corporate sustainability performance. Green innovation serves as an important mediating mechanism, suggesting that environmental commitments become more effective when supported by cleaner technologies, sustainable products, and operational improvements. Institutional ownership is also positively associated with ESG performance, indicating that active monitoring and a long‐term investment orientation strengthen firms' sustainability commitments. Furthermore, gender‐inclusive governance positively moderates the relationship between carbon strategy and corporate sustainability performance, implying that more diverse leadership structures enhance the effectiveness of environmental strategies. Overall, these findings suggest that firms improve sustainability performance by integrating carbon‐oriented strategies with innovation capabilities and supportive governance structures. This study contributes to the literature by providing empirical evidence that environmental strategy, ownership structure, and board gender diversity jointly shape corporate sustainability performance in the ASEAN‐5 context.
Suham Cahyono· Corporate Social Responsibil...· 0 citations
