Efficiency of Manufacturing Firms Practicing ESG: Comparative Study from Selected Advanced and Emerging Asia Pacific Countries

Abstract

The growing attention to Environmental, Social, and Governance (ESG) practices has shifted business horizons, focusing on both financial metrics and sustainable operations to remain competitive and sustainable. However, the existing literature remains largely focused on financial institutions. To some extent, it narrowly concentrates on the context of a single country, overlooking the significance of maintaining efficiency for firms that are highly dependent on the effective management of resources. Correspondingly, the study examines the operational efficiency level, particularly in terms of profit, revenue and cost efficiency, of manufacturing firms practicing ESG in two selected categories of Asia Pacific (APAC) countries: advanced and emerging. This study employed Data Envelopment Analysis (DEA) to examine the efficiency levels of 452 manufacturing firms, comprising 300 firms from advanced and 152 firms from emerging countries. Accordingly, the results reveal remarkable findings that manufacturing firms practicing ESG in selected advanced APAC countries are less efficient than those in emerging countries. In particular, these firms exhibit lower efficiency levels, including revenue, cost, and subsequent profit efficiency. The difference in means for the efficiency level is consistently significant at the 1 percent level when assessed with a parametric t-test and robust non-parametric Mann-Whitney (Wilcoxon Rank-sum) and Kruskal-Wallis tests. Overall, the results offer valuable insights for firms on how to efficiently manage their resources to maximize profits.