ESG performance and total factor productivity of enterprises: the role of digitization

After the pandemic, the global economy faces uncertainties like climate change, the Russia-Ukraine conflict, and rising international trade tensions. These factors significantly threaten the stability of the global economy. Against this backdrop, achieving high-quality economic growth has become an urgent issue. Enhancing Total Factor Productivity (TFP) is essential to achieving this objective. The criteria of Environmental, Social, and Governance (ESG) are gaining wider acknowledgment as pivotal indicators of a corporation's capacity for sustainable development. We analyze the effect of ESG performance on TFP, and the role played by digitization. The study's revelations underscore that a robust ESG performance imparts a significantly affirmative influence on TFP, an effect which is notably more distinct within state-owned enterprises, those characterized by a high degree of technological intensity, and companies operating in less marketized environments. Furthermore, digitization positively moderates the effect of ESG on alleviating financing constraints, thereby enhancing TFP. Based on the above conclusions, we provide policy suggestions aimed at strengthening ESG governance and fostering sustainable, high-quality economic growth. This study explores the relationship between ESG performance and Total Factor Productivity (TFP) in enterprises, emphasizing the role of digitization. It hypothesizes that strong ESG practices improve TFP by alleviating financial constraints, with a more pronounced effect in state-owned enterprises, technology-intensive firms, and companies in regions with lower marketization levels. Additionally, the research posits that digitization enhances ESG performance by improving data transparency and reducing financing costs, which in turn boosts TFP. These findings suggest that both robust ESG practices and digital transformation are key drivers of sustainable productivity growth in firms. Fig. 2 illustrates the mediation and moderation effects examined in this study. Fig. 2. ESG Performance, Digitization and TFP of Enterprises • We analyze the effect of ESG performance on TFP, and the role played by digitization. • Robust ESG performance has a substantial positive impact on the TFP of enterprises. • Digitization positively moderates the effect of ESG on alleviating financing constraints, thereby enhancing the TFP of enterprises. • Enhancing ESG governance contributes to promote sustainable and high-quality economic development.