Do ESG controversies moderates the relationship between corporate sustainability and firm performance? A panel quantile regression approach

Purpose The aim of the study is to investigate the moderating impact of environmental, social and governance (ESG) controversies in the relationship between corporate sustainability and firm performance at different quantiles. Design/methodology/approach We use a unique dataset of 228 firms of S&P 250 global energy sector from 37 countries for the period from 2013 to 2022. Data were collected from Refinitiv Datastream, and panel quantile regression approach is used to conduct the analysis. Findings Our findings reveal a positive relationship between corporate sustainability, as measured by ESG performance, environmental performance, social performance and governance performance scores, and firm performance metrics such as return on assets and return on capital. However, upon introducing the moderating effect of ESG controversies, our analysis indicates a negative and statistically significant impact only for ESG and environmental dimensions on firm performance, while social and governance dimensions exhibit insignificant impact on firm performance. Practical implications The study’s findings indicate that managers and policymakers may include ESG controversies as an important factor in their decision-making and policy formulation processes. Social implications By managing ESG controversies effectively, firms can minimize negative societal impacts, such as environmental damage, labour disputes and governance failures. This, in turn, promotes social well-being and strengthens stakeholder confidence in corporate behaviour. Ultimately, these practices contribute to broader societal goals, such as environmental protection and sustainable development. Originality/value As far as authors’ knowledge, this is the first study to understand the relationship between corporate sustainability, ESG controversies and firm performance in the global energy sector.