ESG disclosure and firm sustainable growth nexus in Indonesia’s emerging markets: does working capital management matter?

Purpose This study investigates the moderating role of working capital management (WCM) in the relationship between environmental, social, and governance (ESG) disclosure and firms’ sustainable growth rates (SGR) in Indonesia. Design/methodology/approach Using empirical data from Indonesian non-financial companies listed on the Indonesia Stock Exchange (IDX) between 2017 and 2023, the analysis examines the interplay between ESG disclosure practices and firms’ financial sustainability in an emerging market context. Findings The results reveal a negative direct relationship between ESG disclosure and SGR, suggesting that the costs of ESG implementation and risks of information leakage outweigh short-term financial benefits. However, WCM effectively moderates this relationship, mitigating the adverse effects and enabling firms to optimize ESG initiatives for superior financial performance. Research limitations/implications This research contributes to the growing body of literature on ESG disclosure and firm performance in emerging markets and offers valuable perspectives on how strategic WCM can transform ESG efforts into sustained financial benefits. These findings emphasize the importance of aligning ESG activities with financial management processes to achieve long-term growth. Originality/value Unlike most studies in which authors relate ESG disclosure and firms’ sustainable growth rate nexus, this study introduces WCM as a moderating factor in emerging markets. This study is expected to provide actionable insights for policymakers and businesses seeking to enhance sustainability practices.