E, S, and G, not just ESG: Exploring the Digital Transformation–Environmental, Social, and Governance Performance Nexus through Patent-Based Evidence

This study investigates the impact of digital transformation on firms’ environmental, social, and governance (ESG) performance. Using panel data from 1,157 listed firms in China between 2012 and 2021, obtained from the Bloomberg database and the CSMAR financial database, we find that digital transformation significantly improves ESG performance. The positive effect is more pronounced in non-high-tech industries, indicating greater gains from digital upgrading in traditional sectors. Moreover, financial constraints weaken the positive relationship between digital transformation and ESG outcomes. Further analysis shows that digital transformation has a significant positive effect on both environmental and social performance, but no significant impact on governance performance. These findings suggest that digital transformation can serve as an important lever for promoting corporate sustainability, particularly in firms facing fewer financial constraints and operating in less digitally advanced industries. JEL Classification: M10, G34, O32, O33.