Does ESG performance affect corporate commitment, competitiveness, and profitability? Evidence from a developing country

Abstract In the era of the green revolution, the purpose of the study is to rapidly transform the global economic landscape and emphasize ESG performance integration to enhance corporate profitability and competitiveness. The current study examines 3,846 firm-year observations of non-financial companies in a developing country namely China, which are listed on the Shanghai and Shenzhen stock markets from 2016 to 2022. However, the wide range of research across various fields has led to a lack of clarity within the academic community regarding relationships between ESG performance, corporate commitment, competitiveness, and profitability in the context of China. Recent discussions on corporate commitment, competitiveness, and profitability metrics have brought greater attention to ESG performance, yet they have also contributed to growing misunderstandings of the concept. Additionally, vague definitions and constructs may hinder managers from effectively setting ESG performance objectives for their organizations. Utilizing data from credible sources, including Bloomberg, this research evaluates ESG performance through a comprehensive ESG score and examines its relationship with corporate profitability, and commitment. Hence, the study employs robust methods (i.e. OLS regressions) to assess ESG practice’s impact on corporate outcomes, considering various control variables like return on assets, firm age, financial leverage, ownership concentration, etc. The quantitative findings suggest that ESG performance positively correlates with enhanced corporate performance (β = 0.0.42, p < 0.001), increased market competitiveness (β = 0.08, p-value = 0.001), and strengthened corporate commitment (β = −0.009, p-value = 0.002), thereby underscoring the importance of sustainable practices in achieving long-term business success. This research also contributes by providing empirical evidence on ESG performance and its impact on fostering profitability, and competitiveness and enhancing employee commitment.