How does environmental, social, and governance (ESG) performance affect carbon emission reduction in the manufacturing industry?

Purpose This paper explores how to accelerate corporate carbon emission reduction (CCR) and green transformation in manufacturing through environmental, social, and governance (ESG) practices, offering actionable strategies for achieving United Nations Sustainable Development Goals SDG-7 and SDG-13. Design/methodology/approach This paper utilizes data from Chinese A-share listed companies between 2013 and 2022 as its research sample. We conduct empirical analyses to identify the CCR-enhancing mechanisms of ESG performance through green management innovation, financing constraints and risk-taking. Findings The results show three pivotal findings emerge: (1) ESG performance can significantly contribute to CCR in the manufacturing industry, with a more pronounced effect on corporate certification for quality and environmental management certification among large-scale enterprises. (2) Mechanism analysis reveals that ESG performance promotes CCR in the manufacturing industry by enhancing internal green management innovation, alleviating external financing constraints, and increasing risk-taking levels. (3) Market leadership paradoxically weakens ESG's carbon-cutting impact, suggesting complacency risks in dominant firms. Originality/value This paper bridges critical gaps between sustainable finance theory and industrial decarbonization practice. We develop an evidence-based evaluation framework to help policymakers calibrate ESG incentives and assist manufacturers in optimizing sustainability investments.