Impact of ESG controversies on corporate reputation: the role of corporate governance and ESG practices

Purpose The study intends to evaluate the influence of environmental, social and governance (ESG) controversies on corporate reputation (CR) by examining the protective role of corporate governance variables and ESG practices in NSE 200 Index Indian companies. Design/methodology/approach The study analyses non-financial Indian companies listed on the NSE 200 Index from 2014–2023 period of time. ESG data were obtained from the Thomson Reuters database. To test the hypothesis, the paper uses a difference Generalised Method of Moments (GMM) model on unbalanced data. Findings The findings reveal that ESG controversies significantly affect CR, considering the dataset of 106 Indian NSE-listed non-financial firms. Rather, the effect of controversy is mitigated through the governance structures and the ESG practices initiated by firms. Corporate governance structure and robust ESG practices help to protect CR. These insights from the study can emphasize the importance of corporate governance and ESG practices in mitigating any reputational damage to companies from ESG controversies. Also, the robustness results support the main model of the study. Practical implications The study highlights the need for Indian firms to strengthen board independence, CEO duality, as well as board size and implementing strong ESG practices helps to mitigate the impact of ESG controversies on CR. Proactive management and transparent communication are key to safeguarding both market value and long-term investor trust. Policymakers should incentivize such practices through regulatory support and incentives. Originality/value This is a new study that thoroughly evaluate the influence of ESG issues on CR along with the moderating role of corporate governance variables and ESG practices undertaken by NSE 200 Index Indian companies.