Stakeholder engagement as an ethical system for carbon accountability: evidence from Indian firms

Purpose This paper aims to investigate the impact of stakeholder engagement (SE) on the carbon performance (CP) of select Indian companies and explores the mediating role of firm value in this relationship. Design/methodology/approach This study examines a sample of the top 146 BSE-listed firms from 2018–19 to 2022–23, using the system generalised method of moments model. A robustness check is conducted using the market-to-book ratio as an alternative measure. Findings The findings reveal a positive relationship between SE and CP, which is partially mediated by firm value. This suggests that firms engaging with stakeholders improve their environmental performance while enhancing their market value. Practical implications The results highlight the importance of integrating SE as a core strategy for reducing carbon emissions. Firms can leverage stakeholder interactions to establish internal carbon standards, driving sustainability efforts. Social implications This study highlights that effective SE enhances corporate commitment to environmental sustainability. The findings offer policymakers and regulators valuable insights for developing effective climate change policies. Originality/value This study proposes SE as a dynamic capability of a firm that enhances FV. Furthermore, this study uses a novel content analysis approach to measure the primary variable of interest, namely, SE, based on the global reporting initiative (GRI) framework. Further, four contingent factors examining the impact of internal governance and external climate governance on the SE–CP link have been studied.