How do ESG practices create value for businesses? Research review and prospects

Abstract

Purpose

The purpose of this paper is to clarify the impact mechanisms and weighting factors of environmental, social and governance (ESG) practices on corporate value through bibliometric analysis and core interpretation of existing literature, further explore whether and under what conditions ESG practices contribute to the corporate value creation, and provide an outlook on future research directions.

Design/methodology/approach

Bibliometric method is used to analyze literature co-citation, burst detection and keyword co-occurrence, and literature review method is used to condense important ideas from the existing literature.

Findings

Through the review, analysis and summary of the existing literature, this paper finds that the perspectives of risk, information and strategy reflect the key pathways through which ESG practices play a role in avoiding harm and creating value for companies directly or indirectly. Macro, meso and micro factors moderate the direction and extent of the impact. Moreover, considering the relationship between ESG performance and ESG disclosure is key to understanding some contradictory findings.

Research limitations/implications

The search terms limit the articles considered, and therefore, the research framework may be incomplete. Moreover, this article is primarily aimed at the research field and lacks guidance at the practical level.

Practical implications

This paper helps the academic community to deepen its understanding of ESG, moving beyond the question of whether ESG is linked to corporate value to further understand why and under what conditions ESG practices create value for firms.

Social implications

This paper has great practical significance in motivating companies to actively participate in ESG practices.

Originality/value

The theoretical framework in this paper reveals the black box between enterprise ESG practices and value creation, and clarifies the research boundary of “the relationship between ESG practices and value creation,” contributing to the future research in this field.

Citation

Wang, N., Pan, H., Feng, Y. and Du, S. (2023), "How do ESG practices create value for businesses? Research review and prospects", Sustainability Accounting, Management and Policy Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SAMPJ-12-2021-0515