A Study on the Corporate ESG Impacts on the Company’s Internal Management Performance and ESG Management Types by Industry

Abstract

The ESG (Environmental, Social, and Governance) management of companies has become essential in the innovative management field of business as the interest in sustainable growth and value-centric investment increases worldwide. Using Refinitiv ESG data, this paper identifies ESG activities that significantly impact corporate performance and analyzes their effects on customers, shareholders, and employee performance by ESG factors. Furthermore, this paper analyzes the current status of ESG management by industry through K-means clustering to provide implications to policymakers and companies for future indicators and ESG practice development. Thus, this paper identified the major variables from the Refinitiv ESG evaluation framework through exploratory factor analysis, conducts confirmatory factor analysis to confirm the model’s fitness, and analyzes the effects of a company’s ESG management activities on performance using structural equation modeling. Through this study, this paper examines that a company’s ESG activities have a positive impact on customer loyalty; however, efforts to improve the environment can have a negative impact on employee satisfaction. Similarly, efforts to improve the environment and governance can have a negative impact on shareholder satisfaction. This implies that there is a need to alleviate the burden derived from environmental and governmental practices and enhance awareness of ESG practices’ necessity to those stakeholders. Additionally, in industry-specific analysis, the manufacturing and infrastructure industries were found to have relatively superior ESG performance, while the absence of physical assets in the banking and some service industries could lead to low ESG performance. As awareness of the global climate crisis and social recognition of sustainable management continues to grow, ESG management and evaluation are expected to become more critical. Therefore, considering the industrial characteristics of companies, it is expected that different ESG evaluation and support methods will be necessary.