Towards the United Nations sustainable development goals: Evidence from ESG performance, labor share and environmental governance pressure in China

Abstract

We seek to analyze whether corporate ESG performance and higher labor share can be achieved simultaneously in China when pursuing Sustainable Development Goals (SDGs). Using the data of listed companies, our result shows that corporate ESG performance negatively affects labor share, which means that continuous improvement in ESG performance has not been accompanied by an increase in labor share. To further analyze the reasons behind this finding, we have first examined the direct effects of the labor share variations, both in terms of wage rate and labor productivity, and then the three indirect effects, i.e. production scale, financing constraint, and technological innovation. Moreover, we discuss the heterogeneous effects between the ESG performance and labor share. It is noteworthy that we also verify the moderating role of environmental governance pressure. We find that the negative impacts of ESG performance are greater when firms face higher external environmental governance pressure. The findings of this paper help to clarify how synergies between ESG performance, labor share and environmental governance pressure can be developed under the SDGs in China.