Impact of business environment uncertainty on ESG performance from the perspective of resource supply and demand based on ESG performance

Abstract

The performance of enterprises in environmental, social, and corporate governance (ESG) reflects the capacity for sustainable development, and the capacity for sustainable development is affected by the operating environment they face. Based on the supply and demand of ESG responsibility fulfillment resources, this study explores the impact of business environment uncertainty (including objective environmental uncertainty and environmental uncertainty perceived by enterprise management) on ESG performance and reveals the impact path of A-share listed companies in Shanghai and Shenzhen from 2009 to 2022. Results show that the objective environmental uncertainty and the environmental uncertainty perceived by enterprise management can considerably inhibit the ESG performance of enterprises. Compared with the environmental uncertainty perceived by the management, the objective environmental uncertainty has a more remarkable inhibitory effect on the ESG performance of enterprises. The mechanism analysis shows that uncertainty avoidance of financial intermediaries is the main path through which objective environmental uncertainty affects the ESG performance of enterprises, while uncertainty avoidance of enterprises is the main path through which environmental uncertainty perceived by management affects the ESG performance of enterprises. Heterogeneity analysis shows that the issuance of government environmental protection subsidies and the improvement of enterprise operating efficiency can considerably alleviate the inhibitory effect of objective environmental uncertainty on enterprise ESG performance, while government tax incentives, the improvement of enterprises' financial flexibility, and the improvement of strategic risk bearing ability can considerably alleviate the inhibitory effect of management's perceived environmental uncertainty on enterprise ESG performance. Optimizing the regional business environment can simultaneously alleviate the inhibition of the two environmental uncertainties on the ESG performance of enterprises. Based on the research findings, this study proposes policy suggestions and coping strategies to improve ESG performance under business environment uncertainty.