Sustainability in the Digital Era: How ESG Performance and Technological Transformation Shape Corporate Value in Emerging Business Environments

Abstract

This study investigates how sustainability in the digital era shapes corporate value through the interplay between environmental, social, and governance (ESG) performance and technological transformation in African business environments. In emerging economies, where institutional weaknesses, regulatory inconsistencies, and rising stakeholder scrutiny create complex operational conditions, the strategic relevance of ESG practices remains underexplored. Drawing on Stakeholder Theory and the Resource-Based View, this research conceptualizes ESG engagement as a strategic capability that contributes to long-term value creation, while digital transformation is viewed as an enabling mechanism that strengthens firms' ability to convert sustainability efforts into financial outcomes. Using a panel of 882 firm-year observations from publicly listed manufacturing firms across Africa between 2010 and 2023, the study employs the system Generalized Method of Moments (GMM) estimator to address potential endogeneity, dynamic panel bias, and unobserved heterogeneity. Robustness checks, including alternative performance measures, winsorization, and endogeneity diagnostics, reinforce the reliability of the results. The findings show that environmental and social performance significantly enhance corporate value, whereas governance performance exhibits a more nuanced nonlinear relationship. Digital transformation positively moderates the ESG and corporate value link, indicating that technology enables firms to better leverage sustainability initiatives for financial gains. Heterogeneity analysis further reveals that ownership structures and industry classifications shape the strength of these relationships. The study highlights the strategic importance of aligning ESG practices with digital transformation efforts to drive sustainable corporate value in Africa's evolving business landscape, offering implications for managers, policymakers, and investors committed to advancing sustainability-driven strategy.