Author(s)

ZHAOKUN GUO, KUNHUI YE

Abstract

The environmental, social, and governance (ESG) guidelines championed by sustainable development now stands as an indispensable pathway for enterprises aiming to unlock new economic growth potentials. However, the drive towards optimal ESG performance is often overshadowed by greenwashing or pseudo-ESG behaviours. The discrepancies in corporate ESG actions, both internally and across time, demonstrate that single-score metrics inadequately reflect the full dimensionality of a company’s ESG commitments. This study adopts a dynamic lens to dissect the influence of temporal consistency in ESG performance on financial returns, probing the complex relationships among corporate ESG effectiveness, financial performance and enduring sustainability. Through analysis of data from 1,499 companies listed in China from 2010 to 2020, it is evident that sustained commitment to ESG responsibilities (temporal consistency) significantly enhances financial performance. The interplay between a company’s ESG performance and its temporal consistency is a substitutive dynamic in impacting financial outcomes. Furthermore, when considering the environmental attributes of companies, the economic advantages garnered from ESG performance in highly polluting firms are notably less pronounced than in those that are less polluting. Our research scrutinises the multifaceted behavioural attributes behind ESG scores and emphasises the necessity of maintaining these behaviours consistently over time, establishing sustainability as a pivotal aspect of corporate ESG integrity.

Keywords

ESG performance, corporate financial performance, temporal consistency, sustained ESG, enterprise sustainability, polluting enterprise