FROM ESG COMMITMENT TO MARKET VALUE: DOES GREEN INNOVATION UNLOCK FINANCIAL GAINS IN ASEAN MINING AND MANUFACTURING FIRMS?
DOI:
https://doi.org/10.35631/AIJBES.828045Keywords:
ASEAN, ESG Score, Financial Performance, Green Innovation, Greenwashing, Mining and Manufacturing Companies, And SustainabilityAbstract
Despite the rapid global adoption of Environmental, Social, and Governance (ESG) frameworks, growing evidence suggests that ESG initiatives frequently fail to translate into tangible financial value, raising concerns about symbolic compliance and potential negative market consequences. This study examines the mediating role of green innovation in the relationship between Environmental, Social, and Governance (ESG) scores and financial performance in mining and manufacturing companies across ASEAN countries. As sustainability gains prominence in corporate strategy, ESG has emerged as a framework intended to align environmental responsibility with long-term profitability. However, its actual impact on financial performance remains unclear, particularly in high-impact sectors such as mining and manufacturing that face regulatory and operational complexities. Using panel data from 2016 to 2023 and applying path analysis, the study investigates whether green innovation serves as a conduit through which ESG influences firm performance. The empirical results reveal no statistically significant direct relationship between ESG scores and financial performance, nor a significant mediating effect of green innovation. These findings suggest that ESG implementation, in isolation, does not deliver financial advantages unless coupled with substantive innovation strategies. A key insight from this study is the identification of an “ESG–Innovation Misalignment,” wherein ESG reporting may be more symbolic than transformative, leading to limited innovation outcomes and failing to support sustainable financial returns. This issue raises concerns about greenwashing and the superficial adoption of sustainability frameworks in ASEAN’s industrial sectors. The findings emphasize the need for an integrated, performance-based ESG strategy supported by effective innovative ecosystems and proactive policy incentives. Such alignment is critical to translating ESG and sustainability commitments into measurable economic and environmental value in emerging markets.
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