Analysis of the Relationship between Corporate CSR Investment and Business Performance Using ESG Index—The Use-Case of Korean Companies

Jihye Yun,Jonghwa Lee

doi:10.3390/su14052911

Abstract

ESG management has become the most prominent topic this year as the worldwide business environment of companies changes. ESG management is not an option to raise a company’s reputation but a factor that significantly affects corporate sustainability and corporate value in the long run as well as can be seen as an essential requirement for a company’s survival. As this trend is essential in evaluating corporate sustainability, ESG management is an inevitable global issue. This study aims to develop an index for ESG, a key indicator of corporate sustainability, targeting 49 companies that issue ‘sustainability reports’ among the top 150 asset-ranked companies. In addition, companies were divided into high and low groups based on the ESG index, and each group attempted to study the effect of economic responsibility among corporate social responsibility on financial performance. As a result, out of 49 companies, the high group was divided into 17 companies, and the low group was split into 14 companies. It was found that only the low group had a significantly positive (+) effect on the relationship between corporate economic responsibility and financial performance. This study can be used as a reference data for ESG research by developing an ESG index related to corporate sustainability. It is meaningful to confirm the management paradigm for corporate social responsibility and the importance of financial performance through comparison.

Highlights

Developed countries are in the process of promoting various environmental regulations to respond to climate change, and ESG management is becoming a widely discussed topic worldwide
ESG index of 49 companies was calculated by year through three methodologies extracted by the NMF technique and based on the average value of each index, 17 companies with an average value or higher were divided into high groups and 14 companies with an average value or lower were analyzed empirically
From a non-financial point of view, ESG management is based on environmental protection by creating an eco-friendly ecosystem, continuous management of supply chains, global social contribution, and establishment of a diverse and healthy corporate culture

Summary

Introduction

Developed countries are in the process of promoting various environmental regulations to respond to climate change, and ESG management is becoming a widely discussed topic worldwide. Korean companies have rapidly adopted ESG management to keep up with the demands of the new era, recognizing sustainability management as one of their active management strategies; they are striving to fulfill the corporate social responsibility by protecting customer information and the environment in consideration of various stakeholders and acknowledging the diversity of our employees [1]. Consumers have started to evaluate the company based on the value that the company pursues, not based on the products or services. This trend lets ESG emerge and makes it an essential element in assessing the sustainability of corporate [2]. The requirements for ESG evaluation agencies to strengthen their transparency are increasing [3]

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