Digital transformation, human capital upgrading, and enterprise ESG performance: Evidence from Chinese listed enterprises

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Research background: With the rapid development of digital technologies such as artificial intelligence (AI), big data, cloud computing, and blockchain, the deep integration of digital technology and traditional industries offers unprecedented opportunities and has become an important technological force driving the development of enterprise environmental, social, and governance (ESG) performance. Digital transformation increases the complementarity between the production and operation processes of enterprises and highly skilled labour, specifically manifested in the adaptive change of the human capital structure of enterprises in labour relations. Meanwhile, transforming enterprises’ human capital structure also affects ESG performance. Purpose of the article: This study investigates the effects of digital transformation on enterprise ESG performance and its underlying mechanisms of human capital upgrading. First, it combines cutting-edge literature to analyse the theoretical mechanism between digital transformation, human capital upgrading, and enterprise ESG performance, revealing the internal driving factors and implementation paths for improving enterprise ESG performance. Second, we use the data of 3928 listed enterprises in the Shanghai and Shenzhen A-share markets from 2009–2022 to analyse the impact of digital transformation on enterprise ESG performance from the perspective of human capital upgrading as well as the mechanism by which digital transformation affects enterprise ESG performance through human capital upgrading. Third, we provide policy recommendations for optimising the labour structure and enhancing enterprise ESG performance from the perspective of optimising human capital and digital technology applications. Methods: Based on data from 3928 listed enterprises in Chinese A-share markets from 2009-2022, we investigate the effects of digital transformation on enterprise ESG performance and the mechanisms of human capital upgrading. The panel mediation effect model tests the relationships between digital transformation, human capital upgrading, and enterprise ESG performance. Findings & value added: In theory, digital transformation is beneficial for optimising human capital structure, accelerating green technological innovation, and improving management efficiency, thus improving enterprise ESG performance. Mechanism testing shows that digital transformation enhances enterprise ESG performance through human capital upgrading. Heterogeneity analysis shows that the impact of digital transformation on ESG performance is more significant in enterprises that are capital- and technical-intensive, and located in the eastern and central regions. This study examines the microeconomic consequences of digital transformation, contributing to a deeper understanding of the theoretical logic inherent in enterprises’ optimisation of their labour structure. It also provides empirical evidence and decision support for developing industrial talent policies.