Digital Transformation in Firm Performance: The Impacts of Environmental, Social, and Governance (ESG)

Huzaifa Ahmad (), Au Yong Hui Nee and Abdelhak Senadjki
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Huzaifa Ahmad: Universiti Tunku Abdul Rahman
Au Yong Hui Nee: Universiti Tunku Abdul Rahman
Abdelhak Senadjki: Universiti Tunku Abdul Rahman

A chapter in Proceedings of the 12th International Conference on Business, Accounting, Finance and Economics (BAFE 2024), 2025, pp 383-390 from Springer

Abstract: Abstract This paper will delve into the complicated relationship between digitalization and firm performance, with a focus on Environmental Social Governance (ESG) concerns. Firms have increasingly been utilizing digital technologies for operational efficiency, customer engagement, and innovation; for sustainable success in recent times, ESG consideration has been highly regarded. The intersection of digital transformation and ESG has recently taken great prominence, as companies come under scrutiny over their ethical and environmentally responsible behavior. The review starts with an analysis of digital transformation as a true driver of changes in organizational processes, structures, and governance. It is observed that digital transformation is not only about the adoption of technology but also about the changes in organizational culture and governance. Very much under the influence of ESG, these factors show the firm's commitment to sustainable development. This paper then inquiries into how each of these ESG dimensions—environmental sustainability, social responsibility, and governance frameworks—is both drivers and driven by digital transformation. Environmental factors revolve around the improved efficiencies and conservation of resources that digitalization can lead to. Social factors include the impact of digitalization on labor practices, human rights, and community engagement in pursuing all-inclusive growth. Governance factors are attentive to how digital technologies either enable or enhance transparency, accountability, and ethical decision-making. Finally, the article looks at some of the challenges, namely, the digital divide, privacy concerns, and cybersecurity risk under the digital-ESG nexus. It also identifies gaps in the current literature, provides recommendations for future research, and notes that digital transformation can drive value creation if it is well aligned with ESG considerations, though its full impact on firm performance has yet to be fully realized and would continue to be materialized through empirical research.

Keywords: Digital Transformation; Environmental Social Governance (ESG); Firm performance (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-666-6_22

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