Navigating Environmental Uncertainty: The Role of ESG Performance in Driving Firm-Level High-Quality Development

Yatao Zhang, Qi Ban and Jialing Li ()
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Yatao Zhang: Postdoctoral Station of Applied Economics, Fudan University, Shanghai 200433, China
Qi Ban: Postdoctoral Station of Applied Economics, Fudan University, Shanghai 200433, China
Jialing Li: School of Business Administration, Hunan University of Technology and Business, Changsha 410000, China

Sustainability, 2025, vol. 17, issue 5, 1-22

Abstract: Total factor productivity serves as a critical indicator of high-quality corporate development. This study systematically examines the impact of ESG performance on TFP using panel data from Shanghai and Shenzhen A-share listed firms spanning 2009 to 2023. The findings reveal three key insights: first, corporate ESG performance significantly enhances TFP, with regression analysis demonstrating a statistically robust positive correlation (1% significance level) and high explanatory power (R 2 > 0.8). Second, under environmental uncertainty, ESG-driven total factor productivity improvements operate through dual mechanisms: energy conservation and resource allocation optimisation. Third, heterogeneity analysis highlights that non-state-owned enterprises exhibit a more pronounced relationship compared to state-owned counterparts, particularly in high-environmental-uncertainty scenarios. Beyond enriching academic discourse on ESG metrics, this research elucidates the intrinsic linkage between ESG practices and TFP under dynamic environmental conditions, offering actionable strategies for firms to align sustainability goals with productivity growth. For international stakeholders, this study provides empirical evidence from China—the world’s second-largest economy—to inform global ESG policy design and cross-border investment decisions, emphasising the role of institutional contexts in sustainability-driven value creation. The insights are pivotal for investors, policymakers, and multinational corporations seeking to navigate ESG complexities while advancing sustainable development goals in emerging markets.

Keywords: environmental uncertainty; ESG performance; total factor productivity; energy saving; consumption reduction (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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