ESG Impact on Corporate Competitiveness

Abstract

Introduction. The purpose of this article is to verify the assertion of most foreign modern authors that the introduction of ESG principles leads to improved competitiveness of modern corporations. The analysis is based on the most relevant theories of competitiveness in terms of intangible factors of competition. In order to test the hypothesis of the impact of ESG principles on competitiveness, the authors have analysed the correlation between companies’ revenues and their S&P Global ESG score. The analysis was based on 87 ESG-leaders operating in different industries. Materials and methods. The analysis is based on the theories of competitiveness set out in the works of P. Sraffa and M. Porter. Results of the research. As the potential of tangible factors of competition is next to exhausted, the focus is shifting to intangible factors, i.e. to meeting specific consumers’ demands, taking into account social and environmental factors in the process of production. In accordance with current trends, satisfying these needs is achieved by implementing ESG principles. However, it remains an open question whether this enhances the competitiveness of the company. According to the results of the study, implementing ESG principles in the activities of companies is not a guarantee of increasing the competitiveness of the company. Discussion. Despite the results obtained, the authors argue that companies should not abandon the implementation of ESG principles. Companies may receive some benefits by luring investors who adhere to the principles of responsible investing, or by being listed on stock exchanges that require ESG disclosures, which allows companies to demonstrate to stakeholders their commitment to ESG or simply to be listed on some stock exchanges. Implementing ESG factors and initiatives does not in itself lead to an increase in a company's competitiveness. However, non-participation in this process in today's environment puts the company at risk of underinvestment and lower consumer demand.