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Sustainable Profitability: Investigating the Relationship between ESG Initiatives and Financial Performance

Ozols, Hermanis (2023) Sustainable Profitability: Investigating the Relationship between ESG Initiatives and Financial Performance.

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Abstract:The purpose of this study is to determine whether an organization's Environmental, Social, and Governance (ESG) initiatives and its financial performance are related. ESG concerns have emerged as a noteworthy component for both investors and consumers as a result of the rise in environmental consciousness among consumers, which has fuelled a growth in sustainable investing. However, stakeholders frequently struggle to understand the sustainability promises made by businesses. We analyse the ESG criteria that firms prioritize and find emerging themes by applying text mining algorithms to their annual reports. The implemented empirical approach in this study extracts useful data from these reports, such as the frequency and context of terms related to ESG principles. The outcomes measure a business' adherence to ESG values and demonstrate the breadth of its commitment to sustainability and ethical business conduct. In the current era of ESG investing and the rising customer preference for sustainable products, it is especially important to distinguish genuine commitment to ESG principles. The developed framework will make it easier for stakeholders to distinguish whether businesses are really devoted to ESG principles from those who are simply "greenwashing" or exaggerating their ESG efforts. By assisting investors and stakeholders in making better decisions, the text mining analysis's findings will ultimately help create a better understanding of sustainable practices and their impact on businesses financial performance.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
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