Integrating governance and ESG through management control systems

Abstract This study examines whether management control systems (MCS) mediate the relationship between governance mechanisms and the maturity of environmental, social, and governance (ESG) practices in organizations. Using survey data from 142 Brazilian firms and partial least squares structural equation modeling (PLS-SEM), the results indicate that governance mechanisms are not directly associated with the level of ESG maturity. Instead, their effect is fully transmitted through the use of management control mechanisms, such as strategic planning, budgeting, forecasting, and performance monitoring, that operationalize strategic intentions and translate them into organizational action. From a theoretical perspective, the study integrates governance and management control literatures by empirically examining how governance mechanisms are associated with ESG maturity through internal management control mechanisms. Empirically, the findings highlight the mediating role of MCS and demonstrate that governance is associated with ESG maturity only when activated through coherent planning and control mechanisms (full mediation model). The results carry important implications for managers, boards, and policymakers seeking to advance ESG integration, particularly in institutional contexts characterized by weak or evolving legal mandates for boards. ESG initiatives progress not through isolated governance structures, but when sustainability intentions are embedded within an integrated set of planning and control mechanisms. By shifting the analytical focus from formal governance structures to execution and internal coordination, this study contributes to a more actionable understanding of how sustainability practices become institutionalized in organizational behavior.