Environmental, social, and governance (ESG): A substantive theory on the implementation process

Purpose The objective of this research is to develop an explanatory theoretical model (substantive theory) regarding the process of ESG implementation in credit cooperatives in Brazil. Design/methodology/approach The qualitative method known as Grounded Theory was employed. Interviews were conducted with 19 managers from different Cooperative Systems (singular cooperatives, central cooperatives, and confederations) in three interview cycles, meaning that some participants were interviewed more than once. Findings The generated substantive theory comprises internal and external conditioning factors, actions, and consequences. The external and internal conditioning factors include: “Principles of Cooperativism,” “Sustainable Development,” “Regulatory/Normative and Public Policy Changes,” “Cooperative and Financial Ecosystem,” “Culture and People,” “Top Management (executives and managers),” “Risks and Opportunities,” “Pre-existing ESG Actions in the System,” and “Availability of Financial, Human, and Technological Resources.” The actions are: “Integrating ESG into Strategy,” “Conducting Benchmarking and Establishing Strategic Partnerships,” “Providing Education, Training, and Information on ESG (for managers and employees),” “Developing the Materiality Matrix,” “Monitoring ESG: Defining Objectives, Goals, Strategies, and Metrics,” and “Formalising, Recording, and Disseminating ESG Practices.” The consequences include: “Systemic Sustainable Strategic Alignment,” “Improved Stakeholder Management,” “ESG Risk Management and Organisational Resilience Strengthening,” “Reinforcement of Organisational Culture,” “Continuous Learning and ESG Awareness,” “Enhanced Transparency and Communication,” “Evaluation and Monitoring of the ESG Journey,” and “Innovation in Sustainable Financial Processes, Products, and Services.” Originality value The originality of this study lies in presenting the ESG implementation process in credit cooperatives in Brazil, developing a Substantive Theory on the theme that encompasses ESG, business models towards sustainability, ESG risk, and decision-making in credit cooperatives, using the Grounded Theory research method.