When ESG Pays Off: Linking Environmental Performance and HRM Practices to Financial Outcomes

Integrated ESG accounting frameworks that link environmental performance, human resource management practices and financial results are developed and then empirically examined in this paper. A exploratory sequential mixed-methods approach was used to collect qualitative views of sustainability and human resources practitioners. In the subsequent step, these observations were utilized in a quantitative analysis of 100 organizations to explore the structural relationships of the model. The results show that environmental performance (β = 0.219, p = 0.011) and human resource management practices (β = 0.527, p < 0.001) exert significant positive influence on environmental, social and governance (ESG) performance. But HRM practices are a stronger predictor of ESG performance. Results suggest that environmental, social and governance (ESG) performance positively affects financial performance (β = 0.410, p < 0.001). Furthermore, environmental performance also still have a direct effect (β = 0.278, p = 0.001). 0.137; 95% CI: 0.016–0.191) It appears that ESG factors serve as mediators between environment and finance to some extent. Additionally, secondary data shows that there is a favorable relationship between environmental, social and governance scores and return on assets (ROA) (β = 0.001, p = 0.047). Overall, the results suggest that there is a need for integrating each of these environmental and social concerns into a seamless ESG governance and reporting structure in order to enhance corporate value. Theoretical and practical implications for sustainability accounting and policy arise from the above.