Is the Corporate ESG Movement Sustainable? A Consumer Behavior View and Evidence

The term “ESG” began with UN Global Compact’s (IFC, 2004) initiative “Who Cares Wins-Connecting Financial Markets to a Changing World.” Since then, capital markets have become a key facilitator of the corporate ESG movement. Today, due to the climate change, ESG movement is drawing unprecedented attention from corporations and their stakeholders, among which investors of capital markets also exert unprecedented pressures on corporations’ ESG efforts and performance. However, while every corporation now seems to or claims to strive for corporate ESG, many corporations are performing “greenwashing” instead of true ESG. Some studies showed that greenwashing did enhance corporations' financial performance (Li et al., 2023). Although research results on the relationship between greenwashing and corporate financial performance are inconsistent, it is clear that greenwashing at least helps corporations to escape from the direct pressures from capital markets, in addition to the pressures from other stakeholders. This brings a question: Why should corporations proactively invest in ESG? If we think that stakeholder theory and legitimacy theory have answered this question, we are assuming that corporate greenwashing is not possible, which is just the opposite of the fact. 

To answer the above question, we must come back to a fundamental question: Can true ESG generate competitive advantages? If the answer is no, logically, we may conclude that the corporate ESG movement is not sustainable and vice versa. To answer the second question, we focus on consumers, whose purchasing behavior determines whether true ESG can generate corporations' competitive advantage and the resulting excess profit. Therefore, in the current study, we developed a consumer behavior model of corporate ESG, which models how corporate true ESG may affect consumers’ behavior and hypothesizes a positive relationship between the purchase and the true corporate ESG. Furthermore, we conducted an empirical study to evaluate the hypothesis. The results of the current study have crucial implications on what motivates the consumers' sustainability (or green) purchases and whether corporations should invest in true ESG. Fortunately, the empirical results support our hypothesis on the positive impact of true corporate ESG on the purchase. Based on the consumer behavior model, strategy implications for corporations’ ESG investment were derived.