Evaluation of the Impact of ESG Practices on Financial Performance in Korean Small and Medium Logistics Companies

This study empirically analyzed the impact of ESG management levels on the financial performance of small and medium-sized logistics companies in South Korea. To achieve this, quantitative evaluation indicators were developed to measure the ESG levels of these companies, and a survey was conducted. The financial performance of the companies was evaluated using and ROE through secondary data. Data analysis was conducted using responses from 98 small-to-medium-sized logistics companies with fewer than 300 employees. The empirical analysis results showed that the social and governance factors of small and medium-sized logistics companies in South Korea had a significant positive impact on ROA and ROE. On the other hand, environmental factors did not have a significant impact on the companies' financial performance. This indicates that when a company fulfills its social responsibilities and enhances employee satisfaction and engagement (Social), and when it establishes transparent management and effective decision-making structures (Governance), the company can build trust among consumers, employees, shareholders, and other stakeholders. This trust can reduce capital costs, improve employee productivity, and lower operating costs. Furthermore, transparent financial reporting and ethical management practices can prevent legal issues and scandals, providing long-term financial stability, and these factors collectively have a positive effect on ROA (return on assets) and ROE(return on equity). Meanwhile, the minimal impact of environmental factors on ROA and ROE could be attributed to the following reasons: the effects of environmental initiatives may not be visible in the short term, and the initial investment costs in environmental efforts could negatively affect ROA and ROE in the short term. While social and governance factors yield immediate financial benefits, the impact of environmental factors may require a long-term perspective, as initial costs can dampen short-term returns but potentially enhance financial performance over time through cost savings and brand value improvement. This study highlights the current state of ESG management in small and medium-sized logistics companies and its effect on financial performance, a topic often overlooked in favor of larger companies. It fills a gap in the literature by focusing on smaller logistics firms’ ESG practices. It also provides significant insights that these companies can adopt to achieve sustainable growth and create better business environments. Ultimately, these findings suggest that ESG adoption in logistics small-to-medium-sized logistics companies can lead to real-world improvements in resilience, stakeholder trust, and competitive advantage, further supporting the sustainable development of the logistics sector.