ESG Initiatives and Firm Valuation: Industry-Level Analysis of Business-to-Consumer and Business-to-Business Sectors

Purpose – The purpose of this paper is to empirically examine the determinants of ESG initiatives in firms, with a focus on the level of consumer or business orientation (B2C vs. B2B), and to evaluate the impact of these sustainability initiatives on key corporate performance metrics (profitability, valuation, and growth) across consumer-oriented and business-oriented industries. Design/Methodology/Approach – Based on stakeholder theory and through regression analyses, this paper examines the ESG ratings and post-IFRS implementation financial data of 8,739 firm-year observations representing Korean publicly listed firms covering the years 2012 to 2022. Findings – The findings highlight environmental sustainability as a primary determinant of ESG performance when a firm’s operations are inclined with consumer-oriented industries. However, these continuous efforts on environmental sustainability detrimentally affect firm valuation for firms in B2C industries. Moreover, social responsibility initiatives negatively impact profitability and sustainable growth, while overall ESG efforts detrimentally affect firm value for firms in business-oriented industries. Research Implications – This study highlight the dynamics of ESG initiatives and underscore how stakeholder expectations shape industry-level strategies. These insights contribute to the understanding of the role of ESG in shaping firm outcomes, offering implications for both academic research and managerial decision-making in sustainability.