Unlocking Sustainable Value through Digital Transformation: An Examination of ESG Performance

Abstract

Digital transformation has already begun to play a significant role in helping EU countries to achieve sustainable values by promoting environmental, social and governance (ESG) efficiency. It is rapidly changing the economic landscape, which leads to changes in all sectors and at all levels. The European Union (EU) has set ambitious goals for sustainable development and climate change mitigation, such as the European Green Deal and the 2030 Agenda for Sustainable Development. The paper aims to test the spatial spillover effect of digitalization on ESG performance for EU countries for 2008–2020. The study applies the spatial Durbin model to check the research hypothesis. The empirical results revealed that the EU exhibits varying levels of ESG performance. Digital transformation has the potential to enhance ESG performance and has shown significant spatial spillover effects. The SDM estimates that a 1% increase in digital inclusion results in a minimal 0.001% increase in the ESG index. The statistically significant positive effects observed in key enablers, digital public services for businesses and citizens, highlight the contribution of digitalization to improving ESG performance. In addition, technological innovation serves as a critical conduit for transmitting digital transformation in the business and public sphere to ESG performance. Given these findings, policymakers are advised to strengthen digitalization efforts to narrow the digital divide, leveraging the digital economy as a potent instrument. Additionally, a dynamic and targeted strategy for digital economic development should be implemented to address ESG performance disparities effectively.

The impact of digital transformation and earnings management on ESG performance: evidence from Chinese listed enterprises

“…Kwilinski et al tested the spatial spillover effect of digitalization on ESG performance in EU countries from 2008 to 2020. The empirical results show that the European Union has different degrees of ESG performance, DT has the potential to improve ESG performance, and shows a significant spatial spillover effect 23 . Fang et al investigated the direct impact of corporate digitalization on ESG performance using Chinese-listed companies from 2012 to 2020.…”

Digitalization, Spillover and Environmental, Social, and Governance Performance: Evidence From China

“…Digital transformation can bring about changes and optimization in organizational structure, internal management, and other governance aspects within the enterprise, so that it can have more dynamic capabilities, helping it to improve ESG performance (Su et al, 2023). A study based on the European Union shows that a 1% increase in digital inclusion results in a minimal .001% increase in the ESG performance (Kwilinski et al, 2023).…”

Technology empowerment: Digital transformation and enterprise ESG performance—Evidence from China’s manufacturing sector

“…The process of digital transformation involves a comprehensive reshaping of the traditional business model, governance mechanism, and organizational structure of an enterprise by integrating artificial intelligence, big data, blockchain, and other digital technologies into various aspects such as production, sales, and transportation [ 35 ]. Existing literature primarily focuses on the economic performance of digital transformation and its individual non-economic aspects [ 36 , 37 ], while only recently has there been exploration of the relationship between digital transformation and integrated environmental, social, and corporate governance (ESG) performance [ 38 ]. The present study posits that the digital transformation is poised to enhance the ESG performance of manufacturing enterprises through bolstering their capabilities and fostering intrinsic motivation.…”