Modeling ESG Relationships with the Employability-Operational Growth-Profitability Trilogy in the European Food System

The development of a sustainable food system involves the coordinated efforts of all actors in the value chain. In this context, environmental, social, and governance (ESG) practices of companies play a key role, being closely related to their economic and financial resilience. The study uses the Gaussian Graphical Model (GGM) technique and the Confirmatory Factor Analysis (CFA) to analyse the direct and indirect causal relationships between ESG ratings and the financial dimensions of European food companies: employability, operational growth, and profitability. The analysed data was extracted from the Refinitiv Eikon database over a 15-year period (2008-2023), covering 71 agri-food companies from the European Union (EU) member states, the European Free Trade Association (EFTA) states, and the United Kingdom. Through the methodological tools used, the research goes beyond the context of traditional models of deterministic dependencies and expands the analysis area, highlighting the connections between the categories of financial indicators (employability, operational growth, and profitability) and ESG ratings. Modelling the complex structure of links between the variables relevant to the management of the transition to climate neutrality creates new perspectives on the correlations between them, exercised directly and indirectly (the ability to mediate). Thus, the results revealed that that the transition to sustainable practices significantly affects the operational activities of companies (negative correlation between ESG ratings and operational growth variables). However, increased efficiency and productivity (positive relationship between ESG ratings and employability and profitability variables) can mitigate the negative impact and maintain the financial performance of companies.