IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v17y2025i6p2341-d1607326.html

The Dual Path of the Impact of Digital Technology Adoption on ESG Performance

Author

Listed:
  • Yiying Wang

    (School of Business Administration, Capital University of Economics and Business, 121 Zhangjialukou, Beijing 100070, China)

  • Derek D. Wang

    (School of Business Administration, Capital University of Economics and Business, 121 Zhangjialukou, Beijing 100070, China)

Abstract

The rapid advancement of digital technologies presents new opportunities and challenges for companies concerning their environmental, social, and corporate governance (ESG) performance. As organizations increasingly prioritize sustainable development, it becomes essential to investigate the role of digital technology in enhancing ESG outcomes. Utilizing data from 35,650 Chinese listed companies spanning 2009 to 2021, this study employs a double fixed-effects model to analyze the dual pathways through which digital technology adoption influences ESG performance. The findings indicate that the adoption of digital technologies positively affects both current and future ESG performance; however, this impact diminishes over time. The breadth and depth of digital technologies offer complementary approaches to improving ESG performance. Specifically, the breadth of digital technologies enhances ESG performance by improving information transparency and alleviating financing constraints, while the depth of digital technologies further bolsters firms’ ESG initiatives by increasing operational efficiency. Additionally, this study reveals significant variations in the impact of digital technologies on ESG performance across different sectors, particularly between manufacturing and highly polluting firms. Notably, the adoption of digital technologies fosters opportunities for the standardization of information regarding firms’ ESG ratings.

Suggested Citation

  • Yiying Wang & Derek D. Wang, 2025. "The Dual Path of the Impact of Digital Technology Adoption on ESG Performance," Sustainability, MDPI, vol. 17(6), pages 1-24, March.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:6:p:2341-:d:1607326
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/17/6/2341/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/17/6/2341/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mu, Weiwei & Liu, Kefu & Tao, Yunqing & Ye, Yongwei, 2023. "Digital finance and corporate ESG," Finance Research Letters, Elsevier, vol. 51(C).
    2. Li, Quan & Chen, Huimin & Chen, Yang & Xiao, Tong & Wang, Li, 2023. "Digital economy, financing constraints, and corporate innovation," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    3. Zhuo Huang & Yunqing Tao & Xin Luo & Yongwei Ye & Tianyi Lei, 2023. "Regional digital finance and corporate investment efficiency in China," Applied Economics, Taylor & Francis Journals, vol. 55(43), pages 5115-5134, September.
    4. Feng, Jingyu & Yuan, Ying, 2024. "Green investors and corporate ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    5. Zhang, Dongyang, 2023. "Can digital finance empowerment reduce extreme ESG hypocrisy resistance to improve green innovation?," Energy Economics, Elsevier, vol. 125(C).
    6. Lou, Youcheng & Rahi, Rohit, 2023. "Information, market power and welfare," Journal of Economic Theory, Elsevier, vol. 214(C).
    7. Fei Li & Yang Zhao & Jaime Ortiz & Yan Chen, 2023. "How Does Digital Technology Innovation Affect the Internationalization Performance of Chinese Enterprises? The Moderating Effect of Sustainability Readiness," Sustainability, MDPI, vol. 15(14), pages 1-25, July.
    8. Fang, Zhen & Razzaq, Asif & Mohsin, Muhammad & Irfan, Muhammad, 2022. "Spatial spillovers and threshold effects of internet development and entrepreneurship on green innovation efficiency in China," Technology in Society, Elsevier, vol. 68(C).
    9. Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
    10. Erik Brynjolfsson & Lorin M. Hitt, 2003. "Computing Productivity: Firm-Level Evidence," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 793-808, November.
    11. Shailesh Rastogi & Kuldeep Singh & Jagjeevan Kanoujiya, 2023. "Firm's value and ESG: the moderating role of ownership concentration and corporate disclosures," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 32(1), pages 70-90, July.
    12. Avramov, Doron & Cheng, Si & Lioui, Abraham & Tarelli, Andrea, 2022. "Sustainable investing with ESG rating uncertainty," Journal of Financial Economics, Elsevier, vol. 145(2), pages 642-664.
    13. Veronika Belousova & Oxana Bondarenko & Nikolay Chichkanov & Denis Lebedev & Ian Miles, 2022. "Coping with Greenhouse Gas Emissions: Insights from Digital Business Services," Energies, MDPI, vol. 15(8), pages 1-26, April.
    14. Powers, Joshua B. & McDougall, Patricia P., 2005. "University start-up formation and technology licensing with firms that go public: a resource-based view of academic entrepreneurship," Journal of Business Venturing, Elsevier, vol. 20(3), pages 291-311, May.
    15. Leal-Rodríguez, Antonio L. & Ariza-Montes, Antonio J. & Morales-Fernández, Emilio & Albort-Morant, Gema, 2018. "Green innovation, indeed a cornerstone in linking market requests and business performance. Evidence from the Spanish automotive components industry," Technological Forecasting and Social Change, Elsevier, vol. 129(C), pages 185-193.
    16. P. Raghavendra Rau & Ting Yu, 2023. "A survey on ESG: investors, institutions and firms," China Finance Review International, Emerald Group Publishing Limited, vol. 14(1), pages 3-33, January.
    17. Liu, Yang & Dong, Jiuyu & Mei, Liang & Shen, Rui, 2023. "Digital innovation and performance of manufacturing firms: An affordance perspective," Technovation, Elsevier, vol. 119(C).
    18. Liao, Feimei & Hu, Yaoyao & Chen, Mengjie & Xu, Shulin, 2024. "Digital transformation and corporate green supply chain efficiency: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 195-207.
    19. Wang, Liang & Qi, Jiahan & Zhuang, Hongyu, 2023. "Monitoring or Collusion? Multiple Large Shareholders and Corporate ESG Performance: Evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    20. Li, Zhenghui & Huang, Zimei & Su, Yaya, 2023. "New media environment, environmental regulation and corporate green technology innovation:Evidence from China," Energy Economics, Elsevier, vol. 119(C).
    21. Sun, Guanglin & Li, Ting & Ai, Yongfang & Li, Qinghai, 2023. "Digital finance and corporate financial fraud," International Review of Financial Analysis, Elsevier, vol. 87(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Miaomiao Yi & Fei Ren & Zhang-Hangjian Chen, 2025. "Institutional Cross-Ownership and Corporate Sustainability Performance: Empirical Evidence Based on United Nations SDGs Ratings," Sustainability, MDPI, vol. 17(10), pages 1-22, May.
    2. Xiong Zheng & Lingling Li & Zhanjie Wang & Mengni Cao, 2025. "Solid Waste Governance Action and Corporate ESG Performance: Evidence from China’s “Zero-Waste City” Pilot Policy," Sustainability, MDPI, vol. 17(8), pages 1-21, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yiying Wang & Derek D. Wang & Rongxuan Liu, 2025. "Impact of Digital Technology Adoption on the Similarity of Sustainability Reports," Sustainability, MDPI, vol. 17(8), pages 1-24, April.
    2. Wang, Mansi & Yu, Xinxin & Hong, Xinyi & Yang, Xiaotao, 2025. "Can digital finance promote green innovation collaboration in enterprises?," Global Finance Journal, Elsevier, vol. 65(C).
    3. Fan Wu & Kaifeng Duan, 2025. "Building Sustainable Financial Capacity: How Supply Chain Digitalization Facilitates Credit Access by Adjustment Capability," Sustainability, MDPI, vol. 17(20), pages 1-27, October.
    4. Wenjuan Su & Jiyu Yu & Lingyun Zhao, 2025. "Can Sci-Tech Finance Policy Boost Corporate ESG Performance? Evidence from the Pilot Experiment of Promoting the Integration of Technology and Finance in China," Sustainability, MDPI, vol. 17(6), pages 1-30, March.
    5. Yan Yao & Zihong Ma, 2025. "Will Digital Inclusive Finance Improve the Quality and Quantity of SMEs’ Green Innovation?," Sustainability, MDPI, vol. 17(6), pages 1-19, March.
    6. Yonghong Li & Haoyue Xie & Chang Liu, 2025. "Research on Synergy Measurement and Digital Finance Driving Mechanism of Enterprise Digital Transformation and Greening Upgrade: An Empirical Analysis Based on the Complex System Coordination Degree M," Sustainability, MDPI, vol. 17(11), pages 1-31, May.
    7. Ayaz, Muhammad & Anwer, Zaheer & Hassan, M. Kabir & Xiaoyang, Xu, 2025. "Inhabiting influence of digital finance on stock price synchronicity," Global Finance Journal, Elsevier, vol. 64(C).
    8. Yunfu Zhu & Haoling Yang & Ma Zhong, 2023. "Do ESG Ratings of Chinese Firms Converge or Diverge? A Comparative Analysis Based on Multiple Domestic and International Ratings," Sustainability, MDPI, vol. 15(16), pages 1-17, August.
    9. Wu, Ke & Zhang, Yongfang & Chen, Ying & Li, Miao, 2025. "Impact of digital finance on corporate ESG," International Review of Financial Analysis, Elsevier, vol. 104(PA).
    10. Li, Shuang & Xie, Nan, 2025. "The impact of digital finance on firms' digital Transformation: Mechanism analysis based on enterprise financing," International Review of Economics & Finance, Elsevier, vol. 101(C).
    11. Huang, Wei & Yang, Fan & Zhu, Yixin, 2025. "Digital economy and entrusted loans: Evidence from shadow banking," Finance Research Letters, Elsevier, vol. 73(C).
    12. Sun, Guanglin & Yan, Zian & Gong, Zejun & Li, Mengding, 2025. "The impact of ESG rating divergence on stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 102(C).
    13. Fang, Mingyue & Nie, Huihua & Shen, Xinyi, 2023. "Can enterprise digitization improve ESG performance?," Economic Modelling, Elsevier, vol. 118(C).
    14. Lei, Hao & Gao, Renyuan & Ning, Chutong & Sun, Guanglin, 2025. "Green finance and corporate green innovation," Finance Research Letters, Elsevier, vol. 72(C).
    15. Li, Yu & Bai, Tianpeng & Sha, Ya & Xu, Zitong, 2025. "Concentration of supply chain, internal control, and corporate risk-taking," International Review of Financial Analysis, Elsevier, vol. 103(C).
    16. Liang, Guibao & Xia, Qiao & Zhang, Lijie, 2025. "Nonlinear influence of digital finance on green economic efficiency," International Review of Financial Analysis, Elsevier, vol. 101(C).
    17. Hao, Pu & Alharbi, Samar S. & Hunjra, Ahmed Imran & Zhao, Shikuan, 2025. "How do ESG ratings promote digital technology innovation?," International Review of Financial Analysis, Elsevier, vol. 97(C).
    18. Fangjun Wang & Xinmiao Zhou & Tian Gan, 2024. "Can green funds improve corporate environmental, social, and governance performance? Evidence from Chinese-listed companies," PLOS ONE, Public Library of Science, vol. 19(3), pages 1-32, March.
    19. Zhang, Qi & Lau, Jat-Syu, 2025. "Promotion or suppression? An empirical exploration of online media supervision on corporate financing efficiency," Finance Research Letters, Elsevier, vol. 81(C).
    20. Lou, Zhukun & Li, Sujie & Tong, Jingyi & Zhao, Jing, 2025. "ESG rating disagreement and the cost of equity capital," Global Finance Journal, Elsevier, vol. 66(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:17:y:2025:i:6:p:2341-:d:1607326. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.