Does Green Productivity Drive ESG? Associational Evidence from Instrumental Variable and Panel Analyses

Green Total Factor Productivity (GTFP) serves as a pivotal indicator for balancing high-quality economic growth with increasingly stringent environmental regulations. However, empirical evidence regarding whether and how firm-level GTFP is associated with enhanced Environmental, Social, and Governance (ESG) performance in emerging markets remains limited. This study addresses this gap by examining the GTFP–ESG nexus within the macro-context of China’s “Dual-Carbon” goals (aiming for peak carbon emissions by 2030 and carbon neutrality by 2060). Utilizing an unbalanced panel dataset of Chinese A-share listed companies strictly covering the period from 2011 to 2022 (with 2010 data exclusively used for one-period lagged variables), we construct firm-level GTFP metrics using a non-radial SBM-DDF global Malmquist–Luenberger index—incorporating both desirable economic outputs and undesirable environmental emissions—and link them with Huazheng ESG ratings. To ensure robust empirical identification, we employ two-way fixed-effects models with lagged variables, propensity score matching (PSM), and an instrumental variable two-stage least squares (IV-2SLS) approach utilizing the leave-one-out provincial average GTFP as an instrument. The results indicate a significant positive association between GTFP and overall ESG performance, as well as its three sub-pillars. Specifically, a one-standard-deviation increase in GTFP corresponds to a 0.15-standard-deviation increase in the ESG score, a marginal effect of profound economic significance, providing robust associational insights via the IV estimates. Mechanism analyses reframe traditional mediation as descriptive associational pathways, revealing that digital transformation, green innovation, and information transparency serve as significant channels, theoretically demonstrating how resource efficiency translates into social legitimacy. Heterogeneity tests show that this association is more pronounced for non-state-owned enterprises, firms in eastern China, and those with lower financing constraints. These findings unpack the “black box” between technical efficiency and sustainability, providing empirical support for policymakers to align corporate productivity with international disclosure standards (such as the EU’s CSRD).