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Environmental, Social, and Governance (ESG) and ESG Controversies: Opportunities or Challenges in Achieving Firm Efficiency?

Author

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  • Qian Long Kweh
  • Irene Wei Kiong Ting
  • Wen‐Min Lu
  • Jawad Asif
  • Hanh Thi My Le

Abstract

Many environmental, social, and governance (ESG) initiatives have emerged because of the world's fast economic growth. On the one hand, ESG appears to be good for firm efficiency. However, the substantial costs of ESG investments expose companies to significant operational risks. This study analyzes the overall effects of ESG, the combined effects of ESG and ESG controversies, and the individual effects of the three pillars of ESG and ESG controversies on firm efficiency, which is derived using a two‐stage data envelopment analysis (DEA) model. This study achieves its objectives by analyzing 1630 firm‐year observations from 2011 to 2020 that pertain to companies in the supply chain of Microsoft Corporation. The regression results indicate a significantly positive association between overall ESG and firm efficiency. However, the combined effects of ESG and ESG controversies on firm efficiency are insignificant. While ESG controversy efforts have a negative impact on firm efficiency, the regression results show that the environmental and governance pillars of ESG have a beneficial effect each. The findings suggest that firms should take active measures to address environmental issues and strengthen governance systems to improve firm efficiency.

Suggested Citation

  • Qian Long Kweh & Irene Wei Kiong Ting & Wen‐Min Lu & Jawad Asif & Hanh Thi My Le, 2026. "Environmental, Social, and Governance (ESG) and ESG Controversies: Opportunities or Challenges in Achieving Firm Efficiency?," Natural Resources Forum, Blackwell Publishing, vol. 50(3), pages 1163-1177, August.
    • Handle: RePEc:wly:natres:v:50:y:2026:i:3:p:1163-1177
    DOI: 10.1111/1477-8947.70019
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