Can an ESG-Focused Approach Lead to Excellence in the Fashion Industry? Transparency as a Driver for Improved Performance

This study investigates the influence of Environmental, Social, and Governance (ESG) disclosure on financial and operational performance in the fashion industry, using the 2023 Fashion Transparency Index Score as a measure of transparency processed by the NGO “Fashion Revolution” as a tool that can be used by consumers to make more conscious decisions. The aim of the paper is to investigate if the index is a useful service to companies in terms of financial and operational performances. It underscores the integration of transparency into corporate strategy, highlighting its significance for reputation. This work contributes to the extensive discussion on ESG disclosure’s role in promoting sustainable, responsible business practices in the fashion industry. The work explores the hypothesis of a positive link between the Fashion Transparency Index score and financial and operational performance across a diverse sample of 65 companies, spanning varied geographic and industry segments. Nevertheless, the multivariate linear regression analysis indicates a non-significant relationship, implying limited influence on financial performance. Likewise, operational performance shows no significant correlation with the transparency score. These findings underscore the need for supplementary control variables or an alternative independent variable to enhance the model’s predictive accuracy and resilience beyond existing literature.