The Impact of Digital Transformation on ESG: A Case Study of Chinese-Listed Companies

Abstract

Enterprise digital transformation involves leveraging digital technologies to optimize and improve business operations. Not only does it augment operational efficiency, but it also establishes favorable conditions for bolstering ESG. To investigate the impact of digital transformation on ESG performance, this study employs a fixed effects model. The analysis utilizes data from a sample of 1422 publicly listed companies in China, spanning the period of 2012 to 2021. This paper further explores the mechanism and heterogeneity behind this impact. The research findings indicate that digital transformation has a positive impact on the ESG performance of companies. It remains robust even after conducting robustness tests, which include omitted variable and endogeneity tests. Furthermore, the study identifies variations in the influence of digital transformation on different dimensions of ESG performance. Through a mechanism analysis, it is revealed that digital transformation positively affects ESG performance by optimizing the structure of human capital, enhancing operational efficiency, and promoting green innovation. Additionally, heterogeneity analysis indicates that the positive effect of digital transformation on ESG performance is particularly significant in capital-intensive industries, high-tech companies, and companies with low carbon emissions.

1. Introduction

Digital transformation has become an inevitable choice for companies to enhance their competitiveness, innovation, profitability, and sustainable development. The process of digital transformation involves transforming traditional business models, processes, and operations into digital ones. Through digital transformation, companies achieve automation or partial automation of production processes; in addition, they enable intelligent workflows, improve production efficiency and capacity, and effectively enhance their competitiveness [1,2,3]. Technologies such as big data and artificial intelligence provide more accurate business insights and predictions during the digital transformation process, thus enabling innovation in production processes and operational modes [4]. By optimizing processes and innovating business models through digital transformation, companies can reduce costs by minimizing material waste and lowering management expenses [5]. Digital transformation also enhances user experience, improves customer satisfaction and loyalty, and achieves increased sales and profits for the company. The dual effect of reducing costs and increasing profits enhances a company’s profitability [6]. Meanwhile, every company is part of an industrial value chain, and the degree of digital transformation in the value chain and regional networks can drive the digital transformation of enterprises. The digital transformation of leading enterprises within the value chain further enhances the overall digital transformation level of production across society. To maintain sustainable development, companies must adapt to the digital advancement in industrial value chains and networks [7]. Therefore, choosing digital transformation is a necessary choice for companies.

Enterprises aim to maximize their economic benefits as their primary goal. However, with the increasing demand for sustainable development, there is growing attention from various sectors toward the environmental, social, and governance (ESG) performance of companies. There is now a stronger emphasis on companies disclosing their ESG information. Despite the existence of the principal–agent relationship in modern corporate systems, where managers pursue their economic interests and shareholders aim to maximize shareholder value, there is often limited consideration given by managers and shareholders to the environmental responsibilities of companies, particularly in the absence of mandatory policies or investor oversight [8,9]. As the global environment deteriorates and the concept of sustainable development becomes more prevalent, governments and investors are paying increasing attention to corporate social responsibility and other related aspects [10,11,12,13,14,15]. Corporate social responsibility encompasses various aspects, including fulfilling social and environmental responsibilities. During the process of fulfilling corporate social responsibility, companies may engage in practices such as “greenwashing” [16], where they falsely portray themselves as environmentally responsible. Consequently, corporate governance becomes a relevant aspect to consider. As a result, a more systematic focus is placed on a company’s performance in terms of environment, social issues, and corporate governance, which is referred to as ESG performance [17]. Moreover, governments around the world have successively introduced policies regarding ESG information disclosure. Currently, these policies are gradually shifting from voluntary to mandatory, and international organizations have also developed “international standards” for ESG disclosure by listed companies. For example, in January 2020, the U.S. Financial Services Commission passed the 2019 ESG Information Disclosure Simplification Act, which mandates eligible securities issuers to clearly describe the relevant content of specified ESG indicators in the written materials provided to shareholders and regulatory agencies. For another example, in November 2022, the European Council passed the “Corporate Sustainability Reporting Directive”, which expanded the coverage of ESG disclosure requirements and increased the requirements for corporate ESG information disclosure.

According to the economic and financial literature, there is a certain degree of inconsistency between corporate digital transformation and ESG goals. Different viewpoints exist regarding the impact of digital transformation on ESG. The essence of digital transformation lies in enterprises adopting more advanced technologies and operating models to achieve higher economic benefits. Therefore, companies have sufficient internal motivation to implement digital transformation. Conversely, achieving ESG goals is an activity with strong externalities, and, from an economic perspective, it may not be cost-effective for companies [18]. Hence, companies lack sufficient motivation to promote ESG practices. Although there is a certain degree of inconsistency between the two in terms of goals, most scholars believe that digital transformation can help improve a company’s ESG performance [19,20,21]. Wang and Esperança [22] and Lu, et al. [23] have verified the incentivizing effect of digital transformation on corporate ESG performance from the perspectives of listed companies and SMEs, respectively. At the same time, different scholars have proposed different views on the specific pathways of digital transformation’s impact on ESG and its influence on ESG sub-indicators. Fang, et al. [24] conducted research based on companies’ financial reports and concluded that digital transformation mainly affects corporate ESG performance by reducing agency costs and enhancing reputation. Digital transformation only affects the governance score (G) and social score (S) of a company without significantly improving the environmental score (E). On the other hand, Yang and Han [25] focused on discussing the moderating role of financing constraints in the impact of digital transformation on ESG. They believed that digital transformation has a significant positive effect on a company’s environmental score (E) and social score (S), but it does not have a significant impact on governance score (G). Some researchers have studied the green innovation effect of corporate digital transformation and concluded that it can incentivize green innovation, thereby improving environmental performance [26,27]. However, some scholars have argued that digital transformation has negative impacts on a company’s environmental, social, and governance performance. In terms of environmental governance, Lange, et al. [28] believe that digital transformation has both energy-saving effects and energy-consumption effects. Overall, the energy-consumption effects outweigh the energy-saving effects, thus making it difficult for digital transformation to improve environmental performance by reducing energy consumption. Regarding social governance, Niehoff [29] suggests addressing the negative social effects of digital transformation, such as unemployment and increased energy consumption, as these negative effects can disrupt a company’s sustainable development. In terms of corporate governance, digital transformation may lead to increased social and time pressures on employees, which can harm their health and safety, thus hindering the implementation of sustainable human resource management practices in companies [30,31]. Overall, scholars have different opinions on the impact of digital transformation on ESG, and a unified consensus has not yet been reached. Additionally, there are many potential mechanisms and pathways that have not been fully explored and require further in-depth research.

This article’s marginal contributions are reflected in the following aspects: Firstly, the benefits in conducting econometric tests to examine the impact of digital transformation on ESG and its various dimensions. Existing research on the impact of digital transformation on ESG has produced inconsistent conclusions. This article not only quantitatively tests the impact of digital transformation on ESG, but it also empirically analyzes the effects of digital transformation on each dimension of ESG. This approach can provide a comprehensive explanation for the inconsistent conclusions regarding the impact of digital transformation on ESG. Overall, based on the findings of this article, digital transformation has a positive impact on ESG, but the impact on different dimensions of ESG varies. Secondly, it explores the mechanisms through which digital transformation influences the corporate fulfillment of ESG responsibilities, thereby enriching and expanding the research on the non-economic effects of corporate digital transformation. Existing studies on the effects of corporate digital transformation have primarily focused on economic effects by considering the goals of digital transformation. However, ESG encompasses not only economic aspects, but also social and corporate governance aspects. Therefore, this article enriches and expands the research on the non-economic effects of corporate digital transformation. Thirdly, the benefits in analyzing the heterogeneity of corporate digital transformation behavior under goal differentiation. The goals of digital transformation and ESG alignment may not be fully consistent, and companies exhibit different decision-making behaviors based on their specific attributes (such as capital intensity, differences in energy consumption, etc.). This heterogeneity contributes to the varied impact of digital transformation on ESG.

The subsequent chapters of this article are arranged as follows: Section 2 presents the research design, which includes the theoretical framework and basic assumptions regarding the influence of corporate digital transformation on ESG. It also covers the model design, an explanation of relevant variables, and data sources. Section 3 focuses on the empirical analysis of the impact of digital transformation on ESG. It includes an analysis of how corporate digital transformation affects ESG and its various dimensions, as well as robustness tests to ensure the reliability of the findings. Section 4 delves deeper into the analysis of the impact of digital transformation on ESG. This section explores the mechanisms through which digital transformation influences ESG and investigates heterogeneity in this relationship across different companies based on their specific characteristics. Section 5 concludes the article, summarizing the key findings, implications, and potential areas for further research.

2. Research Design

2.1. Theoretical Analysis and Research Hypotheses

The impact of digital transformation on ESG for companies is multifaceted and includes enhancing resource utilization, optimizing corporate management processes, strengthening positive externalities, and improving internal governance. Digital technologies can help companies achieve more efficient resource utilization, as well as reduce carbon emissions and environmental pollution [32,33]. For example, through intelligent energy management systems, companies can monitor and optimize energy usage in real-time, reduce inventory levels in processes, lower energy consumption, and minimize waste emissions. Additionally, digital technologies can assist in sustainable supply chain management by optimizing supply chain processes, enhancing resource utilization, and minimizing losses and environmental impacts in logistics [34]. By establishing digital platforms, companies can facilitate close communication and collaboration between stakeholders, improve feedback loops, and optimize overall management. Digital technologies can also create better working environments for employees, improve employee welfare, and have positive effects on a company’s reputation and social image. Furthermore, digital transformation can enhance the quality and positive externalities of products and services provided by companies [35]. For instance, the introduction of digital products like electronic payments and e-healthcare can provide greater inclusivity and convenience for society, thereby increasing positive externalities. Digital transformation can also enhance the transparency of internal management and improve a company’s accountability system, thereby benefiting internal governance [36]. Through digital systems, companies can synchronize project progress and other key information internally while also monitoring and reporting critical metrics transparently, thus enabling more transparent operations and decision making. Moreover, digital transformation provides better data and risk management mechanisms, thereby assisting companies in addressing management challenges and reducing the risks of misconduct. Based on the above analysis, this research puts forward Hypothesis 1:

Hypothesis 1.

Corporate digital transformation is positively associated with improvements in ESG performance.

Digital transformation can optimize a company’s human capital structure, improve operational and management efficiency, and incentivize green innovation, thereby enhancing ESG performance. By leveraging digital technologies and tools, companies can optimize their workforce management and human resources strategies. Digital technologies can improve employees’ work efficiency, reduce labor costs, and enhance employee engagement and satisfaction. Additionally, digital transformation raises the requirements for workforce skills, thereby compelling companies to strengthen employee training, which contributes to enhancing the overall workforce capabilities. Furthermore, digital tools enable companies to streamline human resource processes such as recruitment, training, and performance management, thereby improving the efficiency and accuracy of human resource management. This helps companies better allocate and manage their human resources, increase employee productivity and contribution, and promote sustainable development. Moreover, digital transformation can improve operational and management efficiency within companies. By leveraging digital tools and data analytics, companies can monitor and analyze the operational performance of various business areas in real-time and can thus make informed decisions promptly. Digital systems provide comprehensive and accurate data, thereby assisting companies in understanding and managing risks, as well as aiding in identifying and addressing potential issues [37]. This enhances operational efficiency, reduces costs, and strengthens companies’ agility and competitiveness. Digital transformation can also stimulate green innovation within companies [38]. Through the application of digital technologies, companies can engage in innovative practices such as green product design, intelligent energy management, and environmental monitoring. Digital tools can assist companies in analyzing and optimizing energy consumption, reducing environmental pollution, and supporting circular economy models. Additionally, digital transformation can provide more data and insights, thus helping companies discover and leverage new opportunities in the environmental sector, and aiding in driving the implementation of green innovations [39]. This enhances companies’ sense of environmental responsibility and sustainability, thereby improving their ESG ratings. Based on the above analysis, this paper also proposes Hypothesis 2:

Hypothesis 2.

Digital transformation can enhance a company’s ESG performance by optimizing its human capital structure, improving operational and management efficiency, and fostering green innovation.

The influence of digital transformation on a company’s ESG performance may vary depending on the nature and characteristics of the company, such as whether it is capital-intensive, a high-tech enterprise, or how sustainable it can be due to its level of carbon emissions. Capital-intensive companies are characterized by high investments in fixed assets and equipment management costs. Through the application of digital technologies, these companies can achieve an automation of production processes or process optimization, thus greatly improving equipment management efficiency and enhancing energy utilization efficiency, as well as reducing resource consumption and pollution. Simultaneously, digital technologies can provide more accurate environmental monitoring reports and related information to these types of companies, thus helping them better track and manage their environmental and social impacts. Therefore, the impact of digital transformation on ESG performance may be more pronounced in capital-intensive companies. High-tech companies place greater emphasis on innovation and technology-driven approaches. The application of digital technologies can enhance their innovation capability and competitiveness, improve product and service efficiency, and promote sustainable development. While bringing opportunities, the widespread adoption of digital technologies also poses new challenges for high-tech companies, such as technological transformation risks and data privacy concerns. The handling of these issues is closely related to a company’s ESG performance. Therefore, whether a company is a high-tech enterprise can affect the role of digital transformation in its ESG performance. Carbon emission levels are a crucial environmental indicator, and the application of digital technologies can provide more accurate and real-time carbon emission reporting mechanisms for companies because it improves the transparency of carbon reporting, which is beneficial for a company’s sustainable development. In addition, for companies with different levels of carbon emissions, the impact of digital transformation on their ESG performance may vary. For high-carbon-emission companies, digital transformation can help them achieve emission reduction targets faster; for example, by improving energy efficiency through monitoring and control systems. For low-carbon-emission companies, digital transformation may bring other impacts, such as heightened attention to issues related to resource recycling, the promotion of more green products and services, and the enhancement of the company’s social reputation. Based on the above analysis, this article proposes Hypothesis 3:

Hypothesis 3.

The influence of digital transformation on a company’s ESG performance displays heterogeneity based on the company’s capital intensity, technological level, and carbon emission levels.

2.2. Model Design and Variable Explanation

2.2.1. Model Design

The research sample of this study comprises 1422 listed companies in China from 2012 to 2021. A panel data model was employed for the analysis [40,41]. Taking into account the continuously changing levels of digital transformation among companies and the evolving impact on ESG performance, as well as the various unquantifiable differences among different firms, this study further selects a fixed effects panel model to investigate the relationship between corporate digital transformation and ESG performance. The model is set as follows:

$$\begin{array}{c}ES{G}_{i,t}={\alpha }_0+{\alpha }_{1}digitizatio{n}_{i,t}+{\displaystyle {\displaystyle \sum }_{j=1}^5}{\delta }_{j}Contro{l}_{j,i,t}+{\mu }_t+{\sigma }_i+{\epsilon }_{i,t},\end{array}$$

(1)

where $i$ represents the firm; $t$ represents the year; and $digitizatio{n}_{i,t}$ represents the level of digital transformation of firm i in year t. $ES{G}_{i,t}$ represents the ESG performance of firm $i$ in year $t$. $Contro{l}_{j,i,t}$ represents the control variables. ${\epsilon }_{i,t}$ represents the random disturbance term. ${\mu }_t$ and ${\sigma }_i$ represent the firm fixed effects and time-fixed effects, respectively.

Furthermore, it is necessary to consider the mechanism through which corporate digital transformation affects ESG performance. In addition to directly influencing ESG performance, corporate digital transformation may also have an impact on ESG performance through certain mediating variables, indicating the presence of the mediating effects of corporate digital transformation on ESG performance. This study employs a stepwise regression approach to examine the mediating effects of corporate digital transformation on ESG performance. The specific model specification includes Equation (1), as well as the following Equations (2) and (3):

$$\begin{array}{c}me{d}_{i,t}={\beta }_0+{\beta }_{1}digitizatio{n}_{i,t}+{\displaystyle {\displaystyle \sum }_{j=1}^5}{\delta }_{j}Contro{l}_{j,i,t}+{\mu }_t+{\sigma }_i+{\epsilon }_{i,t},\end{array}$$

(2)

$$\begin{array}{c}ES{G}_{i,t}={\beta }_2+{\beta }_{3}digitizatio{n}_{i,t}+me{d}_{i,t}+{\displaystyle {\displaystyle \sum }_{j=1}^5}{\delta }_{j}Contro{l}_{j,i,t}+{\mu }_t+{\sigma }_i+{\epsilon }_{i,t}.\end{array}$$

(3)

In Equations (2) and (3), $me{d}_{i,t}$ represents the mediating variable. Equation (2) examines the impact of corporate digital transformation on the mediating variable, while Equation (3) incorporates the mediating variable into Equation (1) to consider its influence on corporate ESG performance. When the results of Equation (1) are significant, the significance of Equations (2) and (3) can be used to determine the existence of the mediating effects.

2.2.2. Variable Descriptions

• Dependent Variable

The dependent variable in this study is corporate ESG performance (ESG). Following the previous literature, we use the Huazheng ESG ratings compiled by the Sino-Securities Index Information Service (Shanghai) Co. Ltd. (Shanghai, China. https://www.chindices.com/) as a proxy variable. These ratings consist of nine levels, ranging from AAA to C. In this study, we assign scores from 9 to 1 according to the rating levels, where a higher score indicates better ESG performance. The Huazheng ESG rating system (Shanghai, China. https://www.chindices.com/esg-ratings.html) is widely used in ESG research in China and is considered highly credible.

• Core Explanatory Variable

The core explanatory variable in this study is the level of corporate digital transformation (digital), as cited by Fang, et al. [24]. We utilize the proportion of digital transformation-related vocabulary in the Management Discussion and Analysis (MD&A) section of a company’s annual report as a proxy variable. The specific approach used to measure digital transformation was as follows: First, we constructed a vocabulary dictionary of 162 digital-transformation-related terms based on digital transformation terminologies found in Chinese national policy documents. These dictionary terms include terminology such as “information”, “networking”, and “artificial intelligence”. Next, we conducted text analysis on the MD&A sections of the annual report of each listed company to extract the frequency of the various digital terms appearing in the respective MD&A sections. To calculate the digital transformation degree of each enterprise, we divided the total frequency of enterprise digital-transformation-related terms by the length of the MD&A sections of each annual report. This result was then multiplied by 100, thus yielding the final digital transformation degree of the enterprise (digital).

• Control Variables

By drawing from existing studies and considering the research objectives of this study, we selected the following control variables: firm size (size), the shareholding proportion of the largest shareholder (top1), the shareholding proportion of the top five shareholders (top5), the proportion of independent directors (lndep), and the listing age (listage). Firm size (size) was measured using the natural logarithm of total assets at the end of the fiscal year. The shareholding proportion of the largest shareholder (top1) was calculated by dividing the number of shares held by the largest shareholder by the total number of shares; similarly, the shareholding proportion of the top five shareholders (top5) was calculated in this manner. The proportion of independent directors (lndep) was calculated as the ratio of the number of independent directors to the total number of directors. The listing age (listage) was measured as the natural logarithm of the difference between the current year and the year of the initial public offering plus one.

• Other Variables

Human capital structure (undergraduate): Human capital structure was measured by the proportion of employees with a bachelor’s degree or above in the enterprise. A higher proportion indicates a better human capital structure within the company, thus reflecting a more educated workforce.

Management efficiency (manage): Management efficiency was measured by the proportion of management expenses to the main business income. A higher ratio indicates a lower management efficiency.

Operational efficiency (operate): Operational efficiency was measured by the total asset turnover ratio, which was calculated through the ratio of sales revenue to total assets. A higher ratio indicates a higher operational efficiency.

Green innovation level (green): The logarithm of the number of green patents of a company plus one was used as a proxy variable for green innovation. Using the logarithm helps to scale down the variable. A higher value of this variable indicates a higher level of green innovation within the company.

Innovation (innovation): This variable is qualitative and based on the recognition by relevant provincial units in China, such as the Science and Technology Department. If a company is recognized as a high-tech enterprise, it is assigned a value of 1; otherwise, it is assigned a value of 0.

Capital-intensive industry (capital): This variable is qualitative. First, we calculated the per capita fixed assets for each company. Then, the companies with a proportion of per capita fixed assets in the top 25% are classified as capital-intensive firms and assigned a value of 1; otherwise, they are assigned 0.

Carbon emissions (CO₂): The data for this variable were compiled from the annual energy consumption, electricity consumption, heat consumption, and carbon emission levels disclosed in the company’s social responsibility reports, sustainable development reports, and reports from the Ministry of Environment. The data were standardized, and the total carbon emissions for each company were calculated. If a company’s average annual carbon emissions from 2012 to 2020 ranked within the top 50% among all of the companies, it was classified as a high-carbon-emission company and assigned a value of 1; otherwise, it was assigned a value of 0.

2.3. Data Source and Descriptive Statistics

This study selected Chinese A-share listed companies from 2012 to 2021 as the research sample, and it conducted the following screenings: First, to avoid the influence of companies with abnormal operations on the accuracy of the empirical analysis, ST samples were excluded. Second, considering the special financial reporting structure of the financial industry, samples from the financial industry were excluded. Third, samples with severe data missing were excluded. Finally, data from the 1422 listed companies from 2012 to 2021 were obtained. Among them, the data on ESG performance were obtained from the Wind database, the data on digital transformation levels were compiled based on the companies’ financial reports, and the data on control variables were obtained from the CSMAR database. The source data for high-tech and capital-intensive enterprises were obtained from the CSAMR database, and the data on carbon emissions levels were compiled from the social responsibility reports, sustainable development reports, and other such relevant reports disclosed by each company. The descriptive statistics of the main variables in this study are shown in

Table 1. Descriptive statistics of key variables.

Variable	Obs.	Mean	Std. Dev.	Min.	Max.
ESG	14,220	6.759	1.192	1.000	9.000
Environment	14,203	2.017	1.239	1.000	9.000
Social	14,203	4.450	1.939	1.000	9.000
Governance	14,203	5.386	1.384	1.000	9.000
digital	14,220	0.883	0.963	0.000	12.641
size	14,203	22.665	1.347	19.144	28.636
top1	14,203	0.343	0.153	0.024	0.900
top5	14,203	0.509	0.154	0.069	0.985
lndep	14,203	0.374	0.058	0.000	0.800
listage	14,203	2.577	0.534	0.693	3.466

.

Based on Table 1, the data used in this article did not have singular values, thus making them suitable for empirical research. The average value of ESG performance was 6.759, thereby indicating that most companies performed well in ESG during the sample period. However, there was some volatility in the distribution of ESG performance, as evidenced by the standard deviation of 1.192. The average values of the environment, social, and governance indicators were 2.017, 4.45, and 5.386, respectively. These relatively small average values in environmental, social, and corporate governance indicators suggested that there is room for improvement in the performance of enterprises in these areas. Regarding the digital transformation level, the average value of 0.883 was significantly lower than the maximum value of 12.641, which indicates that most companies exhibit a poor level of digital transformation, with only a very small number of enterprises leading in this aspect.

To further illustrate this fact, the following is a scatter plot of the digital transformation level of each enterprise in 2021.

From Figure 1, it can be seen that the level of digital transformation in most enterprises is relatively low, and only a small number of enterprises have already achieved a high level of digital transformation.

3. Quantitative Analysis of the Impact of Digital Transformation on ESG

3.1. The Impact of Digital Transformation on ESG

To evaluate the impact of digital transformation on ESG performance, this study employed Equation (1) for regression analysis. In this analysis, we excluded the control variables and fixed time effects.

As shown in

Table 2. The impact of digital transformation on ESG performance.

	(1)	(2)	(3)
	ESG	ESG	ESG
digital	0.035 ***	0.029 **	0.025 **
	(3.179)	(2.285)	(1.975)
size			0.208 ***
			(11.999)
top1			0.026
			(0.192)
top5			0.252 *
			(1.940)
lndep			0.239
			(1.440)
listage			−0.444 ***
			(−8.069)
cons	6.728 ***	6.734 ***	2.932 ***
	(595.541)	(536.354)	(7.377)
Individual effect	YES	YES	YES
Time effect	NO	YES	YES
N	14,220	14,220	14,203
R2	0.0008	0.0004	0.0200

Note: *, **, and *** represent the significance levels of 10%, 5%, and 1%, respectively, with the t-values in parentheses.

, digital transformation significantly enhances the ESG performance of listed companies. This conclusion is consistent with the research findings of most scholars [42]. Columns (1)–(2) of Table 1 depict the cases of controlling only individual fixed effects and controlling both individual fixed effects and time-fixed effects without including control variables. The results consistently demonstrated that digital transformation significantly improves ESG performance, thus validating Hypothesis 1 of this study. For every one-unit increase in the level of digital transformation, the ESG performance is expected to increase by 0.025 units.

The findings indicate that digital transformation plays a significant role in boosting a company’s ESG performance, thus suggesting a certain level of consistency between digital transformation and enhanced ESG performance in practice. The goal of digital transformation in companies is to improve efficiency in various aspects, thereby leading to better outcomes and progress in areas such as energy utilization and corporate management [43], which results in improved ESG performance. Moreover, implementing ESG practices requires companies to invest human and material resources, and digital transformation can effectively enhance the operational conditions of companies, thus providing better conditions for implementing ESG practices. The digital production model emphasizes efficiency and collaboration, not only within the company, but also in terms of improved efficiency in cooperation between companies. For instance, digital technologies can facilitate digital collaboration along the industrial chain, promote the implementation of a circular economy model [44], and enable effective resource recycling and reuse, thereby aligning with the principles of sustainable development. In conclusion, despite the differing objectives of digital transformation and the implementation of ESG practices in companies, companies can still drive improvements in ESG performance by accelerating their digital transformation efforts.

As shown in

Table 3. Impact of digital transformation on ESG sub-dimensions.

	(1)	(2)	(3)
	Environment	Social	Governance
digital	0.075 ***	0.054 **	0.020
	(5.580)	(2.493)	(1.064)
size	0.111 ***	0.442 ***	0.100 ***
	(5.970)	(14.629)	(3.846)
top1	0.139	−0.255	0.060
	(0.954)	(−1.080)	(0.295)
top5	−0.235 *	−0.185	0.592 ***
	(−1.689)	(−0.820)	(3.028)
lndep	0.124	0.123	2.844 ***
	(0.699)	(0.426)	(11.406)
listage	0.325 ***	−0.168 *	−1.105 ***
	(5.514)	(−1.752)	(−13.360)
cons	−1.378 ***	−5.038 ***	4.554 ***
	(−3.235)	(−7.290)	(7.623)
Individual effect	YES	YES	YES
Time effect	YES	YES	YES
N	14,203	14,203	14,203
R2	0.0103	0.0179	0.0334

Note: *, **, and *** represent the significance levels of 10%, 5%, and 1%, respectively, with the t-values in parentheses.

, there are differences in the impact of digital transformation on the sub-dimensions of corporate ESG performance. Digital transformation has a significant positive influence on the environmental (environment) and social (social) dimensions. This is the same as Yang and Han’s viewpoint, but different from Fang, Nie, and Shen’s views [23,24]. For every 1 unit increase in digital transformation, the environmental performance (environment) improved by 0.075 units, and the social performance (social) improved by 0.054 units. The coefficient for the impact of digital transformation on corporate governance (governance) was found to be positive but not significant.

In terms of environmental performance, on the one hand, digital transformation reduces the consumption of office resources through the digitization of office work; on the other hand, digital transformation helps enterprises better monitor energy utilization through data analysis tools, improve energy utilization efficiency, and reduce negative environmental impacts. Therefore, digital transformation has an improved effect on the environmental performance of enterprises. In terms of social performance dimensions, digital transformation provides a wider range of communication and interaction channels, thus helping enterprises better communicate and cooperate with stakeholders, which helps with achieving higher levels of social responsibility and employee welfare. Therefore, digital transformation has an improved effect on the social performance of enterprises. In terms of corporate governance, digital transformation enhances the overall level of corporate governance by providing greater transparency and data visualization tools, thereby strengthening internal control and risk management, as well as improving the quality of corporate governance, accountability, and disclosure standards. Digital transformation provides more tools and opportunities for enterprises to establish stronger governance frameworks. From a theoretical perspective, the impact of digital transformation on the three sub-dimensions of ESG may be positive, including the impact on corporate governance dimensions. However, from the empirical results, it can be seen that the impact of digital transformation on the three sub-dimensions of ESG was not the same. Specifically, it had a significant improvement effect on environmental and social performance, while the impact on corporate governance was not significant. Here are some explanations for this phenomenon.

There could be two reasons for the differences in the impact of digital transformation on the sub-dimensions of corporate ESG performance. First, stakeholders tend to place more emphasis on environmental and social performance when assessing corporate ESG performance, while overlooking governance. Enterprises tend to strive for a higher reputation, so when implementing ESG practices, they will pay more attention to improving environmental and social performance [45], and, when conducting digital transformation, they will also pay more attention to combining these two aspects. Therefore, when implementing ESG practices, companies are more likely to focus on improving environmental and social aspects, as well as prioritizing their alignment with digital transformation. Second, the influence of digital transformation on corporate governance is limited. Corporate governance encompasses aspects such as governance structure, business ethics, and compliance management. Digital transformation positively impacts internal management within the company, which may affect the management structure, but it is difficult to influence the board structure or the behavior of major shareholders. Additionally, optimizing internal management does not have a decisive impact on the business ethics of a company. In summary, digital transformation still has some influence on corporate governance, but this influence may be relatively weak, thus leading to insignificant coefficients. Third, this may be a manifestation of the heterogeneity of the impact of digital transformation on the sub-dimensions of ESG. The content involved in the sub-dimensions of ESG varies, and, in the process of digital transformation, environmental and social performance are more easily affected. This suggests that enterprise managers should pay attention to the differences between the sub-dimensions when implementing ESG practices.

3.2. Robustness Tests on the Impact of Digital Transformation on ESG

To examine the robustness of the empirical results, this study conducts robustness tests using three different approaches.

First, four control variables were added to address the issue of omitted variables: dual-role (dual), management ownership ratio (mshare), leverage ratio (lev), and whether the company is in a loss position (loss). Among them, dual-role (dual) and loss were qualitative variables. If the chairman and CEO are the same person, dual-role (dual) takes a value of 1; otherwise, it is 0. If the company has a negative net profit in the current year, the loss takes a value of 1; otherwise, it is 0.

Second, the explanatory variables were replaced, and regressions were conducted again to verify whether the observed empirical results were dependent on specific variables. In this study, the logarithm of the frequency of digital transformation terms in the MD&A sections of annual reports (digital_freq) were used as a new proxy variable to examine the impact of digital transformation on corporate ESG performance.

Finally, the instrumental variable method was employed to address potential endogeneity issues in the model. To ensure the accuracy of the results, this study selected instrumental variables from two different perspectives. The first was the average level of digital transformation among the firms in the same industry and region. Digital transformation among the firms in the same industry and region may have a spillover effect, but it should not directly affect the ESG performance of individual companies. The second instrumental variable was the logarithm of the number of mobile phone users in the region. The digital environment in which a company operates may influence its motivation for digital transformation, but it should not directly affect its ESG performance.

The results of the robustness tests are presented in

Table 4. Robustness test results.

	(1)	(2)	(3)	(4)
	ESG	ESG	ESG	ESG
digital	0.024 *		0.860 *	0.482 *
	(1.912)		(1.875)	(1.891)
digital_freq		0.045 ***
		(3.684)
size	0.241 ***	0.200 ***	0.139 ***	0.163 ***
	(13.207)	(11.380)	(3.210)	(5.746)
top1	0.151	0.056	0.185	0.094
	(1.108)	(0.407)	(1.026)	(0.615)
top5	0.044	0.198	0.481 **	0.393 **
	(0.333)	(1.511)	(2.449)	(2.474)
lndep	0.261	0.291 *	0.415 *	0.286
	(1.579)	(1.726)	(1.925)	(1.554)
listage	−0.246 ***	−0.421 ***	−0.464 ***	−0.450 ***
	(−4.221)	(−7.559)	(−7.154)	(−7.678)
dual	−0.052 **
	(−2.435)
mshare	0.824 ***
	(7.938)
lev	−0.398 ***
	(−5.390)
loss	−0.104 ***
	(−4.447)
cons	1.892 ***	2.944 ***
	(4.515)	(7.332)
Individual effect	YES	YES	YES	YES
Time effect	YES	YES	YES	YES
N	14,203	13,953	14,203	13,653
R2	0.0303	0.0199

Note: *, **, and *** represent the significance levels of 10%, 5%, and 1%, respectively, with the t-values in parentheses.

.

As shown in Table 4, the regression results in this study are robust. Column (1) in Table 4 shows the baseline regression results after adding the control variable set; column (2) illustrates the baseline regression results with the replacement of explanatory variables; and columns (3) and (4) present the baseline regression results, achieved by using instrumental variable methods. Regardless of the testing approach used, it can be observed that digital transformation has a significant positive impact on corporate ESG performance.

4. Further Research on the Impact of Digital Transformation on ESG

4.1. Mechanism Test of the Impact of Digital Transformation on ESG

Digital transformation has the potential to optimize the human capital structure within enterprises, as well as improve management efficiency and operational effectiveness, thereby positively impacting the overall ESG performance of enterprises. To empirically examine these proposed mechanisms paths, this paper employs the stepwise regression method. For detailed information on the specific model settings and variables used in this analysis, please refer to Section 2.2 of this paper.

Table 5. The mediating effect test results.

	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	ESG	ESG	Management Efficiency	ESG	Operational Efficiency	ESG	Green	ESG
digital	0.716 ***	0.023 *	−0.007 ***	0.024 *	0.015 ***	0.024 *	0.763 **	0.025 **
	(5.695)	(1.839)	(−4.797)	(1.881)	(3.273)	(1.894)	(2.343)	(1.973)
undergraduate		0.002 ***
		(2.651)
Management efficiency				−0.165 **
				(−2.168)
Operational efficiency						0.069 ***
						(2.774)
green								0.000
								(0.076)
Company size	1.452 ***	0.205 ***	−0.018 ***	0.205 ***	−0.033 ***	0.211 ***	0.735	0.208 ***
	(8.325)	(11.775)	(−9.011)	(11.791)	(−5.373)	(12.120)	(1.627)	(11.996)
Percentage of shares held by the largest shareholder	−7.580 ***	0.044	−0.024	0.022	0.095*	0.020	−1.240	0.026
	(−5.547)	(0.322)	(−1.491)	(0.163)	(1.959)	(0.144)	(−0.350)	(0.192)
Percentage of shares held by the top five shareholders	4.286 ***	0.242 *	−0.002	0.252 *	−0.075	0.257 **	6.426 *	0.252 *
	(3.281)	(1.862)	(−0.133)	(1.937)	(−1.603)	(1.979)	(1.898)	(1.938)
Proportion of independent directors	−4.471 ***	0.249	−0.010	0.237	0.050	0.235	−3.848	0.239
	(−2.684)	(1.503)	(−0.511)	(1.430)	(0.838)	(1.420)	(−0.891)	(1.440)
Years since listing	−5.575 ***	−0.431 ***	−0.027 ***	−0.448 ***	0.138 ***	−0.453 ***	−0.748	−0.444 ***
	(−10.089)	(−7.803)	(−4.242)	(−8.145)	(6.992)	(−8.227)	(−0.523)	(−8.068)
cons	6.563	2.917 ***	0.587 ***	3.029 ***	1.050 ***	2.860 ***	−12.484	2.933 ***
	(1.644)	(7.339)	(12.712)	(7.574)	(7.387)	(7.182)	(−1.207)	(7.377)
Individual	YES	YES	YES	YES	YES	YES	YES	YES
Time	YES	YES	YES	YES	YES	YES	YES	YES
N	14,203	14,203	14,203	14,203	14,203	14,203	14,203	14,203
R2	0.0208	0.0205	0.0117	0.0203	0.0084	0.0206	0.0014	0.0200

Note: *, **, and *** represent the significance levels of 10%, 5%, and 1%, respectively, with the t-values in parentheses.

presents the measurement results derived from the analysis.

As shown in Table 5, digital transformation can enhance the ESG performance of listed companies by optimizing human capital structure, improving management efficiency and operational efficiency, and promoting green innovation. It also verifies Hypothesis 2 of this paper. The following provides a detailed explanation of the mechanisms through which digital transformation can effectively augment ESG.

• Human Capital Structure

As shown in columns (1)–(2) of Table 5, for every one-unit increase in the degree of digital transformation, the proportion of employees with a bachelor’s degree or higher increased by 0.716 units, and, for every one-unit increase in the proportion of employees with a bachelor’s degree or higher, the ESG performance increased by 0.02 units. This indicates that digital transformation can improve ESG performance by optimizing the human capital structure of a firm.

To achieve digital transformation, companies need to acquire a significant number of talents who possess digital skills. This implies that companies need to strengthen recruitment and training efforts for highly educated talents, thereby optimizing the human capital structure and promoting improvements in various aspects of ESG performance [46]. Firstly, the human capital structure influences resource utilization efficiency and environmental performance. If employees possess advanced skills and a strong environmental awareness, they can actively participate in environmental management and emission reduction efforts, thus improving the environmental performance of the company. Moreover, employees with strong technical capabilities can utilize digital technology to monitor and optimize environmental benefits, such as in reducing energy consumption or optimizing the supply chain, thereby improving environmental performance [47]. Secondly, the human capital structure affects employee management, which, in turn, influences a company’s social responsibility performance. A diverse human capital structure can facilitate the establishment of an equitable and inclusive work environment, thereby providing equal opportunities and treatment, as well as enhancing employee satisfaction and loyalty. Additionally, a sound human capital structure helps companies provide training, career development, and advancement opportunities for employees, all of which contribute to improved corporate social responsibility. Thirdly, high-quality employees can enhance internal governance, drive the establishment of robust internal control and compliance mechanisms, and improve governance transparency and performance. In summary, digital transformation can promote the optimization of a firm’s human capital structure, which positively spills over into ESG performance.

• Management and Operational Efficiency

As shown in columns (3)–(6) of Table 5, for every one-unit increase in the degree of digital transformation, the management expense ratio of companies decreased by 0.007 units, and the total asset turnover ratio increased by 0.015 units. For every one-unit decrease in the management expense ratio, the ESG performance increased by 0.165 units, and, for every one-unit increase in the total asset turnover ratio, the ESG performance increased by 0.069 units. This indicates that digital transformation can improve ESG performance by enhancing a company’s management and operational efficiency.

Digital transformation enhances management and operational efficiency in various ways, and its impact on ESG performance can be both direct and indirect. Digital systems provide efficient and convenient platforms for internal management, thus effectively improving management efficiency. Simultaneously, digital transformation can optimize internal processes and improve the efficiency of collaboration with partners, thus further enhancing operational efficiency [48]. Management and operational efficiency directly affect resource utilization, which is closely related to a company’s environmental performance. Moreover, improving management and operational efficiency enables companies to better serve stakeholders, as well as meeting the needs of customers, employees, and society, thereby directly improving social performance. The enhancement of management and operational efficiency also improves internal governance transparency, the scientific and accurate nature of decision making, as well as risk management capabilities, thus strengthening the effectiveness of corporate governance. Furthermore, management and operational efficiency are closely related to a company’s profitability and competitiveness. Generally, companies with stronger profitability and competitiveness have more capacity to invest in non-economic benefits. Therefore, the improvement in management and operational efficiency also implies that companies can create better conditions for implementing ESG practices, thereby indirectly improving ESG performance.

• Green Innovation Level

As shown in columns (7)–(8) of Table 5, for every one-unit increase in the degree of digital transformation, the level of green innovation in companies increased by 0.027 units, and for every one-unit increase in the level of green innovation, the ESG performance increased by 0.031 units. This indicates that digital transformation can improve ESG performance by promoting green innovation in companies.

Digital transformation promotes green innovation in companies, primarily impacting environmental performance and social performance. On the one hand, digital transformation increases the possibilities for companies to engage in green innovation and provides technological support for such innovation, thus helping companies improve their environmental performance. During the process of digital transformation, companies’ monitoring and management capabilities regarding resource consumption gradually improve. With a comprehensive understanding of their resource consumption and carbon emission data, companies are more likely to choose environmentally friendly technologies that align with sustainable development principles. They are also more likely to identify potential green innovation opportunities and actively pursue green innovation. Furthermore, data-driven predictive and optimization technologies can assist companies in assessing the feasibility and effectiveness of green innovation solutions and lowering innovation costs, thereby ultimately facilitating the successful implementation of green innovation and improving environmental performance. On the other hand, the green innovation of companies not only improves their environmental performance, but also generates spillover effects on supply chain partners. Through information sharing and collaborative efforts, companies can encourage supply chain partners to adopt green innovation technologies, assess the sustainability performance of suppliers, and devise corresponding improvement measures. This promotes the development of a more environmentally friendly and socially responsible supply chain, thereby enhancing corporate social performance.

4.2. Heterogeneity Analysis of the Impact of Digital Transformation on ESG

Different types of firms have distinct characteristics, and the impact of digital transformation on ESG performance may vary accordingly. This article categorizes firms based on whether they are capital-intensive, high-tech, or high-carbon-emission enterprises, as well as examines the heterogeneity of the effect of digital transformation on ESG performance across different types of firms. The econometric results are presented in

Table 6. Heterogeneity test results.

	Capital Intensive	Non-Capital Intensive	High Technology	Non-High Technology	High Carbon Emissions	Low Carbon Emissions
	(1)	(2)	(3)	(4)	(5)	(6)
	ESG	ESG	ESG	ESG	ESG	ESG
digital	0.084 **	0.022	0.047 **	0.010	0.007	0.053 **
	(2.160)	(1.617)	(2.419)	(0.600)	(0.449)	(2.347)
size	0.068 *	0.260 ***	0.219 ***	0.171 ***	0.184 ***	0.246 ***
	(1.937)	(12.770)	(7.096)	(7.525)	(8.648)	(7.666)
top1	−0.390	0.237	0.163	−0.018	−0.292 *	0.558 **
	(−1.580)	(1.443)	(0.657)	(−0.110)	(−1.718)	(2.418)
top5	0.747 ***	0.045	0.266	0.170	0.067	0.731 ***
	(3.116)	(0.287)	(1.138)	(1.055)	(0.405)	(3.476)
lndep	0.202	0.173	0.147	0.191	0.263	0.114
	(0.639)	(0.887)	(0.488)	(0.945)	(1.243)	(0.424)
listage	−0.049	−0.518 ***	−0.593 ***	−0.082	−0.385 ***	−0.319 ***
	(−0.417)	(−8.210)	(−5.971)	(−1.035)	(−5.053)	(−3.777)
cons	5.099 ***	1.998 ***	2.770 ***	3.048 ***	3.730 ***	1.162
	(6.155)	(4.313)	(3.924)	(5.674)	(7.516)	(1.633)
Individual effect	YES	YES	YES	YES	YES	YES
Time effect	YES	YES	YES	YES	YES	YES
N	3546	10,657	5655	8472	8530	5673
R2	0.0078	0.0261	0.0235	0.0094	0.0132	0.0283

Note: *, **, and *** represent the significance levels of 10%, 5%, and 1%, respectively, with the t-values in parentheses.

.

Based on Table 6, it is evident that the impact of digital transformation on ESG performance is more significant for capital-intensive firms, high-tech firms, and low-carbon-emission enterprises. Hypothesis 3 of this study is thus validated. The following is a detailed explanation of the heterogeneity in the effects of digital transformation on ESG performance:

• Capital-Intensive Firms

Columns (1)–(2) in Table 6 present the regression results for the impact of digital transformation on ESG performance for capital-intensive and non-capital-intensive firms, respectively. In capital-intensive firms, a one-unit increase in the level of digital transformation led to a significant improvement of 0.084 units in ESG performance. However, for non-capital-intensive firms, the regression coefficient for digital transformation on ESG performance was not statistically significant. Several reasons may explain this difference. Firstly, according to the scale effect theory, capital-intensive firms have larger scales and production capacities, thereby enabling them to benefit from economies of scale and having more opportunities and resources for digital transformation. For instance, significant capital investments can support their larger-scale investments in digital infrastructure and technological research and development, thereby facilitating a rapid advancement in digital transformation. Under the advantage of economies of scale, capital-intensive firms can more effectively leverage digital transformation to enhance their ESG performance. Secondly, high-capital-intensive firms may have established strong relationships with suppliers, customers, and relevant institutions, thereby creating a robust network of knowledge and resource spill-overs that help them better utilize the potential of digital transformation and improve their ESG performance. Thirdly, capital-intensive firms are often positioned upstream of industries and have higher entry barriers, thereby providing them with a stronger market competitiveness and bargaining power. Such market advantages generate more profit opportunities, thus allowing them to invest more extensively in ESG performance and fully exploit the potential of digital transformation. In summary, capital-intensive firms may possess comparative advantages in digital transformation and improving ESG performance. However, this does not imply that non-capital-intensive firms cannot fully leverage the positive effect of digital transformation on ESG performance. On the contrary, non-capital-intensive firms can capitalize on their advantages, explore digital transformation opportunities through flexible innovation and collaboration, and further enhance their ESG performance.

• High-Tech Firms

Columns (3)–(4) in Table 6 present the regression results for the impact of digital transformation on ESG performance for high-tech and non-high-tech firms, respectively. For high-tech firms, a one-unit increase in the level of digital transformation led to a significant improvement of 0.047 units in ESG performance. However, for non-high-tech firms, the regression coefficient for digital transformation on ESG performance was not statistically significant. Several reasons may explain this difference. Firstly, high-tech firms typically possess stronger research and development capabilities, as well as innovation capacities, thus enabling them to adopt more advanced technologies and innovative applications in digital transformation. These technologies and applications contribute to improved productivity, resource efficiency, and environmental friendliness. Through digital technology and innovation, high-tech firms can better address environmental challenges and achieve ESG improvements. Secondly, high-tech firms inherently have a value orientation toward innovation and sustainable development. This organizational culture and value system make high-tech firms more inclined to consider corporate social responsibility and incorporate it into their digital transformation strategies. This attitude allows digital transformation in high-tech firms to have a greater impact on ESG performance improvements. Thirdly, high-tech firms often require significant initial capital investments. Hence, their corporate image and reputation are crucial for their survival and growth. In such cases, high-tech firms are more inclined to focus on their ESG performance, invest more human and monetary resources in ESG practices, and fully leverage the potential of digital transformation in improving their ESG performance. In conclusion, digital transformation in high-tech firms may have a stronger impact on ESG performance improvements compared to digital transformation in non-high-tech firms.

• Carbon Emissions

Columns (5)–(6) in Table 6 present the regression results for the impact of digital transformation on ESG performance for high-carbon-emission and low-carbon-emission firms, respectively. For high-carbon-emission firms, the regression coefficient for digital transformation on ESG performance was not statistically significant. However, for low-carbon-emission firms, a one-unit increase in the level of digital transformation led to a significant improvement of 0.053 units in ESG performance. There are two possible explanations for low carbon emissions in firms: either the nature of the industry determines lower carbon emissions, or the firms actively manage their carbon emissions and achieve good results. In both cases, digital transformation reinforces the improvement of ESG performance. On the one hand, low-carbon-emission industries face less difficulty in implementing ESG practices compared to high-carbon-emission industries as they inherently cause less environmental pollution and demonstrate better environmental performance. Simultaneously, these firms can quickly apply digital systems comprehensively to monitor and manage carbon emissions, whereas high-carbon-emission industries require more technological advancements and investments to achieve similar efficacy. Thus, digital transformation in low-carbon-emission industries realizes earlier improvements in ESG performance. On the other hand, if a company belongs to a high-carbon-emission industry, such as the mining sector, and actively manages its carbon emissions with significant success, it indicates that the company has established a sound carbon emission management system and possesses abundant experience in carbon governance. Digital transformation can empower the company’s carbon management, thus further strengthening its carbon reduction capabilities and fully realizing the positive effect of digital transformation on ESG performance. In summary, the digital transformation of low-carbon-emission firms may have a stronger impact on ESG performance improvements compared to high-carbon-emission firms.

5. Conclusions

The alignment between digital transformation and enhancing corporate ESG (environmental, social, and governance) performance may exhibit some degree of inconsistency in objectives, yet practical implementation suggests a certain level of congruity. This study focuses on a sample of 1422 publicly listed Chinese companies for the period 2012–2021, in which the impact and mechanisms of digital transformation on corporate ESG performance were empirically examined. The empirical results demonstrate that, firstly, digital transformation significantly improves corporate ESG performance, which is a conclusion that remains robust even after considering omitted variable and endogeneity issues. Furthermore, the positive effect of digital transformation on ESG performance is primarily concentrated in the areas of environmental (E) and social (S) performance, with no significant impact on corporate governance (G). Secondly, the mechanism analysis revealed that digital transformation enhances corporate ESG performance through the optimization of human capital structure, improved operational and managerial efficiency, and incentivizing green innovation. Lastly, heterogeneity analysis suggests that capital-intensive firms, high-tech firms, and enterprises with lower carbon emissions benefit more prominently from digital transformation in terms of improving ESG performance. The conclusion of this article has certain practical guidance significance for enterprise management. Firstly, the conclusion of this article provides ideas for enterprise managers on how to promote digital transformation and ESG practices, in which it is suggested that they can combine the two and fully utilize the positive effects of digital transformation. Secondly, the conclusion of this article can help business managers understand how digital transformation affects ESG performance, improves management efficiency, and reduces the cost of trial and error in practice. Finally, the conclusion of this article can guide enterprise managers to fully integrate their situation and learn from each other when promoting digital transformation and ESG practice.

Based on the aforementioned research findings, this study proposes the following recommendations: The uncertainty of policies can affect the decision making of social units, thereby resulting in uncertain consequences [49,50]. If a country does not have clear policies or ESG policies related to enterprise digital transformation, then enterprises may not pay much attention to this, and the development trend of enterprise digital transformation and ESG practice will also be difficult to determine. To ensure the smooth progress of enterprise digital transformation and ESG practice, governments should adopt a multi-faceted approach by first formulating relevant policies to expedite the process of digital transformation within corporations, as well as encouraging the integration of digital technologies with ESG practices. This can foster the synergy between the internally driven digital transformation and the externally impactful ESG practices. Secondly, while current ESG disclosure practices in various countries rely predominantly on voluntary compliance, the probability of “Greenwashing” by corporations may significantly rise once mandatory ESG disclosure becomes more globally widespread. Therefore, regulatory bodies in different countries should not only establish ESG disclosure regulations, but they should also develop corresponding review processes to ensure the authenticity of corporate ESG disclosures. Lastly, there is a need to promote ESG principles vigorously, and to guide corporations to proactively engage in ESG practices, thereby facilitating sustainable economic development. At the micro-level, companies should strive to incorporate digital technologies into various aspects of their business operations to optimize human capital structure, improve operational and managerial efficiency, and enhance the level of green innovation, thus enhancing ESG performance. Furthermore, the digital economy, digital technology, and digital products are playing an increasingly important role in economies and societies; thus, digital transformation is an inevitable choice for enterprises [51,52,53,54,55]. Companies should consider their strengths and weaknesses, adopt digital transformation and ESG practices that align with their specific circumstances, and integrate the two in a synchronized manner to maximize the spillover effects of digital transformation on sustainable development.

This article uses panel data to study the relationship between enterprise digital transformation and ESG performance, and it concludes that digital transformation is beneficial for improving ESG performance. Further research was conducted on the mechanism path and heterogeneity, thereby providing a reference for subsequent research in terms of methods and conclusions. However, due to limitations in data, methods, and length, there are still many areas that remain to be addressed in this study, which provides direction for future research. Here are some shortcomings of this article and some prospects for future research. First, this article takes into account the particularity of financial statements when selecting samples, but it excludes financial companies. This is because they are a special type of company worthy of a separate study [56,57]. Second, this article did not consider the dynamic impact between digital transformation and ESG when studying the relationship between the two. Future research can further focus on the hysteresis or non-linear impact of digital transformation on ESG, as well as the threshold effect. Third, this article proves that digital transformation can improve the ESG performance of enterprises. It also explains which properties of enterprises may affect the role of digital transformation. Further, we can consider which digital technologies have a more obvious effect on improving ESG performance, and how enterprises can achieve it. During digital transformation, the spillover effect of digital technology on ESG improvement should be maximized. Fourth, the research in this article shows that digital transformation has no significant positive impact on corporate governance. This may be because digital transformation not only brings positive effects, but it also brings new risks and challenges to company management. Future research could discuss the heterogeneity of the impact of digital transformation on the sub-dimensions of ESG based on this approach. Finally, policy factors are a significant factor that affects the ESG performance of enterprises. This article has less consideration for policy factors, and future research can discuss how policy uncertainty affects the ESG performance of enterprises. Furthermore, the impact of digital transformation on ESG performance can be studied.