Consumers are increasingly choosing products from companies that demonstrate genuine environmental responsibility. Although many studies have linked environmental, social, and governance (ESG) performance with stronger financial outcomes, the mechanism through which environmental responsibility translates into greater profitability has remained unclear. New research suggests that sustainability may improve corporate financial performance indirectly by increasing sales.
A study led by Professor Sang-Ho Lee from the Department of Economics at Chonnam National University, South Korea, in collaboration with Professor Arturo Garcia from Universidad Autónoma de Nuevo León, Mexico, has identified sales as a key mechanism connecting environmental responsibility with financial performance. The study was published online on May 22, 2026, in Corporate Social Responsibility and Environmental Management.
Growing concern about climate change has encouraged companies across industries to reduce greenhouse gas emissions, adopt greener technologies, and strengthen their environmental practices. At the same time, consumers are becoming increasingly conscious of the environmental consequences of their purchasing decisions, making environmental responsibility an important factor influencing consumer behaviour and corporate strategies.
“As green consumerism is increasing, the escalating global concern over climate change has compelled firms across numerous industries to integrate eco-friendly practices, such as greenhouse gas reduction and the adoption of green technologies, into their core operations,” explained Prof. Lee. This shift raises an important question for businesses: whether investments in environmental responsibility can generate measurable financial benefits and, if so, how those benefits emerge.
To investigate this relationship, the researchers analysed ESG ratings from the Korea Corporate Governance Service and financial information from the KIS Value database. Their sample included 579 publicly listed Korean companies, representing 2,316 firm-year observations between 2019 and 2022. Using mediation and moderated mediation analyses, they examined whether sales explain the relationship between environmental responsibility and financial performance and whether the effect differs across firm types and periods surrounding the COVID-19 pandemic.
The results showed that environmental responsibility did not directly improve financial performance. Instead, companies with stronger environmental performance achieved higher sales, which subsequently contributed to improved returns on assets and equity. This finding suggests that consumers’ responses to credible environmental practices can provide an important pathway through which corporate sustainability efforts ultimately create financial value.
The effect, however, was not the same for all companies. The sales-mediated relationship was significant among large Chaebol firms but not among non-Chaebol firms, suggesting that larger, more visible companies may be better positioned to translate environmental initiatives into consumer demand through their established reputations. The effect also became significantly stronger after the COVID-19 pandemic, potentially reflecting greater consumer and stakeholder attention to sustainability.
The findings provide businesses, investors, and policymakers with a clearer understanding of how environmental responsibility can contribute to economic performance. “This approach can be potentially applied to other countries that have different business styles and different degree of green consumerism,” said Prof. Lee. He concluded, “Our study emphasises not only the importance of green consumerism to improve environmental quality for a longer time horizon but also the financial performance-based sustainability of business strategies, as a win-win project for the earth and the people.”
More information: Arturo Garcia et al, Environmental Responsibility and Financial Performance: The Mediating Role of Sales in Korean Firms, Corporate Social Responsibility and Environmental Management. DOI: 10.1002/csr.70672
Journal information: Corporate Social Responsibility and Environmental Management Provided by Chonnam National University, The Research Information Management Team, Office of Research Promotion