Environmental, social and governance (ESG) practices and financial performance, evidence from food producers of Southern African Development community (SADC)

The primary objective of this research is to investigate whether Environmental, Social and Governance (ESG) practices influence corporate financial performance, by emphasizing the Southern African Development Community (SADC) region often underrepresented in global ESG discussions and focusing on the food producer sector that is one of the critical industries for this region. In order to achieve this aim, after the theoretical background on the subject, the empirical section examined whether engagement in ESG practices contributes to financial performance as measured by mainly Tobin Q and alternatively market-to-book value. The panel data models are employed for 8-year panel data of 32 publicly traded food producer companies of the SADC region between 2015 and 2022. Additionally, for the robustness test, the estimates were repeated on a subsample of 14 listed food producers in South Africa. According to the analysis results, companies disclosing ESG practices and so having an ESG score operate with higher Tobin Q and market-to-book value ratio, across both the SADC and South Africa samples. The findings suggest that companies actively involved in social, environmental, and governance initiatives, alongside transparent disclosure of their responsible practices, tend to exhibit superior financial performance. This finding is consistent with stakeholder theory, suggesting that firms can only enhance their long-term financial performance by fulfilling their responsibilities to all stakeholders and ultimately to society. Keywords: Corporate Social Responsibility (CSR), Environmental, Social, Governance (ESG) Practices, Corporate Financial Performance (CFP), Tobin Q, Food Industry, Food Producers, Southern African Development Community (SADC)