MANAGEMENT OF ESG ACTIVITIES OF COMPANIES BASED ON THE FINANCIAL RESULTS OF THEIR OPERATIONS

Abstract

The scientific article examines the fundamental reasons for ensuring ESG activities of enterprises from the standpoint of their financial performance. It highlights that expenses for ensuring ESG activities may conflict with companies’ goals to maximize profits, which is in line with the Shareholder Theory. This tension is partially exacerbated by the lack of clear regulatory requirements for organizing and reporting ESG activities, as well as by companies’ limited experience and the absence of established practices and methodologies.
The authors demonstrate that the motivation for enterprises, including their management and owners, stems from a connection between the level of ESG activity and the company’s financial performance. This correlation shifts management decision-making toward a straightforward action-result framework, enabling managers to assert that additional spending on ESG activities can lead to improved financial results. Furthermore, having quantitative estimates of such relationships allows for an objective assessment of the effects of incurred ESG expenses.
Based on the analysis conducted by the authors, it is concluded that an increase in ESG efforts by a company correlates with an increase in asset profitability. Notably, this positive influence persists not only in the year of direct ESG activity implementation but also in subsequent years.