Environmental, social and governance (ESG) performance in the context of multinational business research
ISSN: 1525-383X
Article publication date: 3 February 2022
Issue publication date: 23 March 2022
Abstract
Purpose
This paper aims to examine the state of research on environmental, social and governance (ESG) performance in the context of multinational business research. This paper discusses research progress as well as various issues and complexities associated with using ESG ratings in cross-country studies and for assessing the performance of multinational enterprises (MNE) and emerging market multinationals (EMNEs).
Design/methodology/approach
The paper identifies emerging literature that focuses on tracking the development and uptake of ESG ratings in the international context. It discusses three emerging research streams: Research examining the ESG-financial performance relationship in emerging markets, research tracking the ESG performance of multinationals in the various countries and regions they are operating, and frameworks for assessing ESG-related risks on a country level.
Findings
While the emerging body of work adds an important dimension to the identification and awareness of ESG issues globally, numerous unresolved issues become evident. ESG frameworks have been built to assess corporate sustainability as it relates to firms in their “home” countries (typically with a focus on developed countries), with limited applicability and transferability to emerging markets. International firm activities are often not captured in detail and not comprehensively mapped across firm subsidiaries and a firm’s corporate supply chain where ESG issues are prone to happen, and ESG scores do not comprehensively integrate views and voices from various local stakeholders that are impacted by firm activities, particularly indigenous communities.
Research limitations/implications
Research on ESG ratings in the context of multinational business research is generally sparse and fragmented, thus creating opportunities for future research to expand on existing and emerging findings.
Practical implications
The paper creates awareness of issues to consider when using ESG ratings in cross-country studies and for assessing the ESG performance of MNEs and EMNEs: ESG scores can be subject to bias and are not weighted by materiality, which can be misleading for portfolio construction and performance measurement purposes. Managers need to be aware that ESG scores are often not capturing ESG issues occurring in supply chains and ESG issues affecting local communities.
Originality/value
This study enriches the understanding of ESG in the context of multinational business research practice.
Keywords
Acknowledgements
M.K.L. acknowledges funding from the Australian Research Council.
Funding: Australian Research Council (DP200102332).
Citation
Linnenluecke, M.K. (2022), "Environmental, social and governance (ESG) performance in the context of multinational business research", Multinational Business Review, Vol. 30 No. 1, pp. 1-16. https://doi.org/10.1108/MBR-11-2021-0148
Publisher
:Emerald Publishing Limited
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