This study investigates the relationship between diversity, equity and inclusion (DEI) practices and environmental, social and governance (ESG) performance, offering insights into how DEI initiatives contribute to sustainability outcomes. The research aims to provide a nuanced understanding of DEI’s impact across different ESG dimensions and industry contexts.
Given the time-series and cross-sectional nature of the dataset, this study employs panel regression models to test the hypotheses. The sample comprises 246 listed Indian organizations covering the period from financial year 2012–2013 to 2021–2022. Robustness of the findings is ensured through two-stage least squares (2SLS) and generalized method of moments (GMM) to address potential endogeneity issues.
Three key findings emerge from this research. First, firms with higher DEI scores exhibit stronger ESG performance overall. Second, improvements in DEI have a particularly robust impact on environmental and social dimensions, while their effect on governance performance is comparatively less pronounced. Third, an industry-specific analysis reveals that the positive relationship between DEI scores and ESG performance is stronger in sectors such as communication services, consumer discretionary, consumer staples and information technology than energy, healthcare, industrials and real estate.
To the best of the author’s knowledge, this study is the first to explore the influence of DEI on ESG performance, addressing a significant gap in the literature. By developing a unique DEI measurement framework through content analysis, this research not only provides novel insights into the DEI–ESG nexus but also establishes a methodological foundation for future studies to build upon.
