This study aims to investigate the impact of geopolitical risks (GPRs) on the ethical commitments of companies, specifically focusing on environmental, social, and governance (ESG) performance in USA. By leveraging institutional theory and resource dependence theory, the research seeks to understand how external risks influence companies’ compliance with sustainability responsibilities and their effect on ESG performance across its three dimensions.
An unbalanced sample of 2,862 US-based companies was selected for this study, covering the period from 2002 to 2019. The research uses a dual theoretical approach, integrating institutional and resource dependence theories, to analyse how GPRs affect companies’ ESG performance. Quantitative methods are used to examine the relationship between GPRs and ESG outcomes, assessing both individual and collective dimensions of ESG.
The findings reveal that GPRs significantly influence companies’ ethical commitments towards ESG performance. These risks can lead to institutional changes, altering norms and expectations and causing companies to adopt practices to mitigate risks and meet external demands. Consequently, companies may divert resources from ESG initiatives to manage GPRs, impacting their ability to achieve ESG goals.
This study offers a novel perspective by examining the intersection of GPRs and ESG performance through institutional and resource dependence theoretical lenses. It provides valuable insights into how external risks influence corporate ethical commitments and the strategies organizations can adopt to navigate these challenges. The research contributes to the existing literature by highlighting the importance of transparency and accountability in managing GPRs and advancing sustainability initiatives.
