The study delves into the impact of stakeholder engagement (SE) on corporate environmental, social and governance (ESG) disclosures. Additionally, it unveils the moderating effect of climate sensitivity on this relationship, if any.
The study analyses the leading 100 firms listed on the Bombay Stock Exchange (BSE) from 2019 to 2022 by employing the Global Reporting Initiative framework for SE scores and the “Stakeholder Capitalism Metrics” for ESG disclosure scores. Panel data regression models are applied to explore the impact of SE on ESG disclosures and the moderating effect of climate sensitivity. The results are robust to endogeneity.
Key findings reveal that SE is an internal driver for various ESG disclosures. Furthermore, the climate sensitivity of a firm is identified as a moderator, influencing the impact of SE on ESG disclosures. Firms with high climate sensitivity experience greater advantages through increased reporting on the SE process.
Our study is subject to certain limitations. While it focuses on leading Indian firms to enhance our comprehension of the SE and ESG disclosure relationship, the study’s robustness can be improved by expanding the sample size and study period. Given the scarcity of research in this domain, cross-country analyses could provide valuable insights. Our examination primarily centres on the impact of firm climate sensitivity on the SE–ESGD link. Future research might consider other variables, such as board attributes (e.g. diversity, independence) and firm life cycle stages, for a more comprehensive understanding.
The study imparts implications, such as promoting SE integration into corporate strategy, targeted support for climate-sensitive firms and enforcing stricter compliance measures for deficient disclosures in Indian firms.
This study is the first to investigate the influence of SE on ESG disclosures, with a unique focus on the moderating role of climate sensitivity. Additionally, the research employs the “Stakeholder Capitalism Metrics”, an integrated ESG framework seldom used in previous studies.
