Digital Transformation Empowers ESG Performance in the Manufacturing Industry: From ESG to DESG

Abstract

Digital transformation (DT) is a long-term strategy for economic sustainability, particularly for manufacturing-oriented economies. This study proposes a digital ESG (DESG) theoretical framework to investigate how DT empowers ESG performance in the manufacturing industry. Using Python, we collected data from Chinese manufacturing firms from 2009 to 2020. This study used the ordinary least squares method to examine the relationships among DT, ESG performance, and manufacturing ESG heterogeneity. The results suggest that big companies and growing firms pay more attention to their ESG performance than others and that state-owned enterprises are keen on ESG performance but underperform. Additionally, DT may contribute to manufacturing ESG performance in general; labor-intensive and non-state-owned enterprises benefit more from DT than their counterparts; and manufacturers in economically developed regions show more significant ESG performance thanks to DT. These findings support the use of a DESG theoretical framework in the manufacturing industry whereby digital technologies facilitate business production and improve the business profits of manufacturing firms, so that manufacturers have sufficient profits to conduct ESG investments for sustainable development in a virtuous cycle. JEL Classification: O32, O44, Q56