How Does Each ESG Dimension Predict Customer Lifetime Value by Segments? Evidence from U.S. Industrial and Technological Industries

Abstract

The aim of this study is to analyse the research gap regarding the relationship between environmental, social and governance dimensions (ESG) of corporate sustainability initiatives and customer lifetime value (CLV). We divide an entire data sample (547 U.S. listed firms from the Refinitiv Thomson Reuters Eikon database) of both industrial and technological industries into three segments, using prediction-oriented modelling segmentation to test the hypotheses and evaluate the predictive validity of a partial least squares (PLS) model. As a result, we show that environmental, social and governance dimensions (ESG) encompass ten sustainability initiatives that, in turn, are the precursors of future financial firm performance, represented by CLV. Moreover, we found different poor-to-medium effects of each ESG dimension on CLV in segment 1. However, a stronger effect of the social dimension on CLV in segment 3 is completed with a poor effect, both positive by governance and negative by environmental dimensions, on CLV, while only the environmental dimension had greater effects on CLV in segment 2. The contribution of this research to the body of literature is twofold. First, it deepens the impact of each ESG dimension instead of considering sustainability initiatives as a whole. Second, it evaluates sustainability initiatives with a customer-based corporate firm valuation approach.