The Effects of ESG Combined Score on Business Performance of Enterprises in the Transportation Industry

Abstract

A plethora of present studies has the purpose of analyzing the connection related to the effect of environmental, social, and governance (ESG) on business performance. However, it has still not been able to bring out comprehensive results because of using a single metric to measure performance. Due to that, this research will: (i) use the data envelopment analysis (DEA) method to measure transportation firms’ performance and (ii) use OLS regression to explore the relationship between ESG combined score and business performance. In the first stage, we found out that 43 out of 56 firms work inefficiently. The managers of those companies should utilize their resources and refer to the benchmarking as a sample to follow. The environmental and social scores positively affect business performance in the second stage. Thus, managers should consider ESG as an investment, primarily when transportation is categorized as an “environmentally sensitive industry”. Besides, investors should pay more attention to a company that has ESG activities because that firm has the chance to improve its business performance and deal with its commitments.