Consumers are increasingly choosing products from companies that demonstrate genuine environmental responsibility. While many studies have linked environmental, social, and governance (ESG) performance with stronger financial results, exactly how environmental responsibility translates into higher profits has remained unclear. A new study suggests that sustainability improves corporate financial performance indirectly by increasing sales.
Now, a study led by Professor Sang-Ho Lee from the Department of Economics at Chonnam National University, South Korea, in collaboration with Professor Arturo Garcia from Universidad Autónoma de Nuevo León, Mexico, has identified sales as the key mechanism linking environmental responsibility with financial performance. Their study was published online on May 22, 2026 in the journal Corporate Social Responsibility and Environmental Management.
Growing concern about climate change has encouraged companies across industries to reduce emissions, adopt greener technologies, and strengthen their environmental practices. At the same time, consumers have become more conscious of the environmental impact of their purchasing decisions, increasing pressure on businesses to demonstrate credible sustainability efforts.
Growing concern about climate change has encouraged companies to reduce emissions, adopt greener technologies, and strengthen their environmental practices. At the same time, consumers have become increasingly conscious of the environmental impact of their purchasing decisions, making environmental responsibility an important factor influencing buying behavior. “As green consumerism is increasing, the escalating global concern over climate change has compelled firms across numerous industries to integrate eco-friendly practices, such as greenhouse gas reduction and the adoption of green technologies, into their core operations,” explained Prof. Lee.
To understand how environmental responsibility affects financial performance, the researchers analyzed ESG ratings from the Korea Corporate Governance Service and financial data from the KIS Value database for 579 publicly listed Korean companies, representing 2,316 firm-year observations between 2019 and 2022. Using mediation and moderated mediation analyses, they investigated whether sales explain the relationship between environmental responsibility and financial performance and whether this relationship varies by firm type and before and after the COVID-19 pandemic.
The analysis showed that environmental responsibility did not directly improve financial performance. Instead, companies with stronger environmental performance generated higher sales, leading to improved returns on assets and equity. This indirect relationship was significant for large Chaebol firms but not for non-Chaebol firms, suggesting that larger companies are better able to convert environmental initiatives into stronger consumer demand through greater visibility and reputation. The sales-mediated effect also became significantly stronger after the COVID-19 pandemic, reflecting increased consumer and stakeholder sensitivity toward sustainability.
The findings highlight sales as the pathway through which environmental responsibility creates economic value. “This approach can be potentially applied to other countries that have different business styles and different degree of green consumerism,” added Prof. Lee.
The researchers believe their findings could help businesses, investors, and policymakers better understand the economic benefits of sustainability and encourage strategies that strengthen both environmental responsibility and consumer trust. “Our study emphasizes not only the importance of green consumerism to improve environmental quality for a longer time horizon but also the financial performance-based sustainability of business strategies, as a win-win project for the earth and the people,” concluded Prof. Lee.
Reference
Title of original paper: Environmental Responsibility and Financial Performance: The Mediating Role of Sales in Korean Firms
Journal: Corporate Social Responsibility and Environmental Management
DOI: https://doi.org/10.1002/csr.70672
About the institute
Chonnam National University (CNU), established in 1952, is one of South Korea's leading national universities located in Gwangju. Building on its founding commitment to cultivating leaders of integrity and professional excellence, CNU contributes to national development and global progress through the pursuit of knowledge, ethical responsibility, and inclusive excellence. Guided by the core motto “Truth, Creativity, and Service,” the university advances research, education, and public engagement that strengthen resilient societies, foster sustainable development, and promote the well-being of future generations. As a trusted partner in the global community, CNU remains dedicated to addressing complex challenges in an increasingly interconnected world.
Website: https://global.jnu.ac.kr/jnumain_en.aspx
About the author
Sang-Ho Lee is a Professor in the Department of Economics at Chonnam National University, Republic of Korea. He received his Ph.D. in Industrial Management from the Korea Advanced Institute of Science and Technology (KAIST). His research focuses on green consumerism, corporate environmental responsibility, ESG strategies, industrial organization, and competition policy. Working with former students and international collaborators, including Professor Arturo Garcia, his laboratory develops economic models to understand sustainable business behavior, green research and development, and antitrust issues related to common ownership. His work aims to promote profitable, competitive, and environmentally sustainable markets while informing evidence-based business and public policy.
Corporate Social Responsibility and Environmental Management
Data/statistical analysis
Not applicable
Environmental Responsibility and Financial Performance: The Mediating Role of Sales in Korean Firms
22-May-2026
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