Driving Sustainability: Environmental, Social, and Governance Practices and Financial Implications in India’s Automotive Industry
Driving Sustainability: Environmental, Social, and Governance Practices and Financial Implications in India’s Automotive Industry

Summary/Abstract: This study examines the influence of Environmental, Social, and Governance (ESG) reporting on the financial performance of firms in the Indian automobile sector. ESG ratings reflect the extent to which enterprises engage in responsible governance, social welfare, and environmental conservation. The analysis explores the impact of both aggregate and pillar-specific ESG scores on financial indicators such as Return on Equity (ROE), Return on Assets (ROA), and Earnings Per Share (EPS), while addressing endogeneity concerns through the application of panel least squares (PLS) regression with firm-level fixed effects and lagged ESG variables as instruments to mitigate reverse causality. This approach enhances the robustness of causal interpretation between ESG disclosure and financial outcomes. The study covers all automobile companies listed on the Bombay Stock Exchange (BSE) and those included in the BSE 500 index from 2015 to 2023. The findings reveal that ESG initiatives in the Indian automobile sector may not yield immediate or measurable financial gains through conventional metrics like ROA, ROE, and EPS. However, ESG adoption significantly contributes to long-term wealth creation, brand loyalty, and corporate goodwill.   The results emphasise that sustainable business practices enhance organisational resilience and stakeholder confidence. Furthermore, the study aligns with SDG 8, SDG 9, and SDG 12, underscoring the important role of ESG integration in advancing sustainability and long-term financial stability.

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