Abstract

The integration of environmental, social, and governance (ESG) practices into corporate strategy has become a defining feature of modern business. This article investigates the role of ESG as both a determinant of business performance and a source of sustainable competitive advantage. Drawing on stakeholder theory, legitimacy theory, and the resource-based view, it develops a conceptual framework that links ESG adoption to enhanced financial and non-financial outcomes, ultimately contributing to long-term strategic positioning. Methodologically, the article employs a narrative literature review and conceptual synthesis of peer-reviewed studies published between 2019 and 2024.

Findings highlight that ESG practices positively influence firm outcomes through multiple pathways: strengthening brand reputation, driving innovation, improving risk management, and expanding access to capital. However, the analysis also reveals persistent challenges, including greenwashing, the cost-benefit dilemma of ESG investments, and the absence of standardized reporting metrics. Comparative insights across industries such as finance, manufacturing, and technology show that ESG's impact is highly context-dependent, shaped by sector-specific dynamics and institutional environments.

The article contributes to theory by positioning ESG within established strategic management perspectives and to practice by offering actionable implications for managers, investors, and policymakers. It concludes that ESG should no longer be considered an optional add-on but rather a strategic imperative central to sustainable business performance. Recommendations include stronger reporting standards, targeted incentives for adoption, and further research into industry- and country-level variations in ESG effectiveness.

This work is licensed under a Creative Commons Attribution 4.0 License.