Business Sustainability Practices: A Literature Review of the Association Between ESG and Financial Reporting Outcomes

Résumé

The incorporation of environmental, social and governance (ESG) activities into business strategies has become a predominant way to maintain business sustainability.The impact of ESG adoption on financial reporting outcomes has been a subject of interest to authors in recent years.Nevertheless, studies that discussed and synthesized relevant theories and concepts in this domain are lacking in the literature to date.To fill this gap, this study adopted a narrative review approach to examining ESG and financial reporting outcomes (FROs), with an aim to identify and synthetize FROs that have been proposed and associated with a firm's ESG activities.In addition, this paper commented on the state and development of knowledge in the field of ESG and FRO as well as the limitations of prior research.Although the incorporation of ESG activities into business strategies produces positive FRO outcomes such as enhanced accounting quality, improved performance of a firm, and decreased cost of equity capital and debts, inconsistent propositions still remain.The findings presented in this study are unresolved, leading to ongoing inquiry and the need for further research.The review has implications for investors and policymakers to consider whether ESG could be used as a tool to potentially improve the credibility of financial reports and the outcomes of a firm's operational activities.

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