ESG performance, GHG disclosure and firm performance of listed companies in Vietnam

The trend of global shifting toward sustainability increasingly recognises the importance of environmental, social, and governance (ESG) factors, among which reducing and disclosing greenhouse gas (GHG) emissions is a critical component of responsible corporate behaviour. This study examines the impacts of various sustainability activities on firm performance, highlighting the growing significance of ESG practices in driving business success. Specifically, we investigate the influence of ESG activities and GHG disclosure on firm performance in Vietnam, a developing economy where sustainability practices are beginning to emerge and gain traction. As businesses in Vietnam increasingly face pressure from stakeholders to demonstrate their commitment to sustainability, understanding the dynamics between these factors becomes essential. We also explore the relationship between ESG activities and GHG disclosure, recognising that effective communication of environmental impacts can enhance corporate accountability. Utilising an ESG score dataset constructed based on the methodology by Kinder, Lydenberg, Domini (KLD index) and a GHG disclosure dataset for listed firms over the period from 2018 to 2022, which includes 136 listed firms on the Vietnam stock markets, we employ various regression models, including OLS, FEM, REM, and GLS, to derive empirical results. Our findings indicate that firms engaged in proactive ESG practices are significantly more likely to disclose GHG emissions, suggesting a correlation between responsible actions and motivation in disclosure and transparency on GHG emissions of firms. We also find that both ESG performance and GHG disclosure positively correlate with overall firm performance. This reinforces the idea that sustainability is not just a compliance issue, as suggested by legitimacy theory, but also a strategic advantage that can lead to profitable outcomes. Additionally, our findings support stakeholder theory and signaling theory, indicating that engaging in ESG practices and disclosing GHG emissions allows stakeholders to better understand a firm's operations, thereby fostering support for its activities. However, the results do not align with agency theory, which posits a conflict between shareholders and managers regarding ESG initiatives. Our research highlights practical implications for corporate leaders that a commitment to ESG and GHG transparency can enhance corporate reputation, position firms as sustainability leaders, and drive long-term success and resilience in an evolving global landscape.