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

Article DOI: https://doi.org/10.57017/jaes.v20.4(90).15

Author(s):

Jaba CHAKRABORTY Mittal School of Business, Lovely Professional University, India, Anwer Khan Modern University, Dhaka, Bangladesh
Razia NAGINA Mittal School of Business, Lovely Professional University, India
Farjana SALAM Department of Business Administration, Bangladesh University, Bangladesh
Ishrat Jahan PRITHA Department of Business Administration, Anwer Khan Modern University, Bangladesh
Pincky AKTER Department of Business Administration, Anwer Khan Modern University, Bangladesh

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.

Copyright© 2025 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

Article’s history: Received 15th of November, 2025; Revised 12th of December, 2025; Accepted 23rd of December, 2025; Available online: 30th of December, 2025. Published as article in the Volume XX, Winter, Issue 4(90), December, 2025.

How to cite:

Chakraborty, J., Nagina, R., Salam, F., Pritha, I. J., & Akter, P. (2025). Driving Sustainability: Environmental, Social, and Governance Practices and Financial Implications in India’s Automotive Industry. Journal of Applied Economic Sciences, Volume XX, Winter, 4(90), 895 – 912. https://doi.org/10.57017/jaes.v20.4(90).15

Acknowledgments/Funding: The authors did not receive any financial or material support that could have affected the outcomes or their interpretation.

Conflict of Interest Statement: The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Data Availability Statement: The datasets generated and analysed during this study form part of the ongoing PhD research work of the primary author. Due to academic and institutional restrictions, the data cannot be made publicly available at this stage. However, the data may be provided upon reasonable request to the corresponding author, subject to approval and confidentiality considerations.

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