Abstract
Purpose: The South African corporate landscape is realising an increasing interest on Environmental, Social, and Governance (ESG) with most companies incorporating these dimensions in strategy formulation. Undoubtedly, the government as the key stakeholder is primarily the driver of such growing ESG interest which manifests itself in the form of regulatory pressures. Besides, the South African government is commended for incentivising socially responsible practices by decreeing the prevailing Broad-Based Black Economic Empowerment (BEE) policies. Shifting focus to other stakeholders, we investigate the causal relationship between corporate sustainability performance and consumer economic decisions. We achieve this by statistically establishing the short run and long run dynamics between the dependent and independent variables of interest conceptualised for the study. Methodology/design/approach: We use judgemental sampling technique to target companies listed in the FTSE/JSE Responsible Investment Index. A short panel data set is computed for statistical analysis using Eviews 13 and STATA 18. Panel data set constituted 21 cross sections that sum-up to 126 observations given the number of years used for data collected. Thus, first differenced econometric models were employed in data analyses namely Panel Vector Error Correction Model (VECM), Panel Least Squares (PLS), Wald Test, and Impulse Response Functions (IRFs). Findings: The endogenous variables for corporate sustainability performance and consumer economic decisions produced mixed findings. Thus, short run dynamics posited as statistically significant positive causal effect while long run dynamics indicated a negative relationship. Research implications/limitations: The target population is narrowed to FTSE/JSE Responsible Investment Index. As a result, little is known about other companies that are outside the scope of the FTSE/Responsible Investment Index. Besides, the use of secondary data makes the results of this paper more technical given that if fails to capture the feelings or views of consumers on the subject. Therefore, the paper sets a premise for future studies to expand this study by including more companies and incorporating primary research techniques. Originality/value: The study renders new insights regarding the drivers of the increasing recognition of the ESG phenomenon in the South African context. Moreover, the paper advocates for responsible corporate practices that put ESG on the core of business strategy.