Has digital transformation improved corporate ESG performance?

Departing from literature on digital innovation drivers by examining the theoretical reasoning and important mechanisms of how digital transformation affects corporate ESG performance from three perspectives: technological innovation, labor substitution and creation, and management efficiency. Analyzing panel data from 1,531 Chinese listed companies from 2012 to 2023, we find that digital transformation significantly enhances overall ESG scores, primarily driven by economies of scale. This improvement manifests primarily through accelerated growth in E and S scores, while the G scores decreased linearly. Heterogeneity analysis indicates that digital transformation most substantially accelerates ESG performance in technology-intensive companies, has a transitional effect on the performance of central region companies in central regions, has a linear promotional effect on the ESG performance of labor-intensive companies and in western regions, and significantly accelerates the ESG performance of capital-intensive and eastern regions' companies. E-scores are raised by digital transformation, especially in low-pollution companies. S-score acceleration is greater for technology-driven companies than for labor-driven companies, and state-owned companies exhibit larger G-score declines than non-state-owned companies. Moreover, the dynamic and phased characteristics of digital transformation on corporate ESG performance were further validated by threshold regression analysis and mechanism testing. These methods confirmed the profit conditions necessary for digital transformation to influence ESG and independent dimension scores, the U-shaped mechanism of corporate labor income share decreasing and then increasing, the accelerated green technological innovation, and reduced corporate management expense efficiency due to resistance to change and digital transformation costs.