On ESG and corporate employment decision: Evidence from Chinese listed firms in 2009–2022

Abstract

Implementing effective ESG management may enable firms to improve performance and create employment opportunities. This paper investigates the relationship between ESG practices and corporate employment decisions in the context of Chinese listed firms, aiming to understand how sustainability initiatives affect workforce dynamics. With unbalanced panel data of Chinese A-share listed firms spanning 2009–2022, the empirical results show that heightened ESG practices are positively associated with larger employment scales and a greater proportion of highly-skilled and highly-educated employees within firms. Channel analysis reveals that ESG practices contribute to optimizing employment structure through easing financing constraints, mitigating operational risks, and enhancing production efficiency. In addition, the impact of ESG practices on corporate employment is more pronounced in state-owned, large firms in non-labor-intensive industries, and firms in the growth phase. Furthermore, ESG practices could also enhance corporate innovation capabilities through expanding employment scale and optimizing employment structure. The research results provide valuable insights for corporate leaders and other stakeholders, highlighting the importance of integrating sustainability considerations into corporate strategies to drive innovation, to mitigate risks, and to promote inclusive growth.