Purpose: This study investigates how corporate governance practices—board independence, board diversity,

shareholder rights, and transparency—shape ESG performance in Indian manufacturing firms, and whether firm

size and profitability strengthen these effects. Design/methodology/approach: Using secondary data for 120

rights show a weaker yet positive association; moderation tests reveal that larger and more profitable firms

convert governance strengths into superior ESG outcomes more effectively.

Originality/value: The paper provides sector-specific, India-focused evidence on the governance–ESG nexus

across the BRR→BRSR transition, integrates agency, stakeholder, and resource-based perspectives, and jointly

models two organizational moderators—size and profitability—offering nuanced insights beyond headline ESG

scores.

Implications: Managers should prioritize credible, decision-useful transparency and reinforce independent,

diverse boards to enhance ESG performance; policymakers can deepen BRSR guidance, assurance standards,

and capacity-building incentives for mid-cap manufacturers; investors should weight transparency quality and

board structure alongside ESG ratings to better assess sustainability credibility and risk.

governance enhances long-term sustainability and firm value (Shaikh, 2022). Corporate governance traditionally

concerned with board structure, shareholder rights, and transparency, is now increasingly evaluated for its role

in driving ESG outcomes (Shrivastava & Addas, 2014).

Globally, empirical evidence suggests that companies with robust governance frameworks are better positioned

to disclose ESG practices and align their operations with sustainable development goals (Kim & Li, 2021; Saygili

et al., 2022). For instance, board independence and diversity have been shown to positively influence ESG

disclosure and stakeholder trust (Alexandra & Daria, 2021; Konstantin & Elena, 2022). Similarly, shareholder

protection and transparent governance mechanisms moderate the relationship between ESG reporting and firm

performance (Albitar et al., 2020; Elamer & Boulhaga, 2024).

In emerging markets such as India, ESG adoption has gained momentum due to regulatory initiatives by SEBI,

At the same time, studies across regions provide mixed findings. While some report positive associations

between ESG and corporate performance (Nareswari, Tarczyńska-Łuniewska, & Al Hashfi, 2023; Martha &

Khomsiyah, 2023), others suggest that ESG compliance can impose costs that reduce short-term profitability,

especially in emerging markets (Dalal & Thaker, 2019). Moreover, controversies around ESG practices highlight

the need for strong governance mechanisms to mitigate reputational risks and restore stakeholder trust (Elamer

& Boulhaga, 2024).

Against this backdrop, the present study seeks to examine how corporate governance practices influence ESG

performance among Indian manufacturing companies. By focusing on board structure, shareholder rights,

transparency in ESG disclosure, and firm characteristics such as size and profitability, this research contributes

to the literature on governance–ESG linkages. Using secondary data from NSE/BSE-listed firms, the study aims

business practices (Shrivastava & Addas, 2014; Kim & Li, 2021). Globally, investors, regulators, and rating

agencies increasingly demand that firms demonstrate not only financial performance but also responsible

governance and ESG commitments (Shaikh, 2022).

In the Indian context, particularly in the manufacturing sector, ESG adoption has gained momentum due to

regulatory reforms, pressure from institutional investors, and greater public scrutiny (Sharma, Panday, &

Dangwal, 2020). Rating agencies such as Crisil, S&P Global, ESGRisk.ai, and SES have begun to systematically

assess Indian companies on ESG performance, with large firms like Tata Consultancy Services (TCS) and

Hindustan Unilever securing consistently high ratings. However, many manufacturing firms still lag in ESG

disclosure and performance, often due to weak governance structures, inadequate transparency, and inconsistent

shareholder protection mechanisms.

Despite the growing importance of ESG in India, limited empirical research specifically explores how corporate

governance practices shape ESG performance in Indian manufacturing companies. Most available studies are

either international or sector-agnostic, creating a research gap in understanding this relationship within the Indian

industrial context.

Therefore, this study seeks to address the problem of inadequate clarity on the governance–ESG nexus in India

by empirically examining how board structure, shareholder rights, and transparency influence ESG performance

in NSE/BSE-listed manufacturing firms, while also considering the moderating effects of firm size and

profitability.

The present study has the following objectives:

manufacturing companies.

enhance ESG adoption in the Indian manufacturing sector.

Based on the above objectives, the study seeks to answer the following research questions:

performance?

manufacturing companies?

performance, such that larger firms with strong governance exhibit higher ESG performance.

performance, with more profitable firms showing stronger ESG outcomes.

Board composition sits at the heart of the governance–ESG nexus. Across settings, independent directors and

diverse boards are linked to stronger monitoring, richer stakeholder dialogue, and better sustainability outcomes.

Early evidence shows that boards with higher independence tend to embed sustainability into oversight and

strategy, improving non-financial performance (Shrivastava & Addas, 2014). More recent work emphasizes the

quality of board human capital—skills, expertise, and heterogeneity—as channels that raise the salience of

2022). International panel evidence also indicates that the governance pillar is the most reliable predictor of

profitability and credit quality among the three ESG pillars (Kim & Li, 2021).

Shareholder protection, committee structures, and formal governance processes shape both the decision to

At the public-policy interface, country-level governance quality fosters corporate ESG by raising regulatory

predictability and enforcement credibility (Mooneeapen, Abhayawansa, & Mamode Khan, 2022). Yet recent

evidence warns of “excessive ESG”: in weak public-governance environments, firms may over-index on

symbolic ESG to meet external expectations without underlying operational change, diluting value relevance

(Kuzey, Al-Shaer, Karaman, & Uyar, 2023).

Disclosure is the observable tip of ESG practice. International studies show that firms with stronger governance

disclose more extensively, face lower information asymmetry, and often enjoy valuation premia (Shaikh, 2022).

In India, profitability and market performance are positively associated with ESG disclosure intensity,

suggesting a strategic complementarity between financial strength and transparency (Sharma, Panday, &

Dangwal, 2020). Still, literature stresses that disclosure quality—decision-useful metrics, external assurance,

and consistency across reports—matters more than volume. Where governance tightly links strategy, risk, and

critical gaps remain, particularly in the Indian context. First, most empirical studies focus on developed

economies such as Europe and North America, where governance structures and ESG frameworks are relatively

evaluating the impact of corporate governance practices on ESG performance within the Indian manufacturing

context.

Data Analysis and Interpretation

Table-1: Descriptive Statistics of ESG Scores and Governance Variables

.25*

.18

.15

.14

.20*

.12

Source: Author’s Own Computation

Note: **p < .01 = **; *p < .05 = *

Board independence (r = .42) also shows a strong positive relationship with ESG performance, indicating that

independent directors play a critical role in monitoring management, ensuring accountability, and prioritizing

sustainability initiatives. Board diversity has a moderate but significant correlation (r = .36), reinforcing the

argument that diverse boards are better at integrating multiple perspectives into ESG decision-making.

Shareholder rights (r = .28) also show a positive association, though weaker, suggesting that shareholder

protections contribute to ESG but are not the strongest driver in this context.

Control variables also show interesting trends: firm size is positively correlated with ESG (r = .33), meaning

larger firms have more resources and face greater stakeholder scrutiny, pushing them toward better ESG

practices. Profitability (r = .30) is similarly linked to higher ESG, reflecting that financially stable firms are better

positioned to invest in sustainability.

Table-4: ANOVA

Source: Author’s Own Computation

Table-5: Coefficients

Source: Author’s Own Computation

Interpretation

The regression model explains 47.9% of the variance in ESG performance, a substantial explanatory power for

social science research. Among the predictors, transparency (β = 0.36, p < .001) emerges as the most powerful

determinant of ESG, reinforcing the idea that disclosure is the backbone of sustainability credibility. Board

independence (β = 0.28, p < .01) also has a strong effect, underscoring the importance of external monitoring in

ensuring that firms adhere to ESG commitments.

Board diversity (β = 0.22, p < .05) is significant, highlighting that gender and skill diversity bring innovative

perspectives that strengthen ESG adoption. Shareholder rights (β = 0.15, p < .05) have the smallest but still

significant effect, suggesting that while investors’ influence matters, it is not as central as board or transparency

Source: Author’s Own Computation

Interpretation

The moderation analysis shows that both firm size and profitability strengthen the positive effects of governance

on ESG performance. Larger firms magnify the impact of board independence and transparency, as they have

greater resources, visibility, and stakeholder scrutiny, making governance mechanisms more effective. Similarly,

profitable firms are better able to allocate funds to sustainability programs, amplifying the governance–ESG

The analysis of 120 NSE/BSE-listed manufacturing firms for the period 2016–2023 provides important insights

into how corporate governance practices shape the environmental, social, and governance (ESG) performance

of Indian companies. The results first reveal from the descriptive statistics that the average ESG score of the

sampled firms stood at 58.40, which indicates a moderate level of sustainability integration. However, the range

of ESG scores (32 to 82) suggests substantial variation among companies in terms of sustainability adoption and

The correlation analysis demonstrated that ESG performance was significantly and positively associated with

all governance indicators. The strongest relationships were observed between transparency and ESG

performance (r = 0.49), followed closely by board independence (r = 0.42). This suggests that companies with

clearer, more detailed reporting and stronger independent oversight achieve higher levels of sustainability

performance. Positive correlations were also found between ESG performance and both firm size (r = 0.33) and

profitability (r = 0.30), implying that larger and more profitable companies are more likely to invest in and

independence was the second strongest predictor (β = 0.28, p < 0.01), reaffirming its monitoring and

accountability role in ensuring ESG strategies are implemented effectively. Board diversity also had a positive

and significant impact (β = 0.22, p < 0.05), suggesting that even modest increases in diversity contribute to better

ESG integration by bringing multiple perspectives and innovative problem-solving approaches into board

deliberations. Shareholder rights (β = 0.15, p < 0.05) were found to have a smaller yet significant effect,

indicating that empowered shareholders do exert pressure on companies to pursue sustainable practices, though

their influence is less pronounced in the Indian context where shareholder activism is still developing.

The moderation analysis offered further nuance by showing that both firm size and profitability strengthened the

positive effects of governance on ESG performance. Larger firms, often operating in more competitive and

visible markets, are under greater scrutiny from regulators, investors, and civil society, which compels them to

most critical governance factor influencing ESG outcomes. This reinforces stakeholder theory, which argues that

reducing information asymmetry through clear and credible reporting enhances legitimacy, trust, and long-term

value creation. Indian companies that disclose sustainability practices comprehensively are rewarded not only

with higher ESG scores but also with stronger investor confidence. Second, board independence remains crucial

in line with agency theory, as independent directors safeguard against managerial opportunism and ensure that

sustainability is not treated as symbolic but integrated into corporate strategy. Third, the role of board diversity,

while still emerging in India, reflects global evidence that diverse boards improve the quality of decision-making

and make companies more sensitive to environmental and social concerns. The relatively low levels of diversity

observed in Indian manufacturing boards highlight a structural weakness that needs urgent reform if firms are to

meet global sustainability expectations.

The smaller but significant effect of shareholder rights suggests that governance structures empowering