{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,1,8]],"date-time":"2026-01-08T05:41:07Z","timestamp":1767850867455,"version":"3.49.0"},"reference-count":46,"publisher":"MDPI AG","issue":"10","license":[{"start":{"date-parts":[[2025,9,26]],"date-time":"2025-09-26T00:00:00Z","timestamp":1758844800000},"content-version":"vor","delay-in-days":0,"URL":"https:\/\/creativecommons.org\/licenses\/by\/4.0\/"}],"content-domain":{"domain":["www.mdpi.com"],"crossmark-restriction":true},"short-container-title":["Systems"],"abstract":"<jats:p>This study explores the relationship between corporate financial performance and ESG, reporting performance across all three ESG pillars: Environmental, Social, and Governance. We used a robust panel dataset of over 28,274 firm-year observations from listed companies worldwide (covering 2019\u20132023), combining financial metrics and ESG performance scores from the Refinitiv database. Panel regression results indicate that more profitable firms (measured by Net Income and Return on Assets (ROA)) exhibit statistically significant higher ESG performance across all three pillars, reinforcing the view that financial strength supports more comprehensive sustainability efforts. By contrast, firms with more ESG controversies attain significantly lower ESG scores, suggesting that incidents of misconduct or governance failures undermine sustainability reporting credibility. These findings contribute to the literature by empirically validating the dual role of financial success and reputational risk in shaping ESG performance. This study also offers practical insights for regulators, investors, and corporate managers. Strong profitability can facilitate improved ESG transparency, whereas proactive measures and stricter oversight are needed to address controversies, enhance accountability, and mitigate greenwashing.<\/jats:p>","DOI":"10.3390\/systems13100848","type":"journal-article","created":{"date-parts":[[2025,9,30]],"date-time":"2025-09-30T09:12:23Z","timestamp":1759223543000},"page":"848","update-policy":"https:\/\/doi.org\/10.3390\/mdpi_crossmark_policy","source":"Crossref","is-referenced-by-count":2,"title":["Does Profitability Support Sustainability? Examining the Influence of Financial Performance and ESG Controversies on ESG Ratings"],"prefix":"10.3390","volume":"13","author":[{"ORCID":"https:\/\/orcid.org\/0000-0001-9913-4698","authenticated-orcid":false,"given":"Francisco","family":"Carreira","sequence":"first","affiliation":[{"name":"Instituto Polit\u00e9cnico de Set\u00fabal, Centro de Investiga\u00e7\u00e3o em Contabilidade e Fiscalidade (CICF), 2910-761 Setubal, Portugal"}]},{"ORCID":"https:\/\/orcid.org\/0000-0002-8366-9863","authenticated-orcid":false,"given":"Am\u00e9lia","family":"Silva","sequence":"additional","affiliation":[{"name":"CEOS.PP, Instituto Superior de Contabilidade e Administra\u00e7\u00e3o do Porto, Polytechnic of Porto, Rua Jaime Lopes Amorim, s\/n, 4465-004 S\u00e3o Mamede de Infesta, Portugal"}]},{"ORCID":"https:\/\/orcid.org\/0000-0002-3911-0894","authenticated-orcid":false,"given":"Catarina","family":"Cep\u00eada","sequence":"additional","affiliation":[{"name":"CEOS.PP, Instituto Superior de Contabilidade e Administra\u00e7\u00e3o do Porto, Polytechnic of Porto, Rua Jaime Lopes Amorim, s\/n, 4465-004 S\u00e3o Mamede de Infesta, Portugal"}]}],"member":"1968","published-online":{"date-parts":[[2025,9,26]]},"reference":[{"key":"ref_1","doi-asserted-by":"crossref","first-page":"7139","DOI":"10.1002\/bse.4336","article-title":"Bridging the ESG Credibility Gap: The Role of Institutional Investors in Mitigating ESG Decoupling","volume":"34","author":"Monteiro","year":"2025","journal-title":"Bus. Strategy Environ."},{"key":"ref_2","doi-asserted-by":"crossref","first-page":"2835","DOI":"10.1287\/mnsc.2014.1984","article-title":"The impact of corporate sustainability on organizational processes and performance","volume":"60","author":"Eccles","year":"2014","journal-title":"Manag. Sci."},{"key":"ref_3","doi-asserted-by":"crossref","first-page":"210","DOI":"10.1080\/20430795.2015.1118917","article-title":"ESG and financial performance: Aggregated evidence from more than 2000 empirical studies","volume":"5","author":"Friede","year":"2015","journal-title":"J. Sustain. Financ. Invest."},{"key":"ref_4","unstructured":"Whelan, T., Atz, U., Van Holt, T., and Clark, C. (2021). ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence from 1000 Plus Studies Published Between 2015\u20132020, NYU STERN Center for Sustainable Business."},{"key":"ref_5","doi-asserted-by":"crossref","unstructured":"Clark, G.L., Feiner, A., and Viehs, M. (2015). From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance, Arabesque Partners.","DOI":"10.2139\/ssrn.2508281"},{"key":"ref_6","doi-asserted-by":"crossref","first-page":"169","DOI":"10.1108\/JGR-11-2016-0029","article-title":"Does ESG performance have an impact on financial performance? Evidence from Germany","volume":"8","author":"Velte","year":"2017","journal-title":"J. Glob. Responsib."},{"key":"ref_7","doi-asserted-by":"crossref","first-page":"3025","DOI":"10.1002\/bse.2555","article-title":"Does stakeholder engagement encourage environmental reporting? The mediating role of firm performance","volume":"29","author":"Rodrigues","year":"2020","journal-title":"Bus. Strategy Environ."},{"key":"ref_8","doi-asserted-by":"crossref","first-page":"78","DOI":"10.1016\/j.aos.2014.12.003","article-title":"Organized hypocrisy, organizational fa\u00e7ades, and sustainability reporting","volume":"40","author":"Cho","year":"2015","journal-title":"Account. Organ. Soc."},{"key":"ref_9","doi-asserted-by":"crossref","first-page":"1036","DOI":"10.1108\/AAAJ-04-2012-00998","article-title":"Sustainability reports as simulacra? A counter-account of A and A+ GRI reports","volume":"26","author":"Boiral","year":"2013","journal-title":"Account. Audit. Account. J."},{"key":"ref_10","doi-asserted-by":"crossref","first-page":"19","DOI":"10.1186\/s12302-020-0300-3","article-title":"Concepts and forms of greenwashing: A systematic review","volume":"32","author":"Sobral","year":"2020","journal-title":"Environ. Sci. Eur."},{"key":"ref_11","doi-asserted-by":"crossref","first-page":"687","DOI":"10.1016\/S0361-3682(00)00003-9","article-title":"The social accounting project and Accounting Organizations and Society Privileging engagement, imaginings, new accountings and pragmatism over critique?","volume":"27","author":"Gray","year":"2002","journal-title":"Account. Organ. Soc."},{"key":"ref_12","doi-asserted-by":"crossref","first-page":"13","DOI":"10.1007\/s10551-012-1543-8","article-title":"W(h)ither ecology? The triple bottom line, the global reporting initiative, and corporate sustainability reporting","volume":"118","author":"Milne","year":"2013","journal-title":"J. Bus. Ethics"},{"key":"ref_13","doi-asserted-by":"crossref","first-page":"455","DOI":"10.1016\/j.jaccpubpol.2016.06.001","article-title":"The relationship between sustainability performance and sustainability disclosure\u2014Reconciling voluntary disclosure theory and legitimacy theory","volume":"35","author":"Hummel","year":"2016","journal-title":"J. Account. Public Policy"},{"key":"ref_14","doi-asserted-by":"crossref","unstructured":"Alshehhi, A., Nobanee, H., and Khare, N. (2018). The impact of sustainability practices on corporate financial performance: Literature trends and future research potential. Sustainability, 10.","DOI":"10.3390\/su10020494"},{"key":"ref_15","doi-asserted-by":"crossref","first-page":"232","DOI":"10.24052\/JBRMR\/V12IS02\/TIOCCOEIDAESOTLFIE","article-title":"The impact of corporate characteristics on environmental information disclosure: An empirical study on the listed firms in Egypt","volume":"12","author":"Elshabasy","year":"2018","journal-title":"J. Bus. Retail. Manag. Res."},{"key":"ref_16","doi-asserted-by":"crossref","first-page":"120341","DOI":"10.1016\/j.techfore.2020.120341","article-title":"Corporate controversies and company\u2019s financial performance: Exploring the moderating role of ESG practices","volume":"162","author":"Nirino","year":"2021","journal-title":"Technol. Forecast. Soc. Chang."},{"key":"ref_17","doi-asserted-by":"crossref","first-page":"1305","DOI":"10.1016\/j.bir.2024.08.001","article-title":"The impact of ESG controversies on the financial performance of firms: An analysis of industry and country clusters","volume":"24","author":"Muren","year":"2024","journal-title":"Borsa Istanb. Rev."},{"key":"ref_18","doi-asserted-by":"crossref","first-page":"403","DOI":"10.1177\/0170840603024003910","article-title":"Corporate social and financial performance: A meta-analysis","volume":"24","author":"Orlitzky","year":"2003","journal-title":"Organ. Stud."},{"key":"ref_19","doi-asserted-by":"crossref","first-page":"534","DOI":"10.2307\/257052","article-title":"A resource-based perspective on corporate environmental performance and profitability","volume":"40","author":"Russo","year":"1997","journal-title":"Acad. Manag. J."},{"key":"ref_20","doi-asserted-by":"crossref","first-page":"102373","DOI":"10.1016\/j.irfa.2022.102373","article-title":"ESG controversies, ESG disclosure and analyst forecast accuracy","volume":"84","author":"Schiemann","year":"2022","journal-title":"Int. Rev. Financ. Anal."},{"key":"ref_21","unstructured":"Freeman, R.E. (1984). Strategic Management: A stakeholder Approach, Pitman."},{"key":"ref_22","doi-asserted-by":"crossref","first-page":"143","DOI":"10.1023\/A:1010786912118","article-title":"An empirical investigation of the relationship between change in corporate social performance and financial performance: A stakeholder theory perspective","volume":"32","author":"Ruf","year":"2001","journal-title":"J. Bus. Ethics"},{"key":"ref_23","first-page":"99","article-title":"Firm resources and sustained competitive advantage","volume":"17","author":"Barney","year":"1991","journal-title":"J. Manag."},{"key":"ref_24","doi-asserted-by":"crossref","first-page":"571","DOI":"10.2307\/258788","article-title":"Managing legitimacy: Strategic and institutional approaches","volume":"20","author":"Suchman","year":"1995","journal-title":"Acad. Manag. Rev."},{"key":"ref_25","doi-asserted-by":"crossref","first-page":"282","DOI":"10.1108\/09513570210435852","article-title":"Introduction: The legitimising effect of social and environmental disclosures\u2014A theoretical foundation","volume":"15","author":"Deegan","year":"2002","journal-title":"Account. Audit. Account. J."},{"key":"ref_26","doi-asserted-by":"crossref","first-page":"3","DOI":"10.1093\/ser\/mwr030","article-title":"Corporate social responsibility and institutional theory: New perspectives on private governance","volume":"10","author":"Brammer","year":"2012","journal-title":"Socio-Econ. Rev."},{"key":"ref_27","doi-asserted-by":"crossref","first-page":"169","DOI":"10.1016\/j.jacceco.2017.11.009","article-title":"The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China","volume":"65","author":"Chen","year":"2018","journal-title":"J. Account. Econ."},{"key":"ref_28","doi-asserted-by":"crossref","first-page":"S119","DOI":"10.1016\/j.bir.2022.11.006","article-title":"Impact of ESG performance on firm value and profitability","volume":"22","author":"Ergun","year":"2022","journal-title":"Borsa Istanb. Rev."},{"key":"ref_29","first-page":"372","article-title":"Industry and performance in the Portuguese listed companies: The mediating role of the environmental information disclosure","volume":"10","author":"Monteiro","year":"2023","journal-title":"Entrep. Sustain. Issues"},{"key":"ref_30","doi-asserted-by":"crossref","unstructured":"Yoon, B., Lee, J.H., and Byun, R. (2018). Does ESG performance enhance firm value? Evidence from Korea. Sustainability, 10.","DOI":"10.3390\/su10103635"},{"key":"ref_31","doi-asserted-by":"crossref","first-page":"986","DOI":"10.2307\/258963","article-title":"A natural-resource-based view of the firm","volume":"20","author":"Hart","year":"1995","journal-title":"Acad. Manag. Rev."},{"key":"ref_32","doi-asserted-by":"crossref","first-page":"45","DOI":"10.1016\/j.gfj.2017.03.001","article-title":"ESG performance and firm value: The moderating role of disclosure","volume":"38","author":"Fatemi","year":"2018","journal-title":"Glob. Financ. J."},{"key":"ref_33","doi-asserted-by":"crossref","first-page":"1053","DOI":"10.1002\/smj.2268","article-title":"The impact of corporate social responsibility on investment recommendations: Analysts\u2019 perceptions and shifting institutional logics","volume":"36","author":"Ioannou","year":"2015","journal-title":"Strateg. Manag. J."},{"key":"ref_34","doi-asserted-by":"crossref","first-page":"120","DOI":"10.1002\/bse.506","article-title":"Factors influencing the quality of corporate environmental disclosure","volume":"17","author":"Brammer","year":"2008","journal-title":"Bus. Strategy Environ."},{"key":"ref_35","doi-asserted-by":"crossref","unstructured":"Treepongkaruna, S., and Suttipun, M. (2024). The impact of environmental, social and governance (ESG) reporting on corporate profitability: Evidence from Thailand. J. Financ. Report. Account.","DOI":"10.1108\/JFRA-09-2023-0555"},{"key":"ref_36","doi-asserted-by":"crossref","first-page":"125","DOI":"10.1002\/1097-0266(200101)22:2<125::AID-SMJ150>3.0.CO;2-H","article-title":"Shareholder value, stakeholder management, and social issues: What\u2019s the bottom line?","volume":"22","author":"Hillman","year":"2001","journal-title":"Strateg. Manag. J."},{"key":"ref_37","doi-asserted-by":"crossref","first-page":"147","DOI":"10.2307\/2095101","article-title":"The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields","volume":"48","author":"DiMaggio","year":"1983","journal-title":"Am. Sociol. Rev."},{"key":"ref_38","doi-asserted-by":"crossref","first-page":"355","DOI":"10.2307\/1882010","article-title":"Job market signaling","volume":"87","author":"Spence","year":"1973","journal-title":"Q. J. Econ."},{"key":"ref_39","doi-asserted-by":"crossref","first-page":"126","DOI":"10.14254\/2071-789X.2018\/11-2\/9","article-title":"International sharing economy: The case of Airbnb in the Czech Republic","volume":"11","year":"2018","journal-title":"Econ. Sociol."},{"key":"ref_40","doi-asserted-by":"crossref","first-page":"120173","DOI":"10.1016\/j.techfore.2020.120173","article-title":"The effect of institutional ownership and ownership dispersion on eco-innovation","volume":"158","year":"2020","journal-title":"Technol. Forecast. Soc. Chang."},{"key":"ref_41","doi-asserted-by":"crossref","first-page":"349","DOI":"10.1007\/s10551-022-05181-3","article-title":"Governing corporate social responsibility decoupling: The effect of the governance committee on corporate social responsibility decoupling","volume":"185","author":"Gull","year":"2023","journal-title":"J. Bus. Ethics"},{"key":"ref_42","doi-asserted-by":"crossref","first-page":"101985","DOI":"10.1016\/j.ribaf.2023.101985","article-title":"Impact of corporate governance and related controversies on the market value of banks","volume":"65","author":"Komath","year":"2023","journal-title":"Res. Int. Bus. Financ."},{"key":"ref_43","doi-asserted-by":"crossref","first-page":"105042","DOI":"10.1016\/j.frl.2024.105042","article-title":"ESG controversies and profitability in the European banking sector","volume":"61","author":"Agnese","year":"2024","journal-title":"Financ. Res. Lett."},{"key":"ref_44","unstructured":"LSEG Data & Analytics (2024). Environmental, Social and Governance (ESG) Scores from Refinitiv, LSEG Data & Analytics."},{"key":"ref_45","doi-asserted-by":"crossref","first-page":"338","DOI":"10.55493\/5002.v13i5.4782","article-title":"The effect of environmental, social and governance criteria on the corporate value of listed companies in Malaysia","volume":"13","author":"Shahrun","year":"2023","journal-title":"Asian Econ. Financ. Rev."},{"key":"ref_46","doi-asserted-by":"crossref","first-page":"249","DOI":"10.1108\/JAAR-06-2018-0085","article-title":"The role of audit committee attributes in corporate sustainability reporting: Evidence from banks in the Gulf Cooperation Council","volume":"21","author":"Buallay","year":"2020","journal-title":"J. Appl. Account. Res."}],"container-title":["Systems"],"original-title":[],"language":"en","link":[{"URL":"https:\/\/www.mdpi.com\/2079-8954\/13\/10\/848\/pdf","content-type":"unspecified","content-version":"vor","intended-application":"similarity-checking"}],"deposited":{"date-parts":[[2025,9,30]],"date-time":"2025-09-30T09:55:32Z","timestamp":1759226132000},"score":1,"resource":{"primary":{"URL":"https:\/\/www.mdpi.com\/2079-8954\/13\/10\/848"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2025,9,26]]},"references-count":46,"journal-issue":{"issue":"10","published-online":{"date-parts":[[2025,10]]}},"alternative-id":["systems13100848"],"URL":"https:\/\/doi.org\/10.3390\/systems13100848","relation":{},"ISSN":["2079-8954"],"issn-type":[{"value":"2079-8954","type":"electronic"}],"subject":[],"published":{"date-parts":[[2025,9,26]]}}}