As digital technologies advance, companies increasingly use them to gain competitive and sustainability advantages. However, a firm’s digital development is not solely contingent on its technological assets; it is fundamentally shaped by the organization’s strategic posture toward digitalization. Despite this, extant empirical research lacks sufficient evidence linking a company’s strategic digital posture to its environmental, social, and governance (ESG) performance. This study investigates how a firm’s strategic digital orientation (SDO) – a firm’s strategic posture toward digital development – influences ESG performance. Analyzing data from Chinese A-share firms (2010–2019), we find that SDO positively impacts ESG performance, mediated by improved digital finance facilitating sustainability funding. The relationship is strongest in private firms, state-owned enterprises, politically connected firms, and emerging companies. Our findings, validated through various robustness tests, contribute to the literature by emphasizing the importance of developing multifaceted SDO to enhance ESG performance, demonstrating how strategic digitalization can create societal value.
Hussain et al. (Wed,) studied this question.