Consumers may be turning sustainability into a measurable force in corporate finance. A new analysis of 579 publicly listed South Korean companies suggests that environmental responsibility does not automatically produce higher profits through a direct financial boost. Instead, its economic power appears to operate through the marketplace: companies with stronger environmental performance tend to generate higher sales, and those additional sales are associated with improved financial returns. The result offers a detailed explanation of how climate-conscious business practices may move from corporate sustainability reports to balance sheets—and why the effect appears particularly strong for large conglomerates and in the years following the COVID-19 pandemic.
The study, led by Sang-Ho Lee of Chonnam National University in South Korea in collaboration with Arturo Garcia of Universidad Autónoma de Nuevo León in Mexico, examined the connection between environmental responsibility and corporate financial performance. The researchers published their findings online on May 22, 2026, in Corporate Social Responsibility and Environmental Management. Their central question was not simply whether environmentally responsible companies perform better, but how that relationship develops. By testing sales as a mediating variable, the researchers investigated whether environmental initiatives influence profits because they reduce costs, improve efficiency, attract investment, strengthen reputation, or encourage consumers to buy more products. Their statistical results pointed most clearly to sales as the critical pathway.
To conduct the analysis, the researchers combined environmental, social, and governance ratings from the Korea Corporate Governance Service with financial information from the KIS Value database. The dataset included 2,316 firm-year observations covering 579 publicly listed Korean companies between 2019 and 2022. This period allowed the researchers to compare business conditions before and after the COVID-19 pandemic while also examining differences between large Chaebol firms and non-Chaebol companies. Chaebols are major, often family-controlled business groups that occupy a distinctive position in the South Korean economy. They typically possess extensive financial resources, recognizable brands, large distribution networks, and considerable public visibility—factors that may determine how effectively environmental initiatives influence consumer behavior.
The statistical approach centered on mediation and moderated mediation analyses. In a mediation model, researchers test whether an apparent relationship between two variables can be explained by an intermediate mechanism. Here, environmental responsibility was treated as the explanatory factor, financial performance as the outcome, and sales as the possible link connecting them. Financial performance was assessed using returns on assets and returns on equity, measures that indicate how efficiently a company generates earnings from its resources and shareholders’ investment. Moderated mediation then allowed the researchers to test whether the sales pathway changed according to firm type or historical period. This framework helped distinguish a direct financial effect from an indirect effect operating through market demand.
The results showed that environmental responsibility did not significantly improve financial performance through a direct route. A company could not necessarily expect stronger returns merely because it had adopted greener technologies, reduced greenhouse-gas emissions, or improved its environmental rating. However, firms with better environmental performance tended to record higher sales, and those higher sales were associated with improved returns on assets and equity. In other words, environmental responsibility appeared to create financial value when it changed how customers responded to the company. The finding supports the idea that sustainability can function as a demand-side business strategy: environmental credibility may increase consumer trust, strengthen brand preference, and encourage purchases, which then contribute to profitability.
This mechanism reflects the rise of green consumerism. As public concern over climate change grows, buyers are increasingly exposed to information about emissions, supply chains, resource use, packaging, and corporate environmental policies. Sustainability claims can influence purchasing decisions, but only when consumers regard them as credible. Environmental performance ratings, transparent reporting, and visible investments in cleaner production may therefore become signals of corporate reliability. Companies that fail to meet expectations risk reputational damage, while those that demonstrate consistent environmental responsibility may gain an advantage in crowded markets. The study does not suggest that every green initiative immediately increases revenue; rather, it indicates that environmental responsibility can support financial performance when it is recognized and rewarded by customers.
The sales-mediated effect was especially pronounced among large Chaebol firms. The researchers suggest that these companies may be better positioned to convert environmental efforts into consumer demand because they have greater visibility, stronger reputations, and more extensive resources. A sustainability program implemented by a widely known corporation can reach millions of consumers through national advertising, retail networks, and established product lines. Large firms may also have more capital to invest in energy-efficient facilities, low-carbon technologies, environmental certification, and supply-chain monitoring. These investments can make their environmental commitments more visible and credible. By contrast, smaller or non-Chaebol companies may undertake responsible environmental practices without receiving the same level of public attention or experiencing an equivalent increase in sales.
The timing of the relationship was also important. The indirect effect of environmental responsibility on financial performance became significantly stronger after the COVID-19 pandemic. The pandemic altered consumer priorities, intensified public attention to corporate behavior, and exposed vulnerabilities in global production and distribution systems. In the post-pandemic period, environmental and social expectations may have become more closely connected to judgments about corporate trustworthiness and resilience. Consumers and other stakeholders may now scrutinize sustainability claims more closely, while companies increasingly treat environmental performance as part of long-term competitiveness rather than as a separate public-relations activity. The stronger post-pandemic effect suggests that the commercial value of environmental responsibility may depend on the social context in which firms operate.
The findings carry implications beyond South Korea. For businesses, they indicate that sustainability strategies may be most effective when environmental improvements are integrated with product development, marketing, customer communication, and measurable improvements in corporate operations. For investors, the results suggest that environmental ratings may provide information about future sales potential, although the effect could vary according to company size, brand recognition, and consumer awareness. Policymakers may also find evidence that stronger disclosure standards and credible environmental benchmarks can help consumers distinguish genuine improvements from vague or unsupported green claims. At the same time, the study’s results should not be interpreted as proof that environmental responsibility alone guarantees higher profits. The analysis identifies a significant statistical pathway in a defined group of Korean firms and a specific period; the strength of that pathway may differ across countries, industries, and levels of green consumerism. Even so, the research offers a compelling economic explanation for why environmental responsibility is becoming central to corporate strategy: when consumers reward credible sustainability, environmental action can become a source of sales growth, and sales growth can turn responsibility into financial performance.
Subject of Research: Not applicable
Article Title: Environmental Responsibility and Financial Performance: The Mediating Role of Sales in Korean Firms
News Publication Date: 22 May 2026
Web References: https://doi.org/10.1002/csr.70672; Chonnam National University
References: Lee, Sang-Ho, and Arturo Garcia. “Environmental Responsibility and Financial Performance: The Mediating Role of Sales in Korean Firms.” Corporate Social Responsibility and Environmental Management. DOI: 10.1002/csr.70672
Image Credits: Prof. Sang-Ho Lee
Keywords
Environmental responsibility, green consumerism, ESG, corporate sustainability, financial performance, sales growth, Korean firms, Chaebol companies, environmental economics, corporate social responsibility, sustainable business, consumer behavior
Tags: climate-conscious business strategiescorporate social responsibility and financial outcomescorporate sustainability reporting effectsCOVID-19 pandemic influence on sustainabilityenvironmental initiatives and sales growthenvironmental responsibility and company reputationenvironmental responsibility and corporate financial performancelarge conglomerates environmental performancemediating role of sales in sustainability profitsSouth Korean companies environmental practicessustainability and financial returnssustainability and marketplace impact
