1. Introduction
The climate change problem caused by the excessive emission of greenhouse gases, mainly carbon emissions, has emerged as a global quandary concerning the sustainable progress of human society [
1]. In accordance with the Paris Agreement, all parties will enhance their global response to climate change threats, keep the global average temperature within 2 degrees Celsius of pre-industrial levels, and strive to reduce global warming by 1.5 degrees Celsius [
2]. The IPCC report states that it is imperative for all sectors to curtail their emissions of greenhouse gases [
3]. In accordance with the European Union’s (EU) Green Agreement, there is a pressing need to substantially mitigate greenhouse gas emissions, a strategy that holds the potential to foster global economic prosperity [
4]. Greenhouse gas emissions have a significant impact on environmental development and sustainability [
5]. From the perspective of high energy consumption leading to higher operating costs for enterprises, the primary impact of energy consumption is that greenhouse gas emissions should be controlled and reduced [
6]. In the global context, the significance of sustainable development has escalated, consequently engendering a diverse array of novel frameworks and methodologies embraced by governments, society, and companies [
7]. Upholding the concept of a community of human destiny, the Chinese government has emerged as an exemplar of global climate governance through the implementation of tangible measures and initiatives. In virtue of the commitments undertaken, carbon peaking will occur by 2030 and carbon neutrality will be achieved by 2060, respectively. Enterprises are the micro-subjects of macroeconomic development and the essential organizations of meso-industry development. Thus, in order to attain the macro-level “dual carbon” goal, the implementation of carbon emission reduction responsibilities should be extended to the micro-enterprise level [
8]. As stakeholders increasingly pressurize companies to adopt more sustainable ways to reduce their social and environmental impacts, manage and reduce their carbon footprints, and provide more detailed sustainability-related information through appropriate disclosure policies, ESG is becoming a global benchmark for assessing corporations’ environmental and social responsibility [
9,
10]. Companies employ diverse strategies to attain carbon reductions while effectively conveying these efforts and outcomes to stakeholders through ESG disclosures [
11]. The current consensus acknowledges the increasing urgency of climate change, primarily attributed to the accumulation of greenhouse gases (GHG) in the Earth’s atmosphere. As this phenomenon is believed to approach a critical threshold where permanent and potentially catastrophic consequences are anticipated, the meticulous assessment of corporate greenhouse gas emissions performance is deemed an utmost priority in ESG reporting.
ESG is a corporate assessment system that underscores the need for companies to seek the optimization of profits and focus on multiple objectives, including environmental preservation and social responsibility [
12]. There has been rapid progress in ESG, and an increasing amount of research is now being conducted related to ESG. Current research focuses on factors influencing ESG disclosure, the impact on financial performance, corporate financial irregularities, corporate financial risk, corporate value, etc. [
13,
14,
15,
16,
17,
18]. Zheng et al. examined the correlation between environmental, social, and governance factors and corporate green innovation. The findings of this study revealed that ESG substantially enhanced both the number and quality of green innovations within corporations [
19]. The ESG performance demonstrates a significant correlation with the generation of green invention patents in polluting industries over an extended period. While extensive research has been conducted on corporations’ financial performance and innovative performance, limited research has been given to the implications of company carbon performance. Heavy pollution-listed companies are major producers of carbon emissions; thus, understanding the relationship between ESG disclosure and carbon performance in heavy pollution-listed companies is necessary.
Corporate carbon performance refers to the revenue a company earns per unit of carbon emissions. Many scholars have conducted research on carbon performance, mainly focusing on exploring influencing factors. In terms of environmental influences, Haque and Ntim found that sustainable development policies had a positive impact on the carbon performance of European listed companies [
20]. The findings showed a stronger relationship between sustainable development measures and carbon performance in polluting industries. Additionally, Ren et al. examined the impact of extreme climate risk on the environmental performance of Chinese companies at the national level [
21]. In terms of social influences, based on Chen et al.’s study, corporations’ carbon reduction performance was positively influenced by the implementation of low-carbon city construction initiatives [
22]. Additionally, it was observed that government promotion incentives played a key role in enhancing corporate efforts towards carbon reduction. From the perspective of local government intervention and market segmentation, Kou and Xu quantified the impacts of internet infrastructure on carbon performance [
23]. A significant improvement in total carbon emissions was found when internet infrastructure was implemented. Regarding governance influences, Haque conducted a study examining the impact of board features and sustainable compensation policies on business endeavors targeted at mitigating carbon emissions and greenhouse gas (GHG) emissions [
24]. The findings indicated that corporate boards and top management primarily prioritize the company’s process-oriented carbon performance rather than effectively mitigating greenhouse gas emissions. Using a sample of multinational firms, Oyewo assessed the impact of corporate governance on carbon emission reduction efforts [
25]. By combing through the literature, corporate carbon performance has been studied in corporate governance, social, and environmental dimensions. However, the relationship between ESG disclosure and corporate carbon performance has not been sufficiently investigated in existing studies.
This article aims to examine the impact of ESG disclosure on the carbon performance of heavily polluting enterprises in China. Additionally, it seeks to investigate the moderating effect of institutional environment and media attention on the relationship between ESG disclosure and corporate carbon performance, taking into account the perspectives of institutional environment and media attention. To ensure accuracy in measuring ESG and corporate carbon performance, this study utilizes Huazheng ESG ratings, which are specifically tailored to the Chinese market, to assess corporate ESG disclosure. Furthermore, to address the limited disclosure of carbon dioxide emissions by corporations, corporate carbon emissions are estimated by leveraging operating costs and industry-specific carbon emissions data. This approach enables a more comprehensive evaluation of corporate carbon performance. In this study, ESG disclosure was found to improve the carbon performance of heavily polluting enterprises significantly, and the robustness of the conclusions was evaluated using instrumental variables and substitution of critical variables. Especially in the context of high-growth and privately owned companies, the impact of ESG disclosures on carbon performance is significant. In addition, this study investigated the role of institutional environment and media attention in moderating the relationship between ESG disclosure and the companies’ carbon performance to assess their respective impacts. The research results will be used to support the government in formulating more effective and targeted policies. These policies aim to enhance the level of ESG disclosure by enterprises, strengthen the management of ESG disclosure practices, and facilitate a pathway for improving the carbon performance of heavily polluting enterprises. Ultimately, the research outcomes can contribute to the achievement of China’s “dual carbon” goals by facilitating sustainable environmental practices and initiatives.
This paper presents the primary contributions as follows: Firstly, the contribution of this study is to provide more direct empirical evidence for the impact of ESG disclosure on corporate carbon performance, based on the perspective of linking ESG disclosure with corporate carbon performance for the first time, combined with data from heavily polluting enterprises in China. In previous research on ESG disclosure, based on panel data from multinational corporations, Wen et al. investigated the relationship between the quality of ESG disclosure and ESG investment growth [
26]. Schiemann and Tietmeyer investigated whether ESG disclosure alleviated the relationship between ESG controversy and analyst prediction accuracy [
27]. Using Chinese listed companies as a sample, Ge et al. studied the impact of ESG performance on corporate quality, and Chen et al. investigated how ESG disclosure effectively promoted technological innovation capabilities [
28,
29]. Regarding research on carbon performance, Cheng et al. examined global corporate carbon performance from a decentralized perspective at the national level [
30]. Elsayih et al. used Australian companies as a sample to study the impact of corporate governance on carbon emission performance [
31]. Du et al. and Jiang et al. studied the impact of corporate governance on carbon performance based on provincial panel data, high-tech enterprises, and manufacturing enterprises in China, respectively [
32,
33]. Previous studies have not yet examined the impact of ESG disclosure on carbon performance, specifically within the context of heavily polluting enterprises in developing countries.
Secondly, this study aims to establish a comprehensive research framework for ESG disclosure, corporate carbon performance, institutional environment, and media attention. Previous research has mainly focused on the impact of the media environment on green innovation, including the impact of the new media environment and environmental regulations on green technology innovation, the impact of online sentiment on green innovation [
34,
35], and the impact of the institutional environment on credit risk [
36]. The integration of the institutional environment and media attention within a research framework addresses a notable research gap in the literature regarding the moderating effect of the institutional environment and media attention on the relationship between ESG disclosure and corporate carbon performance.
Thirdly, this study delves into the examination of how ESG disclosure influences the carbon performance of different heavily polluting enterprises from the perspectives of corporate growth and the heterogeneity of corporate property rights attributes to address these research gaps. The empirical findings of this research indicate that ESG disclosure has a more significant impact on high-growth and private enterprises, thus providing empirical evidence to enhance carbon performance across different enterprise types.
3. Research Design
3.1. Sample Selection and Data Sources
This study focuses on heavily polluting Chinese firms listed on the A-share markets to examine the influence of ESG disclosure on the carbon performance of these corporations. The research period spans from 2012 to 2021, as determined by the availability of the data. Selecting Chinese heavily polluting enterprises as the research sample primarily considers two key aspects. On one hand, the selection of heavily polluting enterprises as the research sample is justified by their substantial negative externalities as well as their prominent role in attracting attention from environmental protection departments due to their significant pollution emissions. Therefore, in theory, the ecological management efforts of heavily polluting enterprises are more representative when compared to those of non-heavily polluting enterprises. On the other hand, considering the particularity of production in heavily polluting industries and the significant harm they pose to the environment, the environmental governance needs of heavily polluting enterprises are more urgent. Conducting research on ESG disclosure and carbon performance within this context holds practical significance in alleviating the conflict between enterprise development and the low-carbon requirements of stakeholders. Regarding the definition of polluting industries: In 2003, the State Environmental Protection Administration proposed 13 polluting industries for listed companies’ environmental protection verification, and in 2010, the Ministry of Environmental Protection (MEP) required the disclosure of environmental protection reports for 16 categories of polluting industries. Based on the 2012 China Securities Regulatory Commission Guidelines for Industry Classification of Listed Companies, this paper compares the corresponding industry codes with the above 16 categories of heavily polluting enterprises. Finally, it determines the codes of polluting industries as follows: B6, B7, B8, B9, B10, B11, C15, C17, C18, C19, C22, C25, C26, C27, C28, C29, C30, C31, C32, and D44. This paper defines listed companies belonging to the above industry codes as heavily polluting enterprises. After excluding ST and ST* companies and enterprises with serious data missing, a total of 529 enterprises were included in the analysis. Furthermore, a 1% winnowing technique was implemented to address the potential influence of outliers. Data from the China Energy Statistical Yearbook, the China Statistical Yearbook, the CSMAR database, and the WIND database.
3.2. Econometric Modelling
A bidirectional fixed effects model was applied to benchmark regression to explore the association between ESG disclosure and the carbon performance of heavily polluting Chinese companies between 2012 and 2021. According to Gallego-Alvarez et al., panel data models offer enhanced efficiency and improved inference by addressing the issue of omitted variables and by capturing unobserved heterogeneity between individual units or over time [
48]. The fixed effects model emerges as a more appropriate choice due to its ability to produce more robust and unbiased results. Specifically, Formula (1) is developed to test ESG disclosure’s effect on heavily polluting enterprises’ carbon performance.
where
CPi,t is the carbon performance of firm
i in period
t, and
ESGi,t is the ESG disclosure level of firm
i in period
t,
Controlsi,t are control variables;
Yeart and
Indi are year dummy variables and industry dummy variables, respectively; and
εi,t is a random disturbance term. This paper focuses on the regression coefficients
β1, which are used to measure the impact of ESG disclosure on firms’ carbon performance. If significantly positive, it indicates that ESG can significantly promote the carbon performance improvement of heavy polluting firms, and if significantly negative, it indicates that ESG inhibits the carbon performance improvement of heavy polluting firms.
In order to further explore the moderating effect of the institutional environment on the relationship between ESG disclosure and corporate carbon performance, Formula (2) was developed.
To investigate the role of media attention on the relationship between ESG disclosure and corporate carbon performance, Formula (3) was developed.
3.3. Variable Description
Explained variable: corporate carbon performance (CP). Since the carbon emissions of Chinese firms are not directly available, this study draws on the approach of Clarkson’s conversion formula at the enterprise level to evaluate the carbon performance of enterprises [
49]. Given that enterprises disclose carbon dioxide emissions less often, considering the accessibility of data at the micro level, this paper, with the help of operating costs, estimates the corporate carbon emissions based on the industry’s carbon emissions, i.e., the revenue obtained per unit of carbon emissions as an indicator of the enterprise’s carbon performance. A higher value of this indicator signifies a more favorable carbon performance. Industry carbon emissions are calculated through industry energy consumption and the corresponding energy carbon emission factor, and the carbon performance estimation formula is as follows.
Explanatory variable: ESG disclosure (ESG). Given the emphasis on harmonizing the economy with the environment, numerous prominent rating agencies, such as Bloomberg and Wind, undertake evaluations of corporate ESG performance. A growing level of attention has been paid to the ESG performance of companies by the Chinese government and society in recent years. Therefore, this study employs the Huazheng ESG rating, a rating system designed specifically for the Chinese market, as a standardized measure to evaluate the extent of ESG disclosure by enterprises. The Huazheng ESG evaluation data is characterized by a wide range of coverage and a high degree of timeliness, and the index has been widely recognized and applied by industry and academia at present. The ESG ratings provided by Huazheng are classified into nine distinct levels, ranging from the lowest to the highest as follows: C, CC, CCC, B, BB, BBB, A, AA, and AAA. This paper assigns values to the above rating data in order to serve as explanatory variables to measure corporate ESG disclosure. The ratings C-AAA are sequentially assigned as 1–9: ESG = 1 when the rating is C, ESG = 9 when the rating is AAA, etc.
Moderating variable: Institutional Environment (MARKET). The overall marketization index constructed in the China Provincial Marketization Index Report (2021) is used to measure the institutional environment. The index assesses distinct market environments from a multidimensional perspective, encompassing five key dimensions: the government-market relationship, the growth of non-state-owned economies, the expansion of product markets, the advancement of factor markets, the progress of market intermediary organizations, and the state of the rule of law. Media Attention (MEDIA): Refer to Yang and Zhang to measure media attention by the total media coverage a company receives, including print and online media [
50].
Referring to previous studies, this study incorporates several control variables, namely equity concentration (OC), firm size (SIZE), institutional investor’s shareholding (II), firm’s growth capacity (GROWTH), number of years listed (LY), board size (BOARD), board independence (INDEP), and CEO-Chair separation (DUAL) [
20,
24]. Furthermore, the paper eliminates differences between industries and years by controlling for industry effects (Ind) and year effects (Year). As shown in
Table 1, the variables are defined in more detail.
3.4. Descriptive Statistics Analysis
An analysis of the descriptive statistics carried out on the variables is presented in
Table 2. The minimum value of corporate carbon performance (CP) is 2.707, and the maximum is 8.998, indicating a significant gap in carbon performance across enterprises. There is significant potential for improvement. Regarding explanatory variables, the mean of ESG disclosure (ESG) is 4.207, the minimum is 1.000, and the maximum is 8.000. Some companies still need to further improve their ESG disclosure level. The firm size (SIZE) is measured at 22.590, suggesting that the enterprises included in our sample are characterized by a substantial scale.
5. Conclusions and Implications
ESG is in line with the concept of sustainable development. This article aims to examine the influence of ESG disclosure on corporate carbon performance within the context of China’s “dual carbon” objective. Moreover, it seeks to explore the moderating effects of the institutional environment and media attention on the relationship between ESG disclosure and corporate carbon performance.
The findings can be summarized as follows: First, ESG information disclosure enhances the carbon performance of heavily polluting enterprises; a higher level of ESG disclosure helps heavy polluters achieve better carbon performance. Second, the impact of ESG information disclosure on the carbon performance of heavily polluting enterprises is negatively moderated by the institutional environment and positively moderated by media attention. Media attention exerts a positive regulatory influence on ESG disclosure pertaining to the carbon performance of significantly polluting firms. Finally, the heterogeneity analysis reveals that the ESG disclosure has a noteworthy and positive impact on the carbon performance of heavily polluting enterprises experiencing high growth. Moreover, private enterprises exhibit a more pronounced effect on enhancing carbon performance when compared to state-owned enterprises.
Our findings have the following implications: First, enterprises should reconsider their previous unilateral perspective toward investments in environmental protection and social responsibility, which will crowd out corporate resources and increase costs. They should also realize that good corporate ESG management can not only reduce financing costs in the short term but also consider the sustainable development of the company in the long term, strengthen their awareness of carbon risks, and reduce corporate carbon risks through low-carbon production, green innovation, and other behaviors to improve carbon performance. Secondly, establishing a favorable market environment that encourages enterprises to proactively disclose ESG-related information can effectively mitigate the information asymmetry between stakeholders and enterprises. In turn, this facilitates public comprehension of the environmental status of enterprises and subsequently motivates them to engage in energy conservation and emission reduction efforts, thereby achieving sustainable development. Thirdly, in the era of pervasive media, the media report in various ways with fast speed and a wide range of audiences, which makes the media’s role in the behavior of the enterprise market guidance stronger and strengthens the media management so that the media can accurately and timely report on the enterprise’s environmental violations and track the later development of the incident. At the same time, the media should actively report on enterprises that have achieved notable accomplishments in energy savings, carbon reduction, and green transformation. This approach aims to foster a conducive atmosphere of green and low-carbon development across society as a whole and collectively contribute to the achievement of macro-level reductions in carbon emissions.
The limitations of this article and suggestions for future research directions. Firstly, research has focused on the impact of technology and digital elements on corporate carbon emission reduction; we ignore the interference of technological innovation in corporate emission reduction actions and more from the perspective of management and regulation to build the ESG disclosure on corporate carbon performance. Future research can continue to deepen the issue of corporate carbon performance from the perspective of integrating corporate management, technology, and regulation. Secondly, the scope of the impact of ESG disclosure is extensive, and there may be additional influencing mechanisms in the impact on corporate carbon performance. More research is needed to investigate its impact mechanism further. Thirdly, the research sample in this paper is selected from Chinese-listed, heavily polluting enterprises. Future research endeavors could enhance the sample capacity, for example, by selecting all listed companies in China as a sample for research, and cross-country comparisons can be made with other economies. Finally, the data utilized in this study are limited to static data. Future research endeavors should incorporate longitudinal tracking data to enhance the validity of the findings. This would enable a more comprehensive assessment of the influence of ESG disclosure on the carbon performance of significantly polluting firms.
In conclusion, ESG disclosure plays a crucial role in fostering the sustainable development of future social enterprises and economic progress. Within this context, carbon performance emerges as a crucial and indispensable topic that demands attention and cannot be ignored. This study aims to build a bridge between the two and provide empirical evidence for future development. We provide additional supporting evidence for ESG disclosure by enterprises under the Sustainable Development Goals and a reference for developing countries’ plans to improve corporate carbon performance.