AI-Driven ESG Performance: Innovating Corporate Social Responsibility for a Sustainable Future

Abstract

The study aims to investigate the impact of Artificial Intelligence (AI) adoption on the Environmental, Social, and Governance (ESG) performance of Chinese corporations from 2014 to 2023. The thought-provoking research offers insights into the evolving digital landscape in China and the promise of incremental sustainability, particularly in examining how AI technologies have contributed to enhancing ESG outcomes. With the help of firm-level information provided in corporate reports and Thomson Reuters DataStream, an AI Adoption Index is built and examined alongside the ESG scores. Following the firm-level information provided in the corporate reports and Thomson Reuters DataStream, an AI Adoption Index is developed and analysed in connection with the ESG scores. The fixed effects panel regression models are used to identify the effect of AI on ESG and control for firm-specific and time-varying turbulent heterogeneity. The findings indicate a strong positive correlation between AI adoption and ESG performance, with a stronger relationship observed in the environmental and governance aspects. The impacts are larger at the level of large firms and industries that are resource-intensive (like energy and manufacturing), where the moderating factors are size and industry. These observations suggest that AI is a strategic and operational tool utilised in the pursuit of corporate sustainability. It makes a contribution to the theory in two areas: the Resource-Based View and institutional theory, and has practical implications that can be applied by managers, policymakers, and investors who want to engage in integrated digital technologies as part of their responsible business activities.

Keywords:  ESG, Artificial Intelligence, Environmental, Social, Governance, Thomson Reuters