Purpose Environmental, social and governance (ESG) topics have recently received increasing attention from scholars, as regulations increasingly require companies to make mandatory disclosures on environmental and social issues. For instance, the China Securities Regulatory Commission issued the “Corporate Governance Guidelines for Listed Companies” to force companies to disclose ESG information. Mandatory ESG disclosures relate to both production and consumption and may affect firms' export product quality. We therefore examine how ESG performance influences firms' export product quality. Design/methodology/approach We develop a theoretical framework based on monopolistic competition with heterogeneous firms, incorporating ESG dimensions into international trade theory. Our empirical analysis uses panel data from 921 Chinese publicly listed companies from 2009 to 2016. We use ordinary least squares (OLS) as the baseline estimator and address endogeneity with instrumental variables based on industry–province average ESG performance and the development of pan-ESG funds, and conduct robustness checks by replacing core variables and alternative estimation models to ensure reliable causal inference. Findings ESG performance significantly improves export product quality. Under the nine-tier rating, a one-level increase in ESG rating improves export product quality by about 1.25%; under the 0–100 scoring system, a 10-point increase improves it by about 2.2%. We identify dual transmission mechanisms: supply-side effects through enhanced total factor productivity and green innovation that reduce manufacturing costs, and demand-side effects through reduced operational costs and improved locational advantages that mitigate “liability of foreignness” in international markets. The effect is economically significant, approximating China's average annual export quality growth rate from 2000 to 2006. Practical implications Export-oriented firms should treat ESG investment as a strategic value-creation tool that directly enhances product competitiveness. Policymakers should continue expanding ESG disclosure requirements and integrate ESG criteria into trade promotion policies to support export upgrading. The findings provide guidance for other developing nations seeking to improve export quality through sustainable development practices. Originality/value This study is the first to theoretically and empirically link ESG performance to export product quality using heterogeneous firm trade theory. We extend heterogeneous-firm trade theory by incorporating ESG dimensions and provide novel evidence on how sustainable practices translate into export competitiveness, offering insights particularly relevant for developing economies.
Liao et al. (Tue,) studied this question.