From Workforce to ESG Performance: Product Responsibility Under Strategic Boundary Conditions

Aggregate ESG ratings are widely used in sustainability strategy research, but they often obscure how internal organizational capabilities become externally visible and how credibility shocks alter that process. This study addresses this problem by examining product responsibility as the market‐facing mechanism linking workforce‐related capability to firm‐level ESG performance, and by testing environmental management training and product quality controversies as implementation‐ and credibility‐related boundary conditions. Drawing on the resource‐based view, stakeholder theory, signaling theory, and legitimacy theory, we analyze an unbalanced panel of 952 EU listed firms from 2010 to 2024 using two‐step System‐GMM estimation. The results show that workforce‐related capability is positively associated with ESG performance and product responsibility, and that product responsibility partially channels the workforce–ESG relationship. The indirect association is positive in product‐of‐coefficients tests, although it is interpreted cautiously because causal mediation is difficult to establish in a dynamic panel setting. Product quality controversies significantly attenuate the product responsibility–ESG association, and this result remains evident when ESG is replaced with an environmental–governance outcome that excludes the Social pillar and is not the controversy‐adjusted ESG Combined Score. Contrary to the initial complementarity expectation, environmental management training weakens the workforce–product responsibility association, suggesting that formal training may overlap with, substitute for, or be adopted reactively alongside broader workforce capability. The study contributes new theoretical knowledge by explaining ESG performance as a conditional translation process from internal people capability to credible external responsibility, and it offers practical guidance on aligning workforce systems, product governance, training design, and controversy prevention.