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Focusing on non-financial firms listed on the Saudi Stock Exchange, this study evaluates the effect of digital transformation (DT) on their environmental, social, and governance (ESG) outcomes. Using 105 firm-year observations from 2019 to 2022, a novel DT index was developed through manual content analysis of annual reports. ESG performance data, sourced from the London Stock Exchange Group (LSEG), were disaggregated into environmental, social, and governance scores. The analysis utilizes two-stage least squares (2SLS) and propensity score matching (PSM) techniques to address potential endogeneity and strengthen the robustness of the results. The findings reveal a statistically significant and positive association between DT and overall ESG performance, with the strongest effects observed in the environmental and social dimensions. Further analysis identifies big data analytics and blockchain as key technologies driving ESG improvements. These findings highlight the strategic role of DT in advancing sustainability in emerging markets. By focusing on Saudi Arabia context, this study contributes novel empirical insights to the digitalization–sustainability literature and provides practical guidance for firms and policymakers seeking to align DT initiatives with national goals such as Vision 2030.
Bajaher et al. (2025) studied this question.