Abstract:

The purpose of this article is to empirically assess the relationship between companies’ ESG performance (Environmental, Social, and Governance) and their financial profitability, measured by ROA, ROE, and Operating Margin. The existing literature still lacks conclusive evidence on the direction and strength of the ESG–financial performance relationship, particularly in the context of European enterprises operating under a regulatory framework oriented toward sustainable development (CSRD, ESRS).

This study aims to fill that gap by analysing a large cross-sectional sample of European companies, enabling the observation of diverse ESG practices and their performance effects. The analysis is based on a dataset comprising a subset of 600 European firms (N ≈ 600) drawn from the Refinitiv database, including average values over the last five fiscal years.

To identify the relationships between ESG components and profitability, a Pearson correlation analysis was applied after data cleaning and conversion into a numerical format.

The results indicate significant positive correlations between ESG performance and financial efficiency measures, particularly in the environmental and governance dimensions. The strongest associations were observed for Resource Use Score (r ≈ 0.47), Emissions Score (r ≈ 0.45), and CSR Strategy Score (r ≈ 0.45). Moderate correlations were found for social components (e.g., Workforce Score, Human Rights Score). At the same time, the only negative relationship was identified for the Shareholders Score, which may suggest the limitations of short-term shareholder orientation.

Overall, the findings confirm that high-quality ESG practices contribute to higher corporate profitability, supporting the concept of “sustainable profitability” and providing a foundation for further empirical investigation.