This study investigates whether the relationship between green operations (GR-OPS) and corporate financial performance (CFP) is conditional on firms’ adherence to environmental, social and governance (ESG) practices. GR-OPS is quantified as an inverse of the energy intensity (ene-int) of the firm’s operations. CFP is proxied by return on equity and return on assets. The study uses panel data for non-financial firms listed on India’s Bombay Stock Exchange (BSE) 100 index. The ESG-sensitive firms are bifurcated from a broader list of BSE 100 index based on their belongingness to the BSE ESG 100 index for econometric analysis. The findings confirm that the impact of GR-OPS on CFP is subject to the firms’ adherence to ESG practices. A positive relationship between GR-OPS and CFP is established for ESG-sensitive firms, while the linkage is non-existent for non-ESG firms. Such findings are attributable to ESG sensitivity (reduced risks) and not the reduced operational costs due to reduced ene-int. The study claims that the benefits of ESG are evident via GR-OPS. Firms should attempt to meet ESG practices to unlock the financial benefits of GR-OPS. When coupled, these practices can reduce the overall risk of the firms as well as generate better economic profits. Adherence to ESG practices and GR-OPS will build environmentally and socially sensitive firms. This is a greater need of modern society, which is increasingly fighting social unrest, global health concerns and climate change.
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