Stakeholder prioritization in the ESG practices of European listed firms

Absztrakt

This paper examines the order of stakeholder preferences in the ESG practices of 706 European listed companies between 2009 and 2020. Our research aims to scrutinize which stakeholders benefit the most from the ESG activities of the firms. Based on the ESG scores of Refinitiv, our model uses LASSO regressions to determine which ESG activities and categories have the highest marginal contribution to the overall ESG performance. Our main results show an implied hierarchy of stakeholder preferences in ESG strategy, which differs over time, across the ESG performance of the firms and economic sectors. Concerning the governance and social pillar-related ESG activities, internal stakeholders, i.e., the board, and the employees, are preferred to external ones to internalize the ESG impacts for higher ESG scores. Meanwhile, firms with higher ESG scores prefer suppliers via their environmental ESG activities.