The Effect of ESG-Based Financial Management on Company Financial Performance with Carbon Accounting Disclosure as a Moderating Variable

Abstract

Purpose: This study aims to examine the effect of Environmental, Social, and Governance (ESG) disclosure on corporate financial performance and to investigate the moderating role of carbon accounting disclosure in strengthening the relationship between ESG disclosure and financial outcomes.

Method: The study adopts a quantitative explanatory research design using purposive sampling of companies listed on the Indonesia Stock Exchange that published both sustainability reports and annual reports during the observation period. Secondary data were analyzed using hierarchical regression analysis to test the direct effect of ESG disclosure on financial performance and the moderating effect of carbon accounting disclosure.

Findings: The results indicate that ESG disclosure has a significant positive impact on corporate financial performance, reflected in higher profitability, improved operational efficiency, and enhanced market valuation. Furthermore, carbon accounting disclosure significantly strengthens this relationship by amplifying the financial benefits of ESG initiatives. The increase in explanatory power after introducing the interaction variable confirms that ESG initiatives are more financially effective when supported by transparent, measurable, and credible carbon reporting.

Implications: The findings highlight the strategic importance of integrating ESG disclosure with robust carbon accounting practices. Firms are encouraged to enhance the quality of sustainability and carbon disclosures to reduce information asymmetry, improve investor confidence, and achieve superior financial performance in increasingly sustainability-oriented markets.

Novelty/Value: This study contributes to the ESG and sustainability accounting literature by providing empirical evidence on the complementary role of carbon accounting disclosure in enhancing the financial impact of ESG practices, particularly within the context of emerging markets such as Indonesia.