Can Digital Servitization Improve Environmental, Social, and Governance (ESG) Performance? Evidence from China
Abstract
Against the global transition toward sustainable development, firms are increasingly integrating environmental, social, and governance (ESG) principles into their business strategies. This study develops a conceptual framework linking digital servitization to ESG performance and examines the underlying mechanisms and heterogeneous effects. Using 4686 firm-year observations from Chinese A-share listed firms in heavily polluting industries during 2013–2024, we construct a text-based measure of digital servitization through text mining and Python 3.13’s Jieba word-segmentation function. The empirical results show that digital servitization significantly improves firm ESG performance. The mechanism analyses indicate that carbon emission reduction and information transparency partially mediate this relationship. The quantile regression results further show that the positive effect of digital servitization is stronger at higher conditional quantiles of ESG performance, suggesting a possible cumulative advantage pattern. The heterogeneity analyses reveal that the effect is significantly stronger for non-high-tech firms than for high-tech firms, whereas the difference between state-owned and non-state-owned firms is not statistically significant. These findings extend the literature on digital servitization and ESG performance and provide practical implications for firms and policymakers seeking to promote sustainable development in the digital era.