Abstract
The study investigated the relationship between environmental, social, and governance factors and the financial performance of commodity companies listed on the Johannesburg Stock Exchange Top 40 between 2019 and 2024. The growing global focus on sustainability had intensified interest in whether the integration of environmental, social, and governance practices enhanced or constrained profitability, particularly within resource-dependent economies such as South Africa.
The research was guided by institutional, stakeholder, and legitimacy theories and employed a quantitative, positivist design using panel data obtained from Thomson Reuters Eikon and Equity RT. Return on assets served as the dependent variable, while the environmental, social, and governance pillars represented the independent variables. Leverage, working capital, operating margin, market capitalisation, and interest rate were included as control variables. The data were analysed using pooled ordinary least squares, fixed-effects, and random-effects models, with the fixed-effects model identified as the most suitable specification.
The results indicated that environmental, social, and governance factors did not have a statistically significant short-term impact on profitability, although the model’s explanatory power was strong. Among the control variables, the interest coverage ratio and market capitalisation were positively associated with profitability, while the DTE ratio showed a significant negative effect. The environmental and social dimensions were positive but insignificant, and governance was weakly negative, suggesting that financial structure and operational efficiency remained the key short-term performance drivers.
The findings demonstrated that although environmental, social, and governance integration did not produce immediate financial gains, it positioned firms for long-term value creation, legitimacy, and investor confidence. The study contributed context-specific evidence from South Africa’s commodity sector, showing that sustainability should be regarded as a strategic investment in competitiveness rather than a short-term determinant of profit.