Title:
Organisational Capital and ESG Performance

Authors:
Gaetano Matonti, Giuseppe Iuliano, Italy

Abstract:

This paper investigates the relationship between organisational capital (OC) and firms’ environmental, social and governance (ESG) performance, drawing on resource-based view theory (RBVT). Organisational capital is conceptualised as a firm-specific intangible resource embedded in managerial practices, routines, processes and accumulated knowledge, enhancing operational efficiency and long-term value creation. Using a global sample of 1,000 listed firms (7,000 firm-year observations) over the period 2017–2023, we examine whether organisational capital contributes to superior ESG performance and whether such effects materialise contemporaneously or with a temporal lag. Organisational capital is measured following Peters and Taylor (2017) by capitalising a fraction of selling, general and administrative expenses, while ESG performance is proxied by the LSEG ESG score. Our results indicate that contemporaneous organisational capital does not exert a statistically significant effect on ESG performance.

By contrast, lagged organisational capital is positively and significantly associated with ESG scores, suggesting that the benefits of organisational capital for sustainability outcomes emerge over time. Additional analyses reveal that this relationship persists across industries, including controversial sectors, where organisational capital appears to mitigate legitimacy challenges. Overall, the findings provide novel empirical evidence that organisational capital constitutes a strategic intangible resource that enhances firms’ ESG performance over time, thereby extending the literature on organisational capital and corporate sustainability.

DOI: https://doi.org/10.51505/IJEBMR.2025.91222