Green Finance, ESG Practices and Profitability: Evidence from Selected Food Processing Companies in India
DOI:
https://doi.org/10.66635/7fpjys37Keywords:
Green Finance, ESG Adoption, Profitability, Liquidity, Financial ReadinessAbstract
The increasing integration of sustainability within financial decision-making has positioned Environmental, Social, and Governance (ESG) practices as a strategic priority for capital-intensive industries. This study examines the relationship between financial characteristics and ESG adoption readiness in five listed Indian food processing companies during FY2023–FY2025. Using secondary financial data, a Financial Readiness for ESG Adoption Index (FREI) is constructed based on profitability (profit margin), liquidity (current ratio), and revenue growth, representing firms’ internal capacity to undertake sustainability investments. Correlation analysis and multiple regression modelling are employed to evaluate the impact of financial variables on ESG readiness. The findings reveal that Profit Margin (β = 0.46, p < 0.01) is the strongest predictor of ESG readiness, followed by Current Ratio (β = 0.38, p < 0.05) and Revenue Growth (β = 0.29, p < 0.05). The model explains 71% of the variation in ESG readiness (R² = 0.71), indicating that financial strength significantly enables sustainability transition capacity. The study contributes to emerging market ESG literature by proposing a financial-readiness framework for sustainability adoption within the agribusiness sector. Policy implications highlight the importance of targeted green finance instruments for firms with resource constraints. The findings provide actionable insights for regulators, financial institutions, and corporate decision-makers pursuing sustainable growth in India’s food processing industry.References
1.Bansal, P., Kistruck, G., & Krapivin, V. (2021). The role of materiality in sustainability research. Business Strategy and the Environment, 30(4), 1821–1836. https://doi.org/10.1002/bse.2718
2.Broadstock, D. C., Chan, K., Cheng, L. T., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from China. Journal of Sustainable Finance & Investment, 11(4), 1–25. https://doi.org/10.1080/20430795.2020.1717311
3.Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/ mnsc.2014.1984
4.Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Pitman.
5.Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
6.Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014. https://doi.org/10.2307/258963
7.Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: Evidence on materiality. The Accounting Review, 91(6), 1697–1724. https://doi.org/10.2308/accr-51383
8.Lo, K. Y., Kwan, C. L., & Ng, K. H. (2022). ESG disclosure and firm performance: The moderating role of ownership structure. Journal of Cleaner Production, 349, 131147. https://doi.org/10.1016/j.jclepro.2022.131147
9.Ministry of Food Processing Industries (MoFPI). (2024). Annual Report 2023-24: Scaling the Sunrise Sector. Government of India.
10.Moneycontrol Financial Database (FY2023–FY2025). Financial statements and ratios for Parag Milk Foods, Avanti Feeds, ADF Foods, Kaveri Seed Co., and Prataap Snacks (FY2023-2025). https://www.moneycontrol.com
11.OECD. (2020). Sustainable Finance and Responsible Investment: Alignment with the Sustainable Development Goals. OECD Publishing. https://doi.org/10.1787/5a344488-en
12.Porter, M. E., & Kramer, M. R. (2011). Creating shared value: How to reinvent capitalism—and unleash a wave of innovation and growth. Harvard Business Review, 89(1/2), 62–77.
13.Reserve Bank of India (RBI). (2022). Discussion paper on climate risk and sustainable finance. RBI Publications. https://www.rbi.org.in
14.Schaltegger, S., & Burritt, R. (2018). Contemporary Environmental Accounting: Issues, Concepts and Practice. Springer.
15.Securities and Exchange Board of India (SEBI). (2023). BRSR Core - Framework for assurance and ESG disclosures for value chain. SEBI Circular.
16.Taliento, M., Favino, C., & Netti, A. (2019). Impact of environmental, social, and governance information on economic performance: Evidence of a corporate "efficiency" effect from Europe. Sustainability, 11(6), 1738. https://doi.org/10.3390/su11061738
17.Waddock, S. A., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18(4), 303–319.
18.Xie, J., Nozawa, W., Yagi, M., Fujii, H., & Managi, S. (2019). Do environmental, social, and governance activities improve corporate financial performance? Business Strategy and the Environment, 28(2), 286–300. https://doi.org/10.1002/bse.2224
