Impact of Environmental, Social, Governance Factors on Consumers’ Behavior in the Light of Digital Transformation

Abstract

With increasing concern for the environment and a rise in ethical consumerism, Environmental, Social, and Governance (ESG) factors have become important in shaping how companies are seen and held accountable. This study explores how ESG practices influence consumer behavior, especially in the context of digital transformation (DT). The focus is on university students in Nepal, a group known for their comfort with digital technology and awareness of social and environmental issues. Based on Stakeholder Theory and the Theory of Planned Behavior, the study views ESG as a broad concept that includes environmental care, social responsibility, and good governance. It also looks at how digital transformation affects the relationship between ESG practices and how consumers connect with brands. The study used a descriptive and causal-comparative research approach, collecting primary data through a structured questionnaire with a 5-point Likert scale. The survey was completed by 206 university students from the Kathmandu Valley. Tests for reliability and validity showed that the measurement tools were strong and consistent. The descriptive results indicated that students had positive views of brands that follow ESG principles, especially in governance and the environment. Further analysis using correlation and regression showed that environmental and governance factors significantly positively impacted consumer behavior. However, the social factor did not show a meaningful effect. The regression model accounted for 35.8% of the changes in consumer behavior, suggesting that ESG practices play an important role in shaping consumer choices. Moderation analysis utilizing PROCESS Macro indicated that digital transformation significantly amplifies the relationship between ESG dimensions and consumer behavior, particularly in the environmental domain. However, as DT levels increase, the marginal influence of social and governance practices on consumer behavior shows a diminishing trend, suggesting that technological mediation may recalibrate the salience of traditional ESG signals. These findings imply that DT enhances the transparency, accessibility, and trustworthiness of ESG disclosures, thereby fostering deeper consumer engagement with ethically and environmentally responsible brands. This study adds to the current body of knowledge by showing, through data, how digital transformation influences the relationship between ESG practices and consumer behavior. It highlights the important role digital tools play in promoting ethical and sustainable consumer choices. The findings suggest that companies should include ESG principles in their core strategies and use digital platforms to clearly share these efforts with consumers. The study recommends that businesses develop ESG approaches that suit the needs and preferences of digitally active consumers. It also shows that combining sustainability with digital innovation can give companies a competitive edge. These results offer useful guidance for business leaders, marketers, and policymakers working to improve ESG communication in today’s digital environment.