Cogent Business & Management

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The impact of environmental, social, and governance

(ESG) practices on customer behavior towards the
brand in light of digital transformation: perceptions of
university students

Murad Baqis Hasan, Ruchita Verma, Dhanraj Sharma, Sami A.M. Moghalles
& Saqr Ali Saleh Hasan

To cite this article: Murad Baqis Hasan, Ruchita Verma, Dhanraj Sharma, Sami A.M. Moghalles
& Saqr Ali Saleh Hasan (2024) The impact of environmental, social, and governance (ESG)
practices on customer behavior towards the brand in light of digital transformation:
perceptions of university students, Cogent Business & Management, 11:1, 2371063, DOI:
10.1080/23311975.2024.2371063

To link to this article: https://doi.org/10.1080/23311975.2024.2371063

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Cogent Business & Management
2024, VOL. 11, NO. 1, 2371063
https://doi.org/10.1080/23311975.2024.2371063

Marketing | Research Article

The impact of environmental, social, and governance (ESG) practices
on customer behavior towards the brand in light of digital
transformation: perceptions of university students
Murad Baqis Hasana, Ruchita Vermaa, Dhanraj Sharmaa , Sami A.M. Moghallesb and
Saqr Ali Saleh Hasanc
a
Financial Administration Department, Central University of Punjab, Bathinda, India; bMarketing and Production Department,
Thamar University, Dhamar, Yemen; cAccounting Department, Thamar University, Dhamar, Yemen

ABSTRACT ARTICLE HISTORY

In the digital transformation era, environmental, social, and governance (ESG) practices Received 6 November
increasingly shape customers’ behavior (CB) toward brands, serving as frameworks that 2023
not only correspond with consumer values but also impact their trust, loyalty, and Revised 23 May 2024
Accepted 11 June 2024
engagement with companies. However, prior studies have not extensively investigated
this issue. Hence, this study, based on stakeholder theory, seeks to examine the effect KEYWORDS
of ESG on CB toward brands under the moderating effect of DT. To this end, data was Environmental; social, and
collected from 306 students from Yemeni universities via an online questionnaire and governance (ESG);
analyzed using PLS-SEM via SmartPLS software. The results showed a direct relationship customer behavior; digital
between ESG and CB. Specifically, the environmental dimension had the strongest transformation
effect on CB, followed by the social dimension and governance dimension. The results REVIEWING EDITOR
also found that DT moderates the relationship between the environmental dimension Kaouther Kooli,
of ESG and CB, in contrast, the effect of DT on the relationship of the social dimension Bournemouth University,
of ESG or the governance dimension of ESG on CB is not significant. United Kingdom of Great
Britain and Northern
Ireland
SUBJECTS
Environmental Studies;
Environmental
Management;
Environment and
Business

1. Introduction
In an era marked by heightened environmental awareness and social justice movements, the influence
of Environmental, Social, and Governance (ESG) factors on consumer choices and brand loyalty has
become increasingly significant. As consumers become more aware of the ecological footprints and
social impacts of their purchasing decisions, companies are recognizing the critical need to align their
business strategies with ESG principles not merely as a compliance measure but as a core component of
their market appeal and competitive strategy (Lee & Rhee, 2023). Indeed, some companies intentionally
base their operations on these core principles, making them the foundation of their organizational prac-
tices and strategies (Nugroho et al., 2024). This thorough and thoughtful approach not only satisfies the
needs of discerning customers who are increasingly aware of these issues, but it also generates a pro-
found sense of satisfaction and fulfillment within the company, giving it a competitive edge in the mar-
ketplace (Al-Hakimi et al., 2022; PWC, 2023).
Interest in ESG continues to grow across different sectors. Major global corporations like Kia, Hyundai,
and Samsung now view ESG management as crucial for their survival. They are concentrating on devel-
oping new and renewable energies and expanding the adoption of electric cars (Koh et al., 2022). ESG
significantly affects corporate value, and it is seen as a fundamental value intimately linked to the

CONTACT Saqr Ali Saleh Hasan [email protected] Accounting Department, Thamar University, Dhamar, Yemen.
© 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which
permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The terms on which this article has been
published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.
2 M. B. HASAN ET AL.

long-term survival and success of businesses (Bae et al., 2023). The significance of corporate ESG man-
agement is consistently highlighted for both academics and practitioners. Rezaee (2016) suggested that
a firm can enhance its sustainability by focusing on both financial value and non-financial aspects, like
ESG. Before that, Jones (1995) maintained that a company’s ethical conduct boosts its competitiveness
through the development of positive and sustainable stakeholder relationships. While numerous studies
have been performed on ESG, most of these studies have primarily focused on corporate financial per-
formance (Qureshi et al. 2021; Saygili et al., 2022; Zhao et al., 2018), while few studies have concentrated
on consumer behavior (e.g., Bae et al., 2023). In addition, studies that addressed the effect of corporate
ESG management on consumer behavior, particularly those utilizing primary data like surveys, are quite
scarce (Lee & Rhee, 2023). Specifically, empirical research that explores the effect of ESG practices by
connecting them with customer behavior towards the brand are not extensively investigated. Thus, it is
essential to examine how corporate ESG management influences customer behavior towards the brand,
leading to the following research question:
RQ1. How does ESG practices affect customer behavior towards the brand?

Indeed, ESG practices play a significant role in shaping customer behavior towards brands, and their
importance is further amplified by digital technologies that enhance these practices within companies
(Zhao & Cai, 2023). In line with this, digital transformation (DT) can fulfill the requirements for disclosing
and managing ESG information within firms. This not only improves the timeliness and comprehensive-
ness of ESG disclosures, but also enhances the efficiency and ease of managing and operating ESG infor-
mation. Consequently, this helps bolster firms’ ability to implement ESG practices and enhance their
performance (Wang & Esperança, 2023). DT is the process of incorporating digital technologies into all
facets of a business, resulting in a fundamental alteration of the firm’s operations and the manner in
which value is provided to customers (Vial, 2021). In general, the process of digitalization has a transfor-
mative impact on the allocation of company resources, mostly due to the consequences of information
sharing and integration (Andersson, 2003), which addresses corporate requirements regarding ESG dis-
closure (Sedunov, 2017). Furthermore, the implementation of DT initiatives has the potential to decrease
expenses associated with meeting social responsibility commitments and enhance the effectiveness of
accountability processes (Bhandari et al., 2022). This, in turn, establishes a basis for enhancing ESG per-
formance. Hence, it is contended that the examination of the impact of DT on the relation between ESG
practices and CB towards brand requires additional research, leading to the following research question:
RQ2. Is the relation between ESG practices and customer behavior towards the brand moderated by DT?

Using a questionnaire developed from existing research, data were gathered from 306 students from
Yemeni universities, this study contributes to the literature in two ways. First, it examines whether ESG
practices affect CB towards brands. Unlike previous studies that examined the linkage between ESG prac-
tices and financial performance, the current study focused on the link of ESG practices and CB toward
brands in the context of developing countries, such as Yemen. Furthermore, this study incorporated DT
as a moderating factor in analyzing the relationship between ESG practices and CB, an aspect unex-
plored in previous literature, which contributes to enhancing understanding of the complex link between
ESG practices and CB.
The remainder of the article is organized as follows: Section 2 covers the literature review and the
development of hypotheses. Sections 3 and 4 present the methods employed and the findings of the
study, respectively. Sections 5 provides a discussion of the findings, and finally, section 6 highlights
the conclusions, along with the implications as well as limitations and future research.

2. Literature review and hypotheses development

2.1. Underpinning theory
Theoretically, this study adopted the stakeholder theory (Freeman, 1984) to examine the effect of ESG
on CB toward brands under the moderating effect of DT. According to this theory, a stakeholder is any
person or entity capable of influencing the organization’s objectives (Al-Swidi et al., 2022).
 Cogent Business & Management 3

Hence, consumers have the ability to take action against directors acting as representatives of the com-
pany if they fail to fulfill their duties effectively (Khalil & Khalil, 2022). From this perspective, for compa-
nies to thrive, they need to share information and expectations with their main stakeholders, including
consumers (Hartmann et al., 2017). This enables stakeholders to stay informed about the firm’s sustain-
ability efforts aimed at fostering societal sustainability (Huang et al., 2019). In this context, certain studies
have suggested that the purchasing behavior of 92% of consumers are shaped by their awareness of
firms’ sustainability practices (Herjanto et al., 2021). This is a significant consideration, with nearly 86% of
consumers taking health and environmental factors into account when evaluating a product (Khalil &
Muneenam, 2021). Consistent with this idea, stakeholder theory proposes two approaches to a balanced
sustainability communication strategy: maintaining regular contact with consumers and fostering collab-
orative, interactive communication. Accordingly, we argue that a company’s sustainability efforts (such as
ESG initiatives) can positively influence consumer behavior towards its brands (Khalil & Khalil, 2022),
particularly in the era of digital transformation where a company’s digital capabilities are crucial for effec-
tively disseminating information and meeting the expectations of key stakeholders, such as consumers.

2.2. ESG and customer behavior

According to Min-Kyu and Seong-Soo (2022), customers’ evaluations of companies are shaped by their
ESG initiatives, particularly with regard to their brand reputation. Addressing environmental concerns is
becoming more important, not only because of ethical considerations, but also because of the strategic
edge it brings in terms of increased customer loyalty and increased profits (Billio et al., 2021). This trend
can be linked to increasing environmental consciousness among individuals who are more aware of
significant biological and environmental changes happening globally (Nugroho et al., 2024). Consequently,
environmental considerations have become a valuable competitive asset. Numerous companies have
realized the advantages of adopting eco-friendly measures within their corporate social responsibility
(CSR) initiatives and have developed sustainable products to cater to the rising demand from environ-
mentally aware consumers (Dedunu & Sedara, 2023). Based on the above, we assume that:
H1: Environmental practices positively influence CB.

On the other hand, the establishment of a robust presence on social media platforms can confer a
distinct advantage to a firm by effectively highlighting its endeavors toward sustainability (Nugroho
et al., 2024). Social responsibility initiatives can also enhance a company’s reputation and brand image.
Regarding this, the findings of a consumer research survey conducted by Smartest Energy (2015) showed
that sustainability is important to the majority of customers, specifically four out of five, exhibit a pref-
erence for purchasing products or services from firms that actively endorse and promote sustainability.
The significance of ethical and responsible business practices in attracting customers and enhancing
brand equity has been demonstrated via previous studies (e.g., Hur et al., 2014; Kang & Namkung, 2018;
Tan et al., 2022; Vuong & Bui, 2023). The favorable perception of a company’s social responsibility actions
by customers can significantly contribute to the creation and improvement of brand equity. From a stra-
tegic standpoint, active participation in social responsibility projects can contribute to the cultivation and
preservation of a brand’s reputation. Hence, these projects might be seen as deliberate investments with
long-term objectives. In a study conducted by Sharma and Jain (2019), it was demonstrated that the
implementation of social responsibility programs had a beneficial impact on both brand equity and the
reputation of a firm. According to the study conducted by Smith et al. (2001), it was shown that women
tend to exhibit a greater degree of care towards ethical business duties in comparison to men. In a
similar vein, the study conducted by Haski-Leventhal et al. (2017) revealed that individuals’ perceptions
of CSR initiatives exhibit age-related differences. Based on the aforementioned insights, we put out the
subsequent hypothesis:
H2: Social practices positively influence CB.

Furthermore, the extant studies have explored the effect of governance practices on customers. In
particular, Talesh (2015) suggests that corporate governance affects consumer ethics. Indeed, the gover-
nance practices of an organization significantly influence customers’ purchasing decisions. Furthermore,
4 M. B. HASAN ET AL.

implementing a customer relationship leadership model enhances business performance through posi-
tive customer feedback on the company’s products (Galbreath & Rogers, 1999). As such, we argue that
consumer buying decision and behavior towards the brands is influenced by the governance mecha-
nisms in place in the company. When these mechanisms are open, transparent, and accountable, con-
sumers are more likely to form stronger connections with the firm than ever before (Dedunu & Sedara,
2023). Thus, we suggest that:
H3: Governance practices positively influence CB.

2.3. Moderate role of digital transformation

Businesses are shifting away from focusing exclusively on generating profits for shareholders and are
instead aiming to expand benefits together with stakeholders - including employees, customers, suppli-
ers, communities, and governments - to achieve mutual success for all parties involved (Fang et al.,
2023). That is the purpose of ESG. Meanwhile, DT enables companies to enhance their ESG practices
through more efficient resource management and reduced environmental footprints, leading to greater
consumer trust and loyalty (Lu et al., 2024). By leveraging digital technologies, businesses can not only
monitor and reduce their environmental impact more effectively but also engage with stakeholders in
more meaningful ways, allowing for more transparent and ethical practices that attract socially con-
scious customers (Nambisan et al., 2019). This commitment to responsible practices is increasingly rec-
ognized and valued by consumers, often influencing their purchasing decisions and loyalty to brands
that prioritize sustainability and ethical operations. Moreover, digital tools can facilitate better stake-
holder engagement and communication, empowering customers to make informed choices that align
with their values, thus driving positive changes in consumer behavior. In light of this, it can be
assumed that:
H4: The relation between environmental practices and CB is moderated by DT.

H5: The relation between social practices and CB is moderated by DT.

H6: The relation between governance practices and CB is moderated by DT.

3. Methodology
3.1. Sample and data collection
This study focused on university students as an appropriate sample for studying the effects of ESG prac-
tices on customer behavior amid digital transformation due to their familiarity with digital tools and
heightened awareness of social and environmental issues. Furthermore, their purchasing habits and
brand loyalty often reflect contemporary attitudes and values, providing valuable insights into emerging
consumer trends that can guide businesses in adapting their ESG practices. Consistent with the goals of
this research, a quantitative method was adopted, where data was gathered from a sample of public
university students in Yemen through a cross-sectional survey conducted from mid-February to mid-April,
2023. For this purpose, a sample of 460 participants was selected according to a convenience sampling
method due to the absence of a sample frame. This method is frequently employed in analogous
research, such as those conducted by Al-Swidi et al. (2021) and Hanaysha et al. (2022). The survey ques-
tionnaire was disseminated in the Arabic language. In order to maintain consistency and accuracy, the
original English form was translated into Arabic and subsequently translated back into English by a
third-party.
Before providing answers to the research questionnaire, and to encourage participants to complete
the questionnaire and increase the response rate, the survey included a statement assuring respondents
of their anonymity. The goal is to gain respondent’s trust so that they are eager to answer each question
on the research questionnaire comfortably and stress-free. Respondent’s recruitment is conducted ethi-
cally, and everyone volunteers to act as a respondent’s. Additionally, respondent’s permission was obtained
 Cogent Business & Management 5

Table 1. Sample characteristics.

Demographic information Categories Frequency (%)
Gender Male 264 86.2
Female 42 13.7
Education level Bachelor 142 46.4
Master 121 39.5
Ph.D. 43 14.0
Age 20–30 162 52.9
31–40 100 32.6
41–50 30 9.8
More than 50 years 14 4.5

to publish the results of the respondent’s answers regarding the completed questionnaire. We explain the
purpose of this research and give Respondents the freedom to choose to answer each question or not.
Furthermore, in this study, we have obtained informed consent from all participants involved. Before
participating, respondents were informed about the purpose of the study, procedures, potential risks and
benefits, and the rights of respondents. Participants were assured that their data would remain confiden-
tial and that they could withdraw from the study at any time without any repercussions. Consent was
obtained both in writing and verbally, according to the respondent’s preference. This research was carried
out according to ethical and regulatory guidelines governing research involving human participants.
In all, the study encompassed a total of 460 participants, of which 355 were successfully obtained. Out
of these, 306 people provided complete and usable data, which is a reasonable sample size for perform-
ing PLS-SEM analysis (Hair et al., 2018). To obtain higher precision in calculating the minimum sample size,
we assessed the statistical power with ‘G*Power’, following the recommendations of Faul et al. (2007).
Taking into account a statistical power of 80%, an effect size of 0.15, and a significance level of 5% as
described by Cohen (2013), the analysis indicated that at least 85 cases were required (refer to Appendix
1). Therefore, the sample size selected for this study, which comprised 306 cases, was considered ade-
quate. Additionally, the sample size of 306 respondents met the established standard, which was deter-
mined as ‘ten times the largest number of structural paths directed at a particular latent construct in the
structural model’ (Hair et al., 2011, p. 144). Table 1 provides a summary of sample characteristics

3.2. Measures
Prior to the commencement of data collecting, measures were taken to mitigate potential data bias and
enhance the dependability and accuracy of the scale. This involved the administration of face and con-
tent validity tests. Initially, a group of four scholars critically evaluated the survey questionnaire, offering
insightful comments and recommendations aimed at enhancing the pertinence and comprehensibility of
the interrogative items. Subsequently, a preliminary assessment was carried out with a sample of five
individuals from the designated population in order to ascertain the accurate comprehension of all the
questions as originally intended.
Overall, the questionnaire was divided into two sections: the first section covers the demographic
information of the participants while the second section contains items that measure the variables of the
study, which were evaluated on a five-point Likert scale (1 = strongly disagree to 5 = strongly agree). The
measures of the variables were adopted from previous studies; ESG was measured with ten items that
evaluated its three main dimensions, namely environmental, social and governance, adopted and adapted
from Moisescu (2015), Maignan (2001), and Tripopsakul and Puriwat (2022). CB toward brands was
assessed using a set of three items, adopted and adapted from Rich et al. (2010) and Kosiba et al. (2020).
Finally, DT was measured using three items, derived from Hossain et al. (2020). The questionnaire items
are provided in Appendix 2.

3.3. Common method bias

Before testing the hypotheses, we utilized Harman’s single-factor test, as recommended by Podsakoff
et al. (2012), to check for any potential common method bias (CMB) issues. The test results showed that
6 M. B. HASAN ET AL.

CMB was not a concern, with only 29% of the variance explained by a single factor, well below the 50%
threshold, thus confirming the absence of CMB in the dataset. Additionally, we applied an alternative
method suggested by Fuller et al. (2016), which involved analyzing the collinearity variance inflation
factor (VIF) using SmartPLS to detect CMB. The analysis revealed that VIF values were under the accept-
able limit of 3, further supporting the absence of CMB concerns in the data.

4. Data analysis and results

In this study, we analyzed the proposed model using the PLS-SEM method in SmartPLS 4, adhering to
the procedures specified by Ringle et al. (2005). The frequent use of PLS-SEM in administrative research
is due to its several benefits, highlighted by Gelaidan et al. (2023) and Goaill and Al-Hakimi (2021) and
Goaill et al. (2023). This approach is particularly beneficial for smaller sample sizes (Henseler et al., 2009)
and in research focused on predictive accuracy (Al-Swidi et al., 2023, 2024). PLS-SEM demonstrates supe-
rior statistical power compared to covariance-based SEM (CB-SEM), particularly in complex models with
smaller samples. Overall, the PLS framework includes two interdependent models: the ‘measurement
model’ and the ‘structural model’.

4.1. Measurement model

In this phase, an evaluation was conducted to assess the internal consistency of the scale items, with the
aim of determining their reliability. The dependability of the constructs to indicators was demonstrated
by factor loadings exceeding 0.70, as presented in Table 2 and Figure 2. Confirmatory factor analysis
(CFA) was employed to evaluate the construct validity of the scale items, encompassing both convergent
validity and discriminant validity. In order to achieve reliability, it is necessary for the values of Cronbach’s
alpha (α) and composite reliability (CR) to surpass the threshold of 0.70, as suggested by Nunnally and
Bernstein (1994). Furthermore, the construct validity was assessed through the examination of ‘conver-
gent validity’ and ‘discriminant validity’. Hair et al. (2018) conducted a study. In order to establish

Table 2. Reliability and convergent validity.

Construct Code Loading Α CR AVE
E E1 0.705 0.861 0.905 0.710
E2 0.914
E3 0.921
E4 0.810
S S1 0.948 0.934 0.949 0.884
S2 0.970
S3 0.901
G G1 0.837 0.814 0.893 0.708
G2 0.841
G3 0.846
DT DT1 0.862 0.858 0.858 0.779
DT2 0.894
DT3 0.891
CB CB1 0.880 0.848 0.855 0.765
CB2 0.882
CB3 0.862

Figure 1. Research model.

 Cogent Business & Management 7

Figure 2. Measurement model.

Table 3. Descriptive statistics and discriminant validity.

Construct Mean Std. devation E S G DT CB
E 3.67 0.58
S 3.63 0.62 .069
G 3..75 0.62 .401 .249
DT 3.45 0.55 .089 .290 .230
CB 3.45 0.57 .516 .266 .353 .179

convergent validity, it is necessary for the average variance extracted (AVE) value of each construct to
surpass the threshold of 0.50, as stated by Hair et al. (2019).
Furthermore, the study conducted by Henseler et al. (2015) employed the ‘heterotrait–monotrait
(HTMT)’ method in order to assess and confirm the discriminant validity. Based on the findings of Kline
(2011), it is recommended that the values inside the HTMT matrix should not be above 0.90, particularly
in relation to the constructs. In our investigation, as depicted in Table 3, the results did not exceed this
threshold. As demonstrated in Tables 2 and 3, all criteria pertaining to loadings, reliability, and validity
were satisfied, hence confirming the validity of the measurement models. In general, the findings indi-
cate that the constructs of the model (refer to Figure 1) possess both convergent and discriminant
validity.

4.2. Structural model

The evaluation of the structural model involved the assessment of R2, effect magnitude, and the predic-
tive significance of the model. Additionally, bootstrapping was utilized to validate the research assump-
tions. In order to assess the validity of the assumptions and evaluate the suitability of the proposed
model, the coefficient of determination (R2) was calculated at an aggregate level. This metric, as defined
by Chin (1998), provides insights into the predictability of the model, with values of 0.67 indicating
strong predictability, 0.33 indicating moderate predictability, and 0.10 indicating weak predictability. The
findings suggest that the variables E, S, G, and DT collectively account for 33% of the variance in CB,
which falls within the moderate range as depicted in Table 4.
Additionally, the impact of latent variables on the dependent variable has been evaluated using f2
analysis, which serves as a complement to R2 analysis (Chin, 1998), as demonstrated in Table 4. In his
study, Cohen (2013) employs f2 values (0.35, 0.15, and 0.02) to emphasize the magnitudes of the effect
8 M. B. HASAN ET AL.

Table 4. R2, f2, and effect sizes.

Construct R2 f2 Effect size
CB 0.332
E – 0.149 Medium
S – 0.055 Small
G – 0.031 Small
DT – 0.012 Small

Table 5. Model’s predictive quality.

Total SSO SSE Q²
CB 918.000000 700.975 0.236

Table 6. Path coefficient.

H Path Coefficient Standard error T-value p-Value Result
H1 E → CB 0.356 0.058 6.125 0.000 Supported
H2 S → CB 0.207 0.058 2.840 0.005 Supported
H3 G → CB 0.156 0.058 3.540 0.000 Supported
H4 E*DT → CB 0.230 0.056 3.257 0.001 Supported
H5 S*DT → CB −0.036 0.071 0.646 0.120 Not supported
H6 G*DT → CB −0.088 0.056 1.553 0.519 Not supported

Figure 3. Structural model.

sizes of the predictive factors as ‘large, medium, and small’ respectively. Consequently, the variables S, G,
and DT exhibit a very small effect size (0.055, 0.031, and 0.012) on CB, whereas the variable E demon-
strates a moderate effect size (0.149).
Furthermore, Hair et al. (2019) suggest that a positive value of cross-redundancy (Q2) indicates a
strong predictive capability of the model. The findings shown in Table 5 indicate that the Q2 value of the
CB (dependent variable) is 0.236, hence validating the efficacy of the model for predictive purposes.
Finally, the hypothesized relations in the model were examined, as depicted in Table 6 and Figure 3.
The findings indicate that the paths (E→CB) (β = 0.356, p < 0.01), (S→CB) (β = 0.207, p < 0.01), and (G→CB)
(β = 0.156, p < 0.01) exhibited positive and statistically significant relationships, providing support for
hypotheses H1, H2, and H3.
In addition to examining the linear pathways of our proposed model, we conducted an investigation
into the moderating influence of DT. The findings indicate that ED has a positive and statistically signif-
icant moderating effect on the path from E*DT to CB (β = 0.230, p < 0.01). Therefore, based on the evi-
dence presented in Figure 4, hypothesis H4 is justified. On the other hand, the paths (S*DT→CB)
 Cogent Business & Management 9

Figure 4. Moderating effect of DT in the E-CB link.

(β = −0.036, p > 0.05) and (G*DT→CB) (β = −0.088, p > 0.05) were shown to be statistically insignificant.
As a result, hypotheses H5 and H6 do not receive support.

5. Discussion
Depend on stakeholder theory, we sought to examine the impact of ESG practices on CB toward brands
under the effect of DT. Overall, the findings reveal that all ESG practices have a significant impact on CB
toward brands. This suggests that customers are more likely to respond favorably and make purchases
from companies that implement ESG practices. The findings are outlined and discussed as follows.
First, environmental practices have a positive effect on CB toward brand. This is aligning with prior
studies conducted by Bae et al. (2023), which revealed that environmental factor has a significant pos-
itive effect on brand trust. In contrast, it contradicts the findings of Nugroho et al. (2024), which have
demonstrated no effect of the environmental factor on Indonesian consumer behavior. In addition to
Lee and Rhee’s (2023) study, which showed that environmental practices did not positively influence
brand attitude, brand image, or brand attachment. Our results imply that the implementation of envi-
ronmentally friendly practices by a company positively influences how customers perceive and interact
with its brand, and thus customers are more likely to be loyal to brands they perceive as responsible
and committed to environmental stewardship. Although environmental concerns may be overshadowed
by immediate economic and survival needs due to ongoing conflicts and economic hardships. However,
the study’s findings suggest that environmental consciousness is growing among young consumers,
indicating a shift towards more sustainable consumer behavior even in less developed settings, such
as Yemen.
Second, social practices have a positive effect on CB toward brand. This means that the social behav-
iors, norms, or activities practiced by the company positively influence how customers perceive and
interact with its brand. As such, customers are more likely to feel more connected or loyal to brands that
engage in social practices aligned with their own values or the norms of their community. This is con-
sistent with prior studies conducted by Bae et al. (2023), which revealed that social factor has a signifi-
cant positive effect on brand trust. In contrast, it contradicts the findings of Nugroho et al. (2024), which
have demonstrated no effect of the social factor on consumer behavior. Indeed, social practices, such as
community involvement or ethical business operations, can enhance the brand’s image, as customers
view these brands more favorably, associating them with positive values (Bae et al., 2023). In a country
like Yemen, companies that are seen as beneficial to the community and that uphold social justice are
likely to be favored due to the social fabric and community-oriented culture, which aligns with the find-
ings showing positive influences on customer behavior.
Third, our results reveal that governance practices have a positive effect on CB toward brand, which
is similar to the results of Nugroho et al.’s (2024) study. On the contrary, it contradicts the findings of
Bae et al. (2023), which have demonstrated no effect of the governance factor on brand trust. Overall,
our results indicate that when a company employs governance practices that promote transparency and
ethical behavior, customers tend to respond favorably, where institutional trust may be low due to polit-
ical instability. This positive response can manifest as increased loyalty, higher levels of trust, and a
greater willingness to purchase from or recommend the brand. Essentially, good governance practices
enhance the brand’s reputation, which in turn positively influences how customers perceive and interact
with the brand.
10 M. B. HASAN ET AL.

Finally, the results revealed that digital transformation positively moderates the effect of environmen-
tal practices on customer behavior toward the brand. This means that the introduction or enhancement
of digital technologies in a company strengthens the impact that the company’s environmental practices
have on how customers perceive and interact with the brand. Essentially, as a company becomes more
digitally advanced, the positive effects of its environmentally friendly practices on customer attitudes and
behaviors become more pronounced. This could be due to improved communication, more effective
marketing of the company’s green initiatives, or enhanced customer engagement through digital chan-
nels. On the contrary, digital transformation did not moderate the relationship of social practices and
governance on consumer behavior towards the brand. As such, whether a company is digitally advanced
or not does not affect the impact that its social and governance practices have on how customers per-
ceive or interact with the brand.

6. Conclusion
The present study investigated the impact of ESG parameters on CB in relation to a brand. The data was
obtained through an online poll with a total of 306 participants. The hypotheses were examined through the
utilization of Partial Least Squares Structural Equation Modelling (PLS-SEM). The research revealed a positive
correlation between the three dimensions of environmental (E), social (S), and governance (G) within the ESG
framework and customer attitudes and actions towards a particular brand. The findings of the study indicated
that the environmental pillar exerted the most significant influence on CB towards a brand, with the social
pillar and governance pillar following suit in terms of impact. Various sustainability practices had varying
effects on client perceptions. Hence, it is imperative for companies to take into account the distinct impacts
associated with each ESG pillar during its implementation and communication with customers.

6.1. Implications for theory

Theoretically, this study reinforces the notion that ESG practices are crucial for shaping consumer behav-
ior towards brands. Consumers are increasingly likely to support and remain loyal to companies that
demonstrate responsible ESG practices. This is a significant implication for theory as it underscores the
evolving consumer values towards sustainability and corporate responsibility. Additionally, the findings
suggest that digital transformation can enhance the effectiveness of environmental practices on con-
sumer behavior. This introduces an important theoretical perspective that the integration of digital tech-
nologies can amplify the positive impact of sustainable practices on consumer perceptions and actions.
This moderation suggests that digital technologies not only facilitate better communication and engage-
ment but also heighten the visibility and perceived authenticity of a company’s ESG commitments.
Moreover, the study discusses varying impacts of different ESG components (environmental, social,
governance) on consumer behavior, indicating that not all ESG factors equally influence consumer per-
ceptions and loyalty. This is theoretically significant as it suggests a nuanced understanding of how dif-
ferent aspects of sustainability are valued by consumers, depending on cultural and demographic
contexts and the need for further studies in this area. Furthermore, the study highlights a gap in empir-
ical research, particularly in linking ESG practices directly with consumer behavior through primary data.
This calls for more empirical studies that explore this relationship, suggesting a need to expand theoret-
ical frameworks to include more diverse consumer datasets and methodologies. Finally, by conducting
the study in a developing country context (Yemen), the study suggests that the theoretical implications
of ESG practices on consumer behavior might vary significantly based on geographical and socio-economic
contexts. This challenges existing theories to be more inclusive of diverse settings, thus enriching the
understanding of global consumer dynamics in response to corporate sustainability practices.

6.2. Implications for managers and policymakers

First, this study provides empirical evidence supporting the direct impact of ESG practices on CB towards
the brand. In order to uphold and enhance brand credibility, it is imperative to effectively convey a sus-
tainable vision and integrate sustainability concerns within the company. The establishment of a brand
 Cogent Business & Management 11

that aligns with sustainable practices has the potential to foster trust and loyalty among customers,
thereby serving as a viable approach to brand management.
Second, our study results can provide valuable insights for marketers seeking to comprehend the
underlying rationale behind the prevailing patterns in integrated marketing communications strategies
pertaining to ESG considerations. Accordingly, managers should integrate ESG factors as a core compo-
nent of their business strategies, given the escalating significance of ESG practices in the prevailing com-
petitive landscape. Importantly, managers should adopt ESG strategies to reflect the specific expectations
and norms of their target markets and sectors, especially given the varying impacts of ESG practices on
consumer behavior across different regions reported in previous studies. For policymakers, it is important
to consider regulations and incentives that encourage companies to adopt robust ESG practices. Policies
that support transparency, accountability, and ethical governance can enhance the overall business envi-
ronment and foster trust and loyalty among consumers.
Third, the study highlights the role of DT in enhancing ESG practices, especially environmental ones.
According to the findings, investments in technology that enhance the transparency and communication
of ESG efforts can lead to greater customer engagement and satisfaction. Therefore, policymakers should
support frameworks that facilitate digital advancements in companies, as these can improve the effi-
ciency, comprehensiveness, and timeliness of ESG information management and disclosure. For manag-
ers, investing in digital technologies can amplify the benefits of ESG practices through better stakeholder
engagement and operational efficiencies, which is consistent with the perspective of stakeholder theory.
By taking these actions, society can play a crucial role in encouraging and incentivizing businesses to
prioritize ESG practices, ultimately leading to a more sustainable and equitable future.

6.3. Limitations
Regardless of the contributions mentioned earlier, more investigation is required due to the limitations
of the study. First, the current study used cross-sectional data, limiting the ability to infer causation. This
limitation arises because the impact of ESG practices unfold over time, a temporal dimension not accom-
modated by the empirical framework utilized. So, future research should seek to collect longitudinal data
in order to capture conditional effects. Second, it is important to exercise prudence when extrapolating
and broadening the results beyond the scope of this research. The conclusions are based on the opinions
of students at public universities in Yemen. To validate these findings, further studies should be under-
taken with diverse demographic groups or across various nations. Third, our study focuses exclusively on
evaluating the moderating effect of DT among several potential moderators. Future research may con-
sider any other moderating variables, such as culture, as the behaviors of customers towards ESG issues
can be influenced by several cultural elements. Thus, examining results across different countries presents
a promising avenue for future scholarly investigation. Some demographic characteristics of the sample
(as shown in Table 1) can also be considered as control variables when examining the research model.

Authors contributions
Murad Baqis Hasan: Conceptualization, Data curation, Formal analysis, Methodology, Writing – original draft, and
Revision. Ruchita Verma: Conceptualization, Data curation, Methodology, Writing – original draft. Dhanraj Sharma:
Conceptualization, Data curation, Methodology, Writing – original draft. Sami A.M. Moghalles: Resources, Supervision,
Reviewed the final draft of the paper, and Revision. Saqr Ali Saleh Hasan: Resources, Software, and Reviewed the
final draft of the paper.

Disclosure statement
No potential conflict of interest was reported by the author(s).

About the authors

Murad Baqis Hasan is a Ph.D student at the department of Financial Administration, School of Management, Central
University of Punjab, Bathinda, India.
12 M. B. HASAN ET AL.

Ruchita Verma is an Assistant Professor at the department of Financial Administration, School of Management,
Central University of Punjab, Bathinda, India.
Dhanraj Sharma is an Assistant Professor at the department of Financial Administration, School of Management,
Central University of Punjab, Bathinda, India.
Sami A.M. Moghalles is an Assistant Professor at the department of Marketing and Production, Thamar University,
Dhamar, Yemen.
Saqr Ali Saleh Hasan is a lecturer at the department of Accounting, Thamar University, Dhamar, Yemen.

ORCID
Dhanraj Sharma http://orcid.org/0000-0003-0356-2837

Data availability statement

Data will be made available on request.

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Appendix 1: G*power parameters and output.

F tests: Linear multiple regression: Fixed model, R2 deviation from zero.
Analysis: A priori: Compute required sample size.
Input: Effect size f2 = 0.15
Outputs: α err prob = 0.05
Power (1-β err prob) = 0.80
Number of predictors = 4
Noncentrality parameter λ = 12.7500000
Critical F = 2.4858849
Numerator df = 4
Denominator df = 80
Total sample size = 85
Actual power = 0.8030923

Appendix 2: Questionnaire items.

Statement 1 2 3 4 5
Environmental, Social, Governance (ESG): Moisescu (2015), Maignan (2001), and Puriwat and Tripopsakul (2022)
ESG (Environmental dimension)
The firm (or brand) makes every effort to minimize or eliminate harmful effects on the environment
The firm (or brand) reduces resource consumption as much as possible without harming the
environment.
The firm (or brand) actively pursues using environmentally friendly materials.
The firm (or brand) focuses on the efficient administration of recycling and trash disposal activities.
ESG (Social dimension)
The firm (or brand) respects social norms, traditions, and culture.
The firm (or brand) benefits people’s long-term welfare and quality of life in society.
The firm (or brand) contributes to social and economic development.
ESG (Governance dimension)
The firm (or brand) fully complies with the law when carrying out its operations.
The firm (or brand) is concerned about carrying out its duties towards its partners and stockholders.
The ethical principles of the firm (or brand) have priority overachieving economic performance.
Customer behavior: Rich et al. (2010) and Kosiba et al. (2020)
I am passionate about using the brand.
I feel happy when I am interacting with this brand.
I feel very positive about this brand.
Digital transformation: Hossain et al. (2020)
I prefer to interact with companies through their websites and mobile apps rather than by phone or in
person.
The increased use of digital platforms by companies has raised my expectations for faster customer
service.
Being able to access product information and reviews online is very important to me.