Journal of Risk Analysis and Crisis Response, 2024, 14(3), 314-332

https://jracr.com/
ISSN Print: 2210-8491
ISSN Online: 2210-8505

Article

Does Environmental, Social and Governance

Disclosure Practices Promote Customer Brand
Perception? The Moderating Effect of Customers’
Sustainability Responsiveness
Md. Amanullah 1,*, Habibur Rahman Moni 1, Khadiza Khatun Tumpa 2 and Sayed Azharul Islam 3
1 Department of Humanities and Business, Khulna University of Engineering & Technology, Khulna (9203),
Bangladesh
2 Department of Business Administration, Chandpur Science and Technology University, Chandpur (3600),

Bangladesh
3 Human Resource Management Discipline, Khulna University, Khulna (9208), Bangladesh

* Correspondence: [email protected]

Received: June 12, 2024; Received in revised form: August 6, 2024; Accepted: August 8, 2024; Available
online: September 30, 2024

Abstract: Environmental, social and governance (ESG) aspects have garnered considerable attention
in corporate management on a global scale in recent times. As a result, researchers have paid notable
attention to this subject. Though numerous studies have already explored various aspects of ESG in
the context of emerging economies like Bangladesh, there is limited evidence on whether ESG
practices promote customer brand perception (CBP). This study measures the impact of ESG on CBP
deploying structural equation modeling in an emerging economy by analyzing the responses of 450
samples in accordance with the philosophies of triple bottom line theory and signaling theory. The
results indicate that sustainability responsiveness, social and environmental disclosure practices,
and CBP are positively impacted. Customers’ enhanced level of sustainability responsiveness
strengthens the influence of governance disclosures in choosing a brand, while weakens the impact
of environmental and social disclosures. However, the study concludes there is no significant effect
of governance disclosures on CBP. The findings also reveal that social issues have the strongest
impact on CBP among the ESG parameters. As sustainability concerns increase, customers either
demand more sustainability performance from brands or their impression of the brands declines
correspondingly. The study outlines a customer’s viewpoint on the requirements of ESG and
sustainability concerns, which will contribute organizations to adopt appropriate ESG strategies
and address sustainability challenges to win over customers and strengthen their brand image.

Keywords: Environmental, Social and Governance Disclosure; ESG; Customer Brand Perception;
Brand Image; Sustainability Responsiveness; Sustainability Awareness; Customer Buying Behavior;
Green Consumer Behavior; Corporate Governance

1. Introduction

Over the past years, Environmental, social and governance (ESG) factors are getting more
focused as important phrases for global corporate management techniques and policies. ESG stands
for non-monetary attributes that an organization should think about while making investment
decisions from a sustainable social or environmental perspective [1]. Earlier, the primary benchmarks

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for investing in an organization were the organization's financial performance and earning
capabilities. However, long-term sustainability and the value of the company are among the factors
that ESG asks for to be evaluated at the present time. So, ESG is considered to be an indispensable
tool for an organization seeking sustainability pertaining to the environmental, social and governance
aspects.
ESG management strategies are recognized as non-financial aspects for evaluating a firm’s
investment opportunity and sustainability [2]. These can help an organization enhance goodwill [3]
and build customer beliefs by influencing customer attitudes and buying intentions [4]. ESG puts
more focus on a company's ability to perform sustainable business practices by maintaining social
responsibility and corporate governance [5]. Business organizations should ensure that their
operational functions and offerings satisfy social and environmental requirements. For this reason,
ESG is considered to be a crucial element for an organization to enhance brand perception and brand
loyalty [2]. Additionally, ESG elements can help an organization to strengthen earnings in many ways
such as people who are cautious of environmental and social consequences remain attracted to
products or services of that organization maintaining ESG practices [6].
Previous research focused on the advantages of an organization’s ESG practices. An
organization's environmental behavior and practices can increase its competitive advantage by
fostering and preserving solid relationships with its stakeholders [7]. An organization can achieve a
competitive edge and increase reputation and management efficiency which increases stakeholder
value and sustainability [8]. Several investigations have also been carried out to understand the
association between ESG practices and firm performance. Alareeni and Hamdan [9] found that
financial performance is positively related to ESG practices and disclosures. Maintaining
environmentally friendly practices also demonstrates a favorable correlation with the financial
performance of companies both in developing as well as developed countries [10]. Companies
involved in ESG practices and disclosures exhibit relatively stable stock returns in comparison to
their other companies in the same marketplace [11]. However, though studies have explored ESG
and investment decisions to some extent, there is limited research on whether ESG practices promote
customer brand perception and whether customer sustainability responsiveness has a moderating
influence in that relationship in the designated socio-economic context of Bangladesh.

2. Literature Review and Hypothesis Development

2.1. ESG Practices

ESG focuses on three different pillars or aspects that include different issues concerning
environmental obligations, social responsibilities and corporate governance compliances [12]. The
environmental pillar of ESG refers to the principles and practices by which the environmental impact
caused by a specific business decision or commercial activity can be determined [13]. Some of the
environmental practices include preventing environmental pollution, developing green products,
reducing greenhouse gas or carbon emissions, managing waste, using renewed energy and so on
[14—17]. The social pillar of ESG encompasses a wide range of topics like health, security, ethics,
community support, and social responsibility which primarily concentrate on the relationships
between the organizations and community [14—15]. The social pillar of ESG normally contains the
aspects of maintaining the relationship of the business with the societies and communities. Some of

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the specific social practices include community relations, consumer protection, workplace human
rights, privacy policy, workplace health and safety, and so on [16, 18]. The governance pillar of ESG
comprises the board of directors' independence, ethical policies, transparency, shareholder rights,
management compensation policy, strategies for maintaining control, fair business practices and
adherence to the law [14—15]. Handa [19] found that economic performance is significantly affected
by good and efficient governance. Additionally, good governance practices can significantly
influence the financial performance of business firms compared to environmental and social factors
of ESG [20]. Governance practices may include the experience and expertise of board members,
gender diversity, board independence, and so on [17—18].

2.2. ESG Disclosure

ESG is the contemporary three pillars of corporate social responsibility (CSR) [21]. ESG
disclosures are the exposures of activities or procedures related to how a firm engages with its natural
environment, collaborates with human communities and other populations, and establishes internal
controls and processes, including customs, policies, laws, rules, and regulations [22]. These elements
collectively guide, oversee and manage all aspects of the organization's operations to benefit both
shareholders and other stakeholders. Environmental disclosures describe corporate environmental
actions and performances, which include pollution control, waste management, reduced carbon
emission, energy preservation and so on [14—15]. The social component of ESG disclosure is
primarily concerned with what goals an organization achieves in relation to improving community
health, protecting human rights, reducing gender gap, improving livings of the underprivileged and
others [14—15]. A company's positive and negative aspects regarding politics, labor and social issues
constitute the social pillar of sustainable investing. The governance disclosures address issues
including the board of directors' independence, auditing independence, managerial compensation,
controlling strategies, legal compliance, financial transparency, tax fairness and so on [14, 15, 23].

2.3. Brand Perception

Levy and Rook [24] first evidently introduced "brand image" in the field of marketing that
acknowledged conveying a brand's image to a targeted market as an essential marketing strategy. A
company's brand perception is the impression that consumers hold of it, based on both its tangible
and intangible elements. Brand perception affects consumers' subsequent buying decisions and
assists in decision-making [25]. Sichtmann [26] concludes that brand loyalty plays a significant role
in purchasing behavior of consumers and contributes to the establishment of a brand's reputation or
image. To eliminate information asymmetry and enhance positive brand perception, companies
promote unique and relevant brand asset accomplishments about brand positioning, targets and
growth strategies [27]. Brand image, brand loyalty and brand perception are closely interconnected
with each other [28]. A positive brand image helps to create brand loyalty among consumers which
eventually leads to a better perception of the brand [29].

2.4. Sustainability Responsiveness

Sustainability responsiveness (SR) illustrates an organization's obligation to react to significant

issues in a transparent and environmentally friendly manner in which an organization has to provide
information to its stakeholders regarding organizational decisions, operations and performance as
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well as include them in identifying and addressing sustainability challenges [30]. An organization
needs to be responsive by clarifying how it considers its interactions with stakeholders in sustainable
means and how it expects to establish and maintain those relationships [31]. Therefore, SR can be
described as the potential of a company to adjust and respond to sustainability concerns such as social
protection, environmental preservation, economic stability and others. It includes implementing
sustainable practices into an overall strategy, decision-making procedures and corporate operations
to solve social, environmental and economic issues while maintaining long-term resilience and
profitability.

2.5. Theories Underpinning

2.5.1. Triple Bottom Line Theory

Triple bottom line (TBL) theory, proposed by John Elkington, suggests that firms must be
prepared with three distinct and diverse bottom lines [32]. Firstly, the profit-loss bottom line, which
is the traditional indicator of a firm's profitability [33]. Secondly, the people account's bottom line,
which assesses the degree of the firm's being responsible socially throughout the course of its
operations [33]. Finally, the company's planet account's bottom line, which demonstrates how
environmentally responsible the firm has been [33]. Alternatively, TBL theory suggests that the
growth of the economy, the quality of the environment and the accessibility of the social wealth
should be the primary components upon which a company's entire performance should be assessed
[34]. TBL theory is also known as 3P, which stands for profit, people and planet [35]. As proposed in
TBL, corporates should prioritize business performance while also keeping an eye on the
environment and society. For this instance, TBL is denoted as the broader version of stakeholder
theory in which all stakeholders' interests are taken into consideration.

2.5.2. Signaling Theory

Spence [36] was the one who first put forth the signaling theory. Signaling theory is considered
as one of the fundamental theories of ESG which primarily focuses on mitigating knowledge gaps
between two parties. This situation can be better understood when one party has information about
something, but the others don't [37]. The party with the information decides how and whether to
disclose the information. As per signaling theory, firms carry out ESG practices to reduce information
asymmetry. ESG activity of an organization acts as an indicator of firm performance and prospects
[37]. Although ESG factors are not taken into consideration when evaluating a firm’s value, ESG they
can explain the firm value by disclosing some important non-financial information [38]. Signaling
theory seeks to describe the way actors might decide in circumstances where one party has the
informational advantage, with equilibrium being reached when the expectations of a signal are
validated by the experience of the recipient [39].

2.6. ESG Disclosure and Brand Perception

Brand image or perception have a significantly favorable relationship with corporate social
responsibility [40]. ESG significantly improves customers' desires to spread the word about a
company and their level of brand trust [41]. Positive brand perception toward a product or
organization may be viewed as an asset because it influences the consumers’ way of viewing the

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operations of the company [42]. According to Tripopsakul and Puriwat [43], ESG components
significantly enhance consumers’ brand loyalty and engagement. Bae et al. [41] also suggested that
the environmental and social components possess a significantly favorable impression on brand trust.
Bekar et al. [44] demonstrate that companies must employ sustainable practices to build
consumer loyalty and emotional connections and raise consciousness of environmental preservation.
In this sense, firms that adopt environmentally sustainable practices obtain an advantage over their
competitors and enjoy an increase in the number of environmentally aware consumers [45]. Social
and governance practices were shown to significantly impact brand perception and brand
assertiveness [2]. When a company contaminates the environment or produces negative impacts to
ecosystem, consumers mark the company as unethical and seek a proactive and preventive response
[46]. A negative perception of the brand may also arise from neglecting to meet consumer demands
of being proactive [47]. Another research demonstrated that consumer perceptions of
environmentally friendly practices have a favorable control on consumer attitudes and a firm's green
image [48].
Koh et al. [2] investigated how ESG practices affect consumers' brand perception. The study
illustrates that the social and governance components of perceived ESG are significantly and strongly
associated with brand image and brand credibility [2]. Researchers have classified brand perception
into two unique categories: functional and symbolic [49]. A product's functional perception shows its
tangible traits, while its symbolic perception emphasizes its intangible traits [49]. By enhancing
favorable functional and symbolic brand perception, companies can lead to an enriched brand loyalty
through the legal and ethical obligations of consumers. Furthermore, legally responsible behavior of
corporates helps to enhance a more functional brand perception, while ethically responsible action
impacts a symbolic brand perception [50]. Based on the mentioned literature and theory, we have
proposed the following hypotheses:
H1: Environment disclosure practices promote positive brand perception among customers.
H2: Social disclosure practices promote positive brand perception among customers.
H3: Governance disclosure practices promote positive brand perception among customers.

2.7. Sustainability Responsiveness and Brand Perception

Zelezny and Schultz [51] define SR as certain psychological components associated with an
individual's inclination to participate in environmentally responsible initiatives. A company's
offerings and responsiveness to the environment and society have a prudent impact on the perception
and actions of its consumers [52]. Recently, several firms have adopted sustainable measures and
effectively constructed a positive brand image. Higher SR helps to increase consumers' perception of
the brand [53]. Consumers are extremely conscious of the three pillars of sustainability:
environmental, social and governance [54]. Therefore, the consumers perceive sustainable goods and
services as environmentally and socially responsible, which positively impacts consumer satisfaction,
purchasing intentions and brand reputation [55]. Besides, certain customers are willing to pay extra
amount for goods, services and businesses that exhibit social responsibility and environmental
consciousness, which refers to consumers’ sustainably responsive attitude [56]. Thus, Consumers
who cherish sustainability are the sole group of individuals who will be attracted to a sustainable
brand image [57]. Based on this overall discussion and from the findings of previous literature, the
following hypothesis can be developed:

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H4: Sustainability responsiveness is positively aligned to customer brand perception.

2.8. Sustainability Responsiveness as a Moderator

Sustainability or environmental responsiveness describes an individual's acknowledged desire

to actively participate in the preservation of the planet [58]. Though the impact of SR on brand
perception has been the center of multiple studies, less enquiry has been conducted on the
moderating role that SR plays in brand perception. Organizations realize that an effort to reduce
environmental problems leads the consumers to be more inclined to recommend the firm’s goods or
services [59]. Buyers who care about the environment are more inclined to buy goods that are
sustainable, reusable and recyclable [60]. Furthermore, they try to reduce the consumption of those
products which have negative effects on the environment, and they are more inclined to be aware of
corporate greenwashing [60]. SR has been reported to act as a moderator in a variety of studies
dealing with consumer preferences to make green purchases [61]. Strandvik et al. [62] suggest that
establishing a connection with brand perception may depend significantly on its consumers' concern
for the environment. Vietnamese customers who are extremely cautious about the environment are
inclined to uphold their ecological beliefs in their buying habits in consideration of the severe
pollution in the country [63]. Consequently, we suggest that SR exhibits a decisive role as a moderator
for ESG and brand perception; thus, we propose the following:
H5a: Sustainability responsiveness moderates the effect of environmental disclosure practices
on brand perception.
H5b: Sustainability responsiveness moderates the effect of social disclosure practices on brand
perception.
H5c: Sustainability responsiveness moderates the effect of governance disclosure practices on
brand perception.

2.9. Conceptual Model

Sustainability
responsiveness

H5a
Environmental H5c
disclosure practices H4

H5b H1
Social disclosure H2 Customer brand
practices perception
H3

Governance
disclosure practices
Note: Direct effect (_____), moderating effect (- - -).

Figure 1. Conceptual framework.

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3. Methodology

3.1. Data, Tools and Sampling

To understand the customer’s brand perception concerning ESG practices, we surveyed the final
customers of first-moving consumer goods (FMCG). We deliberately targeted the knowledge
customers who are familiar with sustainability issues; therefore, we spotted them at supermarkets,
chain stores, universities and corporate offices wherever convenient. We either (a) supplied hard
copies of the structured questionnaire to target respondents along with a request note to participate
in the survey or (b) explained the questions to those who were willing to spare a few minutes on the
spot. In the first case, the respondents were provided an access link to respond online or upload the
filled questionnaire in WhatsApp, email or Google Drive. For the second case, we assigned respective
Likert scale points based on their responses. Considering the knowledge of respondents, we designed
and delivered questionnaires in the English language only. Our convenient sampling method
satisfies the recommendation of Malhotra [64] concerning adopting a non-probability sampling
method for unlisted populations.
Before initiating our final data collection process, we conducted a pilot study on 40 respondents
to confirm the usefulness of the questionnaire. In the pilot survey, we encountered that respondents
were having trouble in differentiating social, environmental and governance-related sustainability
issues. Therefore, we have explained a few questions with examples and supplied notes explaining
each component of ESG and corresponding sustainability matters in the final survey. We have also
discussed with two university professors experienced in ESG research to design the final
questionnaire according to the responses retrieved from the pilot survey.
We reached a total number of 850 potential respondents with a target sample size of 385, which
was calculated following the suggestion of Malhotra [64] for a non-finite population at a 0.05 margin
of error. However, we received more than expected feedback from the respondents and finally found
450 usable responses. The response rate was 52.94 percent, which is satisfactory [65]. Therefore, we
have considered all the responses, which make a sample size of 450 for this study.

3.2. Measurement of Variables

3-item measurements of the selected variables were adopted from previous literature and
propositions of the United Nations Development Programme (UNDP) backed project concerning
ESG practices for businesses. We have adopted the items related to EDP, SDP and GDP Kostić and
Hujdur [14] and Puriwat and Tripopsakul [15], SR from Panda et al. [66], and CBP from Mrad and
Cui [67]. However, we adjusted the questions a little before presenting them to the respondents to
ensure clarity and alignment with our study goals. We assessed the variables using a 5-point Likert
scale ranging from “Never” to “Always'' for EDP, SDP and GDP, and “Strongly disagree” to
“Strongly agree” for SR and CBP.

3.3. Analysis Technique

First, we assessed the reliability and validity of data by developing a partial least squares
structural equation model (PLS-SEM) using SmartPLS software (v. 4.0.9). We deployed confirmatory
factor analysis (CFA) to test items’ loading scores. Similarly, the other measurements— Cronbach's
alpha, composite reliability (CR) and average variance extracted (AVE)—are calculated and
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compared with respective reference values to ensure the reliability of the observed data. Secondly,
we tested for data validity and biases deploying heterotrait-monotrait (HTMT) ratios, Fornell-Larcker
(F-L) matrix and variance inflation factors (VIFs). Thirdly, correlations among independent,
dependent and moderating variables are examined to establish the linear connections among
variables along with their level of significance. Finally, we tested for model strength and predictive
relevance with reference to r-square (R2), q-square (Q2) and standardized root mean squared residual
(SRMR). After having acceptable results of the aforementioned measures, we tested the proposed
hypotheses based on the developed model and made our decisions. However, we opted for the PLS-
SEM algorithm for examining reliability and validity criterion, while a bootstrapping approach was
followed with a sub-sample of 1,000 for the rest of the analyses.

4. Results

4.1. Demographic Analysis

Most of the participants in this study were aged between 30 and 49 (57%). Though most of them
were male (57.33%), female participants dominated fairly (42.67%). 46.22% of the respondents
completed their graduation and 38.67% of them completed higher studies after graduation. 49.11%
of the participants were in the income group between BDT 60,000 and BDT 150,000. Table 1 represents
detailed demographic statistics.

Table 1. Demographic statistics.

Index Demographics Frequency Percentage

Age 20’s and below 80 17.78
30’s 143 31.78
40’s 109 24.22
50’s 78 17.33
60’s and above 40 8.89
Gender Male 258 57.33
Female 192 42.67
Education Below bachelor’s 68 15.11
Bachelor 208 46.22
Master’s and above 174 38.67
Income 1 Below 30,000 25 5.56
30,000 — 60,000 55 12.22
60,000 — 100,000 127 28.22
100,000 — 150,000 94 20.89
150,000 — 200,000 72 16.00
200,000 — 300,000 47 10.44
Above 300,000 30 6.67
Total respondents (n) 450 -
1 Income (approx.) in monthly Bangladeshi Taka (BDT), USD 1 ≈ BDT 115.

4.2. Data Measurements

We have followed the propositions of Hair et al. [68] concerning the standard cut-off values of
the reliability and validity statistics where we considered the cut-off values of factor loadings as 0.70,
Alpha as 0.70, CR as 0.70 and AVE as 0.50. In addition, the maximum value of HTMT ratios is
considered as 0.85 [69] and VIF as 3.30 [70]. Moreover, the convergent validity test results (AVE)
explain that our proposed factors are responsible for explaining more than half of the variance of the

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constructs. The resulting values of all the reliability and validity measurements are above the
suggested cut-off values; therefore, it can be proposed that the data considered for this investigation
is reliable and valid for conducting research. Furthermore, the discriminant validity as measured by
the F-L matrix produces satisfactory results because the correlations of the same constructs are higher
than the coefficients with other constructs [71]. Table 2 and Table 3 illustrate the detailed results of
reliability and validity measures.

Table 2. Data reliability and validity measurements.

Constructs Code Loadings Alpha CR AVE

EDP1 0.922
Environmental disclosure practices EDP2 0.896 0.875 0.903 0.798
EDP3 0.860
SDP1 0.923
Social disclosure practices SDP2 0.891 0.878 0.884 0.803
SDP3 0.875
GDP1 0.828
Governance disclosure practices GDP2 0.751 0.732 0.759 0.642
GDP3 0.823
SR1 0.914
Sustainability responsiveness SR2 0.901 0.874 0.873 0.799
SR3 0.865
CBP1 0.804
Customer Brand Perception CBP2 0.887 0.781 0.795 0.696
CBP3 0.809
Note: Alpha = Cronbach's alpha, CR = Composite reliability, AVE = Average variance extracted.

Table 3. HTMT ratios and F-L matrix.

HTMT Ratios EDP SDP GDP SR CBP SR x EDP SR x SDP

EDP
SDP 0.145
GDP 0.173 0.396
SR 0.236 0.275 0.242
CBP 0.349 0.406 0.270 0.440
SR x EDP 0.130 0.065 0.065 0.051 0.156
SR x SDP 0.074 0.052 0.042 0.131 0.116 0.210
SR x GDP 0.067 0.038 0.031 0.059 0.097 0.086 0.367
F-L matrix
EDP 0.893
SDP 0.134 0.896
GDP 0.141 0.318 0.801
SR 0.207 0.242 0.211 0.894
CBP 0.295 0.342 0.220 0.364 0.834

4.3. Correlation Coefficients

The correlation coefficients along with their standard errors, presented in Table 4, explain
positive relationships among dependent, independent and moderating variables. All the correlation
matrices are strongly significant as most of the relationships are established either at p < 0.001 or at p
< 0.01. Additionally, most of the moderating effects on dependent-independent relationships are
negatively correlated with other variables. However, in this case, the correlations between SR x SDP
and CBP (p < 0.05); SR x SDP and SR (p < 0.05); and SR x EDP and CBP (p < 0.05) are significantly
negative, while the coefficients between SR x GDP and SR x SDP (p < 0.001); SR x EDP and EDP (p <

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0.05); SR x EDP and SR x SDP (p < 0.001) are significantly positive. The other coefficients are
insignificant (p > 0.05).

Table 4. Correlation coefficients.

Correlation EDP SDP GDP SR CBP SR x EDP SR x SDP

EDP
0.134**
SDP
(0.049)
0.141** 0.318***
GDP
(0.052) (0.047)
0.207*** 0.242*** 0.211***
SR
(0.047) (0.041) (0.046)
0.295*** 0.342*** 0.220*** 0.364***
CBP
(0.048) (0.048) (0.055) (0.043)
0.126* —0.062 —0.061 —0.048 —0.139*
SR x EDP
(0.058) (0.045) (0.052) (0.049) (0.055)
—0.069 —0.044 —0.041 —0.123* —0.105* 0.210***
SR x SDP
(0.049) (0.055) (0.047) (0.055) (0.049) (0.058)
—0.059 —0.035 —0.002 —0.055 0.084 0.086 0.367***
SR x GDP
(0.050) (0.042) (0.068) (0.060) (0.054) (0.077) (0.067)
Note: ***p < 0.001, **p < 0.01, *p < 0.05, Standard errors in parentheses.

4.4. Model and Hypothesis Testing

The model summary, shown in Table 5, demonstrates that the chosen constructs can explain 28.6%
of the dependent variable (R2 = 0.286); therefore, the model’s effect size is moderate [68]. The SRMR
value is 0.063, which indicates a reasonable model fit as SRMR < 0.08, which is recommended as the
cut-off value of SRMR [72]. Additionally, Q2 represents the moderate degree of predictive relevance
(Q2 = 0.251) of the hypothesized model as the resulting value of greater than zero [68]. Moreover,
based on the conclusion of Kock and Lynn [70], it can be proposed that the VIFs, presented in
hypothesis testing section, show no issues related to multicollinearity as the observed values are
within the reasonable range (< 3.30).

Table 5. PLS-SEM model summary.

Dependent variable R2 Adjusted R2 SRMR Q2 predict

CBP 0.286 0.275 0.063 0.251

Table 6 represents both the direct effects and moderating effects of ESG disclosures and
sustainability responsiveness on customer brand perception. Firstly, the coefficients of EDP → CBP
(β = 0.228, p < 0.001), SDP → CBP (β = 0.230, p < 0.001) and SR → CBP (β = 0.243, p < 0.001) are
significantly positive. Therefore, we have strongly supported H1, H2 and H4. In response to GDP →
CBP (β = 0.052, p > 0.05), the effect size is statistically insignificant; consequently, H3 is rejected. From
the results, it can be interpreted that firms' environmental actions and social initiatives, and
customers’ sustainability awareness enhance positive brand image, while the effect of governance
disclosure practices is negligible. Among the ESG constructs, the impact of social disclosure issues is
the strongest.
Moreover, all the moderated paths are significant where the effects are negative for SR x EDP →
CBP (β = —0.136, p < 0.01) and SR x SDP → CBP (β = —0.086, p < 0.05), and positive for SR x GDP →
CBP (β = 0.154, p < 0.01) relationships. Therefore, hypotheses H5a, H5b and H5c are strongly

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supported. The results imply that sustainability awareness among customers weakens the
relationship between firms’ environment disclosure practices and brand perception, and social
disclosure practices and brand perception. Conversely, SR strengthens the relationship between
governance disclosure practices and brand perception. In other words, as sustainability
responsiveness increases, customers will be more careful when selecting a brand, resulting in less
affection for a certain firm or brand if it fails to demonstrate prudent performance in its
environmental and social actions. On the contrary, customers will place a higher value on governance
concerns when selecting a brand or business as their understanding of sustainability grows.

Table 6. PLS-SEM results and hypothesis testing.

Hypotheses Paths β Std. error t-values p-values VIFs Decision

H1 EDP → CBP 0.228 0.043 5.285 0.000 1.091 S
H2 SDP → CBP 0.230 0.049 4.736 0.000 1.161 S
H3 GDP → CBP 0.052 0.053 0.969 0.333 1.148 NS
H4 SR → CBP 0.243 0.048 5.075 0.000 1.131 S
H5a SR x EDP → CBP —0.136 0.045 3.061 0.002 1.079 S
H5b SR x SDP → CBP —0.086 0.042 2.048 0.041 1.217 S
H5c SR x GDP → CBP 0.154 0.058 2.676 0.008 1.158 S
Note: β = Beta coefficient, S = Supported, NS = Not supported.

The results illustrated in the above tables are presented in the following measurement model
for a comprehensive understanding.

Sustainability
responsiveness

Environmental -0.136**
disclosure practices 0.154** 0.243***

-0.086* 0.228***
Social disclosure Customer brand
practices 0.230*** perception
0.052

Governance
disclosure practices

Note: ***p < 0.001, **p < 0.01, *p < 0.05.

Figure 2. PLS-SEM measurement model.

5. Discussion

With increased alarming environmental and climate risks, the world is showing a growing
interest in ESG disclosures. In response, businesses are behaving responsibly to attract their
stakeholders by demonstrating prudent social, environmental and governance performance. More
importantly, with increased appeals from pressure groups like the United Nations, customers are
exhibiting more and more sustainability concerns in recent days and reconsidering their purchase
behavior or brand loyalty [73]. They would like to think that their brands are functioning in ethical
and pro-environmental manners [74]. In addition, signaling theory indicates that firms’ ESG

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disclosures reduce information asymmetry, which enhances sustainability awareness among

customers [27]. TBL theory also promotes firms’ social, environmental and economic performance,
which encourages stakeholders to behave responsively [75]. This study confirms the findings that
customers’ sustainability understandings significantly influence their brand attitude. Moreover, SR
moderates the relationship between ESG and CBP. For this instance, businesses need to know how
consumers feel about sustainability concerns in order to maintain sustainable brand performance and
favorable customer perception.
The findings also reveal that social issues have the strongest impact on CBP among the ESG
components. The conclusions also support the results inferred in existing studies including Koh et al.
[2], Puriwat and Tripopsakul [15], and Lee and Rhee [76]. Though several previous studies could not
find any significant impact of environmental issues on customers' brand choice [2, 76], the study
provides evidence that EDP is strongly aligned with CBP. And, in both cases, SR strongly weakens
the relationships. The results infer that organizations need to integrate social and environmental
concerns in their dealings and communicate the performance to the stakeholders. Moreover, with
increased interest in ESG issues, customers’ sustainability awareness is also likely to increase [41].
For this instance, organizations must focus more and more on sustainability issues in the coming
days to create a promising brand perception among customers. In addition, Bangladeshi FMCG
customers show greater significance related to environmental concerns than that of the Korean
customers as evident in the investigations of Koh et al. [2], and Lee and Rhee [76]. Hence, firms
operating in Bangladesh require to set special attention to environmental performance along with
social performance.
The study reports that governance issues do not significantly influence CBP. Though this
conclusion is like the recommendations testified by Bae et al. [41], other studies reported that
governance disclosures are substantial for a firm's yield and management tactic [77]. However, the
moderation analysis produces significant results in the relationship between GDP and CBP. The
outcome may be due to respondents’ immediate focus on essential matters first. This result may also
be because of customers’ more attachments with environmental and social issues rather than internal
governance issues of the organizations. The respondents may prioritize SDP and EDP issues over
corporate governance given that Bangladesh is an emerging economy with underdeveloped systems
in numerous environmental and social spheres, as well as because of the country's bitter experience
with environmental challenges like pollution, waste management, climate risks, health and safety,
and so forth [78]. Alternatively, organizations firmly publish their social and environmental
initiatives to attract their stakeholders, especially customers. In this case, the customers are well
informed about firms’ social and environmental performances, which allow the customers to select
their brands more vigilantly. On the contrary, the performing organizations or the consumers may
not put much focus on governance concerns as compared to the social and environmental
performance, where the customers do not desire to learn on their own in general. Therefore, there
may be the possibility of substantial knowledge gap related to governance issues resulting in an
insignificant impact in choosing a brand. Unlike investors, customers may be more interested in
understanding what the firms are offering to society to encounter social and environmental
discomforts instead of securing firms' own performance through standard corporate governance.
Therefore, governance concerns are important when making investments [79] but not when choosing
a brand for consumers, at least not right away, as advocated in this study and previous literature [41].

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It may also be concluded that as SR increases, customers will be more enthusiastic in choosing a brand
based on firms’ corporate governance performance. However, given that there is no discernible effect
of GDP when choosing a brand at the current state, consumers' degree of sustainability awareness
might not correspond with required expectations, which might have an impact on CBP in relation to
GDP.
The theoretical and managerial implication of this work are as follows:
The study addresses the literature gap identified in previous studies. Firstly, Koh et al. [2]
conducted a study from a South Korean perspective and suggested extending the literature to other
cultures. Moreover, the study couldn’t establish the impact of environmental disclosure issues on
customers' brand preferences [2]. Our study answered both issues by extending the literature in a
South Asian developing country and establishing a meaningful connection between EDP and CBP.
Moreover, we have addressed a moderating variable, which explains a better comprehension of the
connection between ESG and brand choice. Secondly, Lee and Rhee [76] concluded that customers’
level of sustainability understanding may affect their brand perception because they can effectively
differentiate social, environmental and governance issues. We have conducted this study to
understand how the FMCG customers of Bangladesh respond to sustainability issues in selecting a
brand. In addition, Lee and Rhee [76] conducted their study based on responses related to photos
and text materials and called for exploring other methods. We adopted a guided questionnaire to
understand customers' brand preferences in relation to ESG and sustainability awareness. Thirdly,
numerous studies explore ESG issues in the perspective of Bangladesh and emerging economies.
However, most of the studies are concerned with investment decisions [79—81] and firm
performances [82—84]. Finally, ESG and brand perception have rarely been addressed in previous
literature. Our study has extended the knowledge of ESG and sustainability responsiveness in
relation to brand choice from the socio-cultural perspective of Bangladesh, a South Asian emerging
economy.
Existing literature hardly addresses customers’ perceptions in relation to corporate ESG
practices [76]. This study explored not only customers' perceptions of brands but also the moderating
effect of their level of sustainability awareness when choosing a brand. Furthermore, the study
revealed that the extent of the impact of ESG components is not the same. The social issues have the
strongest impact followed by the environmental concerns. Additionally, SR is positively and
significantly related to CBP, indicating that customers are more selective in choosing brands that
address ESG concerns in their undertakings. For this instance, the study contributes to the literature
by demonstrating that the dimensions of ESG practices are not equally effective and that customers
are increasingly cautious as their understanding of sustainability grows.
Organizations need to introduce ESG mechanisms to ensure sustainable growth as ESG practices
deliver non-financial information to stakeholders [85]. Therefore, organizations must formulate
appropriate ESG strategies to positively sway customers’ attention. In addition, to establish the
organization's brand image, it has to institute and communicate its ESG strategies, especially
sustainability concerns, to the ordinary customers [76]. In this regard, the study findings provide
insights into which ESG efforts firms should prioritize and implement for sustained growth and a
favorable brand image.

6. Conclusions

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Sustainability concerns have emerged as powerful tools to encounter environmental challenges

such as pollution, greenhouse gas emissions, energy crisis, destruction of natural resources and many
more. People are becoming more enthusiastic in their pro-environmental actions and so are the
customers in choosing their ethical brands. Corporations are participating in the revolution by
demonstrating responsible actions concerning social, environmental and governance issues,
popularly known as ESG. The study reveals that customers’ sustainability concerns directly influence
their brand perception. Therefore, customers are expected to welcome companies or brands that
deploy ESG practices and perform better. This study reveals such claims that customers’ brand
perception is positively influenced by firms' or brands' social and environmental disclosure practices.
However, the impact of governance issues remains inconclusive for now. The results may be due to
respondents’ immediate focus on essential matters for the moment. This result may be also because
of customers’ more attachments to environmental and social issues rather than internal governance
issues of the organizations. The respondents may prioritize SDP and EDP issues over corporate
governance given that Bangladesh is an emerging economy with underdeveloped systems, as well
as because of the country's experience with environmental challenges like pollution, waste
management, climate risks, health and safety, and so forth. Moreover, as customers’ sustainability
concerns increase, either their brand perception fades likewise, or their sustainability expectation
increases correspondingly. In this regard, with the increase in customers’ sustainability
responsiveness, organizations need to be more viable and exhibit continuous improvement in ESG
performance, especially in social and environmental aspects. Otherwise, customers can become less
devoted to the relevant brand or perhaps reject it altogether at some point. For this instance, the study
remains significant in enhancing the knowledge of concerned stakeholders and enlightening
managers to initiate appropriate ESG strategies for ensuring sustainable brand performance.
The limitations and future research of this work are as follows:
Firstly, we opted for knowledgeable customers who understand the sustainability issues.
Therefore, our study represents the brand perception of FMCG knowledge customers. Additionally,
the income group of the respondents is fairly distributed to the above-average category which has
greater purchasing power than many other groups. Secondly, brand perception of consumer goods
and other products or services may not be similar. Customers may prefer other factors to choosing a
brand for diverse goods and services (i.e. the range of facilities or flexibility to use may preside over
ESG for credit card customers). Thirdly, the study was conducted within a specific socio-economic
context, so the findings might be different in the cases of different socio-economic conditions and
contexts. Therefore, the relationship between ESG and brand choice needs to be explored for diverse
products, services, economies and customer groups. A meta-analysis is also advocated to generalize
the findings. Fourthly, we have experienced that governance issues have negligible effect on brand
perception though sustainability responsiveness significantly strengthens the relationship. Further
studies may be conducted to deeply investigate the issue to understand the underlying reasons for
such a result. Finally, this study is based on the triple bottom line theory and signaling theory; hence
the discussion has been made accordingly. Other theories associated with ESG might be used for
future research to obtain more comprehensive and conclusive insights.

Acknowledgments: We would like to express our gratitude to the respondents for their humble participation in
the data collection survey as well as to the managements of chain stores and super shops for their support during
the process.
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Funding: This research received no external funding.

Conflicts of Interest: The authors declare no conflict of interest.

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