Operational Efficiency as a Bridge: ESG, Governance, and Financial Performance in State-Owned Enterprises
Efisiensi Operasional sebagai Jembatan: ESG, Tata Kelola, dan Kinerja Keuangan pada Badan Usaha Milik Negara
DOI:
https://doi.org/10.21070/ups.8895Keywords:
Environmental, Social, and Governance (ESG), Environmental Costs, Good Corporate Governance (GCG), Operational Efficiency, State-Owned Enterprises (SOEs)Abstract
This study examines how operational efficiency acts as a mediator between ESG, environmental costs, governance, and the financial performance of State-Owned Enterprises (SOEs) in Indonesia. The study utilizes quantitative panel data from annual, sustainability, and financial reports of 65 SOEs from 2020 to 2023. The variables include ESG (based on GRI standards), CSR as a proxy for environmental costs, the proportion of independent commissioners for corporate governance (GCG), and ROA as a measure of financial performance. Panel regression analysis was conducted using EViews 12 software. The study reveals that only ESG can enhance financial performance and reduce the BOPO ratio through operational efficiency, while environmental costs and GCG implementation do not have a significant direct or indirect impact on financial performance. These findings highlight the need to integrate efficiency into ESG planning to ensure both sustainability and profitability in state-owned enterprises. The strategy underscores the mediating role of BOPO between ESG, environmental costs, GCG, and the financial performance of SOEs. The OEOI ratio is presented in this study as a new mediating construct in the analysis of ESG and financial performance. This bridges a gap in the literature on how operational effectiveness can serve as a link between financial performance and sustainability initiatives particularly in the context of SOEs, which remain under-researched in developing countries. Financial performance and operational efficiency of SOEs can be improved through effective ESG integration. To avoid ESG becoming a mere formality without creating real value, environmental burdens and governance mechanisms must be aligned more strategically and comprehensively.
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