From Theory to Practice: ESG Integration in Corporate Governance and Financial Decision-Making

The rising prominence of Environmental, Social, and Governance (ESG) factors in corporate strategy and finan- cial decision-making reflects evolving stakeholder expectations and regulatory demands, both globally and within India. This paper explores the theoretical foundations underpinning ESG integration—drawing on stakeholder theory, agency theory, and complementary frameworks—and their relevance to corporate governance and financial management. ESG considerations are increasingly influencing capital allocation, investment appraisal, and risk management practices, offering both a performance- enhancing and risk-mitigating lens for long-term value creation. The paper also examines ESG reporting standards, governance mechanisms, and the evolving Indian regulatory landscape, including the Business Responsibility and Sustainability Report (BRSR) mandate. Despite challenges such as standardization gaps and greenwashing risks, ESG remains central to sustainable financial performance. The study concludes by highlighting key implementation issues, critiques, and future research directions, particularly the need for improved measurement and deeper analysis within emerging market contexts like India.