Analysis of the Impact of ESG Performance on Corporate Financial Performance: A Case Study of China Feihe Limited

Abstract

Amid the global sustainability movement and China's "dual carbon" commitments, ESG (Environmental, Social, and Governance) has become a pivotal driver of corporate transformation and long-term viability. This paper examines China Feihe Limited to investigate the relationship between ESG performance and financial outcomes over 2022–2025. The results suggest a non-linear relationship: during upswings, ESG contributes to profit growth through cost efficiencies and pricing power; during downturns, however, its inherent cost rigidity tends to amplify earnings volatility. Nevertheless, ESG-driven structural improvements and enhanced financial resilience can buffer downturns. The financial effects of ESG thus vary with the business cycle. Accordingly, firms should capitalize on its amplifying benefits during expansions while proactively managing cost rigidities in contractions, so as to strike a dynamic equilibrium between near-term profitability and sustained value creation.