Towards the establishment of an ESG rating in emergent markets: firm-level evidence from Tunisia

Abstract

This study aims to examine the determinants of environmental, social and governance (ESG) practices within Tunisian companies, in order to identify how the specific characteristics of companies influence their ESG engagement in the context of an emerging market. The analysis draws on survey data from 55 Tunisian firms across industrial, financial and consulting sectors. A principal component analysis (PCA)-based composite ESG index, aligned with the Tunis Stock Exchange framework, is constructed to assess performance across environmental, social and governance dimensions. The results reveal that governance and social practices are relatively advanced, while environmental initiatives remain limited. Larger, older, listed and group-affiliated firms exhibit higher ESG performance, suggesting that organizational resources and institutional pressures play a critical role in shaping ESG engagement in Tunisia. These findings provide insights for policymakers and corporate leaders. Strengthening regulatory incentives, improving ESG disclosure frameworks and supporting capacity-building initiatives could foster stronger environmental integration and more balanced ESG development across sectors. Furthermore, integrating ESG criteria into governance mechanisms and internal management tools appears essential to strengthen the alignment between financial performance and sustainable performance. This paper contributes to the ESG literature by providing novel empirical evidence from Tunisia, an underexplored context in sustainability research. By constructing a PCA-based composite ESG index aligned with the Tunis Stock Exchange framework and analysing firm-level determinants of ESG engagement, it offers new insights into how institutional and organizational factors shape ESG adoption in emerging economies. Finally, the study combines methodological rigor with strong contextual grounding, providing a fresh perspective on ESG dynamics in environments characterized by evolving and heterogeneous institutional pressures.