e-ISSN: 2723-6692 p-ISSN: 2723-6595
Journal of Indonesian Social Sciences, Vol. 5, No. 11, November 2024 2829
practices. In many developed countries, for example, regulators are increasingly forcing companies
to disclose comprehensive sustainability reports, which include relevant ESG aspects (Singhania &
Saini, 2022).
Factors that influence the implementation of CSR and ESG in companies in the financial and
non-financial sectors are very complex. One of them is the changing behavior of consumers who are
increasingly paying attention to social and environmental issues in their purchasing decisions.
(Bashar, 2020). Consumers today are not only interested in products and services but also in how
these products are produced and whether they comply with ethical and sustainability standards. In
addition, increasingly stringent government policies and regulations regarding carbon emissions,
renewable energy use, and fair labor practices are also influencing ESG implementation around the
world. For example, SEOJK Number 16/SEOJK.04/2021 in Indonesia requires companies to disclose
their social responsibility in detail in their annual reports (Wiguna et al., 2023).
These factors have a direct impact on a company's financial performance. The implementation
of CSR and ESG often requires significant investment in terms of costs and resources. However,
despite the high costs, many studies indicate that companies that effectively implement CSR and ESG
practices tend to achieve stronger financial outcomes over time (Rahayu & Paramita, 2023). This
happens because companies committed to sustainability and social responsibility are usually more
desirable to consumers, have a better reputation, and more easily gain access to capital at a lower
cost (MacNeil & Esser, 2022).
However, the impact of CSR and ESG implementation on firm profitability is not always
consistent. Some studies show a positive impact of CSR disclosure on firm profitability, such as an
increase in Return on Assets (ROA) and Net Profit Margin (NPM). ESG disclosure sometimes has a
negative impact. (Suyanto & Rahmawati, 2022). This inconsistency reflects the complexity of the
relationship between CSR, ESG, and profitability. CSR is often associated with enhanced reputation
and better relationships with consumers, while ESG, particularly in environmental aspects, can
involve high costs for regulatory compliance (Yuliartanti & Handayani, 2023).
Corporate Social Responsibility (CSR) is a concept in which companies strive to achieve a
balance between economic, social, and environmental interests in their operations. CSR encompasses
multiple dimensions, including a company's responsibility towards workers, consumers, and society
at large. One of the main aspects of CSR is sustainability, where companies are expected to reduce the
negative impact of their operations on the environment (Bai et al., 2023). Environmental Social
Governance (ESG), on the other hand, is a more comprehensive framework covering environmental,
social, and corporate governance aspects. ESG focuses on how a company manages its risks related to
these issues, with the aim of creating long-term value for shareholders and other stakeholders (Singh
et al., 2019).
One of the reasons for differing research results is that previous studies often failed to carefully
consider and misinterpreted the measurement standards for Corporate Social Responsibility (CSR),
relying solely on philanthropic activities or financial indicators such as donation amounts and social
program costs (Wiguna et al., 2023). In fact, proper CSR measurement should be conducted through
a comprehensive Sustainability Report that aligns with SEOJK Number 16/SEOJK.04/2021.
Many complaints have arisen regarding CSR measurement standards, including limitations in
assessing sustainable performance, challenges in collecting accurate data, and difficulties in
determining appropriate metrics. Furthermore, low stakeholder engagement and high
implementation costs are also common issues in applying CSR measurement standards.
There are numerous concerns surrounding the standards for measuring ESG (Environmental,
Social, Governance). One major criticism is the inconsistency and lack of clarity in measuring ESG
factors, making it difficult for companies and investors to compare ESG performance across firms. The
lack of relevant and reliable data also poses challenges, leading to inaccurate ESG performance
reporting. Additionally, there are concerns about 'greenwashing,' where some companies mislead the
public about their sustainability efforts without concrete evidence of real improvements. The