A research gap exists concerning the moderating roles of corporate governance mechanisms on the nexus of environmental, social, and governance (ESG) performance and firm value. This study aims to address this gap in the Australian corporate context. We examine whether ESG performance can enhance firm value and whether this relationship is moderated by the corporate governance mechanisms to balance stakeholder interests. Drawing on a sample from the ASX, we find that while high ESG performance can increase firm value, this effect diminishes in the presence of the large number of supply chain contracts. We further discovered a negative moderating effect of board independence and audit quality on ESG performance and firm value. Our findings highlight the contingent nature of ESG value creation, indicating that while ESG activities can enhance firm value, their impact depends on firms’ governance context and contractual arrangements that shape shareholders’ outcomes collectively.

This paper utilizes agency and stakeholder theories to explore the relationship between ESG (environmental, social, and governance) performance and supply chain contracts. Drawing from data using a sample of ASX 300 firms over the period of 2012 to 2021, our analysis reveals a negative relationship between ESG performance and supply chain contracts, aligning with agency theory principles. Furthermore, this negative association is observed to be more pronounced among firms characterized by lower levels of information asymmetry. These findings hold significant practical implications for management, business suppliers, and customers alike. Specifically, managers can leverage these insights to reinforce the commitment of supply chain partners towards ESG initiatives, thereby enhancing sustainability practices within the supply chain ecosystem.