Profit first, cash later? Is the low ESG commitment in early-stage ventures just a money problem?

This paper investigates the ESG commitment of early-stage firms. Although current literature suggests that the poor ESG commitment of these firms is attributable to their limited resources, using a life-cycle-based perspective in analyzing ESG engagement, we suggest that the strategic and organizational characteristics of early-stage firms impact managerial priorities regardless of resource availability. Based on a sample of companies over the period 2013–2022, our results demonstrate that the ESG commitment of highly profitable early-stage firms is lower than that of highly profitable late-stage firms. Furthermore, the ESG commitment of highly profitable early-stage firms is not different from that of their low-profitable counterparts. Our findings challenge one of the most established explanations in the ESG literature, showing that alleviating financial constraints of early-stage firms does not automatically lead to greater ESG commitment. The results are robust to several controls. The implications of the work are also discussed.