The Relationship Between The Sustainability Index (ESG) And Return On Assets (ROA):A Standard Analysis At Baghdad Soft Drinks Company (2018-2023)

Abstract

This research aims to analyze the relationship between the Environmental, Social, and Governance (ESG) Sustainability Index and financial performance, represented by Return on Assets (ROA), at Baghdad Soft Drinks Company for the period 2018–2023. The research employed a descriptive-analytical approach and an econometric method, utilizing a correlation model and simple linear regression to measure the direction and strength of the relationship between the two variables. Data were collected from financial reports published on the Iraq Stock Exchange and from the company's disclosures regarding its sustainability practices. The results of the analysis showed a positive correlation between the ESG Index and ROA, although the level of this correlation was moderate in terms of statistical strength. The study also revealed that the governance dimension had the greatest impact on financial performance compared to the environmental and social dimension, due to improvements in transparency and financial disclosure policies during the study period. The research concluded that adopting sustainability practices contributes to increased asset utilization efficiency and enhanced investor confidence in the long term, even though the costs of implementation may limit short-term profitability. The research recommends the need to integrate ESG indicators into the financial performance reports of Iraqi industrial companies, and to adopt international disclosure standards (GRI) and (ISSB) to ensure transparency, attract sustainable investments, and enhance the market value of companies.