How do ESG practices assist diamond companies in mitigating reputational damage during crises, such as those involving conflict over blood diamonds?
Files
Bonouh_78882000_Taybi_28851900_2025.pdf
Open access - Adobe PDF
- 3.16 MB
Details
- Supervisors
- Faculty
- Degree label
- Abstract
- In sensitive industries like diamond mining, crises over "blood diamonds" pose challenging reputational and financial risks. This study provides an empirical analysis of how environmental, social, and governance (ESG) practices help diamond companies minimize reputational damage in crisis situations. Theoretically, it draws on resilience theory and signaling theory by conceptualizing a strong ESG commitment as a form of reputational insurance that both enhances firms’ crisis resilience and serves as a protective signal of corporate responsibility. Empirically, We analysed data from 2019 - 2023 of diamond companies' ESG scores and financial performance (i.e., ROA, ROE, and revenue) using panel data analysis and cross-industry comparisons. The results indicate that the diamond sector exhibits higher ESG performance in each sub-score compared with other industries. In addition, organizations with strong ESG characteristics showed improvement in financial performance in the post-2020 period, particularly in terms profitability and revenue, although the relationship was weak between ESG and ROE. These findings imply that a solid commitment to ESG serves as reputational insurance in sectors with potentially greater ethical risk, which can increase companies’ resilience to ethical controversies. This study adds to the body of literature on reputational risk and signaling theory by demonstrating the value of ESG as a protective signal of corporate responsibility in crises. These findings suggest that in ethically sensitive sectors such as the diamond trade, proactive ESG strategies can serve as a form of reputational insurance, thereby strengthening an organisation's resilience and financial stability during turbulent periods. This is a message that is of particular relevance to investors when evaluating risk and to regulators when promoting corporate sustainability.