Employees are a crucial resource for most companies, and they increasingly care about ESG (Environmental, Social, and Governance)- related aspects within their firms. Accordingly, studies have highlighted employee satisfaction as a crucial link between ESG and financial performance. However, how ESG impacts employee satisfaction remains only partially explored. Next to a static view of perceived ESG performance levels, acknowledging changes in ESG performance is important as expectations, interpretations, and attitudinal consequences may be impacted by how sustainability develops within organisations. We hence explore the following question: What is the effect of ESG performance and its change over time on employee satisfaction? In this paper, we draw on organisational justice theory as well as expectancy theory to theorise different impacts that ESG performance level (i.e., ESG Tilt) and changes in ESG performance (i.e., ESG Momentum) have on employee satisfaction, based on different mechanisms connected to Tilt and Momentum. We utilise a dataset from Glassdoor.com, comprising S&P 500 employee reviews from 2009 to 2017, a comprehensive ESG dataset, and automated text analysis (NLP) to test our hypotheses. Our findings confirm that a higher level of ESG performance (i.e., Tilt) increases employee satisfaction mediated by employee perceptions of organisational justice. A relationship between the changes in ESG performance (i.e., Momentum) and employee satisfaction, mediated by the expectancy of future rewards, is partly confirmed. As a key stakeholder group, our paper contributes to a more refined perspective on the relationship between ESG and employees, advancing knowledge of mediating factors in these relationships. Furthermore, we provide a novel operationalisation of organisational justice perceptions and employee expectancy through the analysis of employee reviews using natural language processing.
