Environmental Intensity, Social Responsibility, and Governance as Drivers of Profitability in Listed Nigerian Manufacturing Firms

Abstract

Manufacturing firms in Nigeria face increasing environmental and social pressures that may affect the efficiency with which corporate assets generate returns. This study examined the separate effects of environmental intensity, social responsibility, and corporate governance on profitability among listed Nigerian manufacturing firms. A longitudinal ex-post facto design was adopted using secondary data from audited annual financial statements and sustainability reports of 20 purposively selected industrial and consumer goods firms listed on the Nigerian Exchange Group over 2014–2025, yielding 240 firm-year observations. Profitability was measured by Return on Assets, while environmental intensity, social responsibility, and corporate governance were proxied by carbon intensity, the Corporate Social Responsibility Expenditure Ratio, and board independence, respectively. Descriptive statistics, panel regression models, and diagnostic tests were applied. Following model-selection and diagnostic procedures, the Random Effects model with Panel Corrected Standard Errors was used for final estimation. Carbon intensity had a significant negative association with Return on Assets, whereas the Corporate Social Responsibility Expenditure Ratio and board independence had significant positive associations. The model explained 58.45% of the observed variation in profitability. Firm age was not statistically significant, while leverage showed a significant negative relationship with profitability. The findings indicate that lower carbon intensity, targeted social expenditure, and independent board oversight are associated with stronger asset-based profitability in the sampled firms. The study therefore emphasises integrated attention to environmental efficiency, social investment, and governance oversight in manufacturing firms.