ESG DISCLOSURE AND LOCAL ECONOMIC EXPOSURE IN SUPPORTING INCLUSIVE RURAL DEVELOPMENT: EVIDENCE FROM INDONESIAN LISTED COMPANIES

Abstract

This study examines the role of Environmental, Social, and Governance (ESG) disclosure and local economic exposure in supporting inclusive rural development in Indonesia. Using a quantitative approach, the study analyzes panel data from Indonesian listed companies based on manually constructed ESG indicators derived from sustainability reports. Structural Equation Modeling with Partial Least Squares is applied to evaluate the relationships among variables. ESG disclosure is measured through environmental, social, and governance indicators, while local economic exposure is proxied by firms’ operational activities in rural areas and community engagement. The findings indicate that ESG disclosure positively influences inclusive rural development, suggesting that firms with higher transparency and sustainability practices contribute more effectively to local economic inclusion. Furthermore, local economic exposure strengthens this relationship, indicating that firms with stronger engagement in rural areas generate more substantial socio­economic impacts. The model demonstrates moderate explanatory power in explaining variations in rural development outcomes. This study contributes to the literature by integrating ESG disclosure with spatial economic engagement, offering practical insights for policymakers and corporate managers in aligning sustainability strategies with rural development objectives.