Exploring the Relationship Between Sustainable Business Practices and Brand Loyalty: Evidence from Pakistan’s Manufacturing and Retail

Abstract

Very few studies investigate the effect of Environmental, Social, and Governance (ESG) practices on consumer behavior on the emerging market. The research question in this study is the following: how the dimensions of ESG affect brand loyalty in the Pakistani manufacturing and retail industries taking customer trust as a mediating variable. The cross-sectional design because it relies on the stakeholder theory and the theory of planned behavior is qualitative and utilized both structured questionnaires which were given to the sample of 350 consumers and 50 business managers. Data analysis was done through SPSS version 26 where reliability test was conducted, correlation analysis, multiple regression and mediation analysis. All the scales were very reliable (Cronbach a = 0.78-0.89) with a very good sampling adequacy (KMO = 0.94). The results show that environmental practices have the highest impact on brand loyalty (b = 0.75, p < 0.001), then governance (b = 0.52, p < 0.01) and social practices (b = 0.38, p < 0.05). The model accounted brand loyalty (R2 = 0.67) by 67 percent. Mediation analysis established that customer trust partially of the relationships between environmental practices and loyalty is not strong as the result obtained hinged on b = 0.75 to b = 0.45 with Sobel z = 4.82, p < 0.001. This paper presents ground-breaking evidence of ESG-loyalty in Pakistan, verifies an ESG-trust-loyalty model, and establishes trust as an essential mediating variable. The results indicate that managers are focused on trying to explain sustainability in a transparent manner and in the process, policymakers are rewarding ESG-adoption. It has shortcomings such as cross-sectional design and urban geographic emphasizing.