Internalizing ESG: Validating Psychological Drivers as Leading Non-Financial Indicators (NFIs) In University Sustainability

Abstract

This study addresses a critical accountability gap in contemporary sustainability reporting by empirically examining the internal psychological factors that can serve as reliable leading Non-Financial Indicators (NFIs) for predicting Pro-Environmental Behaviour (PEB). Currently, institutional sustainability practices suffer from an over-reliance on lagging, retrospective output indicators that inherently fail to provide the predictive, timely, and actionable insights crucial for effective institutional governance and proactive policy intervention. Therefore, this research empirically validates whether internal psychological elements, categorised as normative, value-based, and cognitive drivers, can serve as reliable leading NFIs for PEB among students in Higher Learning Institutions (HLIs) in Malaysia. A quantitative, cross-sectional survey was conducted, collecting data from 338 university students using stratified sampling. The analysis employed Partial Least Squares Structural Equation Modelling (PLS-SEM), and the results revealed a critical dual challenge for behavioural governance. Personal Norms emerged as the most significant positive driver of PEB, confirming that intrinsic moral commitment is the primary control mechanism. Conversely, Social Norms exhibited a significant negative influence, indicating that PEB is currently perceived as a cultural barrier or outlier behaviour subject to peer disapproval. Other measured drivers, including General Values, Attitude toward PEB, and Environmental Awareness, were found to be statistically weak or insignificant predictors. This research provides a crucial methodological contribution by substantiating these internal psychological elements as measurable, forward-looking NFIs. The findings recommend a strategic shift for HLIs, prioritising high-impact Moral Reinforcement interventions to strengthen Personal Norms over traditionally ineffective, awareness-based campaigns. The study’s core proposition is the formal inclusion of validated NFIs into governance dashboards, thereby enhancing the credibility and predictive capability of sustainability and ESG performance reporting. Furthermore, this study offers valuable insights for policymakers seeking to operationalise behavioural indicators within broader environmental governance systems.