ESG performance, digital transformation, and green innovation

Abstract

Amid growing environmental challenges, enhancing Environmental, Social, and Governance (ESG) performance is vital for sustainable development. In China’s economic transformation, strengthened environmental regulations require greater corporate responsibility for carbon reduction and energy conservation. Using data from Chinese A-share listed firms (2014–2023), this study explores how green innovation influences corporate ESG performance and its underlying mechanisms. The results reveal that green innovation has a significant impact on ESG performance, with digital transformation acting as a partial mediator. In addition, executive green perceptions strengthen this relationship, while public emergencies weaken it. The positive effect of green innovation is more pronounced in Eastern regions, state-owned firms, non-growth enterprises, heavy-polluting industries, and the manufacturing sector. These findings suggest that firms should prioritize green innovation and digital transformation as strategic levers, while policymakers should implement targeted, region- and industry-specific incentives to support sustainable development.