Shaping ESG modes through intellectual capital: a strategic framework for corporate sustainability and innovation

Purpose This study investigates the relationship between the ESG (environment, social and governance) modes of companies and their innovation activities from the perspective of intellectual capital. Design/methodology/approach A three-stage process was used to analyze a dataset of 1,267 companies from knowledge-intensive industries. In the first stage, principal component analysis was applied to identify the types of ESG-related activities. Next, using cluster analysis, we identified patterns or modes of ESG-related behavior. Third, the identified clusters were compared in terms of their innovation-related behavior. Findings Compared to companies that demonstrated low ESG engagement, enterprises that have adopted comprehensive ESG strategies were found to be more likely to foster innovation and thus achieve sustainable competitive advantages. Our results highlight the particular importance of relational capital in stakeholder collaboration and knowledge sharing. Research limitations/implications While measuring ESG and innovation at the corporate level presents inherent challenges, this study contributes positively by offering a structured categorization of ESG modes, enabling more precise and meaningful comparisons. Our framework reduces ambiguity in assessing ESG-innovation dynamics and provides a solid foundation for future research. Moreover, the study opens exciting avenues for exploration, such as investigating the causal relationship between ESG engagement and innovation outcomes. Future research can build on these insights to examine how specific ESG models drive distinct innovation characteristics, particularly in developing economies and among SMEs, thereby enriching the global understanding of sustainable corporate strategies. Practical implications The study’s findings provide actionable insights for companies, policymakers, and other stakeholders on strategically integrating ESG and innovation. Businesses can leverage these insights to better align their ESG and innovation strategies, recognizing the critical role of relational and structural capital. Fragmented ESG communication yields limited value compared to cohesive strategies that foster external collaboration. Policymakers, in turn, should link innovation incentives to broader ESG strategies, ensuring a holistic integration that encompasses all ESG dimensions to enhance long-term competitiveness and sustainability. Social implications Adopting a broad ESG approach, rather than focusing on isolated aspects, is crucial for fostering sustainable innovation and generating societal benefits. Companies should assess ESG holistically, considering environmental, social and governance dimensions to maximize synergies with innovation. Stakeholder engagement and external cooperation are essential for developing effective and inclusive ESG initiatives. Furthermore, greater emphasis should be placed on the social dimension of ESG, which remains underdeveloped in many organizations. Future research could explore how small and medium-sized enterprises navigate this relationship and examine regional differences to better understand the social impact of ESG and innovation. Originality/value The results offer meaningful insights for corporate strategy, including the need for a holistic approach to intellectual capital management in ESG-driven innovation. In order to promote long-term sustainability and value creation, policymakers should encourage the alignment of innovation incentives with broader ESG frameworks.