How sustainability committees moderate the link between ESG performance and environmental innovation in European firms?

Purpose This paper investigates the moderating role of sustainability committees in the relationship between environmental, social and governance (ESG) performance and environmental innovation within European nonfinancial firms. Design/methodology/approach The study analyzes data from 691 nonfinancial sector firms operating within EU states from 2013 to 2022. It employs regression analysis to examine the correlation between ESG performance and environmental innovation, considering the moderating effect of sustainability committees. Findings The research reveals a significant and positive correlation between ESG performance and environmental innovation. Moreover, it demonstrates that sustainability committees play a positive moderating role in this relationship, indicating their importance in fostering environmental innovation within organizations. Research limitations/implications The study is limited to European nonfinancial companies, potentially limiting the generalizability of findings. Additionally, the research focuses on the moderating role of sustainability committees, leaving room for further exploration of other governance mechanisms. Practical implications The findings suggest that implementing an ESG performance framework and establishing dedicated sustainability oversight mechanisms, such as sustainability committees, can enhance environmental innovation within organizations. This insight is valuable for strategic decision-making aimed at advancing both sustainability and innovation agendas. Originality/value This study addresses a gap in the literature by exploring the moderating effect of sustainability committees on the link between ESG performance and environmental innovation from various theoretical viewpoints. It contributes to the understanding of mechanisms that enhance environmental innovation within companies and provides practical implications for corporate reporting accuracy and sustainability initiatives.