Private vs. Public: Differential Impacts of Sustainable Innovation on ESG Performance in the Digitalize Era

Ying Hongbin, Wu Fei, Lu Zhijie and Javier Cifuentes‐Faura

Business Strategy and the Environment, 2025, vol. 34, issue 4, 4030-4047

Abstract: The environmental, social, and governance (ESG) rating evaluates a company's value practices and impacts its operations. This study examines the effect of corporate sustainable innovation on ESG performance (ESGP) using data from 2009 to 2021 from Chinese A‐share listed companies. The analysis's findings, which utilize panel data models, indicate that effective, sustainable innovation enhances corporate ESGP. Moreover, the study demonstrates that private enterprises experience a more pronounced improvement in ESGP through sustainable innovation than public enterprises. Additionally, digital transformation positively moderates sustainable innovation and the ESGP relationship. These findings emphasize the financial advantages of sustainable innovation for business enterprises and the need for investor and governmental attention. Furthermore, prioritizing continuous innovation and advancing digital transformation efforts can further strengthen the constructive impact of sustainable innovation on ESGP.

Date: 2025
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