Promoting the European Sustainable Firm: How Economic, Social, and Green Innovation and the AI‐Based Technologies Create Pathways of Social and Environmental Sustainability

Joan Torrent‐Sellens, Mihaela Enache‐Zegheru and Pilar Ficapal‐Cusí

Business Strategy and the Environment, 2025, vol. 34, issue 7, 9093-9119

Abstract: The aim of this paper is to expand research on the digital and sustainability transitions in firms by analyzing the effects of artificial intelligence (AI)‐based technologies and incorporating their connections to economic, social, and green innovation processes. The main objective is to analyze whether and how these innovation dynamics—particularly the role of AI—mediate and reinforce the relationship between economic innovation and socio‐environmental sustainability outcomes. Using a large representative sample of 13,117 European firms from 2020 and applying partial least squares structural equation modeling (PLS‐SEM), we identify multiple sustainability trajectories. Our results show that while economic innovation alone contributes positively to social and environmental sustainability, its impact is significantly enhanced when combined with green/social innovation and AI‐based technologies, highlighting their role as drivers of sustainability. These factors exhibit differentiated mediating effects: Green and social innovation primarily amplifies environmental sustainability, whereas AI technologies accelerate social sustainability outcomes. The analysis also shows that these effects vary depending on firm size and the type of AI technology adopted (i.e., AI‐based algorithms and software vs. AI‐based hardware and infrastructures). These insights offer strategic guidance for firms and policymakers in leveraging innovation to achieve social and environmental sustainability goals.

Date: 2025
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