Digital transformation and environmental, social and governance (ESG) performance: The moderating role of green innovation

Research background: The rapid adoption of digital transformation technologies has reshaped corporate operational and governance practices, with important implications for ESG performance, particularly in China. While digital transformation can enhance transparency, efficiency, and sustainability outcomes, its effectiveness largely depends on companies’ innovative capabilities. Green innovation serves as a key moderating mechanism that enables companies to leverage digital technologies to achieve superior ESG performance by supporting environmentally sustainable processes and responsible governance practices. Purpose of the article: This study aims to investigate the moderating role of green innovation in the relationship between digital transformation and ESG performance from the perspectives of stakeholder theory and dynamic capabilities theory in the context of China. Methods: The study utilised data comprising 33,411 observations from non-financial A-share companies listed on the Shenzhen and Shanghai stock exchanges for the period 2013–2023. Findings & value added: The study contributes new insights by examining the moderating role of green innovation in the relationship between digital transformation and ESG performance from the perspectives of stakeholder and dynamic capabilities theories. The results show a positive moderating effect of green innovation on this relationship. This enables a deeper understanding of how companies can leverage green innovation to enhance corporate sustainability and meet stakeholder expectations. Although this study examines firms in China, its findings have significant implications for corporate decision-makers, researchers, and policymakers, both within China and internationally, demonstrating how organisations across different institutional contexts can strategically align digital transformation initiatives with sustainability objectives.