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

PurposeThis 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/approachThe 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.FindingsThe 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/implicationsThe 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 implicationsThe 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/valueThis 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.