The impact of ESG practices and change support on firm performance: The mediating role of innovation culture

Abstract

 This study examines the impact of Environmental, Social, and Governance (ESG) practices on corporate performance, focusing on the mediating role of innovation culture and the moderating effect of change support. Given the growing emphasis on corporate sustainability, understanding the internal mechanisms that drive ESG effectiveness is crucial. A cross-sectional survey was conducted with 614 valid responses collected from employees and managers of mid-to-large multinational corporations (MNCs) actively implementing ESG initiatives. Structural equation modeling (SEM) was employed to test the hypothesized relationships and assess the direct, mediating, and moderating effects of ESG practices on corporate performance. The results indicate that ESG practices positively influence both financial and organizational performance. Innovation culture plays a mediating role by translating ESG investments into tangible performance improvements through enhanced innovation capabilities. Moreover, change support significantly moderates the ESG-innovation-performance relationship, emphasizing the importance of leadership commitment, resource allocation, and employee engagement in driving ESG effectiveness. This study highlights the crucial role of innovation culture in bridging ESG initiatives and corporate performance while also demonstrating how change support strengthens ESG’s impact. Firms that integrate ESG into their innovation strategies and foster organizational readiness for change are better positioned to achieve sustainable competitive advantages. Managers should prioritize building a strong innovation culture and implementing structured change support mechanisms to maximize ESG outcomes. Companies can enhance ESG-driven innovation by investing in employee training, promoting cross-functional collaboration, and providing leadership support. These insights offer practical guidance for firms seeking to align ESG strategies with long-term performance and sustainability goals.