Does corporate social responsibility and environmental governance drive green innovation?

Abstract

In a phase of environmental awareness, corporate social responsibility (CSR) and environmental governance's (EG) involvement in green innovation (GI) is a subject of growing significance. Therefore, the objective of this study is to assess the extent of environmental degradation that can be ascribed to the corporations listed on the Karachi Stock Exchange. This study examines the detailed connection between CSR, EG, and GI within the context of ecologically sustainable development led by innovation. The data encompassing the years 2011 to 2020 are employed for this analysis. The findings indicate that the adoption of CSR initiatives by heavily polluting businesses significantly boosts their capacity for innovation. The positive effect is further enhanced by robust EG, particularly in the short term. The findings further suggest that CSR has a moderate influence on innovation within privately owned companies and those that primarily focus on addressing less severe environmental concerns. In contrast, CSR exhibits a more pronounced influence in state‐owned enterprises that face more substantial environmental challenges. The findings offer significant perspectives for businesses, policymakers, and scholars, thereby promoting sustainability and enabling eco‐friendly innovation in contaminated environments.