Manufacturing enterprises move towards sustainable development: ESG performance, market-based environmental regulation, and green technological innovation

Abstract

The traditional extensive development of the manufacturing industry has caused significant environmental damage. Consequently, the manufacturing sector urgently needs a green transformation to achieve sustainable development. The primary goal of current research is to examine the extent to which green technological innovation (GTI) impacts enterprises' environmental, social, and governance (ESG) performance. Moreover, it determines if this impact varies across enterprises of different natures, resource allocation capabilities, and geographical regions. Furthermore, we will explore how GTI affects the ESG performance of companies through internal and external mechanisms. We empirically examine these issues through panel models using a sample of 3203 Chinese manufacturing firms with 28,334 observations from 2006 to 2022. The findings reveal that (i) GTI significantly enhances firms' ESG performance; (ii) market-based environmental regulation positively influences the relationship between GTI and ESG performance; (iii) GTI contributes to improving a firm's ESG performance by reducing carbon emission intensity; and (iv) the impact of GTI on firms' ESG performance is notably pronounced among non-state-owned enterprises, those with high green total factor productivity, and firms in the central region. Collectively, these findings present a clear pathway for firms to enhance their ESG performance, provide a theoretical foundation for government policy decisions, and contribute to sustainable development.