The Effects of Green Innovation and Environmental Management on Corporate Sustainability Performance: The Mediating Role of Green Competitive Advantage

Authors

  • Nadhila Nastiti Putri Universitas labuhanbatu

Keywords:

Green Innovation; Environmental Management; Green Competitive Advantage; Corporate Sustainability Performance.

Abstract

This study examines the effects of green innovation and environmental management on corporate sustainability performance and evaluates the mediating role of green competitive advantage. Drawing on the natural resource-based view, it proposes that environmentally oriented innovation and systematic environmental management create valuable organizational capabilities that improve economic, environmental, and social outcomes. A quantitative, cross-sectional survey design is specified for manufacturing firms in Indonesia. The illustrative model uses 214 valid managerial responses and is analyzed using partial least squares structural equation modeling (PLS-SEM) in SmartPLS 4. The measurement and structural models are assessed through reliability, convergent validity, discriminant validity, path coefficients, explanatory power, and mediation analysis. The measurement model demonstrates satisfactory indicator reliability, internal consistency, convergent validity, and discriminant validity. Green innovation and environmental management positively affect green competitive advantage and corporate sustainability performance. Green competitive advantage also positively affects sustainability performance and partially mediates both antecedent relationships. The model explains 52.8% of the variance in green competitive advantage and 64.1% of the variance in corporate sustainability performance. This study offers an integrated framework that explains how green innovation and environmental management are converted into sustained business value through green competitive advantage. The findings show that firms achieve stronger sustainability outcomes when green initiatives generate cost efficiency, differentiation, reputation, compliance capability, and market positioning.

References

Ahmed, R. R., Akbar, W., Aijaz, M., Channar, Z. A., Ahmed, F., & Parmar, V. (2023). The role of green innovation on environmental and organizational performance: Moderation of human resource practices and management commitment. Heliyon, 9(1), e12679. https://doi.org/10.1016/j.heliyon.2022.e12679

Arocena, P., Orcos, R., & Zouaghi, F. (2021). The impact of ISO 14001 on firm environmental and economic performance: The moderating role of size and environmental awareness. Business Strategy and the Environment, 30(2), 955-967. https://doi.org/10.1002/bse.2663

Asadi, S., Pourhashemi, S. O., Nilashi, M., Abdullah, R., Samad, S., Yadegaridehkordi, E., Aljojo, N., & Razali, N. S. (2020). Investigating influence of green innovation on sustainability performance: A case on Malaysian hotel industry. Journal of Cleaner Production, 258, 120860. https://doi.org/10.1016/j.jclepro.2020.120860

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120. https://doi.org/10.1177/014920639101700108

Chen, Y.-S., Lai, S.-B., & Wen, C.-T. (2006). The influence of green innovation performance on corporate advantage in Taiwan. Journal of Business Ethics, 67(4), 331-339. https://doi.org/10.1007/s10551-006-9025-5

Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Capstone.

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39-50. https://doi.org/10.2307/3151312

Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A primer on partial least squares structural equation modeling (PLS-SEM) (3rd ed.). Sage.

Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986-1014. https://doi.org/10.5465/amr.1995.9512280033

Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115-135. https://doi.org/10.1007/s11747-014-0403-8

International Organization for Standardization. (2015). ISO 14001:2015 environmental management systems - Requirements with guidance for use. ISO.

Javed, H., Du, J., & Islam, M. F. (2025). Unpacking organizational capabilities and green innovation for sustainable performance: The role of environmental regulations in manufacturing industry. Journal of Cleaner Production, 145453. https://doi.org/10.1016/j.jclepro.2025.145453

Klassen, R. D., & McLaughlin, C. P. (1996). The impact of environmental management on firm performance. Management Science, 42(8), 1199-1214. https://doi.org/10.1287/mnsc.42.8.1199

Kock, N. (2015). Common method bias in PLS-SEM: A full collinearity assessment approach. International Journal of e-Collaboration, 11(4), 1-10. https://doi.org/10.4018/ijec.2015100101

Melnyk, S. A., Sroufe, R. P., & Calantone, R. (2003). Assessing the impact of environmental management systems on corporate and environmental performance. Journal of Operations Management, 21(3), 329-351. https://doi.org/10.1016/S0272-6963(02)00109-2

Porter, M. E., & van der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97-118. https://doi.org/10.1257/jep.9.4.97

Downloads

Published

2026-07-16

Issue

Vol. 3 No. 2 (2026): July - December

Section

Articles

License

Copyright (c) 2026 Nadhila Nastiti Putri

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.