Proceedings of The 6th International Conference on Advanced Research in Business, Management and Economics
The Corporate Transformation towards Environmental, Social and Governance Practices: The Influence of Innovation across the Globe
Researchers and practitioners have rigorously postulated the effectiveness of sustainable practices, measured by environmental, social and governance scores, and their linkage with corporate financial performance. However, a significant research gap remains unexplored, specifically, the influence of innovation on environmental, social and governance practices in the industry 4.0 context. The experimental research is conducted based on the data collected from the Bloomberg database and espacenet for fortune 500 companies across eight years to investigate the impact of innovation, measured by the number of patents published over the years and investments in research and development (R&D) on the environmental, social and governance (ESG) scores. To test the hypothesis, panel data regression models were performed, such as fixed-random effect and generalized least square in eviews software. The analysis shows that innovation significantly promotes sustainability within an organization such that an increase in patent publication and higher R&D can leverage the environmental, social and governance scores of the companies that drive towards industry 4.0. The study also indicates that the companies with higher patent publications and R&D tend to engage more in the transition to a circular economy. This study provides insights to the decision-makers and administrative bodies in an organization to invest in innovation through strategic investment decision-making practices.