ESG Practices and Green Innovation: The Mediating Role of Organizational Pride and the Moderating Effect of Innovation Climate

Abstract

With the growing emphasis on sustainable development, organizations and government agencies are increasingly incorporating environmental, social, and governance (ESG) factors into their strategic agendas. However, previous research has primarily examined ESG performance, stakeholder engagement, and financial outcomes in isolation, overlooking the systemic role of employee perceptions and psychological responses. To address this shortcoming, this study integrated social identity theory and social exchange theory to explain how ESG practices influence green innovation behavior through organizational pride. Furthermore, drawing on organizational climate theory, we explored the moderating role of innovation climate in this relationship. We used structural equation modeling (SEM) to analyze data from 346 employees across diverse Chinese companies, enabling us to capture the overall structure of the relationship rather than isolated causal relationships. Our results show that all three dimensions of ESG practices significantly enhance organizational pride, which in turn stimulates green innovation, highlighting the indirect, systemic relationship between ESG and innovation outcomes. Organizational climate is an important contextual variable influencing both individual behavior and organizational performance. When organizations have a favorable innovation climate, employees are more likely to translate their pride into concrete innovative behaviors. While the direct impact of ESG (S) and ESG (G) on green innovation has not been confirmed, the mediating role of organizational pride and the moderating role of innovation climate highlight the dynamic interplay between psychological and organizational subsystems. This study conceptualizes ESG practices, organizational pride, and innovation climate as interconnected subsystems within a broader organizational system, providing a systems-based perspective for sustainability research. It advances theoretical understanding of how sustainability initiatives spread through psychological and organizational mechanisms and offers practical insights for policymakers and decision makers seeking to promote long-term green innovation.