Corporate social responsibility and environmental performance: the mediating role of green capabilities and green innovation

Purpose The purpose of this study was to examine the relationship between corporate social responsibility (CSR) and environmental performance (EP) among manufacturing small to medium enterprises (SMEs) in the United Arab Emirates (UAE). The potential mediating effects of green innovation (GI) and green capabilities (GCs) within this relationship were also investigated. Design/methodology/approach A survey of 428 SME managers was conducted in the UAE. Mediation analysis uncovered significant positive impacts of CSR, GCs and green innovation on environmental performance. Findings The findings support the positive impact of CSR on EP, indicating that SMEs engaged in CSR practices tend to exhibit higher EP. While this is in line with the findings of previous research, this study further reveals a significant positive correlation between CSR and GC, emphasizing CSR’s role in fostering capabilities that integrate environmental concerns into core business operations. These results demonstrate that GC positively influences firm EP thus highlighting the importance of cultivating GC for organizations striving for a sustained competitive advantage and exceptional performance in dynamic business environments. Research limitations/implications The methodology limits the ability to observe outcome variations over time. Future studies could benefit from longitudinal approaches to gain deeper insights into the dynamics of these relationships. Further research could also explore data from larger firms to examine potential variations in outcomes across different organizational sizes. Conducting similar studies in other countries in the region that have comparable cultural and economic contexts could offer further valuable insights. Nevertheless, this study found that CSR practices can enhance GCs and that GCs play a pivotal role in the CSR-GI nexus. Practical implications The results also have significant implications for managers, policymakers and business professionals. For example, the study’s findings emphasize the importance of CSR initiatives in enhancing environmental management and fostering GI, thereby providing confidence in CSR investment outcomes. CSR was also found to positively influence firms’ GCs, thus increasing the capacity of SME firms to build capabilities while improving environmental performance. These capabilities positively influence firms’ GI, providing the potential to develop innovative products, practices and services that distinguish them among their competitors. Social implications Addressing the challenges of climate change, pollution and resource depletion is a critical goal for society. This study shows that CSR and sustainable practices in business can positively impact environmental performance while also providing significant benefits to businesses. Originality/value The study found that CSR practices can enhance GCs and that GCs play a pivotal role in the CSR-GI nexus. These results show that for firms engaged in CSR to achieve outstanding EP, they must cultivate GC, using the resources and capabilities gained from CSR to develop and execute effective GC, which will subsequently lead to GI. The authors’ model contributes to the current body of knowledge by presenting a mechanism whereby CSR influences EP, while incorporating the mediating and moderating roles of GI and GC.