ABSTRACT Sustainable growth has emerged as a strategic need among the companies in the economies which are environmentally restrained and institutionally developing like China. Despite the growing acceptance of the Environmental, Social, and Governance (ESG) practices as significant contributors to corporate sustainability, there is a lack of empirical studies on how ESG can be converted into sustainable growth in terms of internal innovation and business‐process mechanisms especially in the emerging‐market environments. This paper explores how ESG practices influence sustainable growth by suggesting a serial mediation model incorporating eco‐innovation and sustainable business practices and testing the moderating effect of consumer environmental education. Based on time‐lagged survey data of 387 middle‐level managers working in Chinese manufacturing companies and the analysis of the data by the Partial Least Squares Structural Equation Modeling (PLS‐SEM), the results indicate that ESG practices have a significant positive impact on eco‐innovation, sustainable business practices, and sustainable growth. There are also direct impacts of eco‐innovation and sustainable business practices on sustainable growth, and a cascade effect of positive impact of ESG on growth is passed on by serial mediation. Moreover, consumer environmental education has a positive impact on sustainable growth and enhances the relationship between sustainable business practice and sustainable growth. These results extend the empirical literature on ESG and sustainability by demonstrating the innovation and practice‐based channels via which ESG can generate long‐term value in China.
Chen et al. (Sun,) studied this question.