ABSTRACT This study investigates whether, under what conditions, and how community development—conceived as a form of engagement with secondary stakeholders—affects firms' emissions performance. Specifically, we examine the moderating role of Environmental Management Teams (EMTs) and the mediating role of product responsibility capability. Guided by instrumental stakeholder theory and the dynamic capabilities perspective, this study analyses secondary data from the Refinitiv database, covering 4414 manufacturing firms and 26,089 firm‐year observations worldwide between 2016 and 2024. Using a fixed‐effects regression model, our analysis reveals that community development enhances emissions performance both directly and indirectly through improved product responsibility. Unexpectedly, we find that the presence of EMTs negatively moderates the relationship between community development and emissions performance. These findings contribute to instrumental stakeholder theory by underscoring the strategic importance of community engagement. They also extend the dynamic capabilities perspective by identifying product responsibility as a capability that drives environmental improvement.
Tasavori et al. (Fri,) studied this question.