ABSTRACT This study investigates how different corporate governance (CG) approaches influence firms' environmental and social performance, specifically focusing on the role of internal vs. external resources and operational vs. strategic approaches. Anchored in stakeholder and resource dependency theory, we develop a conceptual framework grounded in the dual mechanisms of exploration and exploitation. These mechanisms differentiate CG approaches into external advisors and independent directors (exploration), internal sustainability teams, and board sustainability committees (exploitation). We test this framework on a sample of 269 listed European manufacturing firms. Through a two‐stage methodology combining content and cluster analysis and multiple regression, we identify four distinct CG approaches and evaluate their effectiveness. Results reveal that firms adopting internal and external strategic CG approaches, blending board sustainability committee, internal sustainability team, and external expertise, achieve significantly higher environmental and social performance. Our findings show how firms can structure CG to embed sustainability into strategy, offering implications for managers, investors, and policymakers.
Fornasari et al. (2025) studied this question.