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Article

Corporate Dual-Organizational Performance and Substantive Green Innovation Practices: A Quasi-Natural Experiment Analysis Based on ESG Rating Events

1
Changzhou University Huaide College, Jingjiang 214500, China
2
School of Educational Sciences, Northwest Normal University, Lanzhou 730070, China
3
School of Economics, Jilin University, Changchun 130012, China
*
Author to whom correspondence should be addressed.
Sustainability 2025, 17(19), 8897; https://doi.org/10.3390/su17198897
Submission received: 31 August 2025 / Revised: 27 September 2025 / Accepted: 3 October 2025 / Published: 7 October 2025

Abstract

Using the “Policy Pressure-Innovation Alignment-Performance Transformation” theory, this paper looks at how ESG ratings, green innovation, and corporate dual-organizational performance are linked. This study uses a multi-period Difference-in-Differences (DID) model in conjunction with a conditional mediation effect model to examine how ESG ratings causally influence substantive green innovation, which in turn improves corporate financial and environmental performance. Regression results show that corporate ESG ratings have a big effect on the performance of both organizations. ESG ratings have a bigger effect on financial performance, while ESG scores have a bigger effect on environmental performance. Looking at the sub-dimensions shows that policy ratings have immediate effects on environmental performance and delayed effects on financial performance. The conclusion that the internalization response of corporate environmental costs is timely, while the market revaluation has a delayed transmission effect, holds true after being tested through parallel trend analysis and synthetic DID testing. More research shows that differences in ESG ratings hurt financial performance but help environmental performance. This means that differences in ESG ratings may lead to more real green innovation activities, which have a direct effect on the environment and, in the end, lead to bigger improvements in environmental performance. The moderating effect test shows that being aware of the environment makes substantive green innovation more focused on quality by making people feel responsible for their actions. Also, environmental management leads to more corporate green patents, which has resource displacement effects and makes green patent innovations less effective. Heterogeneity analysis shows that state-owned businesses use their institutional advantages to improve the “quality-quantity” of substantive green innovation, which helps their corporate green development performance. Declining businesses push for green innovation to fix problems that are already there, but mature businesses don’t like ESG rating policies because they are stuck in their ways, which stops them from making real progress in green innovation. This paper ends with micro-level evidence and theoretical support to solve the “greenwashing” problem of ESG and come up with “harmonious coexistence” policy combinations that work for businesses.
Keywords: corporate sustainability performance; ESG ratings; substantive green innovation; synthetic DID; multi-period DID; conditional mediation model corporate sustainability performance; ESG ratings; substantive green innovation; synthetic DID; multi-period DID; conditional mediation model
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MDPI and ACS Style

Li, H.; Zhao, L. Corporate Dual-Organizational Performance and Substantive Green Innovation Practices: A Quasi-Natural Experiment Analysis Based on ESG Rating Events. Sustainability 2025, 17, 8897. https://doi.org/10.3390/su17198897

AMA Style

Li H, Zhao L. Corporate Dual-Organizational Performance and Substantive Green Innovation Practices: A Quasi-Natural Experiment Analysis Based on ESG Rating Events. Sustainability. 2025; 17(19):8897. https://doi.org/10.3390/su17198897

Chicago/Turabian Style

Li, Huirong, and Li Zhao. 2025. "Corporate Dual-Organizational Performance and Substantive Green Innovation Practices: A Quasi-Natural Experiment Analysis Based on ESG Rating Events" Sustainability 17, no. 19: 8897. https://doi.org/10.3390/su17198897

APA Style

Li, H., & Zhao, L. (2025). Corporate Dual-Organizational Performance and Substantive Green Innovation Practices: A Quasi-Natural Experiment Analysis Based on ESG Rating Events. Sustainability, 17(19), 8897. https://doi.org/10.3390/su17198897

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