Unpacking the Complexity of Corporate Sustainability: Green Innovation’s Mediating Role in Risk Management and Performance

Abstract

This study investigates the relationships among corporate sustainability development (CSD), enterprise risk management performance (ERMP), and green innovation (GI) in the Jordanian manufacturing firms. The empirical data of 97 companies listed on the Amman Stock Exchange were gathered in a time span of three months (i.e., January 2024 to March 2024). A structural equation modeling was employed to examine these complex dynamics. The findings reveal that CSD is negatively associated with both ERMP and enterprise sustainable performance in the short term, challenging conventional wisdom. However, CSD strongly promotes GI, which in turn positively influences ERMP while negatively affecting short-term performance. GI acts as a significant mediator, positively mediating the CSD–ERMP relationship and negatively mediating the CSD–performance link. These results extend the sustainability paradox concept to emerging economies and highlight the critical role of GI in balancing sustainability initiatives with risk management and performance outcomes. The study suggests that firms may experience initial disruptions when implementing sustainability practices, but these initiatives can drive innovation within organizations. Based on these findings, this study recommends that managers in emerging economies adopt a long-term perspective when implementing sustainability initiatives and develop more flexible risk management systems. Policymakers should consider supportive frameworks to help firms navigate the tensions between sustainability, innovation, and short-term performance. Future research should employ longitudinal designs to capture the dynamic nature of these relationships and explore potential moderating factors such as firm size or industry-specific characteristics.