Beyond Compliance: Investigating the Impact of Environmental Innovation on Operational Efficiency and the Moderating Role of Board Independence and Gender Diversity—Evidence From Frankfurt‐Listed Firms

ABSTRACT

Germany, a leader in environmental sustainability and corporate governance, has implemented the pioneering Energiewende strategy. This national initiative promotes the adoption of sustainable technologies by incentivizing renewable energy use and ecological innovation in businesses. Building on this framework, the study applies dynamic capabilities theory to examine the effect of environmental innovation on operational efficiency. Using a rigorous inclusion criterion, purposive sampling was employed to collect 18 years of data (2006–2023) from 150 non‐financial companies listed on the Frankfurt Stock Exchange, sourced from Thomson Reuters Eikon DataStream. The analysis relied on the Augmented Mean Group (AMG) estimator, Driscoll‐Kraay standard errors with fixed effects, and the two‐step Generalized Method of Moments (GMM). Findings reveal that environmental innovation improves asset turnover while reducing the operating ratio. Additionally, the moderating roles of board independence and board diversity strengthen the relationship between environmental innovation and operational efficiency. Based on these results, corporate managers are encouraged to prioritize investments in sustainable technologies and practices. Strategic allocation of resources toward research and development (R&D) can foster the creation of environmentally friendly products and processes, ultimately reducing energy consumption and waste while enhancing operational performance.