Transition Toward Green Economic Growth: The Mediating Role of Organizational Green Capability

ABSTRACT

Environmental issues have emerged as major global concerns that adversely affect overall productivity and sustainable development. This study explores the factors that enhance the green economic growth of organizations, with a specific focus on the mediating effect of green capability, using the Natural Resource‐Based View (NRBV) theory and the Ecological Modernization Theory (EMT). For research purposes, a standard questionnaire was circulated among distinct corporate employees using a non‐probability purposive sampling technique and among them, 407 valid responses were used for analysis using SPSS 25 and SmartPLS 4. Partial Least Squares Structural Equation Modelling (PLS‐SEM) was used to examine the correlation between the predictor and predicted variables. The findings indicate that green innovation (GI0, composed of elements: green product innovation, green process innovation, green technology innovation) does not show a significant direct impact on green economic growth (GEG). Conversely, Green Tax (GTX), Green Climate Finance (GCF), ESG Practices (EP), and Green Capability (GC) exhibit statistically significant direct effect on GEG. This study also found that GC fully mediates the relationship between GI and GEG, and partially mediates the relationship between GTX and GEG and between GCF and GEG. The research is original and novel for its comprehensive generational analysis of how the GEG is shaped in an emerging country context. This study extends green economic benefits concepts by integrating NRBV and EMT to explain how green strategic decisions influence GEG using organizational capability. These findings also create pragmatic insights for firms as well as policymakers to incorporate green ideology in their activities and policies. Organizations should focus on implementing green capabilities based on their accessible resources and integrate ESG practices into capability progression. Also, the adoption of these factors, which ensure green economic growth, can aid our country in attaining five SDGs. Moreover, the study contributes to global sustainability objectives by aligning with SDG 8 (Decent work and Economic growth), SDG 9 (Industry, Innovation, and Infrastructure), SDG 12 (Responsible Consumption and Production), and SDG 13 (Climate Action).