China, being the acknowledged world center of manufacturing and the largest contributor to CO₂, has unique opportunities and environmental challenges arising from industrial activities^1,2. Rapid industrialization has led to severe ecological consequences, which include air and water pollution, loss of forests, and depletion of natural resources³. Additionally, because of increasing environmental concerns and issues, organizations are suggested to adopt sustainable practices to reduce the adverse impacts and improve the firm’s overall performance^4,5. In 2022, the country accounted for 31.1% of worldwide CO₂ emissions, which exceeded those of all developed countries⁶. In particular, the industrial sector accounts for nearly 55% of the country’s energy and 35% of CO₂ emissions⁷. These statistics emphasize the urgent necessity for research that focuses on improvements toward better environmental performance^2,8,9,10. More specifically, stakeholders highlighted the need to adopt sustainable practices that minimize ecological risk while aligning with international sustainable objectives^11,12.

The firm environmental performance (FEP) is “an organization’s effectiveness in meeting and exceeding social expectations with respect to concerns about the natural environment.â€�¹³(p.80) and “the environmental impact of firm environmental strategies.â€�¹⁴(p.395). Beyond satisfying regulatory and societal demands, FEP is essential to a company’s enduring sustainability by optimizing operational efficiency, minimizing expenditures, and improving corporate reputation^15,16,17. Despite its acknowledged essentiality, there remains a gap in understanding predictors designed by senior management, such as organizational policies (OP), to influence sustainable technologies and innovation (STI) and FEP, particularly in Chinese manufacturing enterprises^18,19.

OP significantly influences a firm’s strategic direction and priorities, particularly affecting its dedication to STI and sustainability goals^20,21. In the context of China’s rapid industrialization, OPs are critical for incorporating sustainable practices and technologies into manufacturing processes. These policies promote the implementation of STI, which fosters operational efficiency and reduces ecological impacts^18,22. Despite extensive research concerning the implications of OP on sustainability, a significant gap exists in scholarly investigations that explore OP’s impacts on STI and FEP^23,24.

STIs have been identified as essential in reducing firm environmental impacts and consumption of resources while translating policies into actionable environmental strategies^25,26. However, there is limited evidence examining whether STIs function across different sectors, including the industrial, and translate OP into measurable environmental outcomes^27,28. In addition, growing pressure from stakeholders demanding a sustainable environment and practices suggests that their concerns can improve the link between OP and FEP, making their concern a critical intervening factor in this research^11,29. Nonetheless, studies provided a generalized view of the importance of stakeholder engagement but lacked clarity on how stakeholders’ concerns intervene in the effectiveness of OP on FEP^30,31.

The resource-based view (RBV) theory of Barney³², which emphasizes that organizations attain sustained competitive advantage by leveraging inimitable, non-substitutable, rare, and valuable resources, has been utilized to drive the model (see Fig. 1). The study used the RBV to assess how an organization’s strategic resources (e.g., OP, STI, and stakeholder engagement) are driving superior environmental performance in China’s manufacturing industry.

Following the above gaps, the present study develops the following research questions (RQs):

RQ1: Does OPs influence the adoption of STI in Chinese manufacturing companies?

RQ2: Does STI mediate the relationship between OP and FEP in Chinese manufacturing companies?

RQ1: Does stakeholder concern play a moderator role between OP and FEP in Chinese manufacturing companies?

This research is encouraged by the need to comprehend how organizations can utilize their policies to improve FEP through STI with consideration of stakeholders’ concern role. This study offers implications for policymakers, business leaders, and environmental stakeholders in light of the pressing Chinese environmental issues and the nation’s global industrial power. At first, the present investigation adds to the RBV theory and provides actionable insights for firms aiming to navigate the evolving landscape of sustainability challenges³³. Additionally, by filling current research gaps in the literature, this research adds to the debate on environmental accountability and sustainable development, highlighting industrial innovation’s contribution to achieving ecological goals^23,24. Moreover, by understanding the moderating effects of SC, companies can better align their strategies with stakeholder expectations, improving their credibility and cultivating a culture of sustainability.

Following this introduction, the paper will provide a theoretical background. It then transitions to a literature review that shapes this research hypothesis, setting the stage for the empirical analysis of data collected from Chinese manufacturing firms. The results discuss the implications of this research findings, both for theory and practice. Finally, the conclusion discusses the limitations and future directions of this research.

Theoretical background

The sustainability of an environment driven by an organization’s strategic resources is increasingly considered an essential determinant of firm success³⁴. OP is essential to companies’ environmental strategies³⁵. Sustainability-oriented policies improve regulatory compliance, cost savings, and environmental accountability³⁶. The RBV argues that companies that invest in strong OPs achieve competitive advantage by integrating sustainability into their core business³⁷. In China’s fast-industrializing environment, where the environment usually plays second fiddle to economic growth, strong OPs are even more crucial in guaranteeing sustainable corporate practice.

In addition, the RBV theory identifies firms with superior tech capabilities that enjoy competitive benefits³⁸. STI enhances efficiency, lowers emissions, and aligns environmental agendas with business goals. Firms that use green technology and efficient waste management build sustainability practices that enhance FEP²⁵. Moreover, it is argued that organizations that align their green policies, strategies, and technology initiatives with stakeholder expectations gain legitimacy and market standing^39,40,41. Stakeholder concern, similar to regulatory pressure and consumer preferences, enhances Ops’ ability to influence FEP^42,43. Firms that align stakeholder interests are more environmentally friendly. Singh et al.⁴⁴ also stated that organizations leveraging internal resources and addressing stakeholder pressures are capable of creating long-term competitive advantage in environmental performance.

Unleashing the impact of OP on STI and FEP

OP refers to a set of formal directives, regulations, and principles implemented by an organization to establish favorable environmental outcomes and guide the decision-making process. OP embeds environmental elements into business strategies, routine activities, and future frameworks of decision-making so a firm’s actions remain environmentally conscious⁴⁵. Based on the RBV theory, policies are seen as assets that are “valuable, rare, and difficult to mimicâ€�, thus offering a competitive advantage³². Considering this, environmentally-centered policies serve as strategic resources, enhancing an organizational culture that focuses on STI. OP determines a company’s strong dedication to the FEP⁴⁶ and adopting sustainable practices⁴⁷.

By establishing explicit objectives and guidelines pertaining to the efficient utilization of resources, reduction of CO₂ emissions, and the implementation of green practices, these policies serve as a catalyst for the integration of STI⁴⁸. Such policies create a framework that motivates companies to dedicate resources toward R&D, thereby fostering an innovative culture that prioritizes environmental sustainability⁴⁹. Enterprises that put environmental sustainability in their policy agenda will benefit from governmental support, incentives, and a favorable regulatory framework that actively encourages the adoption of STIs⁵⁰.

H1: OP positively and significantly influences STI.

In addition, OP executed in China’s manufacturing sector can be geared to be consistent with the country’s strategic objectives since the famous “Made in China 2025â€� program emphasizes innovation and sustainability⁵¹. OP’s relations with FEP are also grounded in the triple bottom line theory, which highlights the integration of three factors, namely, economic, environmental, and social, into organizational decision-making⁵². OP acts as the structural mechanism through which firms operationalize environmental stewardship.

Policies that prioritize CO₂ emissions, waste management, and sustainable resource utilization are key to achieving FEP¹⁷. Analytical reasoning highlights that OP does not merely guide internal processes but also signals a firm’s commitment to stakeholders and regulators, thereby enhancing its environmental credibility⁵³. The harmonization of OP practices with national policies reinforces the integration of STI, ultimately intensifying the focus on FEP and positioning Chinese manufacturers as leaders in global sustainability initiatives⁵⁴. Consequently, the proposition is:

H2: OP positively and significantly influences FEP.

Elevating environmental excellence: effect of STI on FEP

Sustainable technologies refer to a “system that can reduce pollution, improve efficiency, and protect ecology, thereby promoting the construction of ecological civilization and the harmonious coexistence between man and nature.â€�⁵⁵(p.4). Sustainable innovation is “the development and implementation of new products, technologies, production processes, resources, markets, and systems that integrate the economy and ecologyâ€�⁵⁶(p.1345). This investigation defined STI as the development, implementation, and integration of new products, technologies, and production processes that not only reduce pollution and improve efficiency but also protect ecology. The diffusion of innovation theory introduced by Rogers⁵⁷ provides a framework through which STI can be seen to augment FEP. In this theory, the potential for adoption of innovative practices depends on perceived benefits, how well they mesh with the existing systems, and their complexity in organizational contexts.

Studies show that organizations adopting STI have significant contributions to reducing emissions, energy conservation, and effective waste management^58,59. Organizations that adopt STI have a strong dedication to green practices, which helps organizations improve performance^60,61. This aligns with international sustainability goals and simultaneously improves the competitive standing of such firms within a market that is increasingly sensitive to environmental concerns^62,63. The synergistic impact of STI improves FEP and encourages balanced integration of economic, social, and environmental factors^64,65. Therefore, the study hypothesizes:

H3: STI positively and significantly influences FEP.

Mediating role of STI

The RBV theory argues that organizations can translate policies into competitive advantages through the use of their internal resources, such as innovation³². STI acts as a dynamic capability that allows the execution of sustainable policies, energy-saving measures, and waste management^25,66. A well-designed OP with clearly defined environmental targets and resource-efficient practices is a strategic foundation that assists in facilitating the uptake of STIs toward effective policy translation into actual environmental progress. This mediation not only assures the successful application of eco-friendly policies but also creates constant technological advancement, which improves the FEP⁶⁷.

Previously, Chen et al.⁶⁸ evidenced a significant mediating role of STI between environmental, social, and governance practice and business performance in the context of manufacturing companies listed on the Shanghai and Shenzhen Stock Exchange. Kant et al.⁶⁹ observed a partial mediation of sustainable innovation between sustainable supply chain strategies and company performance in Ethiopia. In the context of Pakistani manufacturing firms, Aftab et al.⁷⁰ evidenced that sustainable innovation mediates the link between corporate social responsibility and an organization’s financial performance. Badwy et al.⁷¹ also reported a significant intermediary role of sustainable innovation between green practices and FEP in the Egyptian context. Moreover, Liu et al.⁷² conducted a meta-analysis and noted that it is difficult for green technology applications to improve the FEP without the mediation effect of sustainable innovation. Considering this, it is suggested that:

H4: STI positively and significantly mediate the relation between OP and FEP.

SC as moderator

SC is defined as the stakeholder interest in the firm’s dedication to reducing its environmental impacts, using eco-friendly resources, enhancing ecological sustainability, and reducing pollution⁷³. According to Danso et al.⁷⁴, it is essential to embed environmental considerations in strategy development, operational activities, and corporate governance to successfully address SC. In addition, the incorporation of SC is essential to improve corporate performance^75,76. The stakeholder theory of Freeman et al.⁷⁷ provided support that identifies the need for aligning the activities of a company with stakeholder expectations to gain legitimacy and ensure sustainable success. The RBV theory also argues that organizations must leverage stakeholder pressures as strategic resources to improve their performance⁴¹. Hence, it assumes that when stakeholders highlight the importance of being environmentally responsible, firms are pushed to make their OP and programs more effective, thus improving their FEP. Additionally, it is stated that firms that demonstrate effective mechanisms of stakeholder engagement are likely to incorporate SC as a dynamic capacity, thereby making their green policies congruent with regulatory demands and societal expectations⁷⁸.

Furthermore, in contexts characterized by high stakeholder interests, organizations face more scrutiny from government agencies and external stakeholders, hence demanding more robust environmental commitments^79,80. Businesses are, therefore, compelled to enhance their business practices through concrete sustainability practices, such as the adoption of sustainable technologies, CO₂ reduction, and energy conservation⁸¹. As a result, organizations that actively incorporate SC considerations into their strategic decision-making processes are likely to increase the effect of OP on financial and environmental performance by making environmental policies not only formulated but also effectively implemented^31,82,83. In this respect, the intervening role of SC is essential for facilitating a comprehensive sustainability strategy⁷⁶. The study thus proposes:

H5: SC moderates the relation between OP and FEP, such that the relation is stronger when SC is high.

Proposed model.

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Sampling and procedure

This study adopts a quantitative research approach focused on examining the organizational practices of Chinese manufacturing companies in the context of carbon emissions. In 2024, China’s manufacturing sector accounted for 30.1% of GDP⁸⁴ and 22.7% of jobs⁸⁵. Nevertheless, this industry alone accounts for more than 31.1% of global⁶ and 35% of China’s CO₂ emissions and thus is of the highest importance for environmental studies⁷.

The study used a stratified random sampling technique to ensure a multi-dimensional representation of organizations that vary in size, ownership profile, and technology adoption level. The method reduces selection bias and enhances the generalizability of the results⁸⁶. The population targeted was 900 Chinese manufacturing companies dispersed in various regions in China, and a random sample of 500 companies was drawn from this population. The stratification provided representation to state-owned, privately-owned, and joint-venture companies, which are under the jurisdiction of different regulatory regimes and sustainability commitments.

Data collection

Data were directly extracted in four phases from organizational representatives with a mandate to report on organizational practices and outcomes in the period between February 2024 and May 2024. In phases one and two, information regarding the independent variable (OP) and the dependent variable (FEP) was collected from senior management personnel. After two months of phase one and two, responses for mediator (STI) were collected. Lastly, four months after the third phase, data pertaining to the moderator (SC) were gathered to additionally minimize common method bias (CMB) risks. This temporal separation between data collection reduces response bias and increases methodological rigor in the research^1,87.

Furthermore, respondents having knowledge of organizational practices and outcomes were invited to participate in a structured questionnaire that focused on policies and practices associated with CO₂ emission controls and their effectiveness⁸⁸. Prior to full-scale deployment, the questionnaire was pilot-tested with 30 corporate sustainability and environmental policy experts to establish its clarity, reliability, and ease of comprehension. From the 500 randomly sampled companies, there were 331 responses, yielding a response rate of 66.2%, which is substantial for firm-level studies⁸⁹.

Table 1 showed that 61.9% of respondents were male, and 38.1% were female. Regarding education, 37.8% had bachelor’s degrees, 47.7% had master’s, and 14.5% had other degrees and certifications. Of 331 company’s majority of them, 38.7%, were privately owned companies. Age distribution revealed that 24.2, 28.4, 33.2, and 14.2% were aged 18–30, 31–40, 41–50, and over 50 years old, respectively. Regarding the company’s size, 24.2% had 1–50 employees, 42.9% had 5−200 employees, and 32.9% had over 200 employees. Lastly, in terms of the age of the company, 14.5% were less than 1 year old, 47.4% were 1–5 years old, and 38.1% were over 5 years old.

Measurement and questionnaire

The initial part of the questionnaire gathered information regarding the respondents. The following section outlined potential constructs with participants required to evaluate the extent using a five-point Likert scale. The scale for the independent variable OP was gauged using 5 items derived from Tang et al.⁹⁰. STI (mediator variable) was measured using 5 items adapted from Li et al.⁹¹. FEP (dependent variable) was assessed using 5 items adapted from Singh et al.⁹². SC was measured using three items adapted from Fatma et al.^93,94. Lastly, the study measured a marker variable due to the potential of common method methods biases (CMB). The author has used four items for this variable (OP3, STI4, SC3, and FEP5).

Common method and non-response biases

Following the recommendations of Podsakoff et al.⁹⁵, the author took several steps to minimize CMB to ensure that this study’s findings are valid. First, the author employed procedural remedies during survey design and data collection. To reduce anxiety and socially acceptable responses, respondent anonymity was ensured, and the survey questions were carefully worded. Data were collected in four distinct phases to minimize the possibility of CMB. Additionally, the author tested non-response bias by comparing the early and late respondents in terms of key demographic and study-related variables. The results showed no statistically significant differences, an indication that non-response bias does not significantly affect the results^96,97. These methods, combined with careful data collection and analysis, ensure the strength and reliability of the conclusions drawn from the study.

Furthermore, the author applied the marker variable technique suggested by Lindell and Whitney⁹⁸, which includes an unrelated marker variable to the analysis. The non-significant associations with the marker variable further supported CMB’s limited influence⁹⁹. The result of paths with marker variables is provided in Appendix A. Finally, the variance inflation factor (VIF) test was performed, with all values retained below the 3.3 thresholds (see Table 2), further confirming that multicollinearity and CMB were not a major problem¹⁰⁰.

Data analysis

The current study utilized partial least squares structural equation modeling (PLS-SEM), using SmartPLS based on procedures developed in recent studies in environmental contexts¹¹. PLS-SEM is characterized as a powerful, component-based approach appreciated for its predictive ability and potential to deal with complex models, particularly useful in contexts where data sets are small and data distributions are abnormal¹⁰¹.

While traditional PLS-SEM is a flexible and effective tool for exploratory research, it has some limitations when used in estimating reflective models¹⁰². It often results in an underestimation of path coefficients because of measurement error and attenuation bias, especially in the context of larger sample sizes. PLS-Consistent (PLSc) tackles these issues by correcting the inconsistencies of reflective measurement models, therefore helping to bring parameter estimates closer to their true population values¹⁰³. In contrast to traditional PLS-SEM, PLSc generates consistent and unbiased estimates of path coefficients, therefore enhancing comparability with covariance-based SEM and making it more appropriate for confirmatory research^103,104. However, it’s worth noting that PLSc may decrease statistical power in small samples and is not needed for formative models, where traditional PLS-SEM is typically adequate.

Measurement model

Assessment of convergent validity and individual item reliability

Initially, the author conducted a confirmatory factor analysis to evaluate the suitability of each item for its corresponding construct. Following the guidance of the literature, it was required that the factor-loading for respective loadings be greater than 0.700¹⁰⁵. Subsequently, measures of convergent validity, including average variance extracted (AVE), composite reliability (CR), and Cronbach’s alpha (CA), were employed. The recommended thresholds for these indicators, as proposed by Hair et al.¹⁰⁶, were 0.5, 0.700, and 0.700, respectively^107,108. Consequently, four of the twenty items removed from the analysis, such as STI2 = 0.582, were excluded from the analysis. Table 2 illustrates AVE values ranging from 0.641 to 0.714, CR values from 0.802 to 0.929, and CA values ranging from 0.780 to 0.924. This confirms the robust consistency and validity of the measurement scales.

Assessment of discriminant validity

Previous research has suggested using the Fornell-Larcker and Heterotrait-monotrait (HTMT) ratio criterion for assessing discriminant validity^106,109. At the level of measurement scales, satisfactory discriminant validity is achieved when items show a stronger correlation with their designated variables than with any other variables. Additionally, at the construct level, it is considered adequate if the square root of the AVE for every variable exceeds the correlations with the rest of the variables¹¹⁰ (see Table 3). Furthermore, the HTMT value in the study is below the recommended threshold of 0.85 and 0.90¹¹¹(see Table 4).

Structural model

Prior to evaluating the structural model, it was suggested that potential multicollinearity issues among constructs be verified through the variance inflation factor (VIF) test¹⁰⁶. Table 2 illustrates VIF values ranging from 2.500 to 2.835, all below the value of the 3.33 threshold¹⁰⁶. The model underwent assessment based on variance explained (R²), hypothesis significance, and predictive capability. The model demonstrated the capacity to explain 59.9% of the variance in STI and 78.5% in FEP (refer to Fig. 2).

A blindfolding approach was conducted to determine Stone-Geisser’s Q² value¹⁰⁶, resulting in Q² values of 0.338 for STI and 0.448 for FEP. Since both values exceeded zero, the study’s proposed framework was concluded to possess relevance (see Table 5). The model standard root means square residual value retained 0.068, which is below the 0.08 acceptable benchmark. Lastly, a bootstrapping approach with 5,000 subsamples was employed to test the path coefficients’ significance. As observed, statistical significance was evident for all five hypotheses along with the effect size (f²), which assesses the practical relevance of an impact independent of sample size (see Table 5). f²value < 0.020, 0.020 ≤ f² < 0.150, and 0.150 ≤ f² < 0.350, and f² ≥ 0.350 demonstrate no, weak, medium, and large effect size^103,104.

Structural equation modeling.

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Mediation and moderation analysis

Table 5 shows that STI significantly mediated the OP–FEP association (β = 0.257, p < 0.05). The indirect impact of 0.257 with a 95% confidence interval (0.092, 0.256) indicates that the zero value does not go through the middle of the CI, supporting the mediation; hence, H4 is confirmed.

Further, the author used the variance accounted for (VAF) test, which follows the assumptions of Baron and Kenny’s¹¹² mediation process. Preacher and Hayes¹¹³ further extend this process to forecast the indirect effect of the construct (mediator).

(textVAtextF_textSTI=textindirect effect/texttotal effect,textwhere total effect,=,textdirect effect,+,textindirect effect)

(textVAtextF_textSTI=0.text163/0.text761,=,text21.text4% .)

The 21.4% value indicates that STI intermediates nearly one-quarter of OP effects on FEP. According to Baron and Kenny’s¹¹² presumptions, partial mediation occurs when both direct and indirect effects are significant (see Table 5). Not only this, but recent studies also stated that when mediation results are evidenced between 20 and 80%, it is called partial mediation^114,115.

Figure 3 reflects that SC, as a moderator, enhances the influence of OP on an FEP. When SC is higher, the positive impact is even greater. This highlights the need for organizations to align their strategies with SC to achieve improved environmental results.

The moderating effect of SC on the correlation between OP and FEP.

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This study’s results indicate a robust positive connection between OP and STI (β = 0.774, t = 17.857), endorsing H1. This relationship is indicative of a systematic influence where comprehensive OPs are crucial drivers for the uptake of STIs within organizations. The strength of this association suggests that policy frameworks may have a potentially transformative impact on technological innovation. This finding not only extends the research of Xu et al.²⁵ by quantifying the influence of OP on STI adoption but also complements their argument for the strategic importance of policy frameworks in fostering innovation. However, beyond statistical significance, this study raises important questions about the nature of these policies: Are they incentivizing innovation through rewards or mandating it through regulation? This question invites a nuanced examination of policy mechanisms that could foster a climate of innovation.

Consistent with prior research^51,54, this research establishes a significant positive impact of OP on FEP (β = 0.7.7, t = 5.810), thus supporting H2. This finding underscores the role of OP as a vital lever for environmental stewardship within organizations. The practical implications are clear: firms must look beyond compliance and leverage OP as strategic tools for environmental excellence. However, the absence of unexpected findings invites a critical reflection. It may be that in a sector under scrutiny for its environmental impact, OPs are already aligned with best practices, thus offering little novel insights into the drivers of FEP.

The significant connection between STI and FEP (β = 0.331, t = 3.413) supports H3 and reaffirms the importance of innovation in environmental management practices. This relationship signals that investments in STI have a quantifiable payoff in environmental performance metrics. While this supports the assertions of^64,65, it also prompts further inquiry into the types of STI that yield the greatest benefits and how firms prioritize their investments in such technologies.

This research also confirms STI’s mediating role between OP and FEP (β = 0.257, t = 3.038), offering evidence for H4. This mediatory path indicates that while OPs set the stage for environmental performance, the actualization of these policies through STI is crucial for achieving tangible outcomes. It also infers that This mediatory path suggests that STI serves as a critical conduit through which OP influences FEP, a finding that resonates with the studies of^25,66. This mediation is particularly relevant for policymakers and practitioners who aim to translate environmental policy into operational success. Yet, one must question the scalability of this pathway across different sectors and cultural contexts, especially considering China’s unique regulatory environment.

Lastly, the author identified a significant positive moderation effect of SC between OP and FEP (β = 0.257, t = 2.683), providing support for H5. This result indicates that the influence of OP on FEP is strengthened by the degree of stakeholder engagement with environmental issues. As stakeholders increasingly prioritize environmental concerns, the effectiveness of OP in driving improved FEP becomes more pronounced. This finding suggests that the efficacy of OP in improving FEP is amplified when stakeholders voice stronger environmental concerns. The influence of stakeholder activism on corporate environmental behavior is particularly poignant, hinting at a social amplification of policy impact. While^31,82, have highlighted the growing influence of SC, this study quantifies its moderating effect, providing a metric for its impact. As SC regarding environmental issues intensifies, the effectiveness of OPs in driving enhanced environmental performance is magnified. This indicates that the manufacturing sector in China, amidst increasing stakeholder expectations and environmental consciousness, experiences a stronger positive impact on environmental outcomes when OP aligns with and responds to heightened SC (see Fig. 3).

Theoretical implications

This research offers important contributions to the RBV theory by analyzing the interaction of OP, STI, and SC to attain effectiveness in FEP^49,51,53,54. Relative to prior studies based on broad sustainability paradigms, this study illustrates that OP and innovation capacity are internal capabilities that function as strategic assets underpinning improved FEP.

The results evidenced that STI is a mediator of the OP and FEP relation, lending support to the argument that firms with strong internal resources and policies can transform sustainability activities into tangible environmental improvements⁶⁸. This aligns with the RBV theory, where it is presumed that firms have unique and mature abilities, such as STI, and have a persistent competitive advantage³². This research validates this mediation effect by using the RBV model for sustainability research, showing how firms utilize internal competencies to address environmental threats. This expands our theoretical understanding beyond a simplistic policy-impact dichotomy and integrates the concept of innovation as a core element in achieving desirable environmental outcomes.

Moreover, the moderating impact of SC enriches stakeholder theory, showing how external pressures can amplify the effectiveness of organizational strategies in realizing environmental objectives^116,117. These results further the RBV’s emphasis on firm-specific asset and external pressure dynamic interaction because those firms with well-managed stakeholder engagement processes are likely to capture the most value out of their sustainability investments⁴¹. The integration of moderation influences within the RBV model delineates how external pressures support internal capability and underscores stakeholder relations’ strategic role in sustainability management. This combination of external and internal processes provides a dynamic view to production sustainability, but there are questions about how these factors should be balanced.

Practical implications

These findings present implications and insights for both managers and policymakers in the manufacturing sector. The existence of direct impacts of OP on STI and FEP highlights the fundamental aspect of formulating strong policies, which, in addition to complying with environmental standards, encourage innovation and sustainability. Managers must proactively ensure that the market demands and regulatory standards for integrating renewable resources, waste reduction processes, and the circular economy into their practices are met.

Second, the mediation of STI indicates that resources should be allocated for developing and deploying green technologies to ensure that green innovations will flow seamlessly into the operation of companies. Third, the moderating effect of SC emphasizes the critical importance of stakeholder engagement. Companies need to actively engage stakeholders- such as consumers, investors, and local communities- surrounding the environment in which their company operates to align their environmental strategies with downright public expectations. This engagement will legitimize their sustainability efforts and enhance their market position and compliance with emerging environmental standards.

Lastly, policymakers can use these results to guide regulatory frameworks facilitating sustainability efforts. They must design incentive frameworks that encourage firms to adopt STI and align firm policies with local and international environmental sustainability goals. Such actions can improve the transition towards a greener manufacturing sector, enhancing economic and environmental benefits. Further, the findings provide a framework for policy practitioners to reward incumbent green innovation and stakeholder engagement and, hence, cultivate an emerging culture of sustainability in various industries.

The present study employed a quantitative research strategy to explore the interaction among OP, STI, SC, and FEP within the Chinese manufacturing industry, given its significant position as the largest emitter of carbon globally. Using the cross-sectional data and running analysis through the PLS-SEM approach, the study outcomes strongly validate the anticipated correlations and affirm the positive impact of OP on STI and FEP. Furthermore, this research discloses a positive mediation of STI among OP and FEP. Moreover, the constructive moderation effect of SC underscores the increasing effect of stakeholder involvement on the association between OP and FEP. The research findings offer valuable insights for scholars and professionals in comprehending the complex dynamics of sustainability within the Chinese manufacturing industry.

Limitations

This study, while generating meaningful insights into the impact of OP on STI and FEP among manufacturing enterprises in China, acknowledges several limitations.

The use of a cross-sectional survey limits our capacity to definitively ascertain causal relationships among the variables under investigation. Acknowledging this limitation, the research was meticulously structured to account for possible confounding variables; however, the intrinsic characteristics of cross-sectional data require careful consideration when interpreting causality.

In addition, relying on self-report data may lead to biases, such as social desirability bias or response bias. To address this concern right from the outset, the survey was designed to ensure anonymity and reduce evaluation apprehension, and reverse-scored items were included to detect acquiescence bias. Future research can better establish the validity of data by using multiple sources, such as direct observations or external audits, to triangulate results and view organizational behaviors and outcomes more objectively.

Nonetheless, the study results offer useful information pertinent to the manufacturing industry. It is necessary to understand the limitations with regard to generalizability. Although this research targets the Chinese manufacturing sector, the same trends can be discerned in other industrial environments with high environmental pressures. Future research should investigate cross-sectoral and cross-national comparisons to test these findings under different regulatory and cultural conditions. Despite efforts being made to choose a diverse sample of companies in the industry to enhance representativeness. However, extending this study to cover other geographical and sectoral settings could generate comparative insights and enhance the model’s external validity.

Future directions

Future research should consider longitudinal designs to better ascertain the causality and evolution of the relationships among OP, STI, and FEP. Such studies could capture changes over time, providing a dynamic view of how organizational policies impact environmental performance as external conditions and internal capabilities evolve.

Exploring the proposed model in different sectors and conducting comparative analyses between industries and cultures can also broaden the understanding of how diverse organizational and environmental contexts influence the effectiveness of sustainability initiatives. Specifically, examining how cultural differences impact the adoption and efficacy of sustainability practices could add depth to the TBL framework, providing insights into culturally contingent factors that affect organizational sustainability strategies.