Green Innovation and the ESG Disconnect: Evidence from Green Patenting in the Construction Industry in China

Abstract

In the era of heightened emphasis on sustainable development, the environment, social, and governance (ESG) performance of firms has garnered widespread attention for its enduring impact on long-term business operations. Green innovation, aligning with sustainable ideals and minimizing environmental harm, represents a crucial technological facet in this context. This study explores the correlation between ESG performance and green innovation, focusing specifically on the construction industry, an area not extensively examined in prior research. Utilizing the mixed-effects regression analysis and Heckman correction model with patent data from A-share listed firms, the research investigated whether the construction industry, along with other sectors, fosters green innovation to enhance ESG environmental performance. Surprisingly, findings indicate a negative correlation between green innovation and ESG environmental performance in the construction industry, contrasting with other sectors. Despite the overwhelming importance of green innovation, the construction industry’s green innovation output does not contribute to better ESG environmental performance. This highlights the necessity of increasing innovation weighting through standardized ESG ratings and improved information disclosure within the construction industry to address discrepancies in environmental scores.