Environmental Auditing and Corporate Sustainability Performance: Evidence from Emerging Economies

Abstract

Growing environmental pressures have increased the need for corporate governance mechanisms that move beyond symbolic sustainability commitments toward the systematic identification and management of environmental risks. Although environmental auditing is increasingly integrated into corporate environmental management systems, its contribution to broader sustainability performance remains insufficiently understood, particularly in emerging economies. This study develops a moderated mediation model linking environmental auditing, green innovation, institutional pressure, and corporate sustainability performance. Drawing on stakeholder theory, the natural-resource-based view, and institutional theory, we propose that environmental auditing enhances sustainability performance both directly and indirectly through green innovation, while institutional pressure strengthens the translation of audit information into green innovation. Using a sample of 500 manufacturing firms from four emerging economies, the model is estimated through partial least squares structural equation modelling. The results indicate that environmental auditing is positively associated with corporate sustainability performance (β = 0.221, p < 0.001) and green innovation (β = 0.485, p < 0.001). Green innovation positively affects sustainability performance (β = 0.411, p < 0.001) and partially mediates the environmental auditing–sustainability relationship. Institutional pressure also strengthens the environmental auditing–green innovation relationship (β = 0.228, p < 0.001). The study contributes by conceptualizing environmental auditing as an organizational learning capability and identifying green innovation as a key mechanism through which audit-generated knowledge is transformed into sustainability outcomes.