Transforming for Tomorrow: Corporate Digital Innovation, <scp>CSR</scp> , and Sustainability in the Face of <scp>ESG</scp> Risks

ABSTRACT This study investigates the role of corporate digital innovation in bolstering corporate resilience in the face of escalating sustainability‐related challenges. Specifically, our study examines whether corporate digital innovation serves as strategic buffers that strengthen sustainability performance. Utilising a panel dataset of annual observations from 920 firms based in G5 countries from 2014 to 2024, our analysis encompasses 10,120 firm‐year observations. Our findings suggest that corporate digital innovation potentially contributes to advancing sustainable futures. Additionally, our study highlights the crucial role of CSR committees in reinforcing the relationship between corporate investments in patents and the implementation of effective sustainability strategies. Our results demonstrate that these committees significantly strengthen this relationship, thereby enhancing the efficacy of digital innovation. Moreover, global CSR reporting is shown to enhance firms' capacities to navigate uncertainties associated with evolving sustainability policies. In addition, emissions performance and ESG ratings show a strong response to patent evaluation when innovation expenditures exceed the threshold level of 3.467%. Furthermore, high‐tech exports are found to significantly influence environmental performance and mitigate carbon emissions when innovation expenditure thresholds surpass 2.717% and 3.467%, respectively. Collectively, these findings suggest that robust digital innovation practices contribute to corporate value creation in the face of ESG risk.