Digital Transformation, Carbon Disclosure and Firm Performance: The Moderating Role of Green Innovation in European Listed Firms

Abstract

ABSTRACT In the context of accelerating digital and sustainability transitions, firms increasingly face the strategic challenge of simultaneously enhancing technological capabilities and environmental transparency. This study examines the associations of digital transformation and carbon disclosure with firm performance and investigates whether green innovation moderates these relationships in European listed firms. Using a panel dataset of 510 non‐financial firms from the STOXX Europe 600 over the period 2015–2023, the study employs dynamic system GMM estimations complemented by extensive robustness analyses, including winsorized regressions, quantile regressions, nonlinear specifications, sub‐sample analyses, cross‐sectional dependence corrections, and alternative specifications. The findings reveal that digital transformation and carbon disclosure are positively associated with firm performance. The results further indicate that green innovation significantly strengthens these relationships, suggesting that environmentally oriented innovation capabilities enhance the value creation potential of digital and sustainability strategies. Additional evidence shows that the positive effects of digital transformation and carbon disclosure are more pronounced at higher levels of digital transformation, in carbon‐intensive industries, and among firms in upper‐performance quantiles. This study contributes to the emerging literature on digital sustainability by integrating digital transformation, carbon disclosure, and green innovation into a unified empirical framework. The findings highlight the strategic complementarities between technological and environmental capabilities and provide important implications for managers and policymakers seeking to align digital transition objectives with sustainable business development and long‐term value creation.

The authors' abstract, as published at the source. Business Strategy & Development, 2026 · DOI ↗