Green innovation, company's ability, and corporate social responsibility: Evidence from Indonesia's recycling industry

Abstract

This study examines the mediating role of company capabilities in the relationship between green innovation and corporate social responsibility (CSR) initiatives in Indonesia’s recycling sector. A quantitative approach was employed, using data collected from 129 recycling firms across various regions in Indonesia through a structured online questionnaire. Structural equation modeling–partial least squares (SEM-PLS) was applied using SmartPLS software to test the proposed relationships. The results demonstrate that company capabilities significantly mediate the relationship between green innovation and CSR initiatives, indicating that green innovation alone is insufficient without adequate organizational capabilities. These findings highlight the importance of long-term commitment and strategic coordination in addressing the short-term costs and operational challenges of sustainability implementation in developing industries. This study contributes to the literature by emphasizing the strategic management of natural resources as a key driver of green innovation amid the global climate crisis. By integrating company capabilities, environmental initiatives, and green innovation, the research offers novel insights into sustainability practices in the recycling sector of developing countries. The study provides practical implications for managers and policymakers by underscoring company capabilities as a central mechanism for creating sustainable value, supporting circular economy development, and advancing ESG-oriented strategies.