Sustainability Under ESG Uncertainty: Digital Capability, GreenInnovation, and Environmental Tax Pressure

Salsabila  Nur Aini; Umatun Markhumah

doi:10.69725/jebi.v2i4.336

Authors

Salsa Bila Nur Aini Department of Accounting, Faculty of Communication and Business, Universitas Muhammadiyah Karanganyar, Karanganyar, Central Java, Indonesia, 57722
Umatun Markhumah Department of Accounting, Faculty of Communication and Business, Universitas Muhammadiyah Karanganyar, Karanganyar, Central Java, Indonesia, 57722

DOI:

https://doi.org/10.69725/jebi.v2i4.336

Keywords:

Sustainability uncertainty, Digital capability, Green innovation, Green investment, Environmental performance

Abstract

Purpose—This study aims to examine how sustainability uncertainty influences environmental sustainability performance through organizational capability development and regulatory pressure, with particular emphasis on the mediating role of green investment intention. It seeks to clarify how firms strategically respond to sustainability uncertainty by leveraging digital capability and green innovation to enhance sustainability outcomes.
Design/methodology/approach—A quantitative research design was employed using survey-based data and analyzed through partial least squares structural equation modelling (PLS-SEM). The proposed framework integrates sustainability uncertainty, digital sustainability capability, green innovation capability, and environmental tax pressure to explain environmental sustainability performance, while explicitly testing the mediating mechanism of green investment intention.
Findings—The results indicate that sustainability uncertainty exerts a negative effect on environmental sustainability performance. In contrast, digital sustainability capability and green innovation capability significantly enhance sustainability outcomes. Environmental tax pressure also contributes positively, though its effectiveness depends on firms’ internal strategic orientation. Importantly, green investment intention plays a central mediating role, translating organizational capabilities and policy pressure into improved environmental performance.
Originality/value—This study advances sustainability research by integrating uncertainty theory with capability-based and investment-oriented perspectives. It provides novel empirical evidence on the mediating role of green investment intention, offering a nuanced understanding of how firms navigate sustainability uncertainty to achieve stronger environmental performance.

Downloads

Download data is not yet available.

Author Biographies

Salsa Bila Nur Aini, Department of Accounting, Faculty of Communication and Business, Universitas Muhammadiyah Karanganyar, Karanganyar, Central Java, Indonesia, 57722

Salsa Bila Nur Aini Salsa Bila Nur Aini is a researcher affiliated with the Department of Accounting, Faculty of Communication and Business, Universitas Muhammadiyah Karanganyar, Indonesia. Her research interests encompass financial accounting, business strategy, and economic sustainability. She is actively engaged in quantitative research and academic publishing, with a particular focus on digital transformation and green innovation in emerging economies.
Umatun Markhumah, Department of Accounting, Faculty of Communication and Business, Universitas Muhammadiyah Karanganyar, Karanganyar, Central Java, Indonesia, 57722

Umatun Markhumah Umatun Markhumah, S.E., S.H., M.Ak., CTC., serves as a lecturer and researcher at the Department of Accounting, Universitas Muhammadiyah Karanganyar, Indonesia. Possessing interdisciplinary qualifications in economics, law, and accounting, she focuses her research on taxation, financial accounting, corporate governance, and public finance. She is an active academic contributor with a strong publication record indexed in Google Scholar and SINTA.

References

Ahmed, Z., Ahmad, M., Rjoub, H., Kalugina, O. A., & Hussain, N. (2022). Economic growth, renewable energy consumption, and ecological footprint: Exploring the role of environmental regulations and democracy in sustainable development. *Sustainable Development*, 30(4), 595–605. [https://doi.org/10.1002/sd.2251](https://doi.org/10.1002/sd.2251)

Ajzen, I. (1991). The theory of planned behavior. *Organizational Behavior and Human Decision Processes*, 50(2), 179–211. [https://doi.org/10.1016/0749-5978(91)90020-T](https://doi.org/10.1016/0749-5978(91)90020-T)

Barra, C., Esposito, L., & Falcone, P. M. (2025). How Does State Fragility Drive Environmental Degradation? A Multidimensional Analysis of Governance and Socio-Economic Vulnerabilities. *Kyklos*, 1–30. [https://doi.org/10.1111/kykl.70031](https://www.google.com/search?q=https://doi.org/10.1111/kykl.70031)

Barra, C., & Falcone, P. M. (2024). Unraveling the impact of economic policy uncertainty on environmental efficiency: How do institutional quality and political orientation matter? *Economics & Politics*, 36, 1450–1490. [https://doi.org/10.1111/ecpo.12297](https://www.google.com/search?q=https://doi.org/10.1111/ecpo.12297)

Böttcher, T. P., Empelmann, S., Weking, J., Hein, A., & Krcmar, H. (2024). Digital sustainable business models: Using digital technology to integrate ecological sustainability into the core of business models. *Information Systems Journal*, 34(3), 736–761. [https://doi.org/10.1111/isj.12436](https://www.google.com/search?q=https://doi.org/10.1111/isj.12436)

Chen, Y., Moroni, J., Alexander, S., & Dukelskiy, S. (2026). The Digital and Green Twin Transition in the Postal Sector: Synergies and Strategies for a Sustainable Future. In A. R. Pisarkiewicz, T. J. Brennan, L. Mazzoni & V. Glass (Eds.), *Postal Strategies in a Digital and Green Transition* (Topics in Regulatory Economics and Policy). Cham: Springer. [https://doi.org/10.1007/978-3-032-00502-1_18](https://www.google.com/search?q=https://doi.org/10.1007/978-3-032-00502-1_18)

Chu, L. K., & Le, N. T. M. (2022). Environmental quality and the role of economic policy uncertainty, economic complexity, renewable energy, and energy intensity: the case of G7 countries. *Environmental Science and Pollution Research*, 29, 2866–2882. [https://doi.org/10.1007/s11356-021-15666-9](https://doi.org/10.1007/s11356-021-15666-9)

Creswell, J. W., & Inoue, M. (2025). A process for conducting mixed methods data analysis. *Journal of General and Family Medicine*, 26(1), 4–11. [https://doi.org/10.1002/jgf2.736](https://www.google.com/search?q=https://doi.org/10.1002/jgf2.736)

Dong, J., Li, S., Sun, Y., Gong, W., Song, G., Ding, Y., Yang, J., Teng, M., Wang, R., Xing, J., Ou, Y., & Gong, W. (2024). Provincial equity and enhanced health are key drivers for China’s 2060 carbon neutrality. *Journal of Cleaner Production*, 473, 143531. [https://doi.org/10.1016/j.jclepro.2024.143531](https://www.google.com/search?q=https://doi.org/10.1016/j.jclepro.2024.143531)

Dong, X., Chen, B., Wang, W., Wang, J., & Zheng, X. (2025). Pre-existing seawater drives CO2 sources in reef-building coral habitats—a case study in Dongshan coral nature reserve, China. *Marine Environmental Research*, 200, 107361. [https://doi.org/10.1016/j.marenvres.2025.107361](https://www.google.com/search?q=https://doi.org/10.1016/j.marenvres.2025.107361)

Feroz, A. K., Zo, H., & Chiravuri, A. (2021). Digital Transformation and Environmental Sustainability: A Review and Research Agenda. *Sustainability*, 13(3), 1530. [https://doi.org/10.3390/su13031530](https://doi.org/10.3390/su13031530)

Goyal, S., Esposito, M., & Kapoor, A. (2018). Circular economy business models in developing economies: Lessons from India on reduce, recycle, and reuse paradigms. *Thunderbird International Business Review*, 60(5), 729–740. [https://doi.org/10.1002/tie.21883](https://doi.org/10.1002/tie.21883)

Hair, J. F. (2014). *A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM)*. Los Angeles: Sage Publications.

Hair Jr, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). *Partial Least Squares Structural Equation Modeling (PLS-SEM) Using R: A Workbook*. Cham: Springer Nature.

Hu, Y., Bai, W., Farrukh, M., & Koo, C. K. (2023). How does environmental policy uncertainty influence corporate green investments? *Technological Forecasting and Social Change*, 189, 122330. [https://doi.org/10.1016/j.techfore.2023.122330](https://www.google.com/search?q=https://doi.org/10.1016/j.techfore.2023.122330)

Kang, A. S., & Arikrishnan, S. (2024). Sustainability reporting and total quality management post-pandemic: the role of environmental, social, governance (ESG), and smart technology adoption. *Journal of Asia Business Studies*, 18(5), 1308–1343. [https://doi.org/10.1108/JABS-03-2022-0080](https://doi.org/10.1108/JABS-03-2022-0080)

Li, L., & Lin, J. (2024). Digital transformation for the sustainable development of firms: The role of green capability and green culture. *Sustainable Development*, 32(3), 1861–1875. [https://doi.org/10.1002/sd.2756](https://doi.org/10.1002/sd.2756)

Li, R., Xu, G., & Ramanathan, R. (2022). The impact of environmental investments on green innovation: An integration of factors that increase or decrease uncertainty. *Business Strategy and the Environment*, 31(7), 3388–3405. [https://doi.org/10.1002/bse.3090](https://doi.org/10.1002/bse.3090)

Liu, W., Shao, W., & Wang, Q. (2020). Psychological distance from environmental pollution and willingness to participate in second-hand online transactions: An experimental survey in China. *Journal of Cleaner Production*, 276, 124656. [https://doi.org/10.1016/j.jclepro.2020.124656](https://doi.org/10.1016/j.jclepro.2020.124656)

Mol, A. P. J., & Sonnenfeld, D. A. (2000). Ecological modernisation around the world: An introduction. *Environmental Politics*, 9(1), 1–14. [https://doi.org/10.1080/09644010008414510](https://www.google.com/search?q=https://doi.org/10.1080/09644010008414510)

Nguyen, H. P., Hoang, A. T., Nizetic, S., et al. (2021). The electric propulsion system as a green solution for management strategy of CO2 emission in ocean shipping: A comprehensive review. *International Transactions on Electrical Energy Systems*, 31(3), e12580. [https://doi.org/10.1002/2050-7038.12580](https://doi.org/10.1002/2050-7038.12580)

North, D. C. (1990). *Institutions, Institutional Change and Economic Performance*. Cambridge: Cambridge University Press.

Ongan, S., Gocer, I., & Isik, C. (2025). Introducing the New ESG-Based Sustainability Uncertainty Index (ESGUI). *Sustainable Development*, 33, 4457–4467. [https://doi.org/10.1002/sd.3351](https://www.google.com/search?q=https://doi.org/10.1002/sd.3351)

Pigou, A. C. (1920). Co-operative Societies and Income Tax. *The Economic Journal*, 30(118), 156–162. [https://doi.org/10.2307/2223009](https://doi.org/10.2307/2223009)

Qamruzzaman, M. (2026). Environmental sustainability in G7: Nexus between digitalization, green innovation, environmental taxes, and ESG uncertainty. *Innovation and Green Development*, 5(1), 100329. [https://doi.org/10.1016/j.igd.2026.100329](https://www.google.com/search?q=https://doi.org/10.1016/j.igd.2026.100329)

Radmehr, R., Shayanmehr, S., Baba, E., Samour, A., & Adebayo, T. S. (2024). Spatial spillover effects of green technology innovation and renewable energy on ecological sustainability: New evidence and analysis. *Sustainable Development*, 32(3), 1743–1761. [https://doi.org/10.1002/sd.2738](https://doi.org/10.1002/sd.2738)

Raihan, A., Bala, S., Akther, A., Ridwan, M., Eleais, M., & Chakma, P. (2024). Advancing environmental sustainability in the G-7: The impact of the digital economy, technological innovation, and financial accessibility using panel ARDL approach. *Journal of Economy and Technology*, 4, 188–205. [https://doi.org/10.1016/j.ject.2024.06.001](https://doi.org/10.1016/j.ject.2024.06.001)

Santana, N. B., Rebelatto, D. A. d. N., Périco, A. E., Moralles, H. F., & Leal Filho, W. (2015). Technological innovation for sustainable development: an analysis of different types of impacts for countries in the BRICS and G7 groups. *International Journal of Sustainable Development & World Ecology*, 22(5), 425–436. [https://doi.org/10.1080/13504509.2015.1069766](https://doi.org/10.1080/13504509.2015.1069766)

Scott, W. R. (2014). *Institutions and Organizations: Ideas, Interests and Identities* (4th ed.). Thousand Oaks, CA: Sage Publications.

Wei, J., & Zheng, Q. (2024). Environmental, social and governance performance: dynamic capabilities through digital transformation. *Management Decision*, 62(12), 4021–4049. [https://doi.org/10.1108/MD-10-2023-2028](https://www.google.com/search?q=https://doi.org/10.1108/MD-10-2023-2028)

Zheng, G. W., Siddik, A. B., Masukujjaman, M., & Fatema, N. (2021). Factors affecting the sustainability performance of financial institutions in Bangladesh: The role of green finance. *Sustainability*, 13(18), 1–27. [https://doi.org/10.3390/su131810165](https://doi.org/10.3390/su131810165)