The Role of Environmental Regulation, Digital Transformation, and CSR on Green Innovation and Firm Productivity in the Textile Industry in Pakistan

Abstract

This study investigated the impact of environmental regulation, digital transformation, and CSR on green innovation and firm productivity in the textile industry of Pakistan. Green innovation was the mediator, and CSR was the moderator. Data were collected from the senior managers of textile companies in Lahore, Faisalabad, Gujranwala and Sialkot. We distributed a total of 720 questionnaires and analyzed 385 valid responses using PLS-SEM (Smart PLS). CSR is the most significant predictor of green innovation. Green innovation positively and significantly affects firm productivity and fully mediates the relationship between CSR and productivity. In contrast, environmental regulation and digital transformation had no significant impact, which in this case contradicts the Porter Hypothesis. The results indicate that in the textile industry in Pakistan, where regulatory enforcement is weak and digital adoption is limited, internal value-driven motivations such as CSR are stronger drivers than external pressures. In theory, this research contributes to integrate CSR, regulation, digital transformation, green innovation and productivity in a multi-theoretical framework. Practically, the study suggests that managers take a strategic view of CSR, policymakers should strengthen regulation enforcement, and companies should focus on digital investments supporting green objectives (e.g., energy monitoring, sustainable supply chains).