Evaluating the Effect of Chinese Environmental Regulation on Corporate Sustainability Performance: The Mediating Role of Green Technology Innovation

The environmental pollution that accompanies economic growth has always been of widespread concern. The chemical industry is a highly energy-consuming industry in China, and the pollution this industry causes to the environment cannot be ignored. The paper is based on the Porter hypothesis and uses data from different regions of China. In this paper, we investigate the mediating role of different types of environmental regulation (divided into command-controlled, market-incentive, and voluntary environmental regulation) in positively affecting sustainability performance through green technology innovation (divided into green product innovation, green process innovation, and end-of-line management innovation). The results show that different versions of the Porter hypothesis can be accepted in Chinese chemical enterprises. This finding demonstrates that environmental regulation positively impacts both green technology innovation and sustainability performance. Green technology innovation plays a mediating role between environmental regulation and sustainability performance, especially in East China. However, the mediating effect of green product innovation is not significant. Further study shows that command-controlled environmental regulation has a more significant positive effect on sustainability performance. This suggests that the market-incentive and voluntary environmental regulation tools do not fully play their functional roles. Thus, the paper demonstrates the developmental shortcomings of environmental regulation, green technology innovation, and sustainability performance. This is more conducive to chemical enterprises improving green technology innovation and achieving long-term development and ecological environment protection.