How does the ESG performance expectation gap hinder green sustainable innovation? Dual pathway mediation by financing constraints and human capital

In the pursuit of sustainable development, green innovation plays a pivotal role in enabling firms to fulfill environmental responsibilities and build sustainable competitive advantages. However, when a firm’s actual environmental, social, and governance (ESG) performance falls short of stakeholder expectations, the resulting ESG performance expectation gap may ihinder the green innovation necessary for sustainable development transformation. Although existing research has primarily focused on financial performance expectation gaps, the impact of ESG performance expectation gaps remains underexplored. Using data from Chinese A-share listed companies over the period 2011–2023, this study examines the impact of ESG performance expectation gaps on green sustainable innovation. The findings indicate that ESG performance expectation gaps significantly hinder green sustainable innovation. Mediating effects analysis reveals that this gap hinder green sustainable innovation by heightening financing constraints and reducing human capital. Heterogeneity analyses further show that this inhibitory effect is more pronounced among firms located in eastern regions and non-state-owned enterprises. This study provides both theoretical and empirical support for integrating ESG governance with innovation strategies to enhance sustainable competitiveness, suggesting that narrowing such gaps can strengthen corporate resilience and collaborative innovation capacity.