Dynamic capabilities for digital ESG reporting performance: Heterogeneous pathways across capability-advanced and capability-constrained firms

Digital ESG reporting has evolved from a compliance exercise into a strategic governance system that requires continuous adaptation to regulatory, technological, and stakeholder pressures. Yet firms operating under similar ESG regimes often display markedly different reporting outcomes. Drawing on Dynamic Capability theory, this study conceptualizes digital ESG reporting as a capability configuration problem and examines how sensing, seizing, and transforming capabilities jointly shape ESG reporting performance across heterogeneous firms. Using survey data from 883 firms, a two-stage cluster analysis identifies two distinct capability profiles: capability-advanced and capability-constrained firms. Multigroup structural equation modeling is then employed to compare capability pathways and mediation mechanisms across these profiles. The results indicate that dynamic capabilities do not operate uniformly but through configuration-specific pathways. In capability-advanced firms, transforming capability emerges as the dominant driver of ESG reporting performance, reflecting deeply embedded routines, cross-functional data integration, and continuous system renewal. In contrast, capability-constrained firms rely more heavily on seizing capability, with resource mobilization and governance decisions acting as essential precursors to transformation. Across both profiles, sensing capability strengthens seizing capability but exhibits a negative direct association with ESG reporting performance, reflecting an awareness-performance gap in which heightened sensitivity to ESG requirements increases internal evaluation standards and exposes discrepancies between current practices and evolving benchmarks. Mediation analysis further shows that seizing fully mediates the sensing-transforming relationship only among constrained firms, highlighting structurally distinct capability transmission mechanisms. The findings demonstrate that ESG reporting performance depends on capability maturity and configuration rather than uniform regulatory exposure, offering actionable insights for firms and policymakers in Thailand and other emerging economies seeking to move beyond compliance toward credible, performance-enhancing ESG reporting systems.