Role of Financial Conditions: Impact of Green Intellectual Capital on Environmental Sustainability

Abstract

This study discusses the effect of green intellectual capital on the environmental sustainability of manufacturing firms in Pakistan. Further, it examines the role of financial conditions as a significant mediator between green intellectual capital and environmental sustainability. Questionnaires were used for data collection from 373 respondents who were top-level managers of manufacturing firms, and SPSS and Smart PLS were used for analysis. Partial least square structural equation modelling was performed to test hypotheses. Findings indicate that green human, structural, and relational capital are positively related to environmental sustainability. Similarly, green human, structural, and relational capital are positively related to financial conditions. Financial conditions act as a mediator between green human, structural, relational capital and environmental sustainability. This shows that intangible resources results in competitive advantage, enhancing the firm's goodwill. It also suggests that firms must restructure their business models and strengthen their financial conditions to maximize profits and enhance environmental sustainability. This study contributes to the literature of the intellectual capital view and resource-based view theory by discussing the importance of investment in green intellectual capital. With this investment, firms can attain a competitive advantage, maximize their profits, and contribute to protect society, improving health, and working for welfare. By executing environmental friendly technologies and methods, manufacturing firms can diminish the costs related to resource consumption and regulatory compliance. Maintaining environmental sustainability promotes practices that preserve natural resources and reduce ecological harm