This study explores empirical evidence on the role of three dimensions of Environmental, Social, and Governance (ESG) practices independently in the causal link between Innovation performance (IP) and Sustainability performance (SP). We obtained the ESG performance scores of a total of 240 firm-year observations in the pharmaceutical and biotechnology industry published by Thomson Reuters and Forbes from 2017 to 2020. Adopting a two-stage method of analysis, including dynamic network slack-based measurement in Data Envelopment Analysis and path analysis estimation, the results suggest that the relationship between the IP and SP is significantly statistically positive. Furthermore, the empirical analysis provides evidence that three modern pillars of the ESG construct have a mediating effect on the IP-SP link. Specifically, one Environmental component of the three ESG pillar metrics has a significant mediation effect on the aforementioned relationship. One of the primary implications of this study is the direction of assigning priorities while considering each dimension of ESG issue in the implementation of any strategies or policies into practice for both internal and external stakeholders such as managers, investors, and policymakers in the industry.
