Corporate Social Responsibility's Role in Shaping Environmental Innovation and Reputation: Evidence From London's Non‐Financial Sector

ABSTRACT Non‐financial companies listed on the London Stock Exchange actively engage in corporate social responsibility (CSR), significantly impacting communities and the environment. However, they face challenges related to environmental innovation and reputation management, particularly under strict reporting requirements and public scrutiny. This study employed signaling theory to examine the impact of CSR on environmental innovation and corporate reputation. Using purposive sampling, 13 years of data (2011–2023) were collected from 172 non‐financial companies listed on the London Stock Exchange, sourced from Thomson Reuters Eikon DataStream. The analysis utilized the augmented mean group (AMG) estimator and the two‐step generalized method of moments (GMM). Findings indicate that CSR expenditures, sustainability reporting, sustainability strategies, external auditing, and sustainability committees all have a positive and significant effect on both environmental innovation and corporate reputation. Furthermore, firm size was found to moderate the relationship between CSR expenditures, sustainability reporting, and the study's outcomes, also with a positive and significant effect. The study recommends that corporations develop integrated CSR investment plans aligned with their strategic goals and clearly communicated to stakeholders. This approach can enhance market positioning and reinforce trust among consumers and investors by showcasing a genuine commitment to social responsibility.