Artificial intelligence adoption as a mediator of executive cultural diversity-ESG performance nexus: evidence from European companies

Purpose This paper aims to analyze the effect of executive cultural diversity on environmental, social and governance (ESG) performance in European companies using artificial intelligence (AI) adoption as a mediating variable. Design/methodology/approach This study used panel data of 122 European firms listed on the STOXX 600 index between 2021 and 2023. The data were collected from the Thomson Reuters DataStream, ASSET4 database and companies’ annual reports and analyzed using the structural equation model to test the hypotheses. Findings In the case of European firms, the findings indicate that executive cultural diversity is positively related to ESG performance, suggesting that executive cultural diversity drives ESG success by promoting innovation, transparency and stakeholder trust. In addition, AI partially mediates this relationship, exhibiting a positive and significant effect. Practical implications For stakeholders, policymakers and regulatory bodies, this study highlights how AI adoption and culturally diverse leadership teams can drive corporate growth and sustainability, offering actionable insights for strategic decision-making. Originality/value This study contributes to the literature by examining how firms improve sustainability performance through AI adoption and culturally diverse executives – a nexus underexplored in prior research.