Mediating role of green innovation in the environmental taxation and corporate environmental responsibility nexus in an emerging economy

Purpose This study aims to investigate the mediating role of green innovation in the environmental taxation and corporate environmental responsibility nexus in the manufacturing sector of Ghana. Design/methodology/approach The partial least squares structural equation modeling (PLS-SEM) technique was used to analyze data from 340 manufacturing firms in Ghana. Findings Results from the PLS-SEM algorithm and structural model reveal that pollution taxes have a significant positive influence on corporate environmental responsibility. Green innovation is positively influenced by both carbon and pollution taxes, which motivate companies to allocate resources to sustainable technologies to alleviate financial constraints. Green innovation also enhances corporate environmental responsibility by serving as a mediator between environmental taxation and responsible environmental practices. Practical implications Providing incentives for investment in green technologies can help businesses align with sustainability goals for accelerated economic development. Originality/value The paper is one of the premier attempts to provide a distinct viewpoint to the understanding of how organizations transition to sustainable practices by demonstrating that innovation plays a vital mediating role between environmental taxation and corporate environmental responsibility. The study’s context also provides a unique perspective on how environmental policy might be tailored to the specific opportunities and restrictions faced by developing economies such as Ghana. The paper recommends that policymakers should refine tax policies to encourage innovation by structuring environmental taxes to support sustainable transitions.