Building Climate Risk Solutions Through Business Strategy: Leveraging Sustainability Targets, Green Innovation, and Digital Transformation to Navigate Climate Uncertainties

ABSTRACT Amid escalating climate risks, firms face increasing pressure to convert sustainability commitments into capabilities that strengthen climate risk resilience (CRR), yet the mechanisms through which sustainability targets influence resilience remain insufficiently understood in emerging economies where institutional and technological conditions vary widely. Guided by dynamic capabilities theory and contingency theory, this study develops and tests a framework that examines the direct and non‐linear effects of sustainability targets on CRR and evaluates how these effects operate through the mediating role of green innovation and the moderating role of digital transformation. Using panel data from 873 listed manufacturing firms across BRICS countries from 2010 to 2023, the analysis employs robust econometric techniques, including system GMM, mediation and moderation modeling, and extensive endogeneity and heterogeneity checks, to ensure methodological credibility. The empirical results show that sustainability targets significantly improve CRR, with the strongest effects occurring at moderate levels of ambition. Green innovation emerges as a central mechanism that transforms sustainability goals into adaptive capacity, while digital transformation strengthens both the direct and innovation‐driven effects by enhancing firms' ability to scale, monitor, and refine sustainability practices. The heterogeneity analysis further indicates that institutional environments, industry characteristics, and ownership structures shape the strength of these relationships. Beyond the empirical findings, the study advances theory by integrating strategic, technological, and contextual dimensions of resilience and offers practical guidance for policymakers and business leaders seeking to embed sustainability, innovation, and digital readiness into organizational systems capable of navigating intensifying climate‐related risks.