When Governance Is Not Enough: Stakeholder Pressure as the Activation Mechanism Linking Ethical Governance and Sustainability Performance

The research addresses the persistent gap between formal sustainability governance and actual sustainability outcomes despite increasingly stringent environmental, social and governance regulations in emerging economies. This study challenges the often-assumed direct and straightforward link between good governance and positive sustainability outcomes, revealing a deeper, more complex interplay of activation mechanisms. Despite the widespread belief that ethical governance inherently leads to better sustainability, our research delves into why this direct relationship is frequently elusive, particularly in challenging operational environments. Using a quantitative survey of managerial-level respondents, the data were analysed through covariance-based structural equation modelling. The results show that ethical governance does not significantly influence sustainability performance directly but significantly strengthens dynamic capabilities and stakeholder pressure. Dynamic capabilities do not significantly affect sustainability performance, whereas stakeholder pressure has a positive and significant effect and fully mediates the relationship between ethical governance and sustainability performance. These findings indicate that sustainability outcomes emerge primarily through stakeholder-driven activation rather than internal adaptive capabilities. By integrating stakeholder theory, the dynamic capabilities view, and business ethics theory, this study demonstrates that the governance–sustainability relationship is indirect and contingent upon mediating mechanisms in emerging economy extractive industries.