Intellectual capital role in the relationship between sustainable practices and firm systematic risk

In recent years, there has been a global debate over the practical implications of corporate sustainability initiatives. This study aimed to empirically investigate the mediating role of intellectual capital in the relationship between sustainable practices and firm systematic risk. The analysis was conducted using data on non-financial firms from the G20 industrialized nations, spanning 2015–2024. The study employed the OLS model and the SEM technique for mediation analysis. Additional testing and sensitivity analyses are also conducted to ensure robust estimation. The results reveal that intellectual capital partially mediates the sustainability-risk relationship, suggesting that sustainable practices foster an environment that increases the efficiency of human, structural and capital employed, thereby influencing firm systematic risk. The findings offer important implications for managers and policymakers by demonstrating the impact of sustainable practices and intellectual capital on firms’ risk profiles, supporting evidence-based strategic decision-making to incorporate sustainability for enhanced organizational effectiveness.