Sustainability and firm value: The mediating role of competitive advantage in energy firms

Abstract

This study analyzes the strategic role of sustainability practices and governance mechanisms in the energy sector. This issue has attracted growing attention due to rising stakeholder pressure and regulatory demands for transparency and environmental responsibility. The objective of this study is to examine the influence of corporate social responsibility (CSR) disclosure, good corporate governance (GCG), and green intellectual capital (GIC) on firm value, both directly and indirectly through competitive advantage, which serves as a mediating variable. The sample includes 64 energy-sector companies listed on the Indonesia Stock Exchange (IDX) during the period 2020–2024, yielding 320 firm-year observations. A quantitative explanatory approach was employed using secondary data from annual reports and audited financial statements. The data were analyzed using partial least squares structural equation modeling (PLS-SEM) to test the proposed causal relationships. The results indicate that GCG and GIC have a significant direct effect on firm value, while CSR disclosure has no such impact. However, all three variables significantly enhance competitive advantage, which in turn positively affects firm value. Competitive advantage also plays a significant mediating role in linking sustainability practices and governance quality with firm value. Unlike many previous studies that examined CSR, governance, and intellectual capital separately, this study demonstrates that competitive advantage acts as a key strategic mechanism through which sustainability and governance practices translate into firm value in the energy sector. These findings highlight the importance of strengthening strategic capabilities to enhance firm value during the energy transition.