ABSTRACT This study evaluates the direct and indirect effects of the environmental, social, and governance (ESG) implementations on green process innovation (GPCI) and social performance (SCP) in Vietnamese manufacturing firms, respectively. Exploring the moderating role of proactive environmental strategy (PES) and green absorptive capacity (GAC) on the impact of ESG implementations on GPCI are the next objectives. These investigations are supported by the legitimacy theory and dynamic capability theory. Through the survey method, data collected from 205 managers' responses were analyzed by partial least squares structural equation modeling. The results show important contributions. First, ESG implementations have a positive role in GPCI. Second, GPCI is the driving force behind SCP. Third, ESG implementations have an indirect influence on SCP through GPCI. Fourth, the impact of ESG implementations on GPCI is positively moderated by GAC and PES. Further analysis shows that three‐way interaction (ESG implementations × PES × GAC) enhances GPCI. Therefore, the above results fully support legitimacy theory and dynamic capability theory, and thus they provide highly theoretical contributions and managerial implications.
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