Abstract

This study investigates whether ESG controversies affect corporate R&D intensity and whether board-level CSR committees moderate this relationship. Drawing on stakeholder, legitimacy, agency and Porter hypothesis perspectives, we argue that ESG controversies may undermine firms’ ability to sustain long-term innovation investment by generating reputational costs, financial pressures and managerial distraction. At the same time, sustainability-oriented governance may help firms preserve R&D investment in the face of reputational adversity.

The empirical analysis relies on a panel of 262 French listed non-financial firms over the 2005–2021 period, comprising 3,412 firm-year observations. ESG controversy data are obtained from Refinitiv Eikon, financial information from Compustat Global, and governance data from BoardEx and annual reports. R&D intensity is measured as R&D expenditure relative to total assets. Using two-way fixed-effects regressions with firm and year effects, clustered standard errors and lagged controversy measures, we examine both aggregate ESG controversies and environmental, social and governance dimensions separately. A series of robustness tests, including system GMM, instrumental variables and propensity score matching, further assesses the reliability of the findings.

The results indicate that ESG controversies are negatively and significantly associated with R&D intensity, with environmental controversies showing the strongest effect. However, the presence of a dedicated CSR committee significantly weakens this negative relationship. These findings suggest that ESG controversies can generate a previously underexplored cost by constraining firms’ long-term innovation capacity, while CSR committees may enhance organisational resilience by helping firms preserve strategic investment during periods of reputational adversity. The study contributes to the CSR and corporate governance literature by linking ESG risk management to corporate innovation and by highlighting the role of board-level sustainability governance in protecting long-term value creation.