Artificial intelligence-powered innovation strategies for ESG impact and sustainable ecosystems: A natural-resource-based and environmental-legitimacy perspective

Alkaraan, Fadi ORCID: https://orcid.org/0000-0002-6607-5692, Elmarzouky, Mahmoud, Venkatesh, V G, Hussainey, Khaled, Shi, Yangyan and Zhang, Min (2026) Artificial intelligence-powered innovation strategies for ESG impact and sustainable ecosystems: A natural-resource-based and environmental-legitimacy perspective. Business Strategy and the Environment (BSE). doi:10.1002/bse.70654 (In Press)

Text (Peer-reviewed version) 15786 Alkaraan, Fadi et al (2026) Artificial intelligence-powered innovation strategies for ESG impact and sustainable ecosystems.pdf - Accepted Version Restricted to Repository staff only until 5 March 2028. (Publisher Embargo). Available under License Publisher's Licence. Download (670kB)

Abstract

Artificial Intelligence (AI) serves as a core driver of Industry 4.0 Technologies (I4.0Ts), enabling advanced digital capabilities across industrial ecosystems. This study advances the understanding of Environmental Business Innovation Strategies (Env-BISs) by examining the synergistic interplay between Circular Economy Strategy Practices (CESPs), the integration of AI into I4.0Ts, and governance structures (GS) within the UK context. Grounded in the Natural-Resource-Based View (NRBV) and Environmental Legitimacy Theory, we adopt a robust mixed-methods research design that integrates macro, meso, and micro-level data sources. The empirical analysis draws on the UK Innovation Survey (2023) covering 32,273 firms (released May 2024), data over the period (2012–2021) from FTSE All-Share companies, and narrative disclosures from 2023 annual reports of sector-leading firms. Our findings reveal that AI-powered I4.0Ts are critical enablers of CESPs, collectively accelerating the adoption of Env-BISs and enhancing firms’ ESG and ecosystem-related performance. The use of AI within I4.0Ts is positively associated with the implementation of CESPs, which, in turn, fosters circular ecosystem innovation. Furthermore, internal and external GS significantly moderate the relationship between AI-enabled I4.0Ts and CESPs, reinforcing the strategic alignment of digital transformation with sustainability objectives. The study provides actionable insights for managers aiming to operationalise ESG principles through AI-driven innovation and cross-functional integration. It also highlights the importance of standardised ESG metrics and AI-based assessment tools to address ESG reporting performance decoupling and strengthen stakeholder trust. By bridging theoretical, empirical, and practical domains, this research contributes to the Env-BISs literature and offers a strategic pathway for firms and policymakers to drive sustainable business model transformation toward circular ecosystems in a globally competitive environment.

Item Type:	Article
Article Type:	Article
Additional Information:	This is the peer reviewed version of the following article: Alkaraan, F., M.Elmarzouky, V. G.Venkatesh, K.Hussainey, Y.Shi, and M.Zhang. 2026. “Artificial Intelligence-Powered Innovation Strategies for ESG Impact and Sustainable Ecosystems: A Natural-Resource-Based and Environmental-Legitimacy Perspective.” Business Strategy and the Environment 1–25. https://doi.org/10.1002/bse.70654., which has been published in final form at https://doi.org/10.1002/bse.70654. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Uncontrolled Keywords:	Artificial intelligence, environmental business innovation strategies, ecosystems, circular economy, governance, product innovation, natural-resource-based view, environmental legitimacy, process innovation, collaboration, ESG performance, decoupling, Industry 4.0, UK companies.
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HF Commerce > HF5001 Business Q Science > Q Science (General) > Q336 Artificial intelligence
Divisions:	Schools and Research Institutes > School of Business, Computing and Social Sciences
Depositing User:	Kamila Niekoraniec
Date Deposited:	29 Jan 2026 14:11
Last Modified:	30 Mar 2026 13:45
URI:	https://eprints.glos.ac.uk/id/eprint/15786

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