Green Procurement as a Driver of Project Sustainability: The Mediating Role of Organizational Innovation Capability in Pakistan's Construction Industry

Abstract

Green procurement has emerged as a strategic mechanism for embedding Environmental, Social, and Governance (ESG) principles into project-based organizations. Yet its causal pathways to sustainability performance — particularly in developing economies — remain insufficiently understood. This study investigates the direct influence of green procurement practices on project sustainability performance across three ESG dimensions (environmental, social, and governance) and examines the mediating role of organizational innovation capability (OIC) within Pakistan's construction industry. Grounded in Resource-Based View (RBV) theory and Dynamic Capabilities Theory, a quantitative, cross-sectional survey design was employed. Data were collected from 339 professionals across construction firms in Pakistan and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. Results demonstrate that green procurement significantly predicts environmental performance (β = 0.532, R² = 0.519), social performance (β = 0.531, R² = 0.550), and governance performance (β = 0.537, R² = 0.533). Organizational innovation capability substantially mediates these relationships, explaining 82.8%, 73.7%, and 74.9% of the respective total effects (all Sobel z > 12.55, p < 0.001). These findings validate innovation capability as the dominant causal pathway through which green procurement generates holistic ESG performance outcomes. The study offers theoretically grounded and empirically validated insights for policymakers, construction professionals, and sustainability practitioners in emerging market contexts.