Abstract
Sustainable innovation plays a crucial role in realising sustainable development strategy in emerging markets. Transition to sustainable innovation is seen as a sustainable way to achieve low carbon or carbon free environment. This transition needs capabilities of various kinds both at micro and micro level. In developing countries context including India, firms differ a lot in terms of capabilities (Bloom and Van Reenen, 2010). These capabilities include energy efficient production practices that may depend on factors such as access to knowledge, R&D and technical and managerial drivers etc. Firms with a strong focus of sustainability emphasise on energy efficiency and reduction of emission and environmental problems. This paper deals with the linkages between firms’ sustainable innovation and firm capabilities in bringing new environmental friendly production practices via adopting Corporate Social Responsibility (CSR) Policy. Global energy consumption is expected to grow 30-50 percent in the next 25 years, and this will result in higher energy prices and increased level of pollution and GHG emissions (Gerarden et al., 2015). At this juncture, sustainable technologies can enhance the rate of growth in global energy consumption and to its costs and environmental impacts. Global energy consumption is on a path to grow 30-50 percent over the next 25 years. In many countries, this will result in higher energy prices and increased air pollution and GHG emissions (The World Bank Group, 2018, Ang et al., 2003). Energy-efficient technologies could do much to slow the rate of growth in global energy consumption and reduce associated costs and environmental impacts and there is a need of optimal adoption of energy-efficient products. Optimal policy balance both innovation and adoption of energy-efficient products (Kamien and Schwartz, 1982). It supposes that well-designed environmental regulation spurs innovation and increase competitiveness while achieving positive environmental externalities. India has made CSR mandatory for the firms by 2013 policy, it was found that polluting companies started investing more for adopting sustainable and innovative practices reducing emissions. In this paper, we intend to look at the impact of recent CSR act (2013) Policy in India while discussing its relation to sustainable innovation. Corporate Social Responsibility (CSR) practices and sustainable innovation are vital elements of sustainable development. An effective implementation of these in firms are critical in promoting long-term environmental, social, and economic sustainability. This paper presents a policy evaluation of CSR practices and sustainable innovation in India.