Artificial Intelligence as a Strategic Driver of Environmental Sustainability: Unpacking the Mediating Role of Green Governance in GCC Industrial Firms

This study aims to investigate the role of artificial intelligence (AI) for strategically steering corporate environmental sustainability, which remains underexplored in the context of emerging economies. Drawing on the resource-based perspective and Dynamic Capabilities Theory, we argue that the adoption of AI also represents an aspect associated with an organizational capability on a higher rung that can enhance performance towards environmental goals. We further examine a mediating framework through which the effect of AI on environmental sustainability is transmitted through firms’ green governance structures. Using a longitudinal panel dataset of 75 publicly listed industrial firms operating in six Gulf Cooperation Council (GCC) countries from 2018 to 2025, we used fixed-effects regression analysis alongside bootstrapped mediation analysis. In fact, the empirical evidence suggests that AI adoption is positively and significantly associated with environmental sustainability. We also show that green governance partially mediates this relationship implying that AI-based strategic investment is better realized in terms of measurable environmental impacts when it is embedded within sound board-level ESG governance systems. As such, the findings provide an important empirical perspective on the AI–sustainability nexus in the GCC industrial landscape and also explain the empirical role played by green governance in implementing technology, constituting technological enablers for the transformation of technological capabilities to concrete environmental outcomes. The study will also provide policymakers and managers with actionable insights on the potential for digital transformation to act as a strategic enabler of sustainable development in resource-intensive industries.