This paper analyses the link between sustainability-related innovation and sustainability performance and the role that family firms play in this. This theme is particular relevant from a European point of view given the large number of firms that are family-owned. Also the Lisbon agenda with its focus on reconciling sustainability aspects with profitability and innovation justifies an extended analysis of the above link. Governments often support environmentally and socially (particularly) beneficial innovation with various policy instruments, also with the intention is to increase international competitiveness and simultaneously support sustainable development. In parallel, firms use corporate social responsibility (CSR) and environmental management systems partly in the hope that this will foster such innovation in their organisation (and governments support CSR and environmental management systems (EMS) partly because of this). Hence the main research question of this paper is about the association of CSR and EMS with environmentally and socially (particularly) beneficial innovation and its determinants. Based on panel data collected from Compustat and KLD for the period 1992 to 2003, the paper analyses the link of corporate sustainability performance with sustainability innovation and the effect of being a family firm using panel estimation techniques which involve random and fixed effect models. The paper discusses preliminary results from the analysis, which in particular point to a moderating role of family firms on the link between sustainability innovation and performance. It also assesses the policy implications of this insight.