Customer digitalization and supplier greenwashing

Due to growing concerns over greenwashing and the demand for sustainable supply chains, this study investigates how customer firms' digital transformation influences the greenwashing behavior of their upstream suppliers. Using a Chinese sample from 2012 to 2022, we find that customers' digitalization effectively reduces suppliers' greenwashing. This main finding remains robust after addressing endogeneity concerns and conducting a series of robustness checks. We further reveal that customer digital transformation increases suppliers' voluntary ESG disclosure, intensifies customer-driven reputational pressure, and fosters collaborative green innovation, thereby suppressing suppliers' greenwashing behavior. Furthermore, the effect of digital governance on supply chain partners' greenwashing is more pronounced among suppliers that are highly dependent on a single customer and have limited bargaining power, as well as among customers that are subject to more stringent environmental regulations and are state-owned enterprises (SOEs). Our findings introduce customer digitalization as a novel governance mechanism for curbing upstream greenwashing and extend the understanding of how digital capabilities enhance accountability for sustainable practices across supply chains.