Environmental taxation, supply chain dynamics, and corporate ESG performance

Amid growing climate risks and complex supply chain networks, promoting green transformations and enhancing corporate environmental, social, and governance (ESG) performance has become critical. This study examines whether environmental protection taxes can drive these changes. Using a difference-in-differences (DID) approach with data from Chinese listed companies between 2014 and 2022, we find that environmental taxes produce significant spillover effects across supply chains, improving suppliers' ESG performance. Mechanism analysis reveals that the policy strengthens environmental awareness, mitigates supply chain disruption risks, and fosters green innovation. Moreover, customer stability and customer-supplier trust positively moderate these effects. Heterogeneity analysis shows that the ESG improvements are more pronounced among suppliers with lower coordination costs, high environmental uncertainty, greater marketization, and nonstate-owned status. These findings contribute to the green supply chain management literature and offer policy insights on using environmental tax systems to promote sustainable corporate practices.