Customer concentration and suppliers' impression management in climate disclosures

Firms often highlight their efforts to mitigate climate change in corporate reporting. Although exaggerated climate disclosures may enhance corporate image, they could mislead stakeholders. This paper debates the role of major customers in firms' climate disclosure behaviors. By impression management theory, we argue that major customers' bargaining power allows them to access suppliers' climate information through private channels that diminish suppliers' incentives to manipulate climate disclosure. The results show that customer concentration is negatively associated with suppliers' visual presentation and linguistic obfuscation of climate disclosure texts. The governance effect of major customers is particularly pronounced for state-owned firms and firms facing stringent environmental regulations. Poor performance of green innovation and low ESG ratings both make firms reduce impression management behaviors in climate disclosure with the effect of major customers. Our findings demonstrate an important role of supply chain relationships in sharping more reliable climate disclosure.