Customer-driven supply chain sustainability in the digital economy: identifying the role of customer firms’ digital transformation on supplier ESG performance in China

Purpose The purpose of the study is to investigate the relationship between customer companies’ digital transformation and the Environmental, Social and Governance (ESG) performance of suppliers from a supply chain sustainability perspective. Building on stakeholder and legitimacy theories, the research explores the moderating effects of suppliers’ innovation capability and financial slack, together with the mediating effect of analyst attention on this relationship. Design/methodology/approach The analysis focuses on companies listed on the Shanghai and Shenzhen A-share markets between 2018 and 2022. Data is sourced from the China Stock Market & Accounting Research (CSMAR) database, text mining, the China Research Data Services (CNRDS) database and the Wind database. Hypotheses are tested using fixed-effects models by Stata 17.0. Findings Results show that (1) customer companies’ digital transformation significantly enhances suppliers’ ESG performance; (2) suppliers’ innovation capability strengthens the positive relationship between customer digital transformation and ESG performance, while financial slack weakens this relationship and (3) analyst attention partially mediates the relationship between customer digital transformation and suppliers’ ESG outcomes. Originality/value Drawing on stakeholder and legitimacy theories, the study offers empirical evidence and strategic insights for policymakers, supply chain managers and investors, deepening the understanding of how digital transformation influences supply chain management. It further contributes to the literature by expanding knowledge on the relationship between digital transformation and supply chain sustainability.