Supply Chain Climate Risk and Green Innovation: How Firms Respond to Climate-Induced Disruptions

Abstract Climate change has emerged as a major global challenge, impacting various sectors, including supply chains. As climate-related risks increasingly disrupt global supply chains, understanding their effects on corporate behavior is becoming ever more important. This study utilizes panel data comprising 2,090 firm-year observations from publicly listed companies in China between 2009 and 2022 to explore the relationship between supply chain climate risk and corporate green innovation. We develop a supply chain network-based climate risk indicator by applying textual analytics and machine learning to firm disclosures, conducting analyses at the overall, industry-specific, and group levels. The empirical results reveal that supply chain climate risks significantly promote green innovation in firms, with this relationship remaining robust even after multiple checks. Additionally, the study finds that the extent of supply chain digitalization positively moderates this effect. Heterogeneity analysis further shows that state-owned enterprises, high-pollution firms, companies with stronger managerial capabilities, and businesses located in low-carbon pilot cities are more significantly impacted by supply chain climate risks, exhibiting a stronger inclination toward green innovation. This research underscores the importance of addressing climate risks in supply chains as a key driver of corporate green innovation and highlights the critical role of digitalization in enhancing supply chain resilience.