No place to hide: how supply chain digitalization curbs environmental moral hazard

Purpose Drawing upon agency theory and digitalization research, this study investigates how supply chain digitalization (SCD) affects corporate environmental misconduct (CEM). We examine whether SCD can act as a monitoring mechanism that reduces information asymmetry between supply chain partners, thereby reducing the risk of environmental moral hazards such as CEM and explore how regional institutional factors–specifically gambling culture and social trust–moderate this relationship. Design/methodology/approach We leverage China's Supply Chain Innovation and Application Pilot Program as a quasi-natural experiment to establish causal inference. Using a difference-in-differences approach, we analyze panel data from Chinese listed firms spanning from 2010 to 2023. The policy variation in SCD adoption, combined with regional heterogeneity in institutional contexts, enables us to test both the main effect of SCD on CEM and its boundary conditions. Findings Our results demonstrate that SCD significantly reduces CEM. This effect is strengthened by regional social trust, where stakeholders are more willing to share information and coordinate monitoring activities. Unexpectedly, we find that regional gambling culture also enhances rather than weakens the effectiveness of SCD. Originality/value First, by focusing on SCD, our study provides a novel perspective on addressing CEM that extends beyond traditional pressure-dominated approaches such as regulatory oversight or public supervision. Second, it identifies regional institutional factors as critical moderators of digitalization's effectiveness, advancing understanding of how local norms and values shape the reduction of agency risk through digital transformation. These insights address an underexplored area in agency theory regarding environmental contingencies that influence when digitalization reduces organizational misconduct more effectively.