Artificial Intelligence and Carbon Performance: The Complementary Roles of Responsible Innovation and Regulatory Quality in <scp>MENA</scp> Manufacturing Firms

ABSTRACT As global attention increasingly shifts toward sustainable business practices, understanding how technological innovation fosters responsible environmental behavior has become essential particularly in emerging economies. In this context, Artificial Intelligence (AI) is viewed as a transformative tool for sustainability reporting. Yet, empirical evidence on its influence on Carbon Performance (CP) in the manufacturing sector of the Middle East and North Africa (MENA) remains limited. This study examines the effect of AI adoption on CP and investigates the moderating roles of Responsible Innovation (RI) and Regulatory Quality (RQ). Using an unbalanced panel dataset comprising 3834 firm‐year observations from 426 manufacturing firms between 2016 and 2024, the study employs panel quantile regression to capture heterogeneous effects across different performance levels while addressing potential endogeneity through robust econometric controls. The findings reveal that AI adoption significantly enhances CP, with the effect being more pronounced among firms with higher sustainability reporting levels. Moreover, both RI and RQ positively moderate this relationship, suggesting that stakeholder engagement and strong institutional frameworks amplify the sustainability benefits of AI adoption. These results extend the literature on corporate governance, digital transformation, and environmental sustainability by highlighting the complementary roles of technology, stakeholder inclusivity, and regulatory quality. Practically, the study underscores the need for firms and policymakers to align AI‐driven innovation with responsible and transparent sustainability strategies to achieve long‐term industrial resilience and climate accountability in the MENA region.