ABSTRACT As artificial intelligence (AI) becomes embedded in everyday consumer services, it introduces ethical dilemmas that extend beyond fairness and privacy. One underexplored concern is the environmental cost of AI, particularly its carbon footprint. This paper examines how consumers respond to carbon‐transparency cues that reveal the hidden environmental cost of digital convenience, thereby contextualising the broader dilemma between technological ease and ecological sustainability. In doing so, the paper extends theories of Corporate Social Responsibility (CSR) and ethical consumption into the digital realm by focusing on the moral tensions consumers experience when digital convenience conflicts with ecological sustainability. Using a constructivist grounded theory approach in Study 1, we explore consumer reactions to carbon disclosures linked to AI, revealing the emergence of a novel dual‐pathway model of sustainability awareness in which transparency shapes engagement through both cognitive appraisals of brand responsibility and affective responses of guilt and pride. Study 2 tests this model experimentally, while Study 3 validates the emotional mechanisms through biometric data including facial expression and skin conductance. The observed findings contribute by highlighting carbon transparency as a strategic lever for building trust, differentiation, and sustainability leadership in AI‐enabled brands.
Vik Naidoo (Mon,) studied this question.