Exploring the Nexus Between Customer ESG Performance and Supplier Green Innovation: Insights from Chinese Listed Firms

As key stakeholders, customers no longer passively accept services or goods from suppliers; instead, they actively influence suppliers. Based on stakeholder theory, this study suggests that customers with high Environmental, Social, and Governance (ESG) performance exert pressure on and share resources with upstream suppliers to enhance their products' environmental attributes, thereby influencing suppliers' green innovation. Using a paired customer–supplier sample of Chinese listed firms from 2009 to 2022, this study finds that customers' ESG performance is positively associated with suppliers' green innovation. Further analysis reveals that customers' ESG performance promotes collaborative green innovation rather than independent green innovation. The positive influence of customers' ESG performance on suppliers' green innovation is amplified when suppliers and customers have more common institutional investors or are geographically closer. This effect is also stronger when suppliers operate in highly competitive industries, or when customers possess stronger innovation capabilities.