ABSTRACT This study examines whether environmental regulation targeting downstream customers induces carbon emission reductions among upstream suppliers, using data from China's A‐share listed firms. The results reveal that environmental regulation generates a significant carbon reduction spillover effect across the supply chain via regulation pressure transmission. Key mechanisms driving this effect include green reputation pressure, supply chain stability pressure, and operational pressure. Moreover, the resulting emission reduction spillover reinforces supply chain relationships. These findings offer valuable insights for promoting green and low‐carbon transformation throughout supply chains and contribute to the design of integrated environmental policies.
Shen et al. (2026) studied this question.