Buyers using AI reduce supplier environmental controversies
Buyer Artificial Intelligence-Enabled Environmental Governance and Supplier Environmental Controversies: An Organizational Information Processing and Signaling
Computers and SocietyArtificial Intelligence
Summary
Environmental problems with suppliers can create big risks for companies that buy their goods. The authors show that when buyers use artificial intelligence (AI) tools to oversee environmental actions, suppliers tend to have fewer environmental controversies the following year. This effect is stronger in countries where AI use is more common and environmental regulations are better. The study helps us understand how AI can support sustainability in global supply chains.
What this means in practice
- •For supply chain managers: Improve supplier oversight by adopting AI tools to lower environmental controversy risks in complex supply chains.
- •For government regulators: Focus environmental policies in regions with high AI readiness to enhance the effectiveness of AI-based supplier governance.
Authors
Yongchao Martin Ma, Xinya Guan
Abstract
Environmental controversies in global supply chains pose significant risks for global buyers. This study examines whether overseas suppliers' exposure to buyers' artificial intelligence (AI)-enabled environmental governance reduces supplier environmental controversies. Drawing on organizational information processing theory and signaling theory, we investigate how suppliers' exposure to AI-enabled governance influences their environmental controversies and the institutional contingencies under which this effect varies. Using text analysis to measure buyer AI-enabled environmental governance, we analyze panel data on 2,505 suppliers of U.S.-listed firms across 41 countries from 2020 to 2024 with multidimensional fixed-effects models. We find that suppliers' exposure to buyer AI-enabled environmental governance is negatively associated with supplier environmental controversies in the following year. This negative relationship is stronger in supplier countries with higher AI readiness and regulatory quality. The study contributes to research on AI-enabled sustainability governance and sustainable supply chain risk management.