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AI implementation and corporate ESG performance: evidence from SMPP adoption

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  • Changfeng Tao
  • Min Zheng
  • Rong Huang

Abstract

In this study, we investigate whether and how firms’ AI implementation impacts corporate ESG performance. AI implementation can not only improve firms’ environmental outcomes by increasing energy efficiency and decreasing pollution emissions but also help achieve firms’ social and governance goals, leading to enhanced ESG performance. Using the smart manufacturing pilot program (SMPP) adoption as an exogenous shock to firms’ AI investments, we first document that firms’ SMPP adoption is positively associated with corporate ESG performance, suggesting that AI implementation improves firms’ ESG performance. Next, we find that the positive association between SMPP adoption and ESG performance is more pronounced for firms with higher ex-ante levels of information resources and human capital, indicating the mechanisms through which AI affects ESG performance. We further show that the effect of AI on ESG performance is more pronounced for firms located in regions with stronger environmental enforcement and labor protection, as well as for non-SOE firms. Our results remain after we perform a parallel trend analysis, conduct a placebo test, and employ alternative estimation methods. Overall, our study offers a deeper understanding of whether and how firms can leverage AI technologies to enhance their ESG performance.

Suggested Citation

  • Changfeng Tao & Min Zheng & Rong Huang, 2025. "AI implementation and corporate ESG performance: evidence from SMPP adoption," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 32(5), pages 797-826, September.
    • Handle: RePEc:taf:raaexx:v:32:y:2025:i:5:p:797-826
    DOI: 10.1080/16081625.2025.2473334
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