ESG uncertainty and carbon emission reduction: Evidence from Chinese manufacturing firms

Amid growing climate pressures, existing studies emphasize compliance or value-maximizing responses of environment, social, and governance (ESG), yet the role of macro-level ESG uncertainty remains underexplored. Drawing upon real option theory and Motivation–Opportunity–Ability framework, this study examines how ESG uncertainty influences carbon emission intensity and how this relationship can be altered by context-specific factors. Employing a panel dataset of 3406 Chinese manufacturing firms between 2010 and 2023, we find a positive relationship between ESG uncertainty and carbon emission intensity. However, this detrimental effect of ESG uncertainty is significantly weakened by the presence of government subsidies (motivation), supplier concentration (opportunity), and digital innovation (ability). Overall, our study offers a more comprehensive view on firms’ carbon emission performance by investigating the interaction between macro-context and micro-foundations, which provides novel insights for managers and policymakers seeking to accelerate the sustainability transition in an uncertain world.