Chain Leader Policy and Corporate Environmental Sustainability: A Multi-Level Analysis of Greenwashing Mitigation Mechanisms

Abstract

Corporate greenwashing has emerged as a pervasive and systemic threat to global sustainability efforts, undermining regulatory effectiveness and obstructing progress toward multiple United Nations Sustainable Development Goals. As environmental opportunism increasingly diffuses across interconnected industrial supply networks, it evolves from isolated corporate misconduct into a chain-level governance challenge with significant systemic risks. Traditional governance mechanisms—whether market-based self-regulation or top-down administrative control—have proven insufficient, while the effectiveness of hybrid approaches integrating administrative coordination with market dynamics remains largely unexplored. This study investigates China’s Chain Leader Policy, a novel hybrid governance model that combines formal administrative authority with market coordination mechanisms to systematically address environmental opportunism across industrial supply networks, and its impact on mitigating greenwashing. Employing a multi-period difference-in-differences design on 12,334 firm-year observations of Chinese A-share listed companies from 2011 to 2023, we find that the policy reduces corporate greenwashing by 10.8% through four pathways: stabilizing supply–demand relationships, reducing coordination costs, fostering green collaborative innovation, and enhancing external scrutiny via social networks. Coercive isomorphism strengthens these effects, while mimetic isomorphism weakens them; impacts are more pronounced in state-owned enterprises, firms with stronger green awareness and higher levels of internationalization, and in more concentrated industries. By operationalizing embedded autonomy theory in an environmental governance context, this research extends theoretical understanding of hybrid governance mechanisms, offers robust empirical evidence for designing policies to curb greenwashing, and provides a replicable framework for achieving corporate environmental sustainability worldwide.