ESG Rating Disagreement and Supply Chain Green Spillovers: Evidence from Chinese Listed Firms

Environmental, social, and governance (ESG) ratings have become central to sustainable finance, yet substantial disagreement among rating agencies creates information uncertainty that may extend beyond the rated firm itself. While the growing literature examines how ESG rating disagreement affects corporate behavior at the firm level, the question of whether such disagreement propagates along supply chains remains unexplored. Using matched customer–supplier panel data from Chinese A-share listed companies over the period 2015 to 2023, this paper investigates whether and how ESG rating disagreement of customer firms is related to the environmental performance of their suppliers. The baseline results indicate that greater ESG rating disagreement of customer firms is associated with a significant deterioration in supplier environmental performance in the subsequent year, and a one-standard-deviation increase in disagreement is associated with a 0.23% increase in supplier pollution emission intensity. Mechanism analysis points to three channels: greater ESG rating disagreement is associated with weaker green supply chain management practices, with tighter customer financing constraints that limit the resources available for supply chain governance, and with the lower quality of the ESG information transmitted to suppliers. Heterogeneity analysis shows that the negative spillover is more pronounced when suppliers are more dependent on the customer, when the supply chain relationship is more stable, when customer firms are privately owned, and when customers operate in pollution-intensive industries. A decomposition by rating pillar indicates that disagreement over the environmental pillar is the primary driver. These findings extend the ESG rating disagreement literature from the firm level to the supply chain network level, demonstrating that the costs of rating inconsistency are not confined to the rated entity but spill over to upstream partners.