Adapting to uncertainty: digital transformation strategy of Chinese listed companies under climate policy shifts

Purpose Amid escalating global climate change challenges, this paper explores strategies for promoting a low-carbon economy and achieving sustainable growth through the lens of corporate strategy. Grounded in the dynamic capabilities theory and real options theory, it examines whether climate policy uncertainty acts as a catalyst or a deterrent for enterprise digital transformation (DT). Furthermore, it aims to investigate how environmental regulations (ERs) and market competition moderate the relationship between climate policy uncertainty and enterprise DT. Design/methodology/approach This study draws on a comprehensive panel data set comprising 37,637 firm-year observations from A-share listed companies in Shanghai and Shenzhen Stock Exchange spanning the period 2009–2023. The dependent variables are constructed using text analysis techniques. To address unobserved heterogeneity, the study uses firm fixed-effects models, while endogeneity concerns are mitigated through instrumental variable (IV) approaches and dynamic panel estimations. In addition, moderating effect analyses are conducted to assess the impact of regional and industry factors. Findings The results indicate that climate policy uncertainty significantly promotes corporate DT. This effect remains robust after addressing endogeneity concerns and conducting extensive robustness checks. Further analysis reveals that the positive impact of climate policy uncertainty on DT is more pronounced in regions with stricter ERs and in industries characterized by intense competition. Practical implications Both governments and enterprises should recognize that climate policy uncertainty presents a long-term challenge. Policymakers should implement targeted measures – such as subsidies, tax incentives and enhanced access to external financing – to accelerate DT, especially in regions with stringent ERs and sectors marked by intense market competition. For businesses, strategic responses to policy uncertainty should center on enhancing long-term competitiveness through increased investment in digital technologies, talent acquisition and continuous upgrading of digital infrastructure. These measures will better equip firms to navigate the complexities arising from climate policy changes. Originality/value This study contributes to the literature on enterprise DT by examining its drivers from the perspective of climate policy uncertainty. It addresses a critical question: whether firms actively embrace digitalization or scale back their efforts in response to uncertainty? Furthermore, it strengthens the causal link between climate policy uncertainty and DT by using IV techniques and dynamic panel models. Lastly, it explores the moderating effects of external factors, revealing the extent to which climate policy uncertainty “pushes” enterprises toward DT under varying levels of ER across regions and competitive intensity within industries.