The dark side of digital transformation on supply chain’s ESG practices

Purpose This study aims to examines the conflicting impacts of digital transformation (DT) on environmental, social and governance (ESG) implementation and organisational performance in supply chains. Drawing on institutional and organisational inertia perspectives, it explores how external pressures, and internal rigidities hinder the alignment of ESG and DT practices, revealing risks when DT is adopted without strategic and structural readiness. Design/methodology/approach A survey was conducted over 400 supply chain managers in Brazilian organisations. This study uses the ordinary least squares (OLS) regression and slopes to examine the moderating effects of DT, organised in digital strategies, base technologies (i.e. Internet of Things, cloud computing, big data and artificial intelligence) and front-end technologies (i.e. augmented reality, simulation, 3D printing and collaborative robotics), on firms’ ESG practices and financial and operational performance relationships. Findings The findings show when DT strategies act as moderators in corporate governance practices, they facilitate the effective deployment of social and environmental practices. However, the authors confirm there is a “dark side” of DT on the technological side, when base and front technologies act as moderators of ESG practices on financial and operational performance and lead to negative outcomes. Originality/value This research contributes to the literature by highlighting key trade-offs, offering managerial insights and refining theoretical debates on DT–ESG moderation. While much of the literature assumes that digitalisation strengthens sustainability, this study explores how technology implementation may, in certain contexts, generate negative impacts on organisational performance.