Promoting or inhibiting: The impact of artificial intelligence application on corporate environmental performance

Existing research mainly focuses on the economic consequences of artificial intelligence (AI) applications for firms, while less attention is given to its non-economic effects. This study uses data from listed non-financial companies in China between 2008 and 2021, first comparing various methods to effectively measure firm-level AI application and then assessing its impact on corporate environmental performance. The findings indicate that AI application enhances the growth of environmental performance. This growth comes primarily through decreased operating costs, increased operational efficiency, and enhanced employee productivity. AI-powered growth is concentrated among manufacturing firms and is associated with larger fixed assets. Additionally, it is concentrated in firms with lower conventional low-skilled labor and is linked to higher unconventional high-skilled labor. We also find that AI application more effectively translates environmental performance into reputation and market value. Overall, this study offers valuable insights and implications for environmental governance in emerging market firms.