How Artificial Intelligence Empowers Green Supply Chain Management: From the Perspective of Firm Internal Capabilities

In the modern world, the journey of a product from a raw material to a finished good is rarely a straight line. It is a complex web of suppliers, factories, warehouses, and delivery trucks, a system known as a supply chain. For decades, the primary goal of managing this web was simply speed and cost. However, as the climate crisis deepens and global regulations tighten, a new priority has emerged: green supply chain management. This approach asks companies to consider the environmental impact at every single step, from how they source materials to how they dispose of waste. The challenge for business leaders is that making these changes is difficult. It requires vast amounts of information, precise coordination between different companies, and the ability to make smart decisions quickly. Without the right tools, the pressure to go green can feel overwhelming, leading to a situation where companies want to be sustainable but struggle to figure out how to actually do it.

This is where a new kind of technology enters the picture: artificial intelligence. While often discussed in the context of robots or chatbots, in the business world, this technology acts as a powerful engine for processing information. It can spot patterns in massive amounts of data that humans might miss, predict future needs, and optimize how resources are used. A recent study by researchers at the Yancheng Institute of Technology in China explores exactly how this technology helps companies build greener supply chains. The researchers looked at nearly 31,000 observations of Chinese companies over a nine-year period, from 2016 to 2024. They wanted to move beyond the simple idea that "technology is good" and instead uncover the specific ways in which artificial intelligence actually helps a company become more environmentally responsible. Their work reveals that the technology does not just magically fix problems; rather, it strengthens the company's own internal abilities, which in turn allows the entire supply chain to function more sustainably.

The study began by measuring how much companies were using artificial intelligence. The researchers did not rely on vague claims or self-reported surveys. Instead, they used a method called textual analysis, which involves scanning the official annual reports of thousands of companies. They counted how often specific words related to artificial intelligence, such as "machine learning" or "neural networks," appeared in these documents. They did the same for green supply chain management, looking for terms like "green procurement" or "green recycling." By comparing these numbers, they found a clear and significant link: companies that talked more about using artificial intelligence in their reports also demonstrated a much higher level of green supply chain management. This relationship held true even when the researchers accounted for other factors, such as the size of the company, how profitable it was, or the specific industry it operated in. The data suggested that the more a company embraced these digital tools, the better it became at managing its environmental impact.

However, the researchers were not satisfied with simply knowing that the two things were connected. They wanted to understand the "how." To do this, they examined four specific internal capabilities that a company needs to run a successful business. They found that artificial intelligence acts as a catalyst that strengthens these four areas, which then drive the green improvements. The first area is green innovation. Artificial intelligence helps companies search for new ideas and develop better technologies more quickly. By analyzing data, it can help a company find the most efficient ways to reduce waste or create new, eco-friendly products. The second area is environmental, social, and governance performance, often referred to as ESG. This is a measure of how well a company manages its responsibilities to the planet and its people. The study found that artificial intelligence helps companies track their carbon emissions more accurately and manage their relationships with suppliers, leading to better scores in these areas.

The third capability is supply chain efficiency. This is about how smoothly goods move from one place to another. Artificial intelligence can predict demand more accurately, meaning a company does not need to keep as much extra stock in warehouses, which reduces waste and energy use. It can also optimize delivery routes to save fuel. The fourth area is resource integration, which is the ability to bring together different resources, such as money, materials, and information, to work together effectively. The study showed that artificial intelligence helps companies mix these resources in smarter ways, ensuring that nothing is wasted. When a company improves in these four internal areas, the result is a supply chain that is not only faster and cheaper but also significantly greener. The technology essentially upgrades the company's internal operating system, allowing it to handle the complex tasks of sustainability with greater ease.

The researchers also discovered that this effect is not the same for every company. The benefits of using artificial intelligence for green goals depend heavily on the type of company and its environment. The study found that state-owned enterprises, which are companies owned or controlled by the government, saw a stronger positive effect from using artificial intelligence than private companies. This is likely because these state-owned companies often have more stable resources and a stronger mandate to follow national strategies. Similarly, companies that were already very open about sharing their environmental data saw a bigger boost from using artificial intelligence. When a company is transparent, the technology has better data to work with, making its analysis more accurate. Finally, the effect was most pronounced in industries that are known for being heavy polluters, such as manufacturing or energy production. In these sectors, where the environmental pressure is highest and the need for change is most urgent, the ability of artificial intelligence to organize and optimize resources made the biggest difference.

This research offers a clear path forward for businesses and policymakers. It suggests that the key to a sustainable future is not just buying new software, but using that software to build stronger internal capabilities. For companies, the message is that investing in artificial intelligence is an investment in their own ability to innovate, manage their resources, and operate efficiently. For governments, the findings suggest that policies should encourage companies to be more transparent about their data and to focus on building these internal skills, particularly in the industries that need it most. The study confirms that while the transition to a green economy is complex, the tools to manage it are becoming available. By leveraging artificial intelligence to strengthen their internal foundations, companies can turn the challenge of sustainability into a manageable and even advantageous part of their business strategy. The technology does not replace human decision-making, but it provides the clarity and precision needed to make those decisions count.