The digital transformation of enterprises is a significant catalyst for achieving cleaner production and directly affects a company’s carbon performance. This research elucidates the theoretical logic and potential impact mechanisms of digital transformation in reducing corporate carbon emissions. Second, using a panel data set of Chinese A-share listed companies from 2007 to 2020, this study quantitatively investigates the effect of corporate digital transformation on the carbon emissions intensity of businesses. The empirical results indicate that corporate digital transformation has a statistically significant negative effect on the carbon emissions intensity of Chinese firms. Several robustness tests have validated this conclusion. The heterogeneity analysis reveals that state-owned businesses, firms with high carbon intensity, and those with strong financing capacity would benefit more from digital transformation in achieving the goal of reducing carbon emissions. Furthermore, the impact of digital transformation on corporate carbon emission abatement is more prominent in industries with limited technological input and high energy consumption. At the regional level, digital transformation has a more significant impact on reducing carbon emissions in cities with stringent environmental regulation, advanced marketization, and resource-based economies. The transmission mechanism analysis confirms that improving corporate energy use efficiency, enhancing financial performance, and fostering green innovation are crucial transmission mechanisms through which digital transformation can help enterprises decrease their carbon emissions. These findings assist companies in comprehending the role of digital transformation in lowering carbon emissions and provide them with valuable insights.

Environmental performance is a key issue that relates to the sustainable development of the economy and the environment. Innovation-driven approaches are fundamental in improving environmental performance; however, innovation activities come with uncertainties and require supportive policies from the government. This study utilizes the implementation of the Innovation City Pilot (ICP) policy in China as a quasi-natural experiment. It employs a progressive Difference-in-Differences (DID) model using panel data from 283 Chinese cities during the period of 2005–2019 to evaluate the impact of the ICP policy on Urban Environmental Performance (UEP) and its underlying mechanisms. The empirical results indicate that (1) the ICP policy significantly promotes the improvement of UEP and robustness analyses further support this conclusion; (2) compared to cities in the central and western regions, resource-dependent cities, and higher administrative level cities, the ICP policy is more beneficial for enhancing UEP in eastern, non-resource-dependent, and lower administrative level cities; (3) mechanism tests suggest that the ICP policy facilitates UEP improvement by leveraging technological innovation, upgrading industrial structure, and optimizing resource allocation; (4) the ICP policy not only benefits the UEP enhancement in local cities but also promotes UEP improvement in neighboring cities through spatial spillover effects. This study provides evidence and insights from China, contributing to the global implementation of innovation-driven development strategies for sustainable urban economic and environmental development.