Abstract Leveraging digital transformation to improve environmental performance is critical for sustainability. However, the underlying mechanism in the relationship between digital transformation and environmental performance remains unclear. Through the lens of IT‐enabled organizational capabilities, this study develops a moderated mediation model to examine the mechanisms and boundary conditions through which digital transformation affects environmental performance. Using a sample of Chinese agriculture firms, our findings reveal that digital transformation positively environmental performance through green capability, and this indirect effect is stronger when green culture is higher. Moreover, green culture moderates the relationship between digital transformation and green capability. Our theoretical explanation and empirical evidence contribute significantly to the literature by providing insights on how to leverage digital transformation initiatives to improve environmental performance.
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