When the Government Becomes the Buyer: the Exacerbating Role of Government Customers in CSR Decoupling

Purpose As stakeholders pay increasing attention to corporate social responsibility (CSR) decoupling, focusing solely on CSR performance is no longer sufficient. This study examines how government customers influence firms' CSR decoupling. Design/methodology/approach This study draws on multiple databases to construct a secondary data panel of 6,397 firm-year observations for listed companies in China over the 2007–2022 period. Findings The results show that firms with more government customers tend to exhibit a higher level of CSR decoupling. This finding remains robust across multiple robustness checks, including alternative variable measures, alternative model specifications, and multiple tests addressing endogeneity. Moreover, the effect is weaker for state-owned enterprises and in areas subject to stronger environmental regulation, but stronger in more concentrated industries. Research limitations/implications First, this study fills the gap in CSR decoupling antecedent literature by focusing on government customers, a group less explored compared to corporate customers. Second, it reveals a paradox: more major government customers increase CSR decoupling, showing their more complex influence than the previously assumed CSR performance improvement, with enhancements likely from symbolic practices. Third, this study contributes to public procurement research by identifying the boundary conditions under which government purchasing functions more or less effectively. Practical implications Sustainable supply chain managers should watch for CSR decoupling risks in government suppliers, focusing on substantive CSR practices (not just reported performance) during audits to avoid related negative supply chain incidents. Governments, when making procurement decisions, should assess both firms' CSR performance and substantive practices, and refine policies to ensure real CSR implementation. While current policies have improved reported performance, they risk incentivizing decoupling. A renewed focus on substantive actions is crucial for governments to effectively lead by example and promote genuine sustainability. Social implications The article reveals a critical paradox in contemporary governance: models overly reliant on standardized reports and quantitative metrics may inadvertently incentivize performative compliance rather than meaningful change. This underscores the necessity for a fundamental paradigm shift in social governance approaches—moving beyond the pursuit of superficial paper achievements toward genuinely incentivizing substantive innovation. Effective policy design should prioritize robust management processes, stakeholder empowerment, and demonstrable long-term impacts. Governments must evolve into proactive, value-oriented customers by strategically embedding procurement criteria with substantive social values—such as equitable wages, employee well-being, and sustainable community development—to effectively drive equitable and innovative growth. Originality/value These findings extend the current understanding of government procurement and CSR decoupling, while also providing practical implications for firms, corporate customers, and government procurement agencies.