["Business Strategy and the Environment, EarlyView. ", "\nABSTRACT\nDespite the growing importance of climate change mitigation in international business, little is known about how peer firms' environmental responsibility relates to the decarbonization behavior of multinational enterprise (MNE) subsidiaries. Drawing on social identity theory and resource dependence theory, we theorize subsidiary decarbonization as an integrated process in which peer comparison first gives rise to identity‐based motivation for decarbonization, and headquarters (HQ) control subsequently shapes whether and how such motivation is carried out as broader sustainable international business (SIB) outcomes. Accordingly, we examine how subsidiaries' comparisons with salient peers are associated with decarbonization strategies and how HQ control, specifically its extent, focus, and mechanisms, moderates the relationship between subsidiary decarbonization strategies and SIB. Using survey data from 196 MNE subsidiaries in China, we find that peer firms' comparative environmental responsibility is positively associated with subsidiary decarbonization strategies, which in turn are positively associated with SIB. However, the extent of HQ control does not significantly moderate this relationship. This study advances international business and sustainability research by identifying a peer‐based social comparison mechanism linking environmental responsibility to subsidiary strategy and SIB under varying HQ governance conditions.\n"]