["Corporate Social Responsibility and Environmental Management, EarlyView. ", "\nABSTRACT\nGreen trade barriers (GTBs) constitute a key channel through which cross‐border environmental regulations reshape supply chain governance. A critical question is whether the regulatory pressure embedded in GTBs can be transmitted from customer firms to upstream suppliers and, in turn, enhance suppliers' ESG performance. Drawing on data from Chinese A‐share listed firms from 2009 to 2022, this study constructs a supply chain network dataset to examine the transmission effects of customer firms' exposure to GTBs and the underlying mechanisms. The empirical results show that higher levels of GTBs faced by customer firms significantly improve the environmental, social, and governance (ESG) performance of upstream suppliers. This finding remains robust after a series of robustness checks, including alternative model specifications, machine‐learning approaches, and controls for concurrent policy shocks. Mechanism analysis indicates that the external pressure induced by GTBs operates primarily through two channels, green knowledge spillovers and enhanced market discipline, to promote ESG improvements among upstream suppliers. Heterogeneity analyses further reveal that the transmission effect of GTBs is significantly stronger in supply chains characterized by stable customer–supplier relationships, lower financing constraints, and more predictable environmental conditions. Overall, the findings suggest that the institutional effects of GTBs are not limited to directly affected customer firms but can propagate upstream through supply chain linkages. These results provide empirical evidence on how firms achieve sustainable development through supply chain coordination under global green trade regulations and offer policy implications for enhancing green supply chain governance.\n"]