Global Supply-Chain Networks and Corporate Social Responsibility

Abstract

This paper examines the role of supply-chain relationships for the transmission of corporate Environmental and Social (E&S) policies, and the resulting impact on real E&S outcomes and firm performance. I show that E&S policies propagate from customers to suppliers, especially when customers have higher bargaining power and suppliers are in countries with lower ESG standards. This transmission mechanism matters: suppliers subsequently reduce their toxic emissions, litigation and reputation risk decreases, and financial performance improves. I use staggered E&S regulation changes around the world to establish causality. Global supply-chains act as a transmission mechanism for regulatory requirements and standards across borders.

Keywords: Corporate Social Responsibility, ESG, Sustainability, International Supply-Chains, Customers and Suppliers

JEL Classification: F30, F36, G38, Q50