Corporate Social Responsibility in Supply Chain: Green or Greenwashing?

Abstract

Perception regarding a focal firm's corporate social responsibility (CSR) depends not only on itself but also on its known suppliers. This paper provides the first empirical evidence linking CSR and supply chain information disclosure together. Specifically, it uncovers robust evidence that firms greenwash their CSR image via voluntarily disclosing environmentally responsible suppliers while concealing "bad" ones. Exogenous variations in abnormal temperatures around the world drive variations in the selective disclosure of "good" suppliers, supporting a causal interpretation of our finding. Supply chain greenwashing is more prevalent for firms who face higher competition, care more about their brand awareness, and for firms that are more profit-driven and held more by institutional investors. The greenwashing behavior mitigates after implementing mandatory CSR disclosure policies. Finally, firms who greenwash supply chains observe both sales and profitability increase, but only for the short-term.

Keywords: Supply Chain, Corporate Social Responsibility, Greenwashing, Selective Disclosure

JEL Classification: F30, F36, G23, G30, G38, G34, M14, Q50