Green Image in Supply Chains: Selective Disclosure of Green Suppliers

Abstract

Perception regarding a customer firm’s green image depends not only on itself but also on its known suppliers. This paper provides empirical evidence regarding the supplier’s environmental performance and supply chain information disclosure. By innovatively using a dimension of supply chain data that is ignored in the literature to date, namely information on the disclosing party of each supply chain observation, we uncover robust evidence showing that customer firms voluntarily disclose relationships with environmentally responsible (“good”) suppliers while selectively not disclosing relationships with “bad” suppliers, ceteris paribus. We then link such selective disclosure behavior with the firm’s own operating pressure and external public pressure. We find that selective disclosure is more salient for firms that face greater competition, care more about their brand awareness, and have more stock holdings by institutional investors. Such corporate behavior increases with growing public awareness of climate change and decreases with strengthened regulations on environmental information transparency. Firms that selectively disclose “green” suppliers experience increases in sales and valuation, suggesting that product consumers and financial markets do not fully consider this behavior. Our findings have several operational and social welfare implications for understanding green practices in supply chains. Our results suggest that consumers and investors should pay attention to firms’ strategic supply chain disclosure concerning their CSR image. We also support government regulations that aim to increase transparency in a firm’s supply chain networks.

Keywords: supply chain management, selective disclosure, corporate social responsibility, green image

JEL Classification: F30, F36, G28, G30, G38, G34, M14, Q50