Green Washing in Supply Chains?

Abstract

Using granular firm-level disclosures, we show suppliers adopt climate action and governance policies following customer firms' adoption of emission reduction targets. Such transmissions are driven by relative bargaining power rather than through a reconfiguration of customers' supply chains. However, we do not find any effect on suppliers' emissions or its leading indicators. This policy-outcome gap suggests a green-washing motive in suppliers’ adoption of climate policies. The policy-outcome gap is lower when suppliers have higher gross margins, and customers can better monitor suppliers. Our results imply that better commercial terms in supply chain contracts can reduce greenwashing concerns.

Keywords: Corporate Emissions, Climate Governance, Supply Chain Networks

JEL Classification: F18, F64, G34, G38, L16, L24, Q54