Migration of Global Supply Chains: A Real Effect of Mandatory ESG Disclosure

66 Pages Posted: 19 Oct 2023

See all articles by Hai Lu

Hai Lu

University of Toronto - Rotman School of Management

Qilin Peng

University College Dublin (UCD) - Michael Smurfit Graduate Business School

Jee-Eun Shin

University of Toronto - Rotman School of Management

Luping Yu

Xiamen University

Date Written: September 23, 2023

Abstract

This study examines firms’ global supply chain strategies following the staggered introduction of mandatory ESG disclosure in different countries. We find that mandatory ESG disclosure is associated with migration of suppliers to countries with opaque ESG-related corporate information environments and that such migration results in improvement of firms’ perceived ESG profile. These findings suggest that mandated ESG disclosures motivate firms to appear de jure compliant with the mandates, but de facto ignorant about their real ESG-related responsibilities of their suppliers. Our findings also show that such effects are mitigated if the disclosure mandates include more targeted demands on supply chain due diligence processes. Further results indicate that supply chain composition changes in response to mandated ESG disclosure are less pronounced for firms located in countries with higher ESG-related social awareness, and firms subject to stronger external governance mechanisms such as monitoring of analysts and institutional investors. Our study informs policymakers and regulators on the global supply chain consequences stemming from the implementation of sustainability reporting guidelines.

Keywords: ESG, Disclosure, Supply Chain, Regulations

JEL Classification: G38, M41, M48

Suggested Citation

Lu, Hai and Peng, Qilin and Shin, Jee-Eun and Yu, Luping, Migration of Global Supply Chains: A Real Effect of Mandatory ESG Disclosure (September 23, 2023). Available at SSRN: https://ssrn.com/abstract=4581611 or http://dx.doi.org/10.2139/ssrn.4581611

Hai Lu (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Qilin Peng

University College Dublin (UCD) - Michael Smurfit Graduate Business School ( email )

Carysfort Ave
Blackrock
Ireland

HOME PAGE: http://https://people.ucd.ie/daniel.peng

Jee-Eun Shin

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Luping Yu

Xiamen University ( email )

Xiamen, Fujian 361005
China

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