The impact of supply chain international embedment on ESG performance: Evidence from China

Ying Hao, Dan Hu, Lixin Huang and Ziqi Yin

International Review of Financial Analysis, 2025, vol. 104, issue PA

Abstract: Customer requirements are an important aspect of explaining corporate behavior, especially supplier behavior in emerging economies. This paper examines the role of the international supply chain in the improvement of corporate ESG performance in emerging economies. Using novel data on engagements of the international supply chain with Chinese firms, we find evidence that firms with major foreign customers improve their ESG ratings and the improvement is most pronounced for firms with stronger connectivity along the supply chain. Consistent with customers' ESG signaling being effective, customers convey their preferences for improved ESG by engaging with firms they already work with, especially for the supply chain partners with more efficient signal transmission. Based on the supply chain and business operations, suppliers also respond to customers' ESG requirements, and suppliers with high supply chain disruption losses and favorable operating conditions are likely to observe improvements in ESG. Finally, suppliers benefit from the collaborative ESG efforts along the supply chain by achieving an increase in operating efficiency and sales share to international customers. Collectively, our findings provide novel evidence on the causal effect of customer requirements on corporate ESG ratings.

Keywords: International supply chain; Major customers; ESG; Supply chain connectivity; Signal feedback (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:104:y:2025:i:pa:s1057521925003795

DOI: 10.1016/j.irfa.2025.104292

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