The impact of environmental supply chain sustainability programs on shareholder wealth

Abstract

Purpose – Multinationals are increasingly pressured by stakeholders to commit to environmental sustainability that exceeds their own firm borders. As a result, multinationals have started to commit to environmental supply chain sustainability programs (ESCSPs). However, little is known about whether such commitment is rewarded or punished by financial markets, and if the stock price reaction differs depending on the type of firm that commits to such a program. This paper aims to discuss these issues. Design/methodology/approach – The authors conduct an event study followed by two-equation Heckman modeling, using a sample of 66 multinationals that committed to the ESCSP of the Carbon Disclosure Project (CDP). Findings – It was found that generally there is a marginally significant negative stock price reaction to announcement of participation in this ESCSP (i.e. −0.8 percent, p<0.10). However, the authors argue and show that firms in industries that have historically faced more pressure from consumers are less likely to announce their participation. If one corrects for this industry bias, then the negative stock price reaction is even more pronounced (i.e. −3.2 percent, p<0.05). Research limitations/implications – Using objective data, the study provides insights into the shareholder wealth effects of firms that commit to the ESCSP of the CDP. As such, the sample does not cover firms that set up their own ESCSPs. Practical implications – The paper is valuable for practitioners and investors who are interested in finding out if participation in ESCSPs is financially attractive, and for (governmental) policy makers who may want to be assured that there is sufficient incentive for firms to pursue environmental supply chain sustainability. Originality/value – This is the first paper that captures how financial markets react to announcements of ESCSPs.

Stakeholder influences and risks in sustainable supply chain management: a comparison of qualitative and quantitative studies

“…Sample case studies likewise focus on action groups and investors (Dam and Petkova 2014), NGO pressure (McDonald and Young 2012;Geibler 2013;Foerstl et al 2014), or social pressure in general terms (McDonald and Young 2012). Further, a considerable share of formal models concentrates on governmental and other regulatory triggers in the form of emission taxes or quotas (Dou and Sarkis 2010;Walther et al 2012;Rosic and Jammernegg 2013).…”

“…Thus, the coherence of stakeholder triggers and SSCM risks needs to be conceptualized. The influence of financial markets on management decisions to mitigate environmental risks plays a central role in SSCM (see, e.g., Dam and Petkova 2014). Dobler et al (2014) distinguish between regulatory, operational, and natural risks and find that environmental risk management positively affects the controlling of risks in operations, while natural risks appear to be decoupled from related measures.…”

Environmental Sustainability and Energy-Efficient Supply Chain Management: A Review of Research Trends and Proposed Guidelines

“…Concerning the papers dealing with the impact of environmental issues on logistics outsourcing, Dam and Perkova [147] provide a mathematical model analyzing a sample of 66 multinational companies. The findings show the main initiatives aiming to reduce CO 2 emission.…”

A field-level examination of the adoption of sustainable procurement in the social housing sector

“…These studies have led to a call for more industry-specific research on sustainable supply chain management (Hassini et al, 2012) as the studies' results highlight different levels of maturity between industries owing to different contextual, competitive, isomorphic and regulatory pressures. The majority of sector-based studies focus on mature, global manufacturing supply chains of multinational organisations (Hoejmose, Brammer and Millington, 2013;Dam and Petkova, 2014;Huq, Stevenson and Zorzini, 2014) and centre predominantly on the environmental aspects of sustainable procurement (Blome, Paulraj and Schuetz, 2014;Lo, 2014;Simpson and Sroufe, 2014) with economic and social dimensions gaining little coverage. Sustainable procurement in public sector contexts is also underrepresented in the extant literature (Walker and Brammer, 2012) despite the considerable economic, financial and social consequences inherent in public procurement.…”