ESG Shocks in Global Supply Chains

Dr. Alminas Zaldokas
Friday, August 25, 2023
9:30-11:00

Corporations are facing increasing pressure from customers, workers, shareholders, and regulators to monitor and manage environmental and social (E&S) activities along their supply chains. Is it working?

Prof. Alminas Zaldokas and co-authors show that U.S. firms cut imports and are more likely to terminate a trade relationship when their international suppliers experience environmental and social (E&S) incidents. These trade cuts are larger for publicly-listed U.S. importers facing high E&S investor pressure and lead to cross-country supplier reallocation, suggesting that E&S preferences in capital markets can have real effects in far-flung economies. Larger trade cuts around the scandal result in higher supplier E&S scores in subsequent years and in the eventual resumption of trade. Our results highlight the role of customers’ exit in ensuring suppliers’ E&S compliance along global supply
chains.

You can read the full paper “ESG Shocks in Global Supply Chains” here.