Boosting sustainability and financial performance: the role of supply chain controversies

Ignacio Tamayo-Torres,Leopoldo Gutierrez-Gutierrez,Antonia Ruiz-Moreno

doi:10.1080/00207543.2018.1562248

Ignacio Tamayo-Torres, Leopoldo Gutierrez-Gutierrez + Show 1 more

Open Access

https://doi.org/10.1080/00207543.2018.1562248

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Abstract

In recent years, numerous scandals concerning working conditions in Asia have threatened the reputation of large companies like Wal-Mart and Inditex. Since such scandals call attention to activities harmful to sustainable development, it is very important to study the relationships between concerns for sustainable supply chain management (SSCM), sustainability, and organisations’ market value. The added value of our study is, first, to explore SSCM controversies as drivers of or pressures for adopting and applying sustainability practices; and, second, to contribute to the recent but growing literature that analyses the channels through which SSCM and sustainability practices influence the firm’s value. We introduce sustainability environmental, social, and governance (ESG) practices as a mediator between SSCM controversies and market value to examine whether SSCM controversies with firms’ stakeholders lead to improvements in the ESG dimensions of organisational sustainability. We also examine the relationships between the ESG dimensions and market value, measured as Tobin’s Q ratio. The results confirm both the positive relationships of SSCM controversies to the ESG dimensions two years later and a positive relationship of the dimension of governance to Tobin’s Q. We also confirm a negative and significant relationship of the social dimension to Tobin’s Q, and a non-significant relationship of the environmental dimension to Tobin’s Q.

Highlights

Controversies in Sustainable Supply Chain Management (SSCM) can be defined as conflicts that organizations face with stakeholders because the organization’s behavior throughout the supply chain damages environmental or social dimensions of sustainability
Organizations can require suppliers to provide them with environmentally friendly materials or to implement an Environment Management System (EMS) (De Giovanni, 2012; Mitra and Datta, 2014).Given the foregoing, we propose the following hypothesis: H1a: SSCM controversies are positively related to following environmental sustainability practices
Our study focuses on the category “suppliers.” each subcategory is analyzed from four perspectives, which permits us to develop a more complete and objective image than that provided by other methods that focus on a single firm only, such as questionnaires

Summary

Introduction

Controversies in Sustainable Supply Chain Management (SSCM) can be defined as conflicts that organizations face with stakeholders because the organization’s behavior throughout the supply chain damages environmental or social dimensions of sustainability (e.g., suppliers’ labor exploitation, strikes, poor working conditions, pollution, destruction of natural habitats). The online fashion company ASOS and Marks and Spencer, for example, have faced SSCM controversies. These firms exploited Syrian refugees escaping war and poverty Both companies immediately knowledge that they had been unaware of these situations and affirmed their commitment to change: “we will do all we can to ensure that this does not happen again” (Forbes, 2016, p.2). Numerous controversies like these have forced firms such as Nike, Nestlé, Starbucks, Apple, and Mattel to implement or update their sustainability policies (Klassen and Vereecke, 2012; Kumar et al 2012)

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