Abstract

This paper examines the industrial chain ripple effect of ESG in upstream and downstream companies from the perspective of the entire industrial chain, utilizing data from Chinese A-share listed companies. The study reveals that the ESG performance of upstream and downstream companies significantly enhances the ESG performance of midstream focal companies within the industrial chain. The ripple effects of industrial chain ESG are more pronounced when the focal firm demonstrates financial stability, maintains geographic proximity to the upstream and downstream chains, possesses a larger firm size, or operates under private ownership. Further, the paper finds that corporate ESG initiatives exert industrial chain ripple effects through two channels: optimizing the matching of supply and demand between upstream and downstream companies and focal firms; and stabilizing the supply-demand relationship through interactions between focal firms and upstream and downstream entities. This study aims to elucidate the phenomenon of focal firms adopting ESG practices, and how it is affected by upstream and downstream entities within the industrial chain. It offers a novel perspective for fortifying the resilience of industrial chains against market uncertainties and disruption risks, thereby advancing the sustainable development of these chains.

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