Motivating low-carbon initiatives among suppliers: The role of risk and opportunity perception

Abstract

Regulators increasingly pressure companies to reduce greenhouse gas (GHG) emissions. In the case of many large corporations, most emissions originate from supply chain operations. Consequently, firms often pass on external pressures to their suppliers by requesting them to implement low-carbon initiatives. While existing research suggests that external pressures from both regulators and customers are mostly effective in motivating environmental action among suppliers, it remains unexplored how organizational perception of risks and opportunities influences this relationship. The purpose of this paper is to examine empirically how the perception of climate change-related risks and opportunities moderates the influence of external pressures on a supplier’s decision to adopt low-carbon supply chain management (LCSCM) practices. The sample consists of 877 companies from 37 countries that supply to large multinational enterprises. Secondary data is sourced from CDP’s Supply Chain Program and other databases and statistically analyzed using binary logistic regression models. The results show that a supplier’s decision to implement LCSCM practices is mainly determined by customer requests to reduce GHG emissions and the stringency and effectiveness of climate change policies in its home country. Contrary to theoretical predictions, little empirical evidence is provided for a moderating influence of perceived climate-related risks and opportunities. However, in most cases a company’s perception of both risks and opportunities is directly and positively related to LCSCM. Firm size is also found to be influential, while profitability, an industry’s GHG intensity, a country’s economic development and the private sector’s responsiveness to environmental issues do not significantly affect suppliers’ behavior.