ESG Shocks in Global Supply Chains - 2024 - Peking University HSBC Business School(PHBS)

ESG Shocks in Global Supply Chains

2024-05-07 11:47:34

We show that U.S. firms cut imports by 29.9% 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 incident result in higher supplier E&S performance 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.

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