sustainability

There is a growing global demand for sustainable investment, reflected in the recent boom in Environmental, Social, and Governance (ESG) investing. This trend has underscored the significance of private regulations in spreading social responsibility norms. Notably, Corporate Social Responsibility (CSR) and ESG investing are known to impact supply chains, as supplier and customer firms are not just business partners but also politically connected. These supply chain relationships can influence customer firms’ lobbying activities in the U.S.

Working Papers:

1. How Firms Prioritize the Diffusion of Environmental, Social, and Governance Norms in Supply Chains
   Abstract

   Firms are increasingly responsible for the international diffusion of norms across environmental, labor, and governance domains. However, little is known about how firms allocate responsibility \textit{across} these domains. By considering multiple domains at once, I find that firms prioritize their efforts to uphold environmental norms ("E") over social ("S") and governance ("G") norms when they are pressured by customer firms and countries. This supports a new theory of firm obfuscation, in which competition in supply chains and the bundling of ratings across environmental, social, and governance (ESG) domains, incentivize firms to improve in less costly domains. To empirically test this theory, I match firm-level supply chain relationships to five datasets containing ESG ratings, ESG risk incidents, ESG proposals, country-level ESG regulatory instruments, and firm characteristics.

2. Chains of Lobbying: How Sustainability Risks in Supply Chains Affect Corporate Political Activities (with Hyunjoo Oh)
   Abstract

   With the growing emphasis on sustainability, downstream customer firms are increasingly accountable for their upstream suppliers' ESG violations, facing trade restrictions and limited access to international suppliers. This drives them to influence policy through lobbying, given the capital investments required to ensure ESG compliance and to alter supply chain relationships. We propose two hypotheses: (1) customer firms tend to increase lobbying efforts following their suppliers' ESG risk incidents, and (2) these efforts are more pronounced for environmental risks due to their visibility and salience. Using U.S. firm-level lobbying data, global supply chain data, ESG risk incidents, and firm characteristics from 2007-2019, our analysis shows that downstream firms increase lobbying expenditures, specifically trade issues, after ESG risk incidents. Moreover, environmental risk incidents lead to an increase in lobbying on environmental and trade issues, while social or governance risks do not affect lobbying expenditures. This study highlights how supply chain sustainability risks, particularly environmental issues, drive customer firms' lobbying behavior.

Work in Progress:

1. Ballots and Bonds: The Electrifying Facade of Greenwashing in Provinces and Municipalities During Election Seasons (with Simone Dietrich and Monica Widmann)