15:00 - 16:40
P9-S228
Room: 0A.06
Chair/s:
Sayumi Miyano
Discussant/s:
Zoe Ge
INTREG: How Firms Prioritize the Diffusion of Environmental, Social, and Governance Norms in Supply Chains
P9-S228-3
Presented by: Soohyun Cho
Soohyun Cho
Bowdoin College
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 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, shareholder ESG proposals, country-level ESG regulatory instruments, and firm characteristics. Using a two-way fixed effect design, I show that supplier firms prioritize "E" more than "S" and "G" when faced with pressure from their customer firms’ shareholders. Additionally, when subject to regulations incorporating ESG standards in the countries of their customer firms, supplier firms are more inclined to enhance both "E" and "S" practices compared to "G."
Keywords: Supply Chains, diffusion of norms, labor norms, environmental norms, corporate social responsibility,

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