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Relationship between Environmental Social Governance (ESG) Management and Performance – The Role of Collaboration in the Supply Chain

Whitelock, Vincent George, Ph.D.

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2015, Doctor of Philosophy, University of Toledo, Manufacturing and Technology Management.
This research examines the relationship between environmental social governance (ESG) collaboration in the supply chain and performance. ESG collaboration can essentially be described as the interaction within and between organizations in the supply chain pertaining to joint ESG planning, joint ESG goal-setting, joint ESG decision-making, joint reduction of negative ESG impacts, and shared ESG know-how or shared ESG knowledge. This research makes a number of contributions, two of which deserve particular attention. The first contribution of this paper develops the theoretical basis for linking ESG collaboration in the supply chain to ESG activity/ practice in the focal firm and to ESG performance. The second contribution consists of testing empirically the impact of ESG collaboration on diverse dimensions of ESG activity/ practice and to ESG operational and financial performance. Using a combination of stakeholder, agency, institutional, and conventional financial theories as a referent theoretical base to explain the ESG collaboration—performance link, this research draws upon differentiation strategy, espoused by the relational view of the firm (Dyer and Singh, 1998) and the resource-based view (RBV) of the firm (Wernerfelt, 1984) theories for its theoretical development. The relational view of the firm proposes that organizational capabilities can be developed by creating various combinations of resources that exist in different supply chain partners (Dyer and Singh, 1998; Takeishi, 2001). In this regard, collaboration in the supply chain becomes an important organizational capability that offers the potential for intra- and inter-organizational learning. Inter-organizational learning involves a problem-solving routine comprising suppliers and or customers (Schroeder et al., 2002). Likewise, intra-organization learning also entails a problem-solving routine among internal departments of an organization. This cross-learning is one of the resources that can be developed among supply chain partners, and it can impart additional capabilities in organizations (Dyer and Singh, 1998; Grant, 1996a). The resource based view (RBV) theory of the firm (Barney, 1991; Rumelt, 1984; Wernerfelt, 1984) proposes that a firm, through the set of resources it possesses, can develop capabilities providing competitive advantage, so long as these resources are valuable, rare, inimitable and non-substitutable (VRIN). Environmental social governance (ESG) management strategy, founded on resources that exhibit the properties proposed by RBV, can improve ESG and business performance and theoretically create a sustained competitive advantage. These theories (explain uniqueness in characteristics that cannot be easily imitated, in order to highlight the factors that play an important role in the determination of, and making the case for strategic ESG collaboration in the supply chain. Additionally, more advanced ESG management practices, such as those pertaining to joint ESG planning, joint ESG goal-setting, joint ESG decision-making, joint reduction of negative ESG impacts, and shared ESG know-how or ESG knowledge, require the integration of different stakeholders (e.g., internal departments, suppliers and or customers) in the supply chain. All of these practices create a web of interactions between supply chain partners that forms a network of information and knowledge exchange (Vachon et al., 2001). The purposes of this research is to propose a definition for ESG Collaboration, propose a theoretical framework for evaluating the relationship between ESG Collaboration and Firm Performance, in a supply chain management context, and to examine the proposed theoretical model. This research uses the focal firm as its level of analysis, proposes a theoretical model and tests it empirically employing primary data from a large scale survey and secondary data from multiple databases, using the biggest U.S. listed companies. Specifically, this research gathers data from the following sources: 1) ESG Collaboration data from a large scale survey; 2) ESG Management Activity/ Practice data from a large scale survey; 3) ESG Performance data from a large scale survey; and 4) Financial Performance data from the Bloomberg, Compustat, Russell and/ or WRDS databases. Since this research incorporates two types of data— categorical perceptual (primary) variables and continuous objective (secondary) variables— this research chooses to analyze their hypothesized relationships, using the variance based and prediction oriented, Partial Least Squares Structural Equation Modeling (PLS-SEM) analytical approach. More specifically, PLS-SEM path modeling is chosen as the tool to evaluate two causal models— an ESG Collaboration – Operations Performance model, and an ESG Collaboration – Financial Performance model, because PLS-SEM meets the prediction-oriented goals (i.e., explaining/predicting the target constructs in the structural model) for identifying causal links in ESG Collaboration strategies, activities and practices that impact operational performance and financial performance. The results indicate that the proposed theoretical framework, ESG Collaboration – Performance Link, along with its related structural and measurement models, successfully explains the variation in their associated latent endogenous variables. More explicitly, analysis of the findings indicate strong support for all of the hypothesized relationships in the ESG Collaboration – Operations Performance model, and moderate to strong support for virtually all of the hypothesized relationships in the ESG Collaboration – Financial Performance model. Furthermore, the findings indicate support that a firm’s collaboration on environmental social governance issues, with its internal organization, its key suppliers, and with its major customers, leads to increased ESG activity, practices and behaviors resulting in improvements in ESG performance and in financial performance. The implication for practitioners and academics is that this proposed theoretical ESG framework has strong predictive relevance to improve firm performance, and can be used to evaluate risk factors and identify opportunities for improvement, both of which can potentially impact firm valuation, negatively or positively. Detailed findings, summary, conclusions, implications, limitations, reflections and future research opportunities are discussed.
Mark A. Vonderembse, Ph.D. (Committee Co-Chair)
Monideepa Tarafdar, Ph.D. (Committee Co-Chair)
Doina C. Chichernea, Ph.D. (Committee Member)
Peter S. Lindquist, Ph.D. (Committee Member)
229 p.

Recommended Citations

Citations

  • Whitelock, V. G. (2015). Relationship between Environmental Social Governance (ESG) Management and Performance – The Role of Collaboration in the Supply Chain [Doctoral dissertation, University of Toledo]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=toledo1450087632

    APA Style (7th edition)

  • Whitelock, Vincent. Relationship between Environmental Social Governance (ESG) Management and Performance – The Role of Collaboration in the Supply Chain. 2015. University of Toledo, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=toledo1450087632.

    MLA Style (8th edition)

  • Whitelock, Vincent. "Relationship between Environmental Social Governance (ESG) Management and Performance – The Role of Collaboration in the Supply Chain." Doctoral dissertation, University of Toledo, 2015. http://rave.ohiolink.edu/etdc/view?acc_num=toledo1450087632

    Chicago Manual of Style (17th edition)