The Effect of Company Ownership on the Environmental Practices in the Supply Chain: An Empirical Approach

Abstract

Investors are increasingly drawn to ESG-based investing because they seek well-run businesses, believing that companies integrating ESG factors are better managed. However, the impact of company ownership on environmental performance remains unclear. This study aims to address this gap by examining the relationship between company ownership and company interest in measuring the environmental impact of its supply chains, as the environmental aspect is directly linked to supply chain activities and has quantifiable measures. Using random effects ordered logistic regression on panel data from 2017 to 2022 for 2811 companies, we show that companies with long-term investment sources demonstrate a greater interest in measuring environmental variables in their supply chain compared to those financed with short-term investments. Sovereign wealth funds and other long-term investment sources exhibit a positive and significant correlation with higher utilization of ESG indicators in the supply chain. These findings suggest that policymakers and private companies aiming to enhance sustainability should prioritize longer-term investment sources, which display stronger commitments to sustainability and ESG practices and are more likely to use environmental initiatives in their supply chains.