New research reveals environmental initiatives need tailored timing and settings to boost supply chain efficiency

A newly published study argues that greener supply chains do not deliver an automatic efficiency dividend, and may even impose a short-term penalty before the gains appear. Writing in Business Strategy and the Environment, Wen-Min Lu, Irene Wei Kiong Ting and Chia-Chia Liao say the payoff depends on the kind of environmental action being taken and on whether firms operate in settings with a stronger long-term orientation, which appears to reinforce the benefits once those ini...

Rather than treating sustainability measures as one broad corporate virtue, the authors split them into resource use, emissions reduction and environmental innovation, then tracked how each related to three kinds of efficiency: innovation efficiency, eco-efficiency and market efficiency. Their dataset covered 30 counterparts of Merck & Co. Inc., producing 180 firm-year observations from 2018 to 2023. To analyse that panel, they used a three-stage range directional measure network data envelopment analysis model, followed by firm and year fixed-effects regressions with Driscoll-Kraay standard errors. (onlinelibrary.wiley.com)

The main result is a warning against simple “green pays” thinking. According to the Wiley abstract, resource-use initiatives show diminishing returns, suggesting that early gains become harder to sustain as investment rises. By contrast, emissions-reduction measures and environmental innovation tend to begin with efficiency losses and only later produce positive outcomes at higher levels of implementation. Lu and his co-authors say this means environmental initiatives should not be assessed as “uniformly efficiency-enhancing strategies”, but by their timing, dimension and institutional setting. (onlinelibrary.wiley.com)

That conclusion both builds on and complicates an earlier strand of research in Chinese industry. In a September 2024 paper in the International Journal of Production Economics, Lihua Sun, Chunguang Bai and Joseph Sarkis examined 129 listed Chinese semiconductor companies using a slack-based DEA model and Tobit regression. Their abstract reported that overall efficiency in the sector was relatively low, with chip design performing worst, and found a positive link between environmental performance and firm efficiency. It also said a company’s position in the supply chain altered how both environmental and social performance related to efficiency. The paper framed the question through resource-based view and stakeholder theory, underlining how operational position, rather than ESG scores alone, can shape results. (ideas.repec.org)

Public indexing records add some texture to how that semiconductor study has been catalogued and received. EconBiz classifies it under subjects including environmental management, technical efficiency, semiconductors, supply chain, sustainability and corporate social responsibility. OUCI says the article is indexed in both Scopus and Web of Science and lists 57 references. ResearchGate, meanwhile, identifies Sun with the University of Electronic Science and Technology of China and Sarkis with Worcester Polytechnic Institute, and shows the article as published in September 2024 in volume 278 of the journal under article number 109410. (econbiz.de)

There are also signs that the evidence base has become less settled since that 2024 paper appeared. A later Transportation Research Part E article by the same authors, surfaced on ScienceDirect, found almost the reverse pattern for some dimensions: environmental performance was negatively related to operational efficiency, while social and governance performance were positively related. That study said supplier concentration altered the environmental link, and customer concentration altered the social and governance links, with firm age, board independence, revenue growth and financial leverage also associated with operational efficiency. (sciencedirect.com)

An even newer ScienceDirect preview in the Journal of Business Research pushes the argument further. Using a matched sample of 420 Chinese listed companies and a super-efficiency SBM-DEA model, Sun, Bai and Sarkis reported that environmental performance was positively related to firm efficiency, but social performance was significantly negative. They added blockchain technology as a moderator, saying it significantly changed the relationship between both environmental and social performance and efficiency, while revenue growth, supply chain concentration and industry also mattered. In other words, the broader literature now points less to a single ESG rule than to a series of conditional effects that vary by dimension, sector and organisational context. (sciencedirect.com)

Even the public metadata hint at that growing scholarly interest. ResearchGate currently shows 20 citations for the 2024 semiconductor paper, while OUCI lists 21, a minor discrepancy but a reminder that academic databases do not always update in lockstep. What is clearer is the direction of travel: the latest paper in Business Strategy and the Environment shifts the debate away from whether environmental initiatives are good or bad for efficiency in the abstract, and towards a tougher managerial question , which initiatives pay off, how long they take, and in which national and supply-chain settings firms can afford to wait for the return. (researchgate.net)

Source: Noah Wire Services