Corporate ESG performance and operational efficiency: The moderating effect of supply chain concentration

Environmental, social, and governance (ESG) practices and performance are of interest to diverse stakeholders. Organizations know they have to respond to this increased interest. Organizations, and scholarly research, have questions on whether ESG performance and firm operational efficiency relate to each other. Previous evidence on this relationship is mixed. This study delves more deeply to help identify whether context, especially supply chain characteristics provide insights into this relationship. Thus, we explore how an important external supply chain relational characteristic—supply chain concentration—moderates this relationship. We use a sample of 41,717 firm-year observations of 4772 Chinese A-share listed companies from 2010 to 2023 to investigate these relationships. The findings reveal that environmental dimensions have a significant negative relationship to corporate operational efficiency. Social and governance dimensions have significant positive relationships to corporate operational efficiency. Interestingly, there is an asymmetric moderation result. Supplier concentration significantly moderates the relationship between environmental performance and operational efficiency; customer concentration significantly moderates the relationships between both social and governance performance and operational efficiency. The study also sheds light on the relationships between contextual factors and operational efficiency, with firm age, board independence, revenue growth and financial leverage all significantly relate to corporate efficiency. The research findings provide valuable insights for practitioners. The findings also bring up additional questions for supply chain sustainability researchers.