Effects of Sustainable Supply Chain Management on Responsible Investment Through ESG Indicators

Effects of Sustainable Supply Chain Management on Responsible Investment Through ESG Indicators

U. Zeynep Ata (Bogazici University, Turkey) and Gözde Ünal (Bogazici University, Turkey)
DOI: 10.4018/978-1-5225-5757-9.ch008

Abstract

Besides financial indicators, investors started to utilize sustainability performances of companies in their decision making. With this awareness and trend, the number of ESG data providers increased in the last decade after the global recession. This chapter compares mainstream ESG providers with an emphasis on how they cover, provide, analyze, and disseminate these ratings that are invaluable for investors. The impact of sustainable supply chain practices on the ESG indicators and its consequent effect on the investor is also discussed. This study compares the issues and indicators covered by major ESG providers, and link them to sustainable supply chain measures. The synergetic and symbiotic relationship between responsible investment and sustainable supply chain management is called to attention.
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Investor Interest In Sustainability Reporting

United Nations (UN) supported an independent body of international network of investors advocating Principles for Responsible Investment(PRI) in 2005. Shortly after, in 2006 this organization of investors developed and announced the six Principles for Responsible Investment and called their peers, other institutional investors to become signatories and adopt their six principles for responsible investment. The PRI encouraged investors to take environmental, social and corporate governance issues into account within the investment process and to disclose their own performance on these issues.

The United Nations Environment Programme (UNEP) is defined as the environmental conscience of the UN which was established in 1972 after the Stockholm Conference on the Human Environment with the mission to encourage economic growth compatible with the protection of the environment. In 1991, the UNEP joined forces with a small group of commercial banks and launched the concept of the UNEP Finance Initiative (UNEP FI). This initiative promoted the banking industry’s awareness of the environmental agenda. In 2017, the UNEP Finance Initiative has more than 200 member institutions including not only commercial banks but also investment banks, venture capitalists, asset managers, and multi-lateral development banks and agencies from over 40 countries.

UNEP FI studied the link between economic development, environmental protection, and sustainable development. The UNEP and financial institutions worked together to better understand today’s environmental, social and governance concepts and how they relate to finance. This initiative studied these ESG issues in detail. UNEP FI (2005) report explained why ESG considerations are important in financial decisions. UNEP FI (2006) report lists an impressive summary of research that supported presence of a strong link between good ESG performance and good financial performance. Unal and Çoşkun (2015) mention the continuing research on this issue and offer examples as studies of Ameer and Othman (2012); Kim (2013); Churet and Eccles (2014); Cornett, Erhemjamts, and Tehranian (2014).

Key Terms in this Chapter

SSCM: Sustainable supply chain management refers to the management of material, information, and capital flows as well as cooperation among companies along the supply chain, while taking goals from all three (economic, environmental, and social) dimensions of sustainable development into account.

Sustainability Reporting: Company or organization reporting that adopts disclosing economic, environmental, social, and governance performance and impacts.

Triple Bottom Line (3BL) Approach: Achieving sustainable performance in all three elements of a company or investment – economic, social, and environmental return.

ESG Data: Non-financial information on company’s environmental, societal, and governance performance.

Responsible Investment: Investment process which takes ethical and ESG considerations into account especially in fundamental investment selection and management decisions.

GRI: Global Reporting Initiative announces Sustainability Reporting Guidelines for all companies and organizations.

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