Sustainability outcomes in multi-tier supply chains: an empirical study of Turkish manufacturing firms

Abstract

To formulate multi-tier supply chain management strategies with global impact, understanding the roles of various supply chain partners in disseminating sustainability along the supply chain is crucial. We analyze the influence of different supply chain positions on sustainability and financial outcomes of Turkish manufacturing companies listed in Istanbul Stock Exchange (BIST). We propose a sustainability measure, and rank firms according to their sustainability practices in relation to their financial outcomes using data envelopment analysis (DEA). We estimate Seemingly Unrelated Regression (SUR) equations to control for the common financial shocks that can affect sustainability and financial outcomes simultaneously. Our analysis reveals that first-tier and sub-supplier (second-tier and lower-tiers) firms' financial performance is substantially better compared to Original Equipment Manufacturer (OEM) firms while their sustainability outcomes stay behind. We find that this latter effect is more profound for first-tier firms. Although the supplier firms generally comply with the OEM's product standards, our results show that they are not aligned with the OEM in terms of the environmental and social impact of their operations. Given the crucial role of first-tier suppliers in sustainability dissemination along the supply chain, policies should be formulated in this industry amid these characteristics of the sustainability dissemination.