Administrative environmental innovations, supply network structure, and environmental disclosure

Abstract

This study contributes to a theoretical and empirical understanding of whether and how administrative environmental innovations (AEIs)—implemented to help track and manage a firm's environmental impacts—are related to environmental disclosure. Drawing on the Belief–Action–Outcome framework, we posit that the motivation of individuals (employees, managers, and the leadership) within the firm to access, use, and act on the environmental information available to them would be enhanced by the firm's implementation of AEIs, resulting in more extensive environmental disclosure by the firm. Additionally, building on the literature on supply chain networks, we posit that the structural position of the firm vis‐à‐vis its supply network—reflecting information flows, network learning, and status—moderates the AEI implementation–environmental disclosure relationship. To test our hypotheses, we build a multi‐industry dataset of 3,106 firm‐year observations based on 67,809 dyadic cost‐of‐goods‐sold‐based relationships obtained from Bloomberg's supply chain relationships database to construct the supply networks of focal firms. We also draw on Bloomberg's environmental, social, and governance (ESG) data for our AEI implementation and environmental disclosure measures. We find significant evidence to support our hypothesis that AEI implementation is positively associated with the extent of environmental disclosure. However, the implementation of both internal and external forms of AEIs has a more pronounced positive relationship with the extent of environmental disclosure, compared to the implementation of either form alone. With regard to supply network structure, we identify three principal variables—accessibility, control, and interconnectedness—that influence network learning and status of the focal firm and find that they moderate the AEI implementation–environmental disclosure relationship. We provide insights for theory and practice based on our findings.