The (un)sustainable mix: supply chain finance, sustainability ratings and liquidity

Abstract

Purpose

This study aims to investigate the interaction effect between offering supply chain finance (SCF) programmes and sustainability ratings on the liquidity performance of buyers and suppliers.

Design/methodology/approach

The study uses a unique sample of buyers that each have an SCF programme. The sample is complemented with financial information and sustainability scores. The data is analysed through a random effects model.

Findings

Aligning with recent advances in SCF literature, the results confirm a tendency for SCF programmes to favour buyers over suppliers. However, the relationship between SCF programme adoption and liquidity performance for buyers and suppliers is positively moderated by the strong sustainability performance of both parties.

Practical implications

Buyers and suppliers are advised to implement and adopt effective SCF programmes that are beneficial for both parties. For buyers, the authors suggest leveraging on SCF programmes as incentives to foster sustainable behaviour among suppliers. For suppliers, the authors recommend caution before joining programmes offered by buyers that do not perform well on sustainability.

Social implications

Enhancing sustainability within global supply chains and fostering favourable payment practices towards suppliers are crucial for policy development and regulation. The findings clarify the connection between both components, offering valuable insights for policymakers in this domain.

Originality/value

The study is built on a manually picked, unique database of buyers offering SCF programmes to their suppliers. This allows, across a large sample, an evaluation of the differences between buyers that offer SCF programmes and those that do not.