Financial Implications of Supply Chains Transition to ESG Models

Purpose: This study reviews the financial implications of ESG business model redesign, focusing on providing higher orientation to ESG principles for firms’ supply chains, including training needs, policy requirements, or monitoring tool implementation. It assesses the association between firms’ profitability and the efforts firms make to align with principles of sustainable business models. Methodology: Several statistical analyses, including canonical analysis, ANOVA, and multiple regression analysis. The focus of the research is limited to the CAER ex-communist members. Findings: There is significant reluctance from the firms’ side to make the transition to the ESG-based and more circular economy business models when reviewing data about ESG supply chains, mainly driven by insufficient know – how transferred on the firm level from the academic side and insufficient understanding on the cost-benefits analysis of such transition. Implications: Better resource allocation, increased environmental innovation capital acquisitions, or reduced waste along business processes lead to increased firms’ profitability. Transformation driven by the transition to circular business models also involves supply chain management-related business processes. The direct impact of transforming supply chains on firms’ profitability depends especially on the business models, mainly described by the particularities of the sector firms operate in, by countries’ institutional framework, and potential for growth. The green transformation of supply chains also generates indirect effects on firms’ profitability. Limitations: Data selected for the study is extracted from the Refinitiv database, namely, all the listed companies with assets valued over 10,000 EUR from ex-communist economies. Future Research: An extended database.