Conference Agenda

Voluntary climate initiatives such as the Science-Based Targets initiative (SBTi) have emerged as prominent tools for corporate greenhouse gas (GHG) mitigation. While SBTi participation has been linked to reductions in firms’ operational emissions (Scopes 1 and 2), its broader impacts on supply chains—where a large share of emissions reside—remain underexplored. This study investigates whether private-sector climate leadership induces emissions reductions among suppliers or instead displaces costs downstream. Using a global panel dataset comprising 5,728 customer firms and 4,974 suppliers from 2010 to 2024, we apply a staggered difference-in-differences framework to evaluate the causal impact of SBTi adoption. We find that while SBTi-validated firms reduce their operational emissions by approximately 15.6%, they do not generate statistically significant emissions reductions among their suppliers. Instead, these firms restructure their supply chains by expanding their supplier base and shifting toward smaller, lower-bargaining-power vendors. As a result, suppliers experience a decline in financial performance, particularly in net profit margins, with more pronounced effects observed among smaller firms. Our findings highlight a structural limitation in current GHG accounting practices, particularly the use of spend-based Scope 3 estimations, which disincentivize direct supplier engagement. We propose several reforms, including the adoption of supplier-specific emission factors, alignment with financial disclosure standards, and supply chain financing mechanisms to support equitable mitigation. The study underscores the need for more integrated corporate climate strategies that address both environmental and financial sustainability across supply networks.