The Impact of ISSB’s Scope 3 GHG Emissions Validation on US Manufacturers’ Stock Valuations: Analyzing the Role of Supplier Complexity

• Published in: Transportation research. Part E, Logistics and transportation review Logistics and transportation review, 2025-01, Vol.193, p.103850, Article 103850
• Main Authors: Tian, Jingyuan, Jia, Fu, Chen, Lujie, Xing, Xinjie
• Format: Article
• Language: English
• Subjects: Event study; Manufacturing; Scope 3 GHG emissions; Supplier complexity; Supply chain management; Sustainability disclosures
• ISSN: 1366-5545
• DOI: 10.1016/j.tre.2024.103850

•ISSB’s Scope 3 GHG disclosure validation boosts stock valuations for US manufacturers, showing market positivity.•Supplier concentration and spatial complexity reduce this positive impact, but horizontal complexity does not.•We use event studies and regression analysis to evaluate market response and supplier complexity effects.•Findings highlight optimizing supply chains as key to improving sustainability and firm performance.•Supporting signaling theory, Scope 3 disclosure signals environmental responsibility, enhancing market perception. The International Sustainability Standards Board’s (ISSB’s) validation of Scope 3 greenhouse gas emissions disclosure requirements represents a pivotal advancement in sustainability reporting. This study examines the implications of this validation for US-listed manufacturing firms’ stock valuations, taking into account the moderating effect of supplier complexity. Employing the event study methodology and cross-sectional regression analysis, our study reveals a positive market response to the ISSB’s validation. Moreover, we observe that supplier concentration complexity and supplier spatial complexity mitigate this positive impact, while supplier horizontal complexity does not exert a significant effect on this positive impact. This highlights the critical role of supply chain optimization in fostering sustainable business practices. Our study contributes to the literature by empirically assessing the impact of Scope 3 emissions disclosure on firm performance and exploring the moderating role of supplier complexity, thereby enhancing our understanding of sustainability disclosures within supply chain operations. Our findings offer crucial insights for manufacturers, investors, and policymakers as they navigate the complex dynamics between sustainability disclosures, supply chain management, and stock valuations.