The Next “G” On ESG: The Strategic Thinking of Businesses Towards Supply Chain Fraud

Abstract

Supply Chain Management is in the core of businesses’ operational activities worldwide. Its main purpose is the proper management of resources and the assurance of the sustainable operation of the economic entities. However, Supply Chain Management is exposed to breaches related to the code of conduct as well as fraud. Integrating the principles of Environmental, Social and Corporate Governance (ESG) can help build a healthy, sustainable, and resilient supply chain. The purpose of the research is twofold and refers to: (i) highlight those factors of the ESG that contribute to the decrease and mitigation of the fraud in supply chain and (ii) the business strategies that can be developed from businesses and can be based on ESG factors. In this context, a log-log model of multiple linear regression was proposed. Secondary data were extracted from the Thomson Reuters database. The model was based on 681 observations concerning companies operating in Europe. The results have led to the conclusion that the existence of policies related to human resources and technology contribute significantly to tackling supply chain fraud. Regarding the first factor, Human Resource is important to feel safe and their rights should be protected by companies. Securing their rights can lead individuals to their commitment to the work environment, as well as to their protection from threats and violations. Finally, the role of technology is fully consistent with transparency in the supply chain. For this reason, the adoption of reliable solutions and technologies, which turn to the green economy, offer visibility and optimization of processes.