TYPE Original Research

PUBLISHED 29 September 2022

DOI 10.3389/fenvs.2022.982828

Evaluating green supply chain

OPEN ACCESS performance based on ESG and
EDITED BY
Shigeyuki Hamori,
Kobe University, Japan
financial indicators
REVIEWED BY
Yunfeng Shang, Huiling Zeng 1*, Rita Yi Man Li 2 and Liyun Zeng 3*
Zhejiang Yuexiu University of Foreign 1
Languages, China Rajamangala University of Technology Tawan-Ok, Chonburi, Thailand, 2Sustainable Real Estate
Sema Yılmaz Genç, Research Center, Department of Economics and Finance, Hong Kong Shue Yan University, Hong
Yıldız Technical University, Turkey Kong, Hong Kong SAR, China, 3Civil and Architectural Engineering Institute, Panzhihua University,
Zhendong Wu, Panzhihua, China
Wuhan University of Technology, China

*CORRESPONDENCE
Huiling Zeng,
[email protected] To reduce carbon emission and enhance social development simultaneously,
Liyun Zeng,
[email protected] “Environmental, Social and Governance” (ESG) plays a significant role in supply
chain management. The study collected 2,400 financial data and ESG
SPECIALTY SECTION
This article was submitted to performance of 200 companies from the Clean 200 list of global public
Environmental Economics companies from 2019 to 2021. It aimed to: 1) evaluate green supply chain
and Management,
a section of the journal
performance based on financial indicators and corporate’s ESG performance; 2)
Frontiers in Environmental Science use the entropy weight method (EWM) to determine the weight of ESG
RECEIVED 30 June 2022 elements in green supply chain; 3) validate this ESG-based green supply
ACCEPTED 23 August 2022 chain performance using real world examples. The results showed that
PUBLISHED 29 September 2022
operational performance had the highest weight, followed by environmental
CITATION performance, and profitability ranked the last. The results suggested that
Zeng H, Li RYM and Zeng L (2022),
Evaluating green supply chain managers should focus more on the governance and environment rather
performance based on ESG and than emphasizing short-term financial benefits. It contributes to the
financial indicators.
literature by incorporating ESG to evaluate green supply chain performance,
Front. Environ. Sci. 10:982828.
doi: 10.3389/fenvs.2022.982828 which is the first of its kind. The results would be beneficial when people wish
COPYRIGHT
to select supply chain partners. They are also conducive to companies’
© 2022 Zeng, Li and Zeng. This is an managers and listed companies when they submit financial reports that
open-access article distributed under
need to report ESG performance.
the terms of the Creative Commons
Attribution License (CC BY). The use,
distribution or reproduction in other KEYWORDS
forums is permitted, provided the
original author(s) and the copyright ESG, carbon emissions, green supply chain, supply chain performance, index
owner(s) are credited and that the
original publication in this journal is
cited, in accordance with accepted 1 Introduction
academic practice. No use, distribution
or reproduction is permitted which does
not comply with these terms. Given the adverse impact of global warming, such as flooding and drought, many sectors
and countries are implementing various means to reduce carbon emissions. The global supply
chain is no exception. This article highlighted the importance of a green supply chain to
reduce carbon emissions and the necessity of incorporating ESG into green supply chain
performance evaluation. It aimed to explore the relationship between EGS and green supply
chain performance. It contributed to supply chain managers’ decision-making. A green
supply chain comprehensive model was constructed from 200 listed companies and
2,400 financial data.

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Zeng et al. 10.3389/fenvs.2022.982828

1.1 The importance of green supply chain performance and financial risk (Sardanelli et al., 2022).
to reduce carbon emissions Traditional credit rating mainly focuses on the short-term
indicators of enterprises. These indicators focus on the past
Climate change has become a global challenge in recent enterprises’ performance, which does not include the impact
years, and carbon emissions are identified as a risk factor in of enterprises on the environment in the evaluation scope
global warming (Jiang et al., 2022). The World Economic (Agami et al., 2012). Therefore, constructing a supply chain
Forum’s Global Risk Report suggested that greenhouse performance evaluation model, including environmental
gases such as carbon dioxide are essential environmental impact data, can enhance the evaluation comprehensiveness
factors that cause global climate change and are one of the (Sardanelli et al., 2022). When ESG is used for supply chain
top ten global risks (WEF, 2014). Greenhouse gases threaten performance evaluation, it can overcome the lack of non-
environmental sustainability and harm the social economy financial indicators that might impact our future society, such
(Sun et al., 2020; Sun et al., 2022a). Reducing carbon emissions as environmental impact in the traditional credit rating
and improving environmental quality have become vital system. It is conducive to promoting the participation of all
solutions for global sustainable development (Sun and supply chain members in the sustainable development,
Razzaq 2022). Indirect carbon emissions from many minimising carbon emissions (Sardanelli et al., 2022). Thus,
companies’ supply chain activities are five times the incorporating ESG into green supply chain performance
company’s direct emissions (Downie and Stubbs 2013). The evaluation is necessary.
supply chain’s carbon emission control could contribute to
environmental sustainability. According to China’s “14th 5-
Year Plan for Industrial Green Development (2021–2025)”, 1.3 Research gaps, questions, objectives,
the green supply chain is also integral to green development. and structures
Thus, it is critical to accelerating the green supply chain to
reduce carbon emissions. As mentioned above, traditional credit rating mainly focuses
Green supply chain management is a current mode of on enterprises’ short-term indicators and ignores the long-term
management (Chen et al., 2009). It incorporates impacts of polluting industries. In academia, there are few related
environmental factors and resource efficiency into the studies on ESG’s application in green supply chain, not to
category management and considers the impact of supply mention building a green supply performance evaluation
chain activities on the environment (Chen et al., 2009; Rabbi model based on ESG. Therefore, this paper contributes to the
et al., 2020). In green supply chain management, product research on green supply chain performance indicators and ESG
selection, production process, and upstream and downstream can fill the research gap. It may benefit from choosing green
suppliers’ selection are conducive to environmental partners and managerial decisions and promote the development
management, which is the key to carbon emission reduction of green supply chain. It also offers insight into credit rating
(Zhu and Sarkis 2004; Mafini and Loury-Okoumba 2018). All in companies. As ESG has become one main element in listed
all, the green supply chain can be beneficial in reducing carbon companies’ reports, this study also offers insights into them.
emissions. This study’s research questions are: 1) What is the impact of
ESG on the green supply chain’s performance? 2) How to
evaluate the green supply chain’s performance level
1.2 The necessity of incorporating comprehensively and objectively?
environmental, social and governance Specifically, this paper aims to: 1) build a comprehensive
into green supply chain performance evaluation model of the green supply chain based on financial
evaluation indicators and corporate’s ESG performance. It can be used for
the selection of upstream and downstream partners and decision-
The environmental dimension of ESG has become a making for managers in the supply chain; 2) use the entropy
research focus when the greenhouse gas emissions report weight method (EWM) to determine the weight of each
emerges (Baid and Jayaraman 2022). “E” in ESG refers to evaluation index of ESG, which is used to evaluate the impact
the environment, which indicates environmental activities to on the performance level of the green supply chain; 3) evaluate
reduce carbon dioxide emissions and energy consumption and and verify green supply chain performance level based on the
improve enterprises’ sustainable development (IIGF 2022). research model.
Corporate’s ESG performance has become a criterion for The paper’s structure is listed as follows: the second part of
assessing the corporate’s environment and social this paper mainly reviews the literature review of ESG, green
responsibility (Shakil 2021). Credit risk and supplier ratings supply chain management and performance, carbon emissions
are often used in supplier selection to assess operational and EWM; the third part constructs the green supply chain

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performance evaluation model; the fourth utilises the EWM to ESG plays an essential role in supply chain management. There
calculate and verify the performance indicators of a green supply is an interaction between ESG performance and supply chain
chain; the fifth part is discussion and findings; the sixth part is the operation management (Dai and Tang 2022). Strengthening
conclusion, research limitations and future research directions. corporate governance (G) can improve the supply chain’s
productivity (Ziolo et al., 2019). When suppliers select partners,
the traditional rating indicators only focus on financial ones.
2 Literature review Nevertheless, customer satisfaction and product quality might not
be affected by financial indicators only. Likewise, companies may
2.1 Environmental, social and ignore some critical strategic environmental related decisions in the
governance (ESG) supply chain. ESG can overcome the shortcomings of the traditional
credit rating system in the supply chain.
The concept of ESG first appeared in 2006 and attracted the Besides, increase in environmental performance awareness
attention of academia, government and business (Atkins 2020). would be conducive to enterprises’ active participation in
Environmental (E) includes greenhouse gas emissions, air sustainable development related works (Sardanelli et al., 2022).
pollutants, energy consumption, and efficiency, etc. ESG was often used in performance-related research (Li et al.,
(Jayachandran et al., 2013). It also refers to activities that 2021). In the context of ESG research, some keywords included
reduce carbon dioxide emissions and energy consumption financial performance, green, environmental performance, and
and contributes to global carbon neutrality goals (IIGF 2022). corporate performance (Jayachandran et al., 2013). Most
The company’s environmental performance strongly impacts literature studied ESG scores as a measurement on sustainability
ESG (Tampakoudis and Anagnostopoulou 2020; Wang and Sun in supply chain performance (Rajesh 2020). Li et al. (2021) used
2022). Dong et al. (2018) use carbon productivity and intensity CiteSpace to analyze the frequency of ESG-related keywords, and it
to measure carbon emission performance among the indicated that there were few related studies on ESG in green supply
environmental performance indicators. The green revenue chain performance research. Therefore, this paper aims to research
share is used to measure enterprises’ degree of green the relationship between green supply chain performance indicators
development (IIGF 2019). Social (S) factors include supply and ESG and fill the research gap.
chain management, customer health and safety, etc.
Profitability is used to measure a company’s social
responsibility. Companies with higher profitability can have 2.2 Green supply chain management and
more resources and the ability to undertake more social performance
responsibility. Violating societal expectations can lead to
increasing costs for the company and affect the company’s Bowen et al. (2001) defined green supply chain management as
cash flow (Abdul Rahman and Alsayegh 2021). Return on the effort of enterprises, suppliers and customers for
equity (ROE) and return on investment (ROI) are environmental management and technical exchanges to
representative profitability indicators (Rajan et all., 2007; formulate solutions. It ultimately reduces the impact of
Nguyen and Nguyen 2020). Net sales margin and operating production processes and products on the environment (Bowen
profit growth rate are used to measure the company’s cash flow et al., 2001). Therefore, green supply chain management
level, and it is significantly positively correlated with profitability incorporates environmental factors into supply chain
(Liu and Ma 2014; Coad et al., 2017). Governance (G) factors management (Rabbi et al., 2020). A green supply chain is not
include shareholder rights, stakeholder engagement, and only economically viable but also environmentally friendly
relationship governance (NEA, 2012). Shi and Liao (2015) (Srivastava 2007; Li and Zhou 2022). Likewise, green supply
found that in the context of the supply chain, the level of chain management focuses on products, production processes,
corporate’s governance can be measured by operational and supplier selection (Zhu and Sarkis 2004; Du et al., 2020), but
performance. In the indicators of operational capability, also consider the potential costs and benefits among supply chain
inventory turnover and proportion of products sold are used members (Zhu et al., 2012). The collective efforts of all
to measure the company’s governance risk (Choi and Ham stakeholders help companies mitigate the adverse
2009). Total asset turnover represents the operating quality of environmental impact of logistics activities in their supply chain
the company (Houmes et al., 2018; Porebski and Tomczak 2020; (Yang et al., 2013; Sosnowski 2022). Thus, green supply chain
Almomani et al., 2021). The environmental dimension of ESG management is considered necessary for a company’s sustainable
has become the focus of academia (Baid and Jayaraman 2022). development and growth (Wu et al., 2012). As environmental
ESG has been considered a vital criterion for companies to assess issues, for example, carbon emissions, continue to gain attention,
the environment and social responsibility (Shakil 2021). Raising the selection of green partners has become particularly important.
ESG standards helps companies achieve sustainable Nevertheless, traditional supplier selection does not consider
development (Whitelock, 2019). environmental aspects (Yeh and Chuang 2011; Gurel et al.,

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2015). Thus, strengthening green supply management of chain that technological progress in carbon emission was one of the
partners is conducive to promoting the effective integration of the critical factors in addressing environmental concerns and ensuring
entire supply chain, minimising the impact on the environment sustainable economic development. Fiscal decentralization and
(Green et al., 2012; Ghosh et al., 2020). As consumers pay more green investment contributed to environmental sustainability
attention to the environment, green innovation has emerged as an (Sun et al., 2022a). Green innovation also reduced corporate’s
opportunity for green supply chain management to reduce carbon carbon emissions (Sun and Razzaq 2022). Thus, green supply
emissions (Sardanelli et al., 2022; Sun and Razzaq 2022). chain management minimises carbon emission. Green supply
To effectively integrate financial and non-financial data and chain management was conducive to promoting the effective
improve the reliability of performance evaluation, it is necessary integration of the entire supply, minimising environmental
to incorporate environmental and financial data into supply impact (Green et al., 2012). It can achieve green environment
chain performance evaluation (Sardanelli et al., 2022). development by supporting and changing consumption patterns
Increasing environmental concerns in supply chain management (Sun et al., 2022b). Thus, ESG and green supply chain
and monitoring green supply chain performance can improve management research benefit carbon emission reduction.
managers’ decision-making capabilities and achieve sustainable
competitive advantage. The performance evaluation of the green
supply chain could be multi-dimensional, including environmental 2.4 Entropy weight method
performance, operational performance, and economic performance
(Sardanelli et al., 2022). Hervani et al. (2005) believed that the goal of The entropy weight method (EWM) has been widely used in
the green supply chain is to reduce the negative impact on the economic evaluation. It is a very successful evaluation metric in
environment and the waste of resources. This process should start calculating target weights (Kumar et al., 2021) and has strong
by extracting raw materials, transporting, and consuming products. objectivity in the index’s weight calculation process (Wei et al.,
Therefore, the performance evaluation of the green supply chain 2008; Kumar et al., 2021). The method has established sufficient
should focus on the whole process and supply chain stakeholders. consistency in identifying responses and contrasted strengths in
Green supply chain can promote ESG’s development and decision-making (Kumar et al., 2021). Although EWM is
enhance the ESG’s attention by companies’ managers. Rabbi relatively simple to calculate, it is logical (Kumar et al., 2021)
et al. (2020) proposed a probability model based on a Bayesian and can be used for supply chain performance assessment (Li
Belief Network (BBN) to predict green supply chain performance. et al., 2009) and overall performance evaluation of green supply
Observing the impact of a supply chain performance indicator on chain (Yu 2015). EWM was widely used in decision-making in
the overall environmental perspective was conducive to managers’ supply chain management. It included equipment procurement
decision-making. Fernando et al. (2019) studied the impact of in supply chain quality performance evaluation (He et al., 2020),
offshore green supply chain management on sustainable business supplier paradigm selection (Li et al., 2016), risk assessment of
performance. They found that green supply chain management supply chain, etc. (Liu et al., 2022). All in all, EWM can be used to
can indirectly promote enterprises’ sustainable economic, evaluate the performance of the supply chain, which is beneficial
environmental, operational and social performance. to reflect the weight of indicators for managers’ decision-making
objectively. Yet, no study has incorporated ESG in green supply
chain before. Thus, it is applied in this study.
2.3 Carbon emissions

Coping with climate change (You and Kim 2021) is one of the 3 Construction of green supply chain
most severe challenges facing human society. In recent years, the performance evaluation model
adverse impacts of climate change on human lives have become
prominent. The emission of greenhouse gases such as carbon 3.1 Principles for establishing the
dioxide is an essential environmental factor leading to global evaluation index system
climate change (WEF, 2014). It is also among the top ten global
risks (WEF 2014). Excessive carbon emissions cause a threat to Measuring the performance level of the supply chain is the
current and future environmental sustainability (Sun et al., 2022b). key to achieving efficient supply chain management and
It also has enormous socioeconomic impacts on supply chain improving managers’ decision-making (Hervani et al., 2005).
management. Reducing carbon emissions and improving Green supply chain performance evaluation is an indispensable
environmental quality have become critical issues for the supply prerequisite for evaluation work, reflecting the operation of the
chain’s sustainable development (Sun and Razzaq 2022). entire supply chain. Green supply chain evaluate environmental,
Scholars studied the relationship between carbon emission, economic, and operational performance (Sahoo and Vijayvargy
green supply chain management and ESG (especially “E”, 2020; Sardanelli et al., 2022). Because the performance evaluation
environment) (Sun et al., 2022a). Sun et al. (2022b) showed indicators cover a wide range and are complex in content, the

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TABLE 1 Green supply chain performance indicator system.

Evaluation object First-level Secondary indicators Calculation formula

indicator

Green supply chain Profitability Net profit margin on sales (a1) Net profit margin on sales = net profits/sales revenue
performance
Rate of return of Rate of return of investment (ROI) = income before tax/total investment
investment (a2)
Return on equity (a3) Return on equity = net income/average shareholders equity
Operating profit growth Operating profit growth rate = operating profit growth this year/total operating
rate (a4) profit for the previous year
Carbon intensity (b1) Carbon intensity = carbon footprint/operating revenue
Environmental Carbon productivity (b2) Carbon productivity = operating revenue/carbon footprint
performance
Green revenue share (b3) Green revenue share = green revenue/operating revenue
Inventory turnover (c1) Inventory turnover = operating revenue/average balance of inventory
Operational The proportion of products The proportion of products sold = sales/(total inventory amount + sales amount)
performance sold (c2)
Total asset turnover (c3) Total asset turnover = sales/average total assets

construction of the performance evaluation indicator system for performance indicates the enterprise’s ability to utilise
green supply chain should follow scientific principles and link environmental protection technology better, reduce the
theory with practice and operability, independence and integrity enterprise’s cost and drive the enterprise’s operational
(Jin 2021). performance and profitability. Therefore, there is a correlation
between profitability, environmental, and operational
performance indicators (Wang et al., 2013).
3.2 Construction of green supply chain The indicator of profitability, return on equity (ROE) is used to
performance evaluation index measure a company’s success in generating profits for shareholders.
The rate of return on investment (ROI) is a measure of a company’s
As mentioned above, environmental, operational, and ability to generate profits from its investment activities (Ichsani and
economic performance are the main aspects of green supply Suhardi 2015). Both represent profitability indicators (Rajan et al.,
chain performance evaluation (Sardanelli et al., 2022). Thus, this 2007; Nguyen and Nguyen 2020). Net profit margin on sales can
paper will combine ESG data to construct a green supply chain measure enterprise growth (Liu and Ma 2014). The operating profit
performance evaluation index based on green supply chain growth rate promotes the enterprise’s development and
profitability, environmental performance, operational employment’s growth (Coad et al., 2017) and helps achieve the
performance (Table 1). Profitability is essential for evaluating sustainable development of the enterprise.
a company’s present and future performance (Nguyen and Concerning the indicator of environmental performance,
Nguyen 2020). It can be used to measure a company’s social carbon intensity relates to a company’s physical carbon
responsibility (Abdul Rahman and Alsayegh 2021). Since ESG performance and is measured by the ratio of a company’s
performance has become a criterion for assessing corporate absolute carbon usage to a related business metric (Hoffmann
environmental and social responsibility (Shakil 2021), the and Busch 2008). It plays a significant role in showing how the
environmental dimension of ESG has become emphasised company’s emissions performance can improve the company
(Baid and Jayaraman 2022). To strengthen and enhance the (Zhao et al., 2012). Carbon productivity is the economic output
importance of environmental protection and management in per unit of carbon dioxide emissions over time (Y and K 1997),
supply chain management, it is essential to incorporate which is considered a key indicator of companies’ control of
environmental indicators into the green supply chain greenhouse gases (Meng and Niu 2012). Dong et al. (2018) use
performance evaluation system. Operational performance is a carbon productivity and intensity to measure carbon emission
crucial factor affecting supply chain performance (Gunasekaran performance. The green revenue ratio is one indicator to measure
et al., 2004). It can be used to measure the level of corporate enterprises’ degree of green development (IIGF 2019).
governance (Shi and Liao 2015). The improvement of the Concerning the indicator of operational performance,
operational performance level will increase the financial inventory turnover is a ratio of a firm’s goods sold to its average
performance level of the company and then increase the inventory level. It is commonly used to measure inventory
company’s profitability. The progress of environmental management performance (Gaur et al., 2004), directly reflecting

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FIGURE 1
Green income of countries worldwide (currency unit: USD).

the company’s profit level (Qu and Zhao 2016). The proportion of Information Technology and Consumer Discretionary
products sold can reflect the utilisation of supply chain resources, industries, as shown in Figure 1.
and total asset turnover measures the turnover ratio of all assets
owned by a company, which is an indicator to measure the ratio
between the scale of asset investment and the level of sales 4.2 Financial data collection
(Nariswari and Nugraha 2020). It can better measure the growth
of enterprises (Liu and Ma 2014). Investing.com is a real-time market and information expert
in the global financial market. It is the second largest financial
website globally. It provides comprehensive financial data of
4 The measurement process of global financial products, which is conducive to complete access
performance indicators to sample corporate indicators data (Investing.com, 2022).
Therefore, this article obtained the financial data of
4.1 Selection of study samples 200 companies in investing.com via Python and received
2,400 operational performance and profitability performance
This study included 200 companies from the Clean 200 list of indicators from 2019 to 2021. Finally, it combined with the
global public companies published by Canadian market research clean revenue data of the Clean 200 global listed companies
firm Corporate Knights and the US nonprofit As You Sow. released by Corporate Knights and As You Sow, the sample
Companies on the Clean 200 list are leading the transition to companies’ operational performance, profitability performance
a clean energy future by putting sustainability at the heart of their indicators, and environmental performance indicators were
products, services, business models and investments. According calculated.
to the Clean 200 list released by As You Sow, the United States
ranks first in total clean revenue, with 52 companies on the list.
These firms mainly come from Information Technology, 4.3 Performance indicator calculation
Industrials and Materials industries. The second is France, results
with 12 companies on the list, mainly including industrials
and information technology industries. China ranked third According to the data collected by Python and the company’s
with 16 companies on the list, mainly in the Industrials and ESG report, this study calculates the results of the profitability

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TABLE 2 Performance indicator calculation results.

Indicators Minimums Maximum Medium Standard Source of

deviation data

Net profit margin on sales −1.2574 11.2262 0.0667 0.8205 Investing (https://investing.com/)
Rate of return of −12.7045 57.6056 0.944 6.1558 Investing (https://investing.com/)
investment
Return on equity −1.2376 7.602 0.092 0.63649 Investing (https://investing.com/)
Operating profit growth −30.4082 107.7232 −0.0502 11.1155 Investing (https://investing.com/)
rate
Carbon intensity 0.0005 113.944 0.3507 11.6447 Company ESG report; investing (https://investing.com/)
Carbon productivity 0.0088 1845.2467 2.8512 142.6949 Company ESG report; investing (https://investing.com/)
Green revenue share 0.0992 1 0.5428 0.3058 Company ESG reporte; investing (https://investing.com/); as you
sow(https://www.asyousow.org/)
Inventory turnover 0.3016 790 8.5062 81.1846 Investing (https://investing.com/)
The proportion of 0.1534 1 0.9017 0.1242 Investing (https://investing.com/)
products sold
Total asset turnover 0.0181 2.6959 0.6149 0.4553 Investing (https://investing.com/)

indicators and environmental performance indicators and 1 n

ej
−  pij lnPij  (2)
operational performance indicators of 200 samples (Table 2). ln n i
1
Among the indicators, carbon productivity’s standard deviation
Among them, 0≤e_j≤1.
is 142.6949, indicating a wide gap in carbon emissions among
different companies. Likewise, inventory turnover’s standard
(3) Calculate the coefficient of difference of the evaluation
deviation is high (81.1846). This is because the impact of
index xj.
COVID-19 on the inventory of different products has high
deviations (Fisher Ke et al., 2022). gj
1 − ej (3)

(4) Calculation of index weight coefficient:

4.4 Measured result of entropy weight m
Wj
gi j
1 gi , j
1, 2, 3....., m (4)
method
Where wj is the final weight coefficient of each performance
The EWM is a kind of objective weighting method, which
indicator.
can determine the index weight coefficient according to the
degree of difference between the evaluation index values. The
(5) Weight factor results for performance indicators.
EWM avoids the interference of human factors when
determining the weight coefficient and objectively reflects
According to the entropy standardised calculation result (pij)
each evaluation index’s importance (Sun et al., 2017). EWM
of all indicators (Table 3), the weights of each performance
can be used for supply chain performance appraisal (Li et al.,
indicator were calculated (Table 4). The operational
2009) and assessment of overall performance levels for green
performance has the highest weight (0.5723), followed by the
supply chain (Yu 2015).
environmental performance (0.3946) and finally profitability
Suppose xij ( i = 1,2,3,. . .. . .,n; j = 1,2,. . .. . .,m ) is the
(0.0331). Among the indicator, the highest weight is the
observed data of the jth index in the ith evaluated object.
proportion of products sold at 0.5273. It indicates a high
proportion of products sold, which can have a high green
(1) Calculate the index ratio of the ith evaluated object on the jth
market attractiveness and help reduce carbon emissions (Sun
performance indicator.
and Razzaq 2022). Utilising supply chain resources has the
n greatest impact on the overall performance level (Garveya and
Pij
xij
i
1 xij (1)
Nash, 2018). The second is the green revenue share at 0.3796. It
measures the degree of green development of the company. It is
(2) Calculate the entropy weight of the jth performance the ultimate goal of evaluating the performance level of the green
indicator. supply chain (IIGF 2019). The environmental dimension of ESG

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TABLE 3 Results of standardization of performance indicators (pij).

Indicators Minimums Maximum Medium Standard deviation

Net profit margin on sales 0 0.0056 0.005 0.0004

Rate of return of investment 0 0.0063 0.0051 0.0006
Return on equity 0 0.0059 0.005 0.0004
Operating profit growth rate 0 0.0064 0.005 0.0005
Carbon intensity 0 0.0052 0.0051 0.0005
Carbon productivity 0 0.0051 0.0051 0.0004
Green revenue share 0 0.0106 0.0054 0.0036
Inventory turnover 0 0.0052 0.0051 0.0005
The proportion of products sold 0 0.0423 0.0042 0.0059
Total asset turnover 0 0.0066 0.0051 0.0011

TABLE 4 The results of performance index weight via EWM.

Performance indicators Indicators ej gj wj

Profitability (weight = 0.0331) Net profit margin on sales 0.999 0.001 0.0058
Rate of return of investment 0.9983 0.0017 0.0101
Return on equity 0.9988 0.0012 0.0069
Operating profit growth rate 0.9982 0.0018 0.0103

Environmental performance (weight = 0.3946) Carbon intensity 0.9985 0.0015 0.009

Carbon productivity 0.999 0.001 0.006
Green revenue share 0.9351 0.0649 0.3796

The Operational performance (weight = 0.5723) Inventory turnover 0.9984 0.0016 0.0095
The proportion of products sold 0.9098 0.0902 0.5273
Total asset turnover 0.9939 0.0061 0.0356

Note: Pij, the proportion of the jth indicator in the ith plan; ej, Information entropy of each indicator; gj, information entropy redundancy; wj, the weight of each indicator.

is the focus of the research (Baid and Jayaraman 2022), and it on Equity; a4: Operating Profit Growth Rate; b1 represents
significantly impacts the performance of the green supply chain. Carbon Intensity; b2 indicates the Carbon Productivity; b3
The result also confirms that green supply chain management denotes Green Revenue Share; c1 refers to the Inventory
focuses on environmental management (Zhu et al., 2008; Zhu Turnover; c2 records the Proportion of Products Sold; c3
et al., 2012). The third is the total asset turnover rate (0.0356), denotes the Total Asset Turnover.
indicating that the turnover rate of total assets is an important Using the above calculation results, this paper randomly
indicator to measure the company’s overall operating quality. selects five companies from different industries in the Clean
Strengthening the asset turnover rate is conducive to improving 200 list, among which Apple Inc.’s GICS Sector is Information
the utilisation efficiency of assets, thereby improving the overall Technology, Kering SA’s GICS Sector is Consumer
performance level (Nariswari and Nugraha 2020). Therefore, Discretionary, Rexel SA’s GICS Sector is Industrials, Orsted
according to the calculation results in Table 4, the company’s green A/S’s GICS Sector is Utilities, and the GICS Sector of Cogeco
supply chain performance indicator is X = 0.0058*a1 + 0.0101*a2 + Communications Inc. is Communication Services. Then, this
0.0070*a3 + 0.0103*a4 + 0.0090*b1 + 0.0060*b2 + 0.3796*b3 + 0. study calculates the green supply chain performance evaluation
0095*c1 + 0.5273*c2 + 0.0356*c3. results, and the highest is Apple Inc. (5.0611), the second is
Among them, X is the evaluation results of enterprise green Kering SA (1.3288), the third is Rexel SA (0.8652), the fourth is
supply chain performance; a1 is Net Profit Margin on Sales; a2 Orsted A/S (0.7577), the fifth is Cogeco Communications Inc.
refers to the Rate of return of Investment; a3 denotes the Return (0.6269) (Table 5). These performance evaluation rankings are

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TABLE 5 Green supply chain performance evaluation results.

Company Apple Inc. Kering SA Rexel SA Orsted A/S Cogeco communications

Inc.

Performance evaluation results 5.0611 1.3288 0.8652 0.7577 0.6269

Clean200 global listed companies ranking 1 26 43 71 195

TABLE 6 Green supply chain performance evaluation results.

Company Steel dynamics Outokumpu Oyj PPG industries Umicore SA Hanwha solutions
Inc. Inc. corporation

Performance evaluation results 1.1301 0.8552 0.7293 0.7197 0.6583

Clean200 global listed companies ranking 39 52 74 76 133

the consistent with the results of the Clean 200 global listed of the enterprises, consistent with the research purpose of this
companies released by Corporate Knights and As You Sow. paper.
It then calculates the five companies’ green supply chain
performance level results in the same GICS Sectors (Table 6).
According to the calculation results, the highest is Steel 5.2 Impact of environmental, social and
Dynamics Inc. (1.1301), the second is Outokumpu Oyj governance on green supply Chain
(0.8552), the third is PPG Industries Inc. (0.7293), the fourth performance
is Umicore SA (0.7197), the fifth is Hanwha Solutions
Corporation (0.6583). These performance evaluation results 5.2.1 The impact of operational performance on
are consistent with the ranking of Clean 200 global listed green supply chain performance
companies released by Corporate Knights and As You Sow. According to the above calculation results, it can be
concluded that the operational performance (0.5723) has the
highest impact on the performance level of the green supply
5 Discussion and findings chain. Although there is less research on the relationship between
green supply chain performance and ESG, some researchers have
5.1 Effectiveness of green supply chain found that operational performance comprehensively reflects the
performance evaluation model governance of each link of the supply chain. Operational
performance has the widest impact on supply chain.
The ranking order of Clean 200 was first used and released in Strengthening the operational performance can significantly
July 2016. It is mainly based on the cleaning income of the improve supply chain performance (Mafini and Loury-
evaluated company and whether its business meets the essential Okoumba 2018; Sahoo and Vijayvargy 2020). When studying
criteria of social investors. Through the above empirical analyses the performance level of green supply chain, more attention was
and tests, it can be concluded that assessing supply chain paid to environmental indicators, but operational indicators and
performance by constructing and testing ESG and companies’ economic indicators were rarely involved (Rodriguez-Aguilar,
financial data is comparable to the Clean 200 Global released by 2020). As a result, the evaluation results are one-sided and
Corporate Knights and As You Sow in calculating and evaluating unrelated with the company’s operating conditions and social
the performance of companies in the same industry and across responsibilities. In order to comprehensively reflect the
sectors. Incorporating the ESG evaluation index and companies’ performance of green supply chain, this study considers all
financial data into the green supply chain performance the indicators about ESG (operational, environmental, and
evaluation model can further strengthen the relationship profitability indicators) when constructing the research model
between ESG and green supply chain performance. It is to calculate the performance level of green supply chain. It is
conducive to increasing enterprises’ attention to the ESG and proved that the impact of the operational performance is more
promoting the green development and sustainable development important than environmental and economic performance.

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Among the indicators of operational performance, the performance evaluation index. It indicates the importance of
highest weight of the proportion of products sold ratio is “E” in ESG in supply chain management. The green revenue
0.5273. Products sold ratio has the greatest impact on the share is an important indicator that measures the degree of green
green supply chain performance. It reflects the market development of the company. It is the ultimate goal of evaluating
acceptance of its products, which is conductive for managers the performance level of the green supply chain (IIGF 2019). This
to adjust management strategies. It also avoids the backlog of result confirms that green supply chain management focuses on
inventory and resources waste, ensures the most efficient use of environmental management (Zhu et al., 2008; Zhu et al., 2012).
supply chain resources, and ultimately achieves green Besides, a green supply chain should focus on green development
development (Garveya and Nash 2018; Sun and Razzaq 2022). and market acceptance to avoid wasting resources, and help
When Wattanutchariya and Kuaites, (2017) did the performance reduce carbon emissions from supply chain activities.
analysis of the rice supply chain, they emphasized the importance
of the proportion of products sold ratio. It is consistent with the 5.2.3 The impact of profitability on green supply
findings of this paper. The weight of total asset turnover ratio is chain performance
0.0356. Its weight ratio ranks third in the weight of the entire The overall weight of profitability ranks third (weight =
green supply chain performance evaluation model. The turnover 0.0331). Profitability has the lowest impact on the
rate of total assets is an important indicator that measures the performance level of the green supply chain. All indicator
company’s overall operating quality. It measures the company’s weights of profitability did not rank in the top three. This also
governance risk and operating quality (Choi and Ham 2009; confirms that economic benefits are not the highest standard
Porebski and Tomczak 2020). Strengthening the asset turnover for measuring performance levels in green development, and
rate is conducive to improving the efficiency of assets, thereby managers should pay more attention to ESG. In the early stage
improving the overall performance level (Nariswari and Nugraha of green investment, the company cannot increase
2020). However, some studies prove that excessive asset turnover profitability in a short time, but has a negative financial
reduces corporate profitability and financial risks (Houmes et al., impact instead (Buallay et al., 2020). Green supply chain
2018; Almomani et al., 2021). In the process of green management has a positive impact on the environment but
development, although most of the environmental protection no positive impact on the economy (You and Kim 2021).
assets are non-current assets, this result is applicable to assets Nevertheless, companies might be affected by COVID-19,
with strong liquidity. resulting in lower profitability. Under the influence of the new
epidemic, the global economy has been severely affected, and
5.2.2 The weight of the impact of environmental the profitability of companies has been reduced (Xiong et al.,
performance on green supply chain 2020; Gazi et al., 2022; Papikova and Papik 2022).
performance In conclusion, operational performance has the most
The overall weight of environmental performance ranks significant impact on the green supply chain performance
second (0.3946). It has the second highest impact on the level, followed by environmental performance, and the third is
performance of green supply chain. Some studies have also profitability. Adhering to green development is the key to future
demonstrated that environmental management in the supply supply chain management, and managers cannot place too much
chain is an essential driver for improving supply chain emphasis on short-term economic benefits. Improvement in
performance (Park and Choi, 2021). Environmental green and quality management can reduce the waste of
performance significantly affects green supply chain resources (Wu et al., 2022). Focusing on suppliers’
management (You and Kim 2021). Strengthening green environmental cooperation and green manufacturing minimise
management can improve environmental performance (Wu supply chain carbon emissions (Mafini and Loury-Okoumba
et al., 2022). Jin-Hee, (2020) found that if green supply chain 2018). Strengthening the use of ESG in green supply chain
activities were promoted through environmental regulation, it performance evaluation can also increase public attention to
would improve environmental performance, but there may be a the environment.
negative impact on overall performance. Because a lot of
environmental supervision is required in the early stage of
green development, enterprises at this time might experience 6 Conclusion
transformation problems and investment problems. It will lead to
a decrease in their overall performance level. Thus, manager 6.1 Research contribution
should pay attention to their current stage of development when
comparing supplier partners. ESG is the core framework for achieving sustainable
Among the environmental performance indicators, the development, and it represents the practice and performance
proportion of green revenue share (weight = 0.3796) ranks of enterprises in environmental, social, and governance aspects.
second in the importance of the entire green supply chain Strengthening ESG management and green development in the

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Zeng et al. 10.3389/fenvs.2022.982828

supply chain is the key to reducing carbon emissions. It is also an Data availability statement
inevitable trend in developing enterprise green supply chain in
the future. Despite few previous studies incorporate ESG for Publicly available datasets were analyzed in this study. This
evaluating green supply chain performance, ESG has been an data can be found here: https://investing.com/; https://www.
important element in financial reporting in listed companies asyousow.org/.
worldwide. The evaluation model incorporating ESG for
evaluating green supply chain performance can fill the
research gap and offer a new angle to global supply chain Author contributions
management, listed companies and stock markets. Besides, it
can also increase enterprises’ awareness of ESG. The Conceptualisation, HZ, RL, and LZ; methodology, HZ and
comprehensive evaluation model of the green supply chain LZ; software, HZ, LZ; validation, HZ, RL; formal analysis, HZ;
constructed in this paper is validated using real world investigation, HZ and LZ; resources, HZ; data curation, HZ;
examples. This model determines the weight of indicators writing—original draft preparation, HZ, RL; writing—review and
through the EWM, ensuring the results’ objectivity. This editing, visualisationation, LZ; project administration, LZ and
model can comprehensively evaluate its performance RL; funding acquisition, LZ. All authors have read and agreed to
level, benefit the selection of partners and managers’ decision- the submitted version of the manuscript.
making.

Funding
6.2 Research limitation and future
research directions This research was funded by the Ph.D. Starting Research
Fund from the Panzhihua University (No. 035200153).
The academic community has not yet reached a consensus on
the performance evaluation system of the green supply chain.
Although the comprehensive performance evaluation model of Conflict of interest
the green supply chain constructed in this paper is practical, there
are still some limitations in this paper. 1) ESG’s environmental The authors declare that the research was conducted in the
performance, social responsibility, and governance might affect absence of any commercial or financial relationships that could
each other. But this paper analyses their impact weights on be construed as a potential conflict of interest.
supply chain performance separately, without studying the
interaction of these factors based on interaction terms. 2) The
performance evaluation indicators constructed in this paper Publisher’s note
focus on the environment and economic benefits. There are
few indicators in the social dimension. All claims expressed in this article are solely those of the
In the future, all these limitations may become a new research authors and do not necessarily represent those of their affiliated
agenda. It is also possible to further study the interrelationship organizations, or those of the publisher, the editors and the
between environmental performance, social responsibility, and reviewers. Any product that may be evaluated in this article, or
governance. It can better improve the decision-making of claim that may be made by its manufacturer, is not guaranteed or
managers and reduce carbon emission. endorsed by the publisher.

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