The impact of sustainable public procurement on corporate ESG performance—The Chinese evidence

Abstract

Public procurement is an important bridge between public demand and market supply and may affect corporate behavior. However, in the advocacy of sustainable development, the extant research has rarely combined sustainable public procurement (SPP) with corporate ESG performance, to explore whether governments have contributed to the development of sustainable corporate performance through their sustainable procurement activities. This paper fills in the gap by matching the actual implementation of SPP of 42,369 projects in China over 2015~2020 with 20,125 corporate ESG performance data, to analyze the relationship between SPP implementation and corporate ESG performance. The results show that the implementation of SPP has a significant positive impact on corporate ESG performance. Further heterogeneity analysis reveals that the impact is stronger in China’s eastern and central regions than in other regions, and corporates at a mature stage are more likely to follow the government sustainable behavior. In addition, the implementation of SPP has a long-term effect on corporate ESG performance. The above findings have important policy implications: firstly, there is a better role for government to play as the “invisible hand”, to participate in the market economy; Specifically, SPP policy should be added to government policy tool box to improve corporate ESG performance in addition to disclosure requirement, and the SPP policy employed should in particular attend to the “missing sectors” of sustainability in SPP for the good of corporate ESG; secondly, the government should implement differentiated policies tailored to the region’s economic development conditions and corporate development characteristics; thirdly, a long-term evaluation mechanism should be established so that the government can play a more long-term demonstration and leading role.