Recent cases demonstrate that negative effects of sustainability-related scandals experienced by upstream suppliers can spill over to downstream firms. Thus, initiatives to help suppliers improve their sustainability performance are becoming increasingly essential for firms’ risk management in relation to supply chains. Thus far, the literature has yet to provide significant evidence on how firms can generate value from sustainable supplier development initiatives. In this study, we conduct dynamic panel data analysis of a dataset of 768 firm–year observations collected from four secondary sources, and find that sustainable supplier development initiatives can contribute to firms’ customer satisfaction, which further contributes to improved sales performance. Moreover, the relationship between sustainable supplier development initiatives and customer satisfaction is negatively moderated by firm reputation, yet positively moderated by the firm’s advertising intensity. These results provide robust evidence that customer satisfaction is a valid mechanism that links sustainable supplier development initiatives with improved sales performance.
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