Does supplier ESG rating divergence affect customer stability? Evidence from China

Purpose Drawing on signaling theory, this study examines whether divergence in supplier environmental, social and governance (ESG) ratings affects customer stability in supply chains, shifting attention from ESG performance levels to cross-rater disagreement. Design/methodology/approach Using panel data on Chinese A-share listed firms from 2015 to 2022, we estimate fixed-effects models. Findings Supplier ESG rating divergence significantly reduces customer stability. The effect operates through higher information asymmetry, tighter financing constraints and greater reputational risk and is stronger for firms with weaker ESG performance, non-state ownership, high customer concentration, intense market competition and decline-stage status. Originality/value This study contributes to the literature on ESG and supply chain management by identifying signal inconsistency as a unique governance risk when divergent ESG assessments weaken signal interpretability and increase buyers' verification and legitimacy concerns. Critically, it challenges the implicit assumption of informational clarity prevalent in prior sustainable sourcing studies. By shifting the analytical focus from investor-centric outcomes to supply chain relational governance, the findings provide theoretical and practical insights for mitigating ESG uncertainty and enhancing the robustness of supply chain relationships.