Key Drivers of Environmental, Social, and Governance Practices in Taiwan’s Manufacturing Industry: Digital Supply Chain by Hybrid Delphi Technique and Analytical Hierarchy Process ^†

Abstract

Environmental, social, and governance (ESG) has become a concern for companies, investors, and regulators. Its significance cannot be underestimated, as stakeholders increasingly demand accountability and transparency regarding corporate practices in these areas. Government agencies enforce laws mandating companies adhere to established ESG standards in response. However, despite these regulatory pressures, several obstacles have hindered organizations from effectively implementing sustainability initiatives, often resulting in lackluster outcomes. In this study, we developed a framework to implement ESG principles across various companies, utilizing the critical success factor (CSF) theory. By incorporating the perspectives of stakeholders, we identified the essential elements to achieve ESG. The developed framework in ESG studies employed the hybrid Delphi technique and the analytical hierarchy process (AHP), a structured method for organizing and analyzing complex decisions. Based on the results obtained from targeted questions, variables that influence ESG performance were identified. The effectiveness of different sustainability initiatives was also assessed to understand stakeholder engagement strategies and evaluate the impact of organizational culture on ESG adoption.

1. Introduction

In the supply chain, raw materials are transferred for industrial manufacturing [1] and converted into waste after manufacturing in a linear economy. However, the linear economy model cannot balance supply and demand for natural resources [2]. Furthermore, a business strategy to preserve natural resources and the environment, innovative manufacturing techniques, models, and services are related to climate change and ecosystem degradation globally [3,4,5]. Okorie et al. stated that supply chains are the origin of the circular economy (CE), which offers environmentally friendly corporate solutions and strategies [6]. According to Kouhizadeh et al. [7], CE aims to extend the life cycle of products and materials, add value to them, and renew them till the end of their useful lives. Due to the growing cost, complexity, unpredictability, and susceptibility of the supply chain due to the CE attribution, managers look for better, faster, and less expensive vertical and horizontal supply chain collaboration.

To overcome the aforementioned challenges [8,9], provide sustainable output [10], and minimize human–machine interaction for the adoption of sustainability practices and CE principles [11], supply chains must also be innovative. The digital supply chain is a powerful means for sustainability. It aims to reduce environmental impact, improve efficiency, and promote social responsibility. Digital technologies provide tools and frameworks to enable and enhance circularity within supply chains.

Environmental, social, and governance (ESG) factors increasingly play a significant role in corporate decision-making and performance evaluation. ESG policies boost companies’ stock liquidity [12] and cumulative abnormal returns [13]. However, stakeholders are worried about ESG and how companies handle them. For example, investors look for ESG data to identify sustainable companies. Therefore, ESG factors are included in risk management, performance evaluation, and strategic decision-making. The leading cause is the pressure from numerous stakeholders, such as workers, investors, clients, and regulators, who demand that companies demonstrate accountability and openness about ESG matters.

ESG principles are adopted to enhance supply chain resilience by positively impacting a company’s willingness to adopt innovative technologies with technology adoption and improved supply chain resilience [14]. ESG management in the supply chain positively impacts supply chain resilience through information network capability and emerging information technologies. Supply chain collaboration, supply chain management capabilities, supply chain risks, and green-product innovation positively impact a company’s willingness to adopt innovative technologies, subsequently leading to positive effects on supply chain resilience and performance [15].

Therefore, it is necessary to understand the obstacles to putting ESG into practice in the manufacturing supply chain based on variables and research questions in the previous studies, is the basis of this study.

2. Methodology

We employed methods that combine qualitative and quantitative research techniques. By integrating various methodologies, factors influencing ESG implementation across various organizations were determined. Stakeholder interviews and focus group discussions were conducted along with data collection through surveys. The data collected were analyzed using the Delphi technique and the analytical hierarchy process (AHP). The variables identified were used to construct the questionnaire (Figure 1). We conducted a literature review by gathering and examining publications from reliable academic sources, including Google Scholar, Web of Science, and ScienceDirect. We chose publications to assess and compare the results of this study with those of previous studies. The Delphi and AHP techniques were used to identify important variables. The Delphi technique was used to collect expert opinions agreed on variables. At the same time, AHP was used to assign weights to these variables according to their relative importance.

3. Result and Discussion

3.1. Variable

Critical success factors (CSFs) are essential for organizations to enhance sustainability and long-term value creation through ESG integration. These factors guide the effective implementation and management of ESG strategies: corporate governance [16], long-term value creation [17,18], stakeholder engagement [17,19], transparency and reporting [17,18], senior management involvement [17,18], risk management [17], use of technology and data [18]. Martiny et al. [20] selected 14 variables for the implementation of ESG: company strategy, company characteristics, CEO features, CEO compensation, corporate governance, audit committees, investor relationship, regulatory framework, country governance, industry, period, economic development, financial performance, and market performance. Khamisu et al. [21] chose 20 variables: financial performance, market performance, environmental performance, earnings quality, ESG reporting guidelines, board size, board diversity, board independence, signaling future performance, third-party ratings, mandatory disclosure policies, managerial attributes, company characteristics, demand by stakeholders, presence of CSR committee, ESG materials, reputation insurance, disclosure costs, audit and assurance, reduced information system.

The following variables were chosen based on discussion with experts in the Delphi method: company strategy, company characteristics, chief executive officer (CEO) features, CEO compensation, corporate governance, audit committees, investor relationship, regulatory framework, country governance, industry, period, economic development, financial performance, market performance, environmental performance, earnings quality, ESG reporting guidelines, board size, board diversity, board independence, signaling future performance, third-party ratings, mandatory disclosure policies, managerial attributes, company characteristics, demand by stakeholders, presence of CSR committee, ESG materials, reputation insurance, disclosure costs, audit and assurance, reduced information system. The variables were validated using AHP.

3.2. AHP

The variables were chosen using AHP [22] and ranked based on their weight. After using AHP, variables prioritized in the model development process were identified. These variables were validated by using the consistency ratio. The consistency index (CI) was calculated using Equation (1).

$$\mathrm{C}\mathrm{I}={\displaystyle \frac{{\mathsf{\lambda }}_{\mathrm{m}\mathrm{a}\mathrm{x}}-\mathrm{n}}{\mathrm{n}-1}}$$

(1)

where ${\mathsf{\lambda }}_{\mathrm{m}\mathrm{a}\mathrm{x}}$ The term “maximum value of Eigenvalue” refers to the highest eigenvalue of a matrix, and n represents the order or size of the matrix. Finally, it is necessary to compute the consistency ratio (CR) by dividing the consistency index by the random consistency index using Equation (2).

$$\mathrm{C}\mathrm{R}={\displaystyle \frac{\mathrm{C}\mathrm{I}}{\mathrm{R}\mathrm{I}}}$$

(2)

The CR was 0.07, which indicated that the weights were consistent. The weight of the variables was calculated based on the Pareto rule.

Institutional investors, board independence, media monitoring, perception of CSR, formal institutions, industrial visibility, board diversity, board size, and earnings quality had low weights (Figure 2). Therefore, they were not used in the next stage.

Table 1. Variables and categories.

Variables	Categories
Non-financial characteristics	Company characteristics
Managerial attributes
Financial characteristics
Financial Performance	Performance
Market Performance
Environmental performance
Third-party ratings
Signaling future performance
Strategic Orientation	Strategy
Diversity on the board of directors	Corporate governance
Board activity
Sustainability governance of the company
The company’s organizational visibility
Investors	Investors relation
ESG reporting and disclosure	ESG adoption
ESG materiality
ESG reporting guidelines
Mandatory disclosure policies
Audit and assurance
Technology and competition	Technology

shows the variables grouped by organizational characteristics, performance, strategy, corporate governance, investor relations, ESG adoption, and technology. These variable were used for constructing questions (

Table 2. Variables and questions.

Variables	Questions
Name
Company
Category	Small Medium Large
Position
Education
Gender
Age
Organizational Characteristics	Are there specific budgets allocated for ESG-related projects?
	How does the company balance financial performance with ESG investments?
	Does the company have a clear strategy to reduce its carbon footprint? How does the company manage its waste and recycling programs? Are there any certifications or benchmarks achieved related to sustainability (e.g., ISO 14001)?
Performance	Does the leadership team demonstrate commitment to ESG initiatives?
	How transparent is management regarding ESG-related performance?
	How does the company balance ESG initiatives with profitability goals?
	How have ESG announcements impacted the company’s stock price or market value?
	What metrics evaluate the company’s environmental performance (e.g., emissions, energy usage)?
Strategy	What is the company’s current ESG rating from recognized third-party organizations (e.g., MSCI, Sustainalytics)?
Corporate Governance	What future ESG goals and targets has the company set, and are they publicly disclosed?
	Does the company have a long-term strategic plan that integrates ESG priorities?
	How does board diversity contribute to the company’s strategic decision-making and ESG performance?
	Are there dedicated committees (e.g., sustainability or ESG committees) within the board structure?
Investors Relation	How is sustainability performance tracked, reported, and communicated to stakeholders?
ESG Adoption	How does the company promote its ESG efforts and achievements to stakeholders (e.g., through reports, media, or campaigns)?
	How does the company communicate its ESG strategy and performance to investors?
	Does the company have a formal ESG reporting framework in place?
	How does the company identify material ESG issues relevant to its industry and operations?
	Which ESG reporting frameworks or standards does the company follow (e.g., GRI, SASB, TCFD, CDP)?
Technology	What ESG information is disclosed to comply with local, regional, or international regulations?
	Are ESG reports independently audited or assured by third-party companies?
	What technologies has the company adopted to promote sustainability and reduce environmental impact?

).

4. Conclusions

A framework for implementing ESG principles across various companies was developed based on the CSF theory. By incorporating the perspectives of stakeholders, we identified the variables for the achievement of ESG goals. Twenty variables were selected for this research and classified into seven groups. The variables were used for data collection related to ESG. These variables ensured that ESG was embedded into the supply chain process and aligned with business goals. By prioritizing these variables, companies need to enhance their competitiveness, reduce risks, and develop long-term value, in addition to meeting ESG goals. Integrating ESG factors into digital supply chains is crucial for sustainable, ethical, and responsible business practices while enhancing efficiency.