From waste to wealth: How sustainable supply chain management shapes the link between waste management and investment efficiency?

Despite growing corporate sustainability initiatives, the direct relationship between waste management practices and investment efficiency remains largely unexplored, particularly regarding how sustainable supply chain management moderates this relationship. This study investigates the relationship between waste management and investment efficiency, offering new insights into how sustainable supply chain management affects this relationship. A sample of 1458 firm-year observations from S&P 500 firms was collected from Bloomberg and Refinitiv databases between 2010 and 2023. This study uses instrumental variables quantile regression (IVQR) to address potential concerns of endogeneity. The findings reveal that effective waste management significantly enhances investment efficiency. A 10-percentage point increase in recycling ratio reduces investment inefficiency by 0.73 basis points, while a 10-percentage point increase in total waste increases investment inefficiency by 3.83 basis points. The IVQR results confirm these findings while revealing significant moderating effects of sustainable supply chain management. Specifically, sustainable supply chain practices reduce the negative impact of total waste on investment efficiency, particularly for firms in the 90th percentile of investment inefficiency. Conversely, these practices diminish the positive effects of recycling on investment efficiency for high-inefficiency firms, suggesting that operational complexity arising from concurrent recycling and supply chain management initiatives may impair the effectiveness of capital allocation. These findings suggest that managers should strategically sequence waste reduction and supply chain sustainability initiatives to minimize operational complexity. Meanwhile, regulators should implement differentiated policies, emphasizing waste reduction incentives for high-waste firms and providing tailored recycling support based on each firm's efficiency profile, to optimize investment outcomes.