ESG Legitimacy in EU Palm Oil Trade: The Signalling Role of NGO-Led Initiatives

There is an increasing number of NGO and commercial ESG ratings, yet credible evidence on
whether firms and buyers use these signals or gain benefits remains limited. This study
examines signal fit in the Malaysia to European Union palm oil supply chain, asking whether
ratings align with verification needs and influence disclosure and trade. We test whether
European buyers’ disclosure intensity is associated with the WWF Buyers Scorecard and
whether Malaysian producers’ SPOTT scores predict exports to the European Union in value
and volume. Methods combine practice focused dictionaries derived from NGO guidance,
dictionary-based text analysis of annual reports from 2014 to 2024, and panel regressions with
firm and year fixed effects, standard controls, and robustness checks. For the second objective,
we assemble an unbalanced panel of Malaysian producers covered by SPOTT, link firm
identifiers to European export records, and estimate fixed effects models. Sampling follows
NGO coverage for buyers and producers with non-missing reports and trade observations.
Findings show buyers’ disclosure increases with the WWF score after 2020, while producers’
SPOTT scores do not significantly explain export outcomes, which indicates a signal use gap.
The study benefits companies and regulators by providing replicable indicators and an
actionable roadmap to align disclosure and practice evidence with European buyer expectations
and the evolving requirements of the European Union Deforestation Regulation.