Boldly going where firms have gone before? Understanding the evolution of supplier codes of conduct

AuthorSebastian Brockhaus, Stanley E. Fawcett, Sammuel Hobbs, Adoley Simone Schwarze
DOIhttps://doi.org/10.1108/IJLM-02-2018-0043
Pages743-771
Publication Date12 Aug 2019
Boldly going where firms
have gone before? Understanding
the evolution of supplier
codes of conduct
Sebastian Brockhaus
Department of Management, Marketing, and Supply Chain,
John Carroll University, University Heights, Ohio, USA
Stanley E. Fawcett
Department of Business Administration,
Weber State University, Ogden, Utah, USA, and
Sammuel Hobbs and Adoley Simone Schwarze
Weber State University, Ogden, Utah, USA
Abstract
Purpose Supplier codes of conduct (CoC) are the primary mechanism companies use to drive corporate
social responsibility (CSR) upstream in their supply chains. Companies have traditionally used CoC to tackle
systemic social issues (e.g. forced labor, wages and working conditions). More recently, CoC have included
environmental concerns (e.g. waste treatment, toxic chemicals and pollution). The purpose of this paper is to
analyze how companies have evolved their CoC across four points in time between 1999 and 2017. By
evaluating changes in the scope, depth and possible regime of sanctions included in CoC, the authors consider
whether companies use CoC as either a leveling or a differentiating mechanism.
Design/methodology/approach The authors employ a competing-theories approach to examine how
companies have employed CoC. Specifically, the authors examine the content of CoC between four data points:
1999, 2005, 2010 and 2017 to determine whether CoC are used to maintain comparative parity (institutional
theory) or to achieve a distinctive market presence (awarenessmotivationcapability (AMC) framework).
The sample includes 36 transnational companies. To enable replication, the authors maintained consistent
sampling and coding procedures across the four time periods.
Findings The authors find a significant harmonization and standardization of CoC over time. Alignment
occurs at the lower end of acceptable norms i.e. a lowest-common-denominator approach. Companies have
not chosen to take a more aspirational approach that involves raising the bar on social and environmental
performance. That is, companies have not attempted to use CoC to differentiate themselves as CSR standard
bearers. Provision specificity dropped for the 2010 sample before rebounding in 2017.
Originality/value The authors juxtapose the findings with a theoretical framework based on the tenets of
institutional theory and the AMC framework. The authors conclude that changes in CoC are largely driven by
coercive, normative and mimetic isomorphism as opposed to attempts to leverage CoC to create a distinctive
image that could be used for competitive advantage. This finding provides context for how the public,
investors and managers should view these documents.
Keywords Sustainability, North America, Europe, Asia, Buyersupplier relationships, Supplier management,
Mixed method, Sourcing and supply
Paper type Research paper
Introduction
Despite recent instances of economic protectionism, the world is as globalized as ever (Stiglitz,
2017). After a serious, but essentially temporary, dent due to the Great Recession of 2008, global
trade has grown steadily (WTO, 2017). Transnational corporations based i n western markets
continue to rely on low-cost inputs from emerging economies to fuel growth. Sourcing labor
and natural resources at a fraction of the cost compared to home market costs dramatically
improves margins and economic viability (Sindi and Roe, 2017; Tate and Bals, 2017).
The International Journal of
Logistics Management
Vol. 30 No. 3, 2019
pp. 743-771
© Emerald PublishingLimited
0957-4093
DOI 10.1108/IJLM-02-2018-0043
Received 23 February 2018
Revised 20 October 2018
29 March 2019
21 May 2019
Accepted 23 May 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0957-4093.htm
743
The evolution
of supplier
codes of
conduct
However, with the low-cost benefits of global sourcing comes theneed to answer to the social
and environmental concerns of the affluent and increasingly deman ding western consumer
(Lins et al., 2017; Shin et al.,2017;Sinkovicset al.,2016;Tateet al., 2010).
While enjoying (if not demanding) low costs of imported goods and services, a growing
percentage of western consumers have shown little tolerance for news regarding abusive
and exploitative working conditions in the countries of origin of their purchases. Many
western consumers may be oblivious to (or actively in denial of ) the logic that rock-bottom
prices are naturally connected to very low wages for labor-intensive products such as
apparel (Barnett, 2014). Yet, they react allergicallyto the cognitive dissonance created by
the documentation of child and forced labor, hazardous working conditions and (more
recently) gross environmental misconduct (Gardetti and Torres, 2017; McNeill and Moore,
2015; Schäufele and Hamm, 2017).
Table I depicts recent examples of obvious misconduct of apparel companies (or rather
their suppliers) in emerging economies and the companiesresponses to the misconduct.
The data reveal that transnational companies face a conundrum. They must fulfill the
low-price expectations of consumers that they themselves have created a fact that makes
reshoring production to high-cost consumer markets such as the USA or Western Europe
difficult (Tate and Bals, 2017). But they also need to purge obvious social and
environmental misconduct from their supply chains in order to protect brand image a
potentiallydifficultandcostlyendeavor (Minor and Morgan, 2011; Odriozola and
Baraibar-Diez, 2017; Shamma, 2012).
Importantly,the proverbial corporate socialresponsibility (CSR) buckdoesnot stop with
in-house operations but extends well into the supply chain of transnationals across multiple
tiers (Brockhaus et al., 2013; Fawcett et al., 2015; Mena et al., 2013; Seuring and Müller, 2008;
Tachizawaand Wong, 2014). In each instance depictedin Table I, the reported misconduct did
not occur at the companyin question but at the companys suppliersor its supplierssupplier.
Even so, the transnational company incurred the brand damage. Notably, non-governmental
organizations(NGOs) have made it their goal to call out and documentcorporate misconduct,
making sure to attach the blame to the western brand. Their goal is to increase public
backlash and raise the cost of irresponsiblecorporate behavior (Graafland, 2018). Thus,
transnationalsneed a way to protect their operationsand brands from reputational risks.
Codes of conduct (CoC) emerged as a tool to promote socially responsible supplier behavior
and provide immunization against potentially toxic press (Emmelhainz and Adams, 1999;
Magnan et al., 2011; Multaharju et al., 2017).
CoC are legal documents that companies use to communicate and enforce socially
responsible standards such as employee rights, working conditions, maximum hours and
the minimum age for workers. More recently, some companies have expanded their CoC to
include standards for environmental factors such as waste management, use of resources
and recycling throughout their upstream supply chain (Erwin, 2011; Seuring and Müller,
2008). In its CoC, a company establishes the ground rulessuppliers need to abide by in
order to do business with the company. Importantly, CoC are a one-way-street: they
mandate the behavior of the supplier. This means that CoC are the tool of choice to extend
CSR programs of companies upstream into their supply chain (Carter and Easton, 2011;
Christensen et al., 2007; Multaharju et al., 2017; Seuring, 2011). Thus, an analysis of the
changes in CoC provisions over time provides insight into emerging trends in CSR.
Therefore, our goal is to explore the evolution of CoC and provide answers to the following
research questions:
RQ1. How have CoC evolved over time?
RQ2. How rigorous are CoC and how have they been implemented by companies?
RQ3. What motivates firms to pursue and evolve their CoC?
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