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

• DOI: https://doi.org/10.1108/IJLM-02-2018-0043
• Published date: 12 August 2019
• Pages: 743-771
• Date: 12 August 2019
• Author: Sebastian Brockhaus,Stanley E. Fawcett,Sammuel Hobbs,Adoley Simone Schwarze
• Subject Matter: Management science & operations

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 (awareness–motivation–capability (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, Buyer–supplier 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 “allergically”to 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 companies’responses 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) “buck”doesnot 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 company’s suppliersor its supplier’ssupplier.

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 “irresponsible”corporate behavior (Graafland, 2018). Thus,

transnationalsneed a way to protect their operations–and 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 rules”suppliers 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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