The Effect of Sourcing Policies on Suppliers’ Sustainable Practices

Abstract

T o meet the growing demand for sustainably produced products, firms must be able to source sustainably produced parts from their suppliers. In this study, we analyze how a buyer (manufacturer or retailer) can use sourcing policies to influence their suppliers to adopt sustainable processes that can meet certain sustainability criteria. We study two sustainable sourcing policies commonly observed in practice, which influence suppliers' process decisions by committing to offer sustainable products. Under a Sustainable Preferred policy, a buyer commits to offering a sustainable product if she can source sustainably produced parts from the supplier, but will otherwise offer a conventional product. In contrast, under a Sustainable Required sourcing policy, a buyer will only offer a sustainable product, and therefore will only source from the supplier if he has adopted a sustainable process. Our results offer insights for managers by identifying how these sustainable sourcing policies influence upstream suppliers to switch to a sustainable process, and how this affects the ability of a downstream buyer to offer a sustainable product. We find that when the buyer sources from a sole supplier, the Preferred policy can deter the supplier from switching as compared to when the buyer remains noncommittal. However, only the Required policy can induce the supplier to switch. In contrast, when a buyer has multiple suppliers, the Preferred policy does not deter the supplier, but can induce him to switch to a sustainable process, similar to the Required policy. Accordingly, our results suggest that to induce the supplier to switch to a sustainable process, a buyer should adopt a Required policy when sourcing from a sole supplier, but utilize a Preferred policy when there are multiple suppliers.

Cascading Sustainability in Multi‐tier Supply Chains: When Do Chinese Suppliers Adopt Sustainable Procurement?

“…And requests for cascading are even less institutionalized. Moreover, cascading is difficult to Finally, most studies examining how procurement practices can improve sustainability have used samples of American or European buyers and involved resource-intense practices, such as providing sustainability training to suppliers or developing green products/packaging (Agrawal and Lee 2019, Amengual et al 2020, Awaysheh and Klassen 2010, Marshall et al 2019, Pagell et al 2010. Chinese manufacturing firms often lack such expertise and resources and operate under tremendous cost-reduction pressure.…”

The Role of Vendor Legitimacy in IT Outsourcing Performance: Theory and Evidence

“…Vendor moral legitimacy is challenged when inappropriate moral practices arise from disputed use of the IP and distribution or reverse engineering of software source code or other products. ITO contracts increasingly emphasize the institutionalization of standards, certifications, policies, procedures, and regulations on IP-related issues (Agrawal and Lee 2019;Bartley 2007). For instance, service level agreements (SLAs) in ITO contracts provide clear definition of confidential and secret information, which can help prevent data-related misconduct by the vendor (Benaroch et al 2016).…”

“…The second aspect of vendor moral legitimacy is related more broadly to judgements about vendor ethical standards and moral practices such as their corporate social and environmental responsibility (CSER). In sourcing in general (Agrawal and Lee 2019;Orsdemir et al 2019) and ITO in particular (Babin et al 2011;Babin and Nicholson 2009), contractual governance increasingly requires policies and provisions that mandate that vendors show responsibility and concerns for a diverse set of stakeholders beyond their clients. Such contractual clauses can foster a vendor's positive relationship with other, different stakeholders, including "employees, local communities, society-at-large, [and] the natural environment" (Flammer 2018(Flammer , p. 1302.…”

Can Brands Claim Ignorance? Unauthorized Subcontracting in Apparel Supply Chains

“…They conclude that supply chain partnership can greatly improve an industry's compliance. Different sourcing policies and the influence of supplier competition on the supplier's willingness to switch to a sustainable process are studied in Agrawal and Lee (2019). Greater downstream competition, a more concentrated supplier base, and a less flexible supply chain make a retailer more likely to source responsibly (Guo et al 2016).…”