just do it? the adoption of sustainable supply chain ......european brands (such as primark,...

Big corporations are of considera-ble importance worldwide. In 2009,44 of the 100 largest economicentities were corporations (Keys &Malnight, 2009). Their impact goeswell beyond legal frontiers. A largepart of world trade is organized bymajor multinational firms throughsupply networks (Gereffi et al.,2001; Millington, 2008) in whichmultinational companies (MNCs)have an influence on what is to beproduced and how (Gereffi et al.,2001).

At the same time, MNCs areincreasingly being held accoun-table for actions beyond theirboundaries, raising the importanceof managing their supply chains,particularly in emerging markets(Millington, 2008; Visser, 2008).They have therefore establishedsustainable supply chain mana-gement (SSCM) initiatives tomonitor the social and environ-mental performance of their

suppliers and improve their overallperformance. Seuring and Müller(2008, p. 1700) define SSCM “as themanagement of material, informa-tion and capital flows as well ascooperation among companiesalong the supply chain while takinggoals from all three dimensions of sustainable development, i.e.,economic, environmental andsocial.”

SSCM initiatives include supplierassessment tools, codes ofconduct, and collaboration withsuppliers (Gimenez & Tachizawa,2012). Some of these initiatives canalso be structured as formal SSCMdevelopment programs, built asintegrated management systems,covering a list of requirementsrelated to sustainability perfor-mance (environmental, social, andeconomic dimensions) andoperational processes (qualitymanagement). Suppliers joining theprogram are then likely to be

Although many multinational companies are engaged in formalsustainability programs in order to upgrade social and environmentalconditions within their supply chains, little is known about adoption atthe supplier’s level. Using neo-institutional theory and building on an in-depth case study of a middle-sized supplier of a multinational company inthe food industry in Latin America, we explore how the firm integratesthe requirements of a supplier development scheme and to what extentthese demands are diffused to next-tier suppliers. Beyond coercivepressures, our results reveal the role of embedding sustainability demandsinto local network ties to foster adoption and diffusion in the upstreamchain.

Keywords: sustainable supply chain management, adoption of social andenvironmental practices, Latin America, neo-institutional theory

Just Do It? The Adoptionof Sustainable SupplyChain ManagementPrograms from a SupplierPerspective

76Supply Chain Forum An International Journal Vol. 15 - N°1 - 2014 www.supplychain-forum.com

Pilar Acosta PhD student, ESCP Europe, Paris, France

[email protected]

Aurélien AcquierAssociate professor, ESCP Europe,

Paris, France

Olivier DelbardProfessor, ESCP Europe, Paris, France

© Copyright KEDGE BSISSN print 1625-8312ISSN online1624-6039

An International JournalSupply Chain Forum

audited by the client or any otherexternal party to check theapplication of the program withintheir daily processes (e.g., thesupplier development programdeveloped by IKEA; Andersen &Skjoett-Larsen, 2009).

As such, SSCM programs hold thepromise of increasing suppliers’environmental capabilities (Lee &Klassen, 2008) and of diffusingsocial and environmental ideas andpractices along the supply chain(Carbone et al., 2012). However,recent crises, such as the RanaPlaza collapse in Bangladesh,which killed over 1,100 workers andinjured another 1,000, suggest thatthe relevance and effectiveimplementation of such programscannot be taken for granted.Several North American andEuropean brands (such as Primark,Walmart, Mango, and Benetton)were clients of Rana Plaza and haddeveloped SSCM programs.

So far, less attention has been givento SSCM at the supplier’s level(Ayuso et al., 2013), and only fewstudies have explored the role ofSMEs in SSCM programs (e.g.,Jorgensen & Knudsen, 2006;Pedersen, 2009). As a result,although one better understandswhy MNCs get involved in suchprograms, less is known about theirdiffusion and impact along thechain. The situation is even morecomplex because many of thesesuppliers are small and medium-sized enterprises (SMEs),accounting for more than 90% ofthe worldwide business network(Jenkins, 2004). Some organiza-tional characteristics of SMEs, suchas limited resources, lack of skillsand knowledge, and prevalence ofinformal systems (Gimenez &Tachizawa, 2012; Hall & Matos,2010; Lee & Klassen, 2008; Russo &Tencati, 2008), may lead todecoupling (Meyer & Rowan, 1977)or, at least, limit the adoption ofSSCM practices.

In order to better assess thetransformative power of multina-tional companies in emergingmarkets, this article explores theconditions leading suppliers toresist, fake transformation, or

transform their social andenvironmental practices inresponse to SSCM programs. Usinga neo-institutional approach, weexplore SSCM from the perspectiveof the first-tier supplier of a largeMNC subsidiary. We build on asingle case study of a middle-sizedcompany operating in the sugarindustry in Latin America(Colombia) and acting as a first-tiersupplier of a multinationalsubsidiary in the agro-food sector.The company is part of a suppliermanagement program establishedby the multinational in 2009. Thisprogram is based on a continuousimprovement approach, includingeconomic, social, and environ-mental evaluation criteria.

This article explores how suppliersadopt SSCM programs andeventually transmit them onto theirown suppliers according toinstitutional factors. To do so, weconsider, on the one hand, theprograms as a set of differentinstitutional demands and exploreto what extent each demand isinfluenced by relationships withinthe organizational field. On theother hand, we analyze the strategyof the supplier in responding toeach of the MNC’s demands (Oliver,1991) and the diffusion of thesesustainability requirements to itsown suppliers.

Our results reveal different degreesin the adoption of sustainabilitydemands (ranging from acquie-scence to avoidance), suggestingthat suppliers adopt and diffuse

SSCM programs selectively andpartially rather than exhaustively.Overall, our study reveals the central role of network ties(such as the relationships withindustry associations) in adoptionprocesses: such network tiescontribute to reducing theinstitutional distance (Kostova,1999) separating the SSCM programfrom the local context.Unexpectedly, we also found thatsuppliers may transmit somesustainability demands in theupstream chain (i.e., imposingsustainability demands onto theirown suppliers) while decouplingthese practices within their ownorganizations.

This article sheds light on twoareas of sustainable supply chains.First we take a broad look at sustainable supply chains,including social and environmentalpractices, because a considerableamount of research on SSCM hasbeen conducted in the environ-mental area (Carter & Easton, 2011;Sarkis, 2012) but has rarelycombined both social andenvironmental issues (Ashby et al.,2012). Second we broaden thescope of analysis by includingdifferent levels of the supply chainin the context of an emergingmarket and by adopting an SMEsupplier perspective. Using neo-institutional theory enables us to connect various externaldimensions (Sarkis, 2012)influencing SSCM initiatives andaddress the “relative dearth in theuse of a theoretical lens” in theSSCM literature (Carter & Easton,2011, p. 55). From a managerialperspective, we offer insights intowhat practices are best tackled bySMEs in emerging markets, givinginputs on how to design adaptedsupplier development programs.

This article is structured in fourparts. We first introduce ourliterature review and bring forthour propositions. The second partof the article is dedicated to theempirical set and methodologyused. Our results are thensummarized and discussed, leadingto a final conclusion on thelimitations of our research.


How do suppliers

adopt SSCM

programs and

transmit them onto

their own suppliers?

Literature review

Companies are embedded in inter-organizational ties fostering theadoption and implementation ofnew practices (Owen-Smith &Powell, 2008; Westphal et al., 1997).In the case of supply chainrelationships, demands for socialand environmental responsibilitymay be analyzed through the lensof resource dependence theory(Pfeffer & Salancik, 1978), in whicha powerful client uses coercivepressure through audit schemes tocontrol practice implementation.Neo-institutional theory adopts anextended perspective on adoption,which, beyond coercive pressures,may result from wider socialpressures for conformity within the institutional environment(Boxenbaum & Jonsson, 2008;DiMaggio & Powell, 1983, Oliver,1991). Furthermore, coercivepressure alone may lead tosymbolic adoption (Meyer &Rowan, 1977; Kostova & Roth,2002).

Institutions that can be defined asenduring, constitutive elements ofsocial life, providing stability andmeaning to it (Scott, 2001), aresustained by three pillars, namely,cognitive (shared understandingsshaping behavior), normative(expectations in specific socialsettings), and regulative (formaland legal rules). Within thisinstitutional context, organizationsare facing pressures from a varietyof actors to adopt new practices.These actors may be at theindustry or regulatory levels orwithin professional networks in theorganizational field; additionally,the variety and intensity of therelationship is likely to influencethe adoption process (Ansari et al.,2010; Raffaelli & Glynn, 2014;Westphal et al., 1997).

Although there has been extensiveresearch on the diffusion ofpractices, not only do we “lack adeep understanding of SSCMdiffusion mechanisms at the inter-organizational level” (Carbone etal., 2012, p. 27) but also there hasbeen a “relative neglect of practicevariation at the organizationallevel” (Ansari et al., 2010, p. 67). We

have opted in this article for a neo-institutional perspective1 in orderto better understand how differentinstitutional pressures influencethe adoption of SSCM practices andtheir diffusion to next-tiersuppliers.

Adoption of sustainable supplychain management programs

Adoption of SSCM at the supplier’slevel has received less attention insupply chain managementliterature (Ayuso et al., 2013) so far.According to a recent literaturereview, only 8% of the articlestargeted the supplier as the unit ofresearch analysis (Brammer et al.,2011). Most studies adopt a client-centered approach, exploring thedrivers, enablers, and strategies ofeither MNCs or SMEs acting asclients. Previous studies on SSCMand SMEs (see Table 1) have shown that SMEs share somecharacteristics challenging SSCMimplementation, such as limitedknowledge at the national andorganizational levels or lack ofresources. In the case of developingcountries, the cultural environmentseems to constitute another barrierto successful diffusion of corporatesocial responsibility (CSR) alongthe supply chain. However, currentresearch lacks approaches from aSME supplier’s perspective tounderstand how - and to what extent - sustainability-relateddemands are integrated. Wetherefore believe that a study at theintra-organizational level specifyingthe degree of adoption and theinterplay among different pressuresfor adoption is likely to enrich ourunderstanding of the conditionspertaining to effective adoption ofSSCM programs.

Oliver (1991) identified five levelsof strategic responses that may beunderstood as incremental levels ofadoption (Goodstein, 1994; Ingram& Simons, 1994): (1) acquiesce:firms accede to pressure withdifferent degrees of consciousobedience, (2) compromise:organizations balance betweenconflicting demands or incon-sistencies between institutionalexpectations and organizationalobjectives, (3) avoid: organizations

attempt to preclude the necessityof conformity, (4) defiance:organizations actively rejectinstitutional processes, and (5)manipulation: organizations aggre-ssively exert power over thecontent of external expectations inorder to change them.

As such, adoption of sustainabilitypractices in the case of SSCMprograms cannot be taken forgranted as a voluntary reaction tocoercive pressure from clients.Other variables, such as theattitude toward practice, theconfiguration of multiple exog-enous pressures, or the compliancewith internal objectives, have to betaken into account so as tounderstand adoption (Crilly et al.,2012; Kostova & Roth, 2002; Oliver,1991).

Adoption is generally higher wheninstitutional pressures are strong,the benefits of the new practicebeing perceived as important andthe presence of multiple andcontradictory expectations low(Goodstein, 1994; Ingram & Simons,1994; Oliver, 1991). By contrast,lower levels of adoption anddecoupling are likely to occur whenmembers from the targetorganization do not perceive thevalue of the practice (Kostova &Roth, 2002; Oliver, 1991), leading todecoupling. Decoupling couldmanifest itself as an avoidancestrategy in which the company mayengage in window dressing (Oliver,1991; Scott, 2001) or when there is asymbolic adoption of practices,disconnecting discourse frompractice in order to makelegitimacy compatible withtechnical efficiency constraints(Meyer & Rowan, 1977).

The following propositionsregarding levels of adoption ofSSCM practices may thus be putforward:


1. Although we acknowledge that sta-keholder theory may also be usefulto understand responses as the resultof power, legitimacy, and urgency ofdifferent stakeholders (Mitchell et al.,1997), neo- ‐institutional theory enablesthe integration of the organization’ssocial context, including explanations foradoption beyond coercive pressure.

Proposition 1a: Higher levels of adoption of apractice may be associated with apositive perception of theusefulness of the practice for thetarget organization.

The adoption of a practice is alsopositively correlated with higherlevels of knowledge about thepractice at the supplier andcountry levels (Kostova & Roth,2002). As companies have more

knowledge of the practice,employees will be less uncertainabout the efficiency of the practice,thus encouraging its implementa-tion. This follows to the nextproposition:


Table 1Empirical studies on SSCM and SMEs

Proposition 1b: Higher levels of adoption of apractice may be associated withhigher pre- existing knowledgerelated to that practice at thecountry and organizational levels.

Supply chain relationships play akey role in the diffusion of SSCMpractices (Ciliberti et al., 2008;Kovács, 2008; Lee & Klassen, 2008).However, relational networkswithin the organizational field exerta positive influence over practiceadoption (Raffaelli & Glynn, 2014;Westphal et al., 1997), thus “anyeffort to understand institutionalprocesses must take networks intoaccount and vice versa” (Owen-Smith & Powell, 2008, p. 594). Themost influential inter-relationalpressures in the organizational fieldmay be mimetic from industrynetworks and normative fromprofessional networks (Raffaelli &Glynn, 2014). We then constructproposition 2 as follows:

Proposition 2: Higher levels of adoption of apractice are more likely to occurwhen the client’s demand is backedup by other network ties.

Suppliers as transmitters ofsustainable supply chainmanagement programs

Suppliers may diffuse social andenvironmental demands fromclients to their own suppliers. Theliterature addressing suppliers asclients is noticeably less developed(Ayuso et al., 2013; Ciliberti et al.,2008; Millington, 2008; Pedersen,2009).

Kovács (2008) shows thatenvironmental demands forresponsibility may go beyond first-tier suppliers. Jorgensen andKnudsen (2006) stress the fact thatSMEs do not set the standards fortheir suppliers, rarely pass onrequirements to their suppliers,and in most cases do notcommunicate or verify suchrequirements. By contrast, Ayusoet al. (2013) found that SMEs passon approximately the samerequirements they receive fromtheir clients.

Evidence is therefore not yetconclusive about the reasons fordiffusion and which demands arediffused to the next-tier supplier,particularly for SME suppliers: “itcannot be asserted if surveyedSMEs actually pass on require-ments to the next tier of the supplychain because customers imposethis or if they do it for otherreasons” (Ayuso et al., 2013, p. 20).For instance, are adopted demandssystematically diffused to next-tiersuppliers? This leads us to thefollowing proposition:

Proposition 3: Diffusion to the next tier level ismore likely to occur when there arehigher levels of adoption of thepractice and when other networkties reinforce the practice.

Methods

Our empirical material is based ona study of three levels of a supplychain in the food industry.Specifically, we conducted an in-depth case study of the SMEsupplier of a multinationalsubsidiary in Colombia operating inthe sugarcane industry. We usedinterviews, observation, andinternal document analysis. Thismaterial was supplemented byinterviews at the client (themultinational’s subsidiary) and thenext-tier supplier levels. One of theresearchers has been following thefocal company since June 2011.

Context

The sugar industry is economicallyimportant in Colombia because itrepresents 0.5% of GDP andaccounts for 265,000 jobsthroughout its value chain(Arbeláez et al., 2010). Worldwide,sugar is one of the most traded andconsumed commodities. Worldtrade of raw sugar representedapproximately 50 billion US dollarsin 2012–2013 (United StatesDepartment of Agriculture, 2013)with an average global consum-ption of 160 million tons per yearbetween 2007 and 2011. Sugarproduction is dominated byemerging markets, whereas majorsugar importers are the United

States, Europe, China, andIndonesia. Of the sugar obtainedfrom sugarcane, 80% is used by awide range of industries, mainly infood and beverages.

Meanwhile, the industry is sociallyand environmentally controversial.It has been through several boutsof tension with the surroundingcommunities and particularly itslow-skilled workers (sugarcanecutters and factory workers), and ithas had a long history of strikesand conflicts since the 1930s(Sánchez Ángel, 2008). Theindustry is currently facing a seriesof challenges, such as wage terms,fair conditions to suppliers, andlabor and human rights (Maloni &Brown, 2006), which areparticularly salient in emergingmarkets. In 2008, a major strikefrom sugarcane cutters asking forbetter work conditions blockedaccess to the production site fortwo months. Regarding environ-mental practices, communitieshave historically blamed sugarcanemills for using water for plantationsand polluting them. Thus, thecompany under study is not onlyfacing coercive pressures fromclients but also is under pressurefrom different local stakeholdersregarding its social and environ-mental impacts.

In response to these environmentaland social issues, the industry setup a formal association, founded in1959 as a response to the threat ofrural reform and social unrestamong workers (Sánchez Ángel,2008). Today it holds committeemeetings on a regular basis andofficially promotes sustainabledevelopment.

The focal company

Surrounded by sugarcaneplantations, the focal company islocated in a rural area, with thenearest village having approxi-mately 900 inhabitants. Theremains of a small village are stillvisible on the company site: officesare spread out with some of theadministrative buildings beingformer employee houses. LatinAmerica has a long history ofphilanthropic and paternalistic


approaches in its business-societyrelationship (Sanborn, 2006). At thebeginning, the company housedmost of its employees. The mill wasfounded in the 1940s by a wealthylocal family who first lived next tothe mill. Today, the owner familystill holds 80% of the stock. Thesales are evenly distributedbetween the domestic andinternational markets and the mainproducts are raw and refined sugarand molasses.

In 2010 the company entered asupplier management schemedesigned by a multinationalsubsidiary in the beverageindustry. The MNC subsidiary is amajor family-owned local companythat was sold in 2005 to a globalgroup headquartered in Europe.The program is aimed at certifyingselected suppliers in 11 categorieson social, financial, and environ-mental criteria. It is designed forstrategic suppliers (considerablepurchasing volume and critical interms of production processes orquality standards) and is based ona continuous improvement philo-sophy evaluating the supplier’s

performance on a yearly basis.Each of the four levels comprises achecklist with which the supplierneeds to comply. If the supplierfails to comply, an action planneeds to be presented. Everyassessment gives the supplier atotal grade based on a weightedaverage. Although the programgives more importance toproduction requirements, environ-mental, labor conditions, foodsecurity, and CSR are separatecategories with equal weight. Thetotal grade is used as an input forthe yearly purchasing decisionsmade at top management level. Theassessment is conducted by theMNC subsidiary and follows threesteps: document analysis, on-siteaudit, and action plan follow-up.Some assistance to suppliers isoffered: information related to thedemanded practice is diffused onrequest and access to the MNCsubsidiary production sites isfacilitated.

Data collection

A case study methodology ischosen because case studies

enable a deeper understanding ofthe context (Yin, 2003). Werestricted our empirical data set toone industry because sustainabilityissues in the supply chain areindustry specific (Maloni & Brown,2006). Four main reasons wereconsidered in the case selection:

1. At the time of the research our focal company was the onlysupplier in the industry involvedin a formal supply chainmanagement developmentprogram. Other companies in theindustry received audits frommultinational clients but were notinvolved in SSCM schemes.Because the program startedonly one year before the analysiswe were able to capture real-timeadoption.

2. The supplier operates in an industry with poor social andenvironmental reputations but ofconsiderable importance atnational and international levels.

3. The supplier is acting as a client assessing its own suppliers onsocial and environmental criteria.


Figure 1Empirical set and data collection methods

4. Our study contributes to filling the research gap related to SMEs particularly in emergingcountries.

Multiple data sources were usedcombining primary data (inter-views and observation) withsecondary data (document

analysis) to increase the reliabilityand validity of the study. Interviewswere conducted at three levels ofthe supply chain with managers in


Table 2Data analysis process

charge of the supplier assessmentscheme. In the focal – that is,supplier – company, 30 interviewswere conducted with managersinvolved in social and environ-mental practices. We also observed27 sustainability-related meetingsand three meetings held to define asupplier development scheme. Wealso attended six industry meetingsheld by human resources managers(usually in charge of sustainability-related activities) in the context ofa training scheme developed by theindustry association. Most of themeetings were recorded and allwere documented with field notes.Interviews lasted between 30minutes and 2 hours and wererecorded and transcribed. We alsohad access to SSCM assessmentdocuments from the multinationalsubsidiary and the focal company.

Furthermore, the person in chargeof the supplier developmentprogram at the client level and theemployees receiving the auditingvisits at the second-tier supplierlevel were interviewed. We used asemi-structured interview protocol

to assess the evolution of socialand environmental practices, therole of the clients and other forcesin that evolution, the changes madein response to clients’ demands,and the benefits and difficultiesrelative to these changes. Theinterviews were conductedbetween 2012 and 2013.

Data analysis

We approached our data analysis inthree stages with a view toidentifying similarities anddifferences among sustainabilitypractices. We first chose the socialand environmental practices wewanted to study. Based on Maloniand Brown’s (2006) framework forthe food supply chain and theclient’s assessment scheme, thefollowing categories were selected:environment, community issues,labor and human rights, health andfood safety, procurement, andethics and CSR management(including CSR policy, performanceindicators, and stakeholdermanagement).

The second stage involved theanalysis of each categoryseparately. We analyzed a total of40 sustainability practices andcharacterized each practice interms of its embeddedness withinthe relational network of the field,the knowledge at the supplier’slevel, and the perception of itsusefulness. The final stage is basedon a cross-case analysis in whichdifferences and similarities for thesix categories were identified. Table2 summarizes the process.

In assessing supplier responses welooked at the level of adoptionaccording to the substantive actionundertaken by the focal company.Table 3 summarizes the codingscheme.

Results

The institutional dimension of supplier responses

Our results reveal different degreesin the adoption of sustainabilitydemands (ranging from acquie-


Table 3Coding scheme for supplier responses


Table 4Coding scheme for supplier responses

scence to avoidance). We identifiedthree types of supplier responses:acquiesce, compromise, andavoidance. We did not find supportfor defiance or manipulationstrategies (see Table 4) because ofthe limited resources of thesupplier and its strong dependenceon the MNC subsidiary (accountingfor around 30% of its sales volume).

Overall, the SSCM program can beconsidered to be a set of strongcoercive pressures. Within themultinational company, SSCMdemands are mandatory for thesubsidiary: “the headquarters asksus to audit our suppliers according toSMETA,2 and 55% of the requirementsare included in this [SSCM]program” (MNC manager). Coercivepressures are strong because socialand environmental risks areassociated with supply shortagesand reputational loss. As a managerfrom the multinational companyexplained, “they [the supplier] faceimportant risks, for instance astrike from sugarcane cutters,3 orfloods4 in the sugarcane planta-tions. If such risks materialize, wemight end up without sugar. Thisconstitutes a shortage risk for us,and we are closely monitoring thatthey control their risks.” Even ifproduction-related risks have ahigher grade in the assessment,social and environmental condi-tions could also lead to delistingthe supplier from the program. Notonly has the company differentsuppliers offering the same product(white sugar) but also if social andenvironmental risks are notcontrolled, it could lead to themultinational company changingsuppliers: “what happens here inthis industry is that ... because of therisk of strikes of sugarcane cuttersand all kinds of risks… when there istoo much risk [we] always havedifferent suppliers” (MNC manager).This risk is clearly perceived by thesupplier: “if we do not get the yearlycertification, they might replace uswith any other supplier” (changemanagement officer - supplier).

Acquiescence strategies

There is no unique configuration ofinstitutional factors leading toacquiescence. However, in addition

to the client demand, at least one ofthe conditions mentioned inpropositions 1 and 2 is associatedwith an acquiescence strategy.

Acquiescence generally occurs forsustainable practices with directmarket implications, embeddedinto local ties, and combiningcoercive, normative, and mimeticinstitutional forces. Acquiescencestrategies are found when actorsbelieve in the value of the practice,finding support for proposition 1a.The issue of health and food safetyillustrates it well because the topic has become a major issueworldwide (Maloni & Brown, 2006).The supplier is adopting a series ofmeasures to “fulfill and improve theclient’s requirements” (documentpresented to the MNC subsidiary).Inside the organization, food safetyis defined by a series of practices,with the explicit objective to movetoward the FSSC22000 certification.For most interviewees, this newtrend goes beyond a mere responseto client demands. Food safety isperceived as a strategic issue,implying a paradigmatic shift in theorganization, aiming at trans-forming the identity of theorganization from an agriculturalcommodity supplier to a foodcompany, guaranteeing traceabilityat all stages of the supply chain“from the field to the table”(management and supplierdevelopment - logistics department- supplier).

Health and food safety constitutesa key concern for the industryassociation as well, whichperceives it as crucial to theeconomic development of thesector: “[it] is a key issue for theindustry association because it willgive us access to internationalmarkets” (health and safety -supplier). Accordingly, the industryassociation plays a pivotal role inthe diffusion of such practices: “weidentify the failures and establishcriteria to improve the topic andarticulate [the industry] withgovernmental entities” (industryassociation sustainability coordina-tor).

Avoidance, concealment, and compromise strategies

Lower levels of adoption occurwhen coercive forces are lessassociated with direct marketaccess and when practices aredistant from the normative andcognitive references of the supplier.In such situations, network ties(such as the relationships with theindustry association) play a keyrole in reducing the institutionaldistance (Kostova, 1999) separa-ting the SSCM program from thelocal context.

Avoidance strategies are associatedwith the absence of the conditionsmentioned in propositions 1 and 2.Cultural distance - normative andcognitive institutions (Aguilera-Caracuel et al., 2013) - is important,and the issues are not supported bynetwork ties.

We could not find any regularpattern for compromise strategies,but compromise and avoidancestrategies are always related tolimited pre-existing knowledge(proposition 1b) about the practiceor cultural distance. In such acontext, our results reveal thecentral role of network ties inadoption processes.

Compromise strategies

We found a large proportion ofcompromise strategies, that is,partial implementation of theclient’s demands, particularly inthe labor and human rightscategory. The requirements todesign policies to prevent childlabor and protect human rightsconstitute examples of suchsituations. In our case, the industryassociation was promoting thediscussion on human rights while the supplier displayed acompromise strategy limited towhat the industry associationadvocated: “[the company has to]implement a child policy in theorganization; [it] is not enough toadhere to the industry policy”(assessment document - MNC).Suppressing human rights abuses isa major issue in emergingcountries, but there is still a lack ofknowledge:“we didn’t know how to define andtranslate human rights into ouractivities […] today we are starting


to understand their logic” (industryassociation manager). In fact, theindustry

has been depicted as “a familybusiness sustaining its colonialheritage mixed with overexploita-tion capitalistic logics” (SánchezÁngel, 2008, p.35), in which laborabuses have long been the norm(as mentioned in one of theindustry meetings). The focalcompany has not included anysubstantive actions on the subject.For instance, even if the companysigned the global compact, nodiffusion regarding human rightshas been done.

Coercive demands are thus filteredby the institutional context(Kostova, 1999), and in this specificcase by the cognitive andnormative institutions of thecountry. Even if the program wasdesigned in the same country andis not an off-the-shelf solution fromthe headquarters, it includesinternationally oriented practicesthat are not common among localSMEs.

Avoidance and concealment strategies

The supplier’s response to thedemand of developing corporategovernance and an ethics codeillustrates voluntary concealmentand avoidance strategies. Ethicsappears as a subject that is poorlyhandled in emerging markets(Baskin, 2006), and this statementholds true for our supplier. Therequirement for a code has beenpresent since the launch of theprogram, yet the supplier avoidedit for two years until in one meetinga manager declared, “the clients areputting pressure on us about thecode! (human resources - supplier).During that same meeting, actorswere more concerned about theexistence of a formal document tobe presented to the client thanabout the content of the code itself(ethics, human rights, corruptionpractices, etc.) or the inclusion ofthese practices within dailyactivities. Ethics and corporategovernance are new practices forthe organization and more largely

in the Latin American context:“certain practices, such as conflictsof interest and lack of transparencyin corporate governance, arecommon in large Mexican firms, butwould be unethical, if not illegal, inthe US” (Logsdon et al., 2006, p.54).Following the first visit by the clientin 2010 the performance of thesupplier was graded at the lowestlevel: the audit recommended to“develop an ethical policy, formalizeethical principles, or a formaldocument where ethical behavior isdefined within the organization andtowards the suppliers. The documenthas to be distributed to employeesand suppliers” (MNC assessmentdocument). For two years, thecompany avoided this requirement:“we have been coping with thedemand by showing them a proposalby an external consultant to developsuch a code. We have been doingthat for two years now, but we cannotdo that anymore” (quality manager -supplier).

The company finally decided towrite the document with the help ofan educational institution acting asconsultants because “we didn’tknow how to do it” (quality manager- supplier). However, the documentwas never distributed; it was onlyposted on the intranet without anyawareness campaign: “we haven’treally changed in terms of ethicalprocesses, but now we have thecorporate governance document”(health and safety manager -supplier). In the words of amanager, the code remains “a hugething that is on the website but thatnobody ever reads.”

Concealment is also evidenced inissues related to the CSRmanagement category (e.g.,development of formal policies fordiversity, CSR, ethics, and freedomof association). As described by aquality manager, “[when the clientcame for the evaluation], she askedus: what are the CSR programs thatyou have? You have to define someobjectives. Define some indicators.”In order to fulfill this requirementthe focal company worked with thesame educational institution on theconceptualization of a sustaina-bility strategy, the definition of indicators, and stakeholder

mapping. During the meetingsseveral discussions were heldabout the definitions of sustaina-bility and stakeholders becauseboth concepts were new within thecountry and for the organization: “Ihad to ask for examples of a CSRpolicy” (human resources team -supplier). This was also mentionedby the MNC manager in charge ofthe SSCM program: “someoneexplained to us and to our suppliershow to write the report, apply theGRI guidelines, etc. In these cases Ialways send them [suppliers]examples.” Today, although thesedefinitions have been formalized,they are not used in dailymanagement: “[during the audit] wechecked everything to be compliant,in order to please the client. […] itwas just to look nice in the picture.”Indeed, no indicators have beendefined or clearly used to monitorthe operation.

In an nutshell, an approach to CSRbased on a management systemsetting formal targets andobjectives as promoted by theSSCM program does not seem tomake much sense for theemployees interviewed at thesupplier’s site. All CSR activitiesmentioned by the employeesduring the interviews revolvearound traditional practices rootedin paternalistic and philanthropicorientations (such as communitysupport through education andhealth services, donations, andfinancial support to employees).The lack of knowledge is related tothe sustainability traditions of thecountry: “people still think that CSRis what we do with the communityand the training activities foremployees” (human resources team- supplier). As mentioned by theclient, “people in Colombia thinkthat corporate social responsibilityis only related to communityrelationships” (MNC manager).Such practices remain informal andare not integrated withinmanagement systems. In fact, asmentioned by one informant, “eventoday, I do not know what a personin charge of sustainability issupposed to do…” (changemanagement team - supplier).


Overall, lower levels of adoptionand decoupling are related to thecultural distance between the SSCMprogram and the local context,which supports proposition 1b.The previous two examplesdemonstrate that without pre-existing knowledge about thepractice and help from other actors(such as the industry associationor external experts), decoupling isnot likely to occur.

The mediating role of network ties

We previously noted the role ofactors such as the industryassociations or professional net-works in the adoption of somepractices that are new for thecultural environment (e.g., ethicsand CSR management or health andfood safety). No reinforcement fromany external actor is related tolower levels of adoption. Withoutany network ties in theorganizational field backing up thedemand, the supplier is more likelyto opt for a compromise strategy,partially adopting the requiredpractice or even voluntarily hidingnon-implementation. Reciprocally,we find higher levels of adoptionwhen sustainability demands areembedded in strong relational ties.Among external actors, theindustry association seems to exertmore influence, leading to someacquiescence strategies, althoughinteraction with consulting andeducational actors did notsystematically prevent decoupling.

Our results thus confirm the centralrole of network ties in sustainabilityadoption processes: such networkties, particularly the industryassociation, contribute tonarrowing the institutional distanceseparating the SSCM program fromthe local context. The industryassociation specifies potentiallyambiguous demands, gives tech-nical support, spreads information,and sponsors meetings to shareand improve practices throughexchange between members. Thisrelationship matters preciselybecause it infuses meaning (Owen-Smith & Powell, 2008), improving

the adoption of internationallyoriented, not-well- understooddemands, thus helping the supplierto make sense of the client’sdemands by adapting thesedemands to local culturalexpectations (Ansari et al., 2010).Suppliers as transmitters to next-tier suppliers

Unexpectedly, we found thatsuppliers may transmit somesustainability demands in theupstream chain (i.e., imposesustainability demands to theirown suppliers) while decouplingthese practices within their ownorganization. Hence, the diffusionof sustainability practices by thesupplier is not directly related tothe adoption of the practice or to acoercive demand from the MNC.

The focal company may transmit afraction of the requirements,complying with the demands oftheir client (extending therequirements in the procurementpractices of the suppliers): “wehave some responsible procurementprinciples, we ask our suppliers todiffuse them to their suppliers” (MNCsubsidiary). The focal company isdiffusing demands that are ofimportance for the MNC subsidiarybut for which it has limitedknowledge and partial levels ofadoption (such as human resourcesmanagement). Diffusion of theclient’s requirements is not linkedto strong levels of adoption. On thecontrary, diffusion may occur in thecase of an avoidance strategy (forexample, in the case of child laborpolicy).

In line with Ayuso et al.’s (2013)suggestion, our study looked atfactors that strengthen diffusion tonext-tier suppliers. We found thatall relational ties account for thediffusion of requirements to thenext-tier suppliers. The focalcompany is replicating some of thedemands of the MNC subsidiaryand including the assessmentrequirements from other actors. In2012 the supplier companyincluded the food safety categoryinto its own assessment checklist.

The industry association pushedfor it, and although the MNCsubsidiary was not specificallyasking to extend it to next-tiersuppliers, second-tier suppliersintegrated food safety as arequirement from the focalcompany (similar to othercompanies in the industry): “sincelast year our client has been focusingon food safety and has evolvedtowards a holistic approach”(packing supplier). Diffusion mayalso be fostered by other actorsthan the industry association. Forinstance, control over solid waste isan ISO 14000 standard and a locallegislation requirement.

In some cases, diffusion to next-tiersuppliers occurs even in the case ofpartial adoption and limitedknowledge about the practice fromthe focal company. This comesfrom the replication of the SSCMaudit scheme along the wholechain: “[our client’s] model helpedus to design our own supplierevaluation model […]. We didsomething based on what they dowith us” (logistics departmentmanager - supplier). This also camefrom a recommendation by thecertifying organization to develop a“more specific supplier evaluation”(quality manager - supplier).

Consequently, proposition 3 is onlypartially supported because thefirst-tier supplier is demanding acomprehensive range of practicesregardless of whether suchpractices have been adopted or notwithin the focal organization.

An interesting finding is thatbeyond the specific demands of theclient, the focal company isreplicating the philosophy of thedevelopment program by goingbeyond the audit scheme: “theclient asks us to develop oursuppliers. The idea is that ourcompany manages to do what theclient is doing with us: a supplierdevelopment program” (logisticsdepartment - supplier). The focalcompany adapted the SSCMprogram, adopting its principlesand recently launching a supplierdevelopment program based ontraining sessions. A function to


manage and develop suppliers hasbeen created in the logisticsdepartment. Taking as an examplethe action plan required by theMNC subsidiary, the focal companyhas recently begun asking suppliersfor action plans to follow up on theassessment visit.

Discussion

Our case reveals the centralimportance of observing SSCMprograms from the point of view ofsuppliers - rather than clients - inorder to analyze their trans-formative potential. Indeed, thevariance observed in response to the institutional demandsconveyed by the SSCM programsuggests that suppliers adopt anddiffuse SSCM programs selectivelyand partially rather thanexhaustively. By themselves, formalcoercive demands from clients,aggregated into a SSCM program,do not offer any guarantee as totheir actual adoption.

The imbalance in power relation-ships between actors seems to playa central influence on institutionalresponses to SSCM programs (seeLund-Thomsen & Lindgreen [2014]for a converging observation). Inour case, given the lower size,limited resources of the localsupplier, as well as its dependenceon the multinational company, thesupplier did not engage into activeresistance (defiance or manipula-tion strategies). Rather, forms of“silent” resistance were observed,taking the form of compromise,avoidance, or concealmentstrategies. Such strategies are, inessence, less visible for theexternal observer and requiredirect observation at the locallevel. However, our case suggeststhat such silent resistancerepresents a large proportion ofinstitutional responses to SSCMdemands. Because SCM researchhas not systematically exploredthis issue so far, further work coulddraw on multiple case studymethodology to investigate howvarying degrees of dependencebetween suppliers and clientsaffect the adoption of SSCMprograms.

Overall, higher levels of adoptioncan be observed when demandsbring a clear market benefit. Inother cases, a large variance mayoccur in the adoption ofinstitutional demands.

Overcoming compromise andavoidance strategies requires amediator, in our case, the industryassociation. Industrial associationsplay a key role in diminishing theinstitutional distance between thesource and the destination of thedemands. As such, our studycontributes to exploring the role ofnetworks in limiting decoupling(Boxenbaum & Jonsson, 2008) by exposing how the industryassociation acts as a mediator ofdecoupling, translating institution-ally distant practices. This isconvergent with calls to betteraccount for the role of industryassociations as sources ofcollective action to promote CSRpractices (Lund- Thomsen & Nadvi,2010).

Our results also suggest that onekey dimension of adoption lies inthe cultural and cognitive distancesbetween SSCM programs and localpractices. Indeed, practice adop-tion varies according to itscoherence with the local institu-tional environment, particularlyregarding the perception of itscultural relevance. Our studyshows the difficulty faced bymanagers in understanding thecontent of some internationalpractices, such as sustainabilityperformance measures or ethicaland human rights issues, which areperceived as emanating from adistant institutional environment.For such demands, the level ofknowledge within the company andin the field level is limited. Thesustainability approach of the MNCsubsidiary is rooted in a differentconception of what responsibilitymeans. It based on a strategic andmarket-oriented vision of CSR (seePorter & Kramer, 2011; Vogel, 2004),in which CSR has to be managedthrough performance indicators,articulated with strategy, and reston ethical and economicjustifications (Salamon, 2010). TheSSCM program as such includes anumber of practices that areinstitutionally distant from the

local context, largely overlookingthe local environment (Logsdon etal., 2006) in which suppliersoperate. As pointed out by the MNCinformant, CSR means reducing riskand enhancing the reputation forthe MNC. Although a largeproportion of the SSCM demandscovers issues that can damage theglobal reputation of the MNCsubstantially (e.g., labor andhuman rights), such issues are notnecessarily perceived as relevantwithin the local context.Reciprocally, the SSCM programtends to break away from the localapproach to CSR becausecommunity-related issues (whichconstitute the central frame ofreference locally) are addressedonly through one element withinthe SSCM program, which has clearimplications for the literature oncultural CSR (Maignan & Ralston,2002; Matten & Moon, 2008;Waldman et al., 2006). Thedefinition and implementation ofSSCM programs should deservemuch more consideration becausethey constitute an interesting andpotential source of culturalhybridization among alternativeviews of CSR. In this perspective,SSCM programs can be analyzed asa tool or artifact reshaping the veryunderstanding of CSR in the localcontext. As a consequence, SSCMprograms should not only beanalyzed as drivers of CSRpractices but also as a CSR cultureand managerial philosophy. In ourcase, beyond substantial changesand adoption of specificinstitutional demands, the SSCMprograms also promoted qualita-tive changes, a new managerialphilosophy based on qualitymanagement frameworks, repor-ting, and audits (see Power [1997]for a description of such amanagement philosophy based onaudits). Interestingly, althoughadoption of SSCM practice washeterogeneous within thesupplier’s operations, the logic ofthe program and the type of toolsseemed to be more easily adoptedand passed onto next-tiersuppliers. SSCM programs couldthus serve as an interestingempirical setting for investigatingthe extension of audits to new areasof social life.


Our research also has managerialimplications. First our studyindicates that SSCM managers needto better acknowledge the networkties in which suppliers areembedded. In order to boost theadoption of SSCM requirementsalong the chain, they should actbeyond dyadic relationships withtheir clients in order to get involvedat a more collective level, forexample, within industry associa-tions. Second, MNCs interested inestablishing SSCM schemes shouldadopt a collaborative approachrather than a command-and-controlone. In line with Gimenez andTachizawa (2012), the compliance-based paradigm - the most commonone - has limited impacts. Acollaborative scheme is necessary(for a critical discussion see Lund-Thomsen and Lindgreen [2014]) toimprove sustainability withinsuppliers, particularly in emergingmarkets and SMEs when ethicalboundaries are blurred and legalcompliance is considered a socialresponsibility. Our empiricalsetting highlights the fact that thelevel of adoption is mediated by asupplier’s understanding of thepractice.

MNCs should therefore be awarethat adoption cannot be taken forgranted in the context of a coercivedemand. Appropriation of demandsmay be improved through dialogueso as to encourage progressiveimplementation when institutionaldistance is higher and considerableresources are needed. In this caseMNCs could rely on other actors inthe supply network, particularly inindustry associations, to translatesuch practices into the localnormative and cognitive frames.Regarding the next-tier suppliers,diffusion is not guaranteed. In thissense, local networks are pivotal asmediators in the diffusion toupstream supply chain members.

There are of course somelimitations in this study. First, weresorted to one in-depth case studyto illustrate our purpose, limitingits generalization. However, thevariables we specified could beused in further research in otherindustries and countries. Second,we acknowledge a potential bias in

the client’s evaluation, but webelieve that using other sources ofdata improved the reliability of the study, particularly regardingcompromise and avoidancestrategies.

Our conclusions highlight theimportance of the industryassociation for SMEs, but furtherresearch could investigate to whatextent this is the case for largerindustry members. We are aware ofother filters at the inter-organizational and intra-organiza-tional levels, which could befurther explored, such as logisticalintegration or the role of agents ofchange inside the organization(Carbone et al., 2012; Gimenez &Tachizawa, 2012). It would also beinteresting to boost the robustnessof the study by extending theresearch to other suppliers of theMNC subsidiary.

We believe that our studycontributes to the debate over localresponsiveness and globalsustainability practices bystressing the importance of localties and the institutional context inthe adoption of new internationallyoriented ideas, and positing thatsustainability cannot be viewed asa collection of clearly definedpractices, particularly in LatinAmerica, where a strong traditionof social business commitmentexists. We are convinced thatstudies highlighting how sustaina-bility traditions and external tiesinfluence the adoption of newpractices constitute an interestingavenue for research in SCM. Finally,if supply chain managers want toensure higher levels of adoption,they need to recognize theinterplay of local and globalsustainability traditions as well asthe networks in which suppliers areembedded.

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About the authors

Pilar Acosta is a PhD student at ESCP Europe.She studies the evolution of sustainability-related practices. Her current researchfocuses on the diffusion of such practicesacross different levels of the supply chain inLatin America. She holds an industrialengineering degree and graduated with amaster’s degree in organizations from theUniversity of Paris X. She previously workedas an organizational consultant.

Aurélien Acquier is an associate professor inthe Department of Strategy, OrganizationalBehavior and Human Resources at ESCPEurope Paris Campus. He currently teachescorporate strategy and organizationaldynamics. In collaboration with variousnational and multinational companies, hisresearch focuses on the relationships amongsustainable development, corporate strategy,and institutional change. At theorganizational level, he investigates the linkbetween sustainability and innovationmanagement. His internal perspective iscomplemented by an institutional analysis inwhich he investigates various standard-setting processes and the development of aCSR industry.

Olivier Delbard is a professor in theDepartment of Economics, Law and SocialSciences at ESCP Paris. He is in charge ofprojects and academic programs related tosustainable development and CSR. He alsoworks on cultural management issues and haslong been interested in European affairs. Heholds a doctorate degree from the Universityof Paris IV Sorbonne (1995); his dissertationconcerned environmental philosophy andethics in Anglo-Saxon culture. He obtained hisHDR (French qualification for PhDsupervision) in economics in 2010.


just do it? the adoption of sustainable supply chain ......european brands (such as primark,...

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