Monitoring global supply chains (original) (raw)
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What Shapes the Gatekeepers? Evidence from Global Supply Chain Auditors
SSRN Electronic Journal, 2013
Firms seeking to avoid reputational spillovers that can arise from dangerous, illegal, and unethical behavior at supply chain factories are increasingly relying on private social auditors to provide strategic information about suppliers' conduct. But little is known about what influences auditors' ability to identify and report problems. Our analysis of nearly 17,000 supplier audits reveals that auditors report fewer violations when individual auditors have audited the factory before, when audit teams are less experienced or less trained, when audit teams are all-male, and when audits are paid for by the audited supplier. This first comprehensive and systematic analysis of supply chain monitoring identifies previously overlooked transaction costs and suggests strategies to develop governance structures to mitigate reputational risks by reducing information asymmetries in supply chains. Managerial Summary Firms reliant on supply chains to manufacture their goods risk reputational harm if the working conditions in those factories are revealed to be dangerous, illegal, or otherwise problematic. While firms are increasingly relying on private-sector "social auditors" to assess factory conditions, little had been known about the accuracy of those assessments. We analyzed nearly 17,000 code-of-conduct audits conducted at nearly 6,000 suppliers around the world. We found that audits yield fewer violations when the audit team had been at that particular supplier before, when audit teams are less experienced or less trained, when audit teams are all-male, and when the audits were paid for by the supplier instead of by the buyer. We describe implications for firms relying on social auditors and for auditing firms.
Monitoring the Monitors: How Social Factors Influence Supply Chain Auditors
SSRN Electronic Journal, 2014
Outsourcing firms increasingly rely on social auditors to provide strategic information about the conduct of their suppliers to manage the reputational risks that can arise from dangerous, illegal, and unethical behavior at supply chain factories. But little is known about what influences auditors' ability to identify and report poor supplier conduct. We find evidence that private supply chain auditors' reporting practices are shaped by several social factors including their experience, gender, and professional training; their ongoing relationships with suppliers; and the gender diversity of their audit teams. By providing the first comprehensive and systematic findings on supply chain auditing practices, our study suggests strategies companies can pursue to develop more credible monitoring regimes to reduce information asymmetries between themselves and their suppliers.
Social auditing in the supply chain: business legitimisation strategy rather than a change agent
Meditari Accountancy Research, 2022
Purpose-This paper aims to examine the role of social auditing in legitimising the relationship between the buyer and supplier firms rather than strengthening corporate accountability in the global supply chain. Design/methodology/approach-Applying case study methodology and drawing on Suchman's theory on societal legitimacy, it is argued that social audits are artefacts of legitimacy, and global firms dominate the buyer-supplier relationship across the supply chain. The analysis is based on data collected from different secondary sources, including Walmart's corporate sustainability reports. Findings-Using Walmart's relationship with Tazreen Fashions Limited around the Tazreen factory fire incident as a case study, it explains that the practices which attempt to symbolically demonstrate accountability from social audits need to shift to a more continuous and sincere demonstration of accountability through the social audit process. For this to occur, the cognitive and pragmatic approaches that international buyers have previously used in auditing their supply firms' social responsibility are no longer sufficient to achieve societal legitimacy. Instead, a moral turn needs to underpin the intentions and actions of these buyers to maintain legitimacy and demonstrate accountability across the supply industry in developing economies. Originality/value-The findings of the study answer the questions raised in the extant literature about the expectation from social auditing and whether social auditing serves to ensure corporate accountability. The paper contributes to the policymaking discussion of how social auditing can be configured to include a legal provision to ensure that social auditing is not a parroting tool for corporations.
Social Auditing and Responsible Outsourcing:Improving a Sustainable Global Supply Chain
Outsourcing is increasingly considered as a value creation that can provide companies with a long-lasting competitive advantage. Regrettably, many social and environmental impacts continue to plague the global supply chain, creating scandals for the buying companies. Failure to manage these impacts has increased the risk of non-compliance, which in turn harms the company’s reputation. Given the absence of a global enforcement mechanism and the regulation deficit of many developing countries, pressures have led many companies to develop CSR initiatives and a variety of monitoring mechanisms. Realising the difficulties in managing external relationships with independent suppliers operating in different contexts, the question is how a company can held their suppliers responsible and whether the social auditing, embraced as a monitoring mechanism, is efficient in improving a sustainable outsourcing. The present contribution tries to address many of the issues raised. Firstly, a short description of the different underlying causes of ‘unsustainable’ outsourcing is provided. Secondly, the scope and typology of social auditing and the quality of auditors are reviewed, and different aspects of the social auditing process are highlighted. Finally, the paper evaluates the credibility and effectiveness of the social auditing and outlines what this mechanism has to offer in relation to the core question of promoting a sustainable global supply chain. Key words: Global Supply Chain, Sustainability, Social Auditing, compliance.
Supplier Centrality and Auditing Priority in Socially Responsible Supply Chains
Manufacturing & Service Operations Management, 2020
Most supply networks are characterized by firms that source from multiple suppliers and suppliers that serve multiple firms, thus resulting in suppliers who differ in their degree centrality, i.e., the number of firms they supply to. In such networks, any negative publicity from suppliers' noncompliance of socially-responsible practices-e.g., employment of child labor, unsafe working conditions, and excessive pollution-can significantly damage the reputation of the buying firms. To mitigate this impact, firms preemptively audit suppliers, although resource and time considerations typically restrict the number of suppliers a firm can audit. Therefore, a key question is whether firms should prioritize the auditing of suppliers with low or high centrality, ceteris paribus. To investigate, we consider an assembly network consisting of two firms (buyers) and three suppliers-each firm has one independent supplier who uniquely supplies to that firm and one common supplier who supplies to both. Methodology: Game-Theoretic analysis. Results and Managerial Implications: Downstream competition between the firms drives them away from auditing the supplier with higher centrality; i.e., the common supplier, in equilibrium, despite the fact that auditing this supplier is better for the aggregate profit of the firms. We show that this inefficiency is corrected when the firms cooperate (via a stable coalition) to jointly audit the suppliers and share the auditing cost in a fair manner. We also examine conditions under which the firms' auditing decisions are in sync with a social-planner's objective of minimizing harm to society via the identification of sociallyirresponsible practices.
Governing Global Supply Chain Sustainability through the Ethical Audit Regime
Globalizations
Over the past two decades multinational corporations have been expanding ‘ethical’ audit programs with the stated aim of reducing the risk of sourcing from suppliers with poor practices. A wave of government regulation—such as the California Transparency in Supply Chains Act (2012) and the UK Modern Slavery Act (2015)—has enhanced the legitimacy of auditing as a tool to govern labor and environmental standards in global supply chains, backed by a broad range of civil society actors championing audits as a way of promoting corporate accountability. The growing adoption of auditing as a governance tool is a puzzling trend, given two decades of evidence that audit programs generally fail to detect or correct labor and environmental problems in global supply chains. Drawing on original field research, this article shows that in spite of its growing legitimacy and traction among government and civil society actors, the audit regime continues to respond to and protect industry commercial interests. Conceptually, the article challenges prevailing characterizations of the audit regime as a technical, neutral, and benign tool of supply chain governance, and highlights its embeddedness in struggles over the legitimacy and effectiveness of the industry-led privatization of global governance.
Dynamics of Social Auditing in the Global Textile and Apparel Supply Chain
Pivoting for the Pandemic, 2020
In the past three decades global sourcing of textiles and apparels (T&A) from developing countries is on the rise. However, international retailers' received criticism on their ability to manage social non-compliances at supplier factories. Retailers are implementing code of conduct policies to ensure conformity with social standards and avoiding businesses with non-complaint suppliers (Jaiswal & Brookshire, 2018). One of the major tool retailers use across the global apparel value chain is social auditing, which is a workplace assessment and a way of measuring, understanding, reporting, and ultimately improving an organization's social and ethical performance (Hussain, 2015). International retailers require apparel manufacturing firms from developing countries to conduct social audits and get accreditation as a precondition to the commercial relationship (Sanders, Cope, & Pulsipher, 2018). Social audits are meant to identify any violations of workers' rights in production facilities; assess suppliers' social performance; and improve overall workplace standards. However, incidences such as Ali Enterprises fire in Pakistan and collapse of Rana Plaza building in Bangladesh suggest flaws in the current practices of social auditing and indicate gaps to understand dynamics of auditing process. Several issues such as time, pressure, budget constraints, social ties, management control, national and organizational culture, etc. affects audit quality (
This paper explores the motivation for the use of social audits in the supply chains of multinational companies (MNCs) sourcing clothing products from a developing nation. We investigate the practice of social audits in the supply chains of MNCs based upon a range of interviews with key operatives within the garment industry in Bangladesh. Our results show that social audits are typically not advancing workers' rights but where there are advances, they occur because of the financial penalties that would otherwise be imposed on suppliers (through loss of contracts). Consistent with the notion of institutional decoupling, our results suggest that MNCs appear to use social audits as an instrument to maintain and re-establish their legitimacy rather than ensuring accountability to workers (who are the most affected stakeholders). This is the first known study that investigates how social audits are undertaken by MNCs sourcing products from a developing nation; the implications this has for supply chain claims; what motivations drive the adoption of such audits and what, if anything, are the likely outcomes from the process.
Collaborative Approach for Sustainable Auditing of Global Supply Chains
Symphonya. Emerging Issues in Management, 2013
Over the last years, Corporate Social Responsibility (CSR) has become an important component of business activities for many companies in the world. Much attention has been devoted considering also supply chain perspective. Multinational corporations are not only responsible for sound environmental and social practices within their own premises, but increasingly also for sustainable performance of their suppliers, and ultimately for the entire supply chain which they lead as channel leaders. That is why, large buyers have recently come under pressure to increase monitoring of suppliers' behaviours to bolster CSR compliance. This paper aims to present a conceptual framework for analyzing the Sustainable Procurement practices in global supply chains. An important aspect of implementing such supply chain CSR initiatives involves achieving supplier compliance. It also seeks to demonstrate how a specific consortium of Large European Telecommunications Companies, implements and man...