Doing Well by Doing Good? The Self‐interest of Buying Firms and Sustainable Supply Chain Management

• Published date: 01 April 2016
• DOI: http://doi.org/10.1111/jscm.12096
• Date: 01 April 2016
• Author: Christian Busse

DOING WELL BY DOING GOOD? THE SELF-INTEREST

OF BUYING FIRMS AND SUSTAINABLE SUPPLY

CHAIN MANAGEMENT

CHRISTIAN BUSSE

Swiss Federal Institute of Technology Zurich

This paper investigates how changes in sustainability-related conditions

(SRCs) at a supplier influence buyers’economic performance. Using a con-

ceptual theory-building approach and drawing on instrumental stakeholder

theory, this research identifies four mediating effects through which suppli-

ers’SRCs affect buyers’economic performance. The four mediating factors

are purchasing costs, supply chain sustainability risk costs, cooperation

benefits, and benefits stemming from spillovers of a supplier’s self-promo-

tion. Purchasing costs exert a negative influence on buyers’performance,

whereas the other three factors contribute positively to performance. The

study also suggests that the anticipation of performance effects which are

salient to the buyer triggers efforts to improve the supplier’s SRCs. This

research makes several contributions. First, the study identifies and ana-

lyzes the causal pathways through which a supplier’s SRCs influence buy-

ers’performance, thus contributing to the development of sustainable

supply chain management theory. Second, the study helps buyers make bet-

ter decisions about their suppliers. Finally, the study provides a conceptual

platform for improved dialogue between stakeholders and buyers.

Keywords: sustainable supply chain management; corporate social responsibility;

supply chain risk; stakeholder theory; conceptual theory building

INTRODUCTION

For many years, buying firms (referred to hereafter

as buyers) have been pressured by their stakeholders

to improve sustainability-related conditions (SRCs) at

their suppliers (Foerstl, Reuter, Hartmann & Blome,

2010; Klassen & Vereecke, 2012), especially with

respect to sourcing from emerging markets (Ellram,

2013; Jiang, 2009). However, SRCs in current supply

chains remain rather poor (Pagell & Shevchenko,

2014). Given that buyers are able to influence their

suppliers’ SRCs through supplier management pro-

cesses, and using tools such as supplier codes of con-

duct and audits (Carter & Rogers, 2008; Jiang, 2009),

a relevant question has yet to be addressed: To what

extent is such remedial action in the buyer’s self-inter-

est? Attention is thus directed toward associated per-

formance effects. Accordingly, this paper posits the

following research question: How do changes in sustain-

ability-related conditions at a supplier influence a buyer’s

economic performance?

I employ a conceptual theory-building approach

(Choi & Krause, 2006; Markman, Gianiodis &

Buchholtz, 2009) to identify any indirect causal

pathways (i.e., mediating effects) that relate the sup-

plier’s SRCs to the buyer’s financial performance. In

doing so, I draw on instrumental stakeholder theory.

Stakeholder theory is concerned with the reciprocal

relationships between a firm and its numerous stake-

holders, such as suppliers, customers, employees,

NGOs, the media, and others (Freeman, 1984; Free-

man, Harrison, Wicks, Parmar & de Colle, 2010).

Instrumental stakeholder theory essentially views these

relationships as a means to achieve the buyer’s goals

(Donaldson & Preston, 1995) and is hence particu-

larly appropriate to the research question.

Acknowledgments: I would like to thank the Co-Editor-in-Chief,

Craig Carter, and the STF Guest Editors, Gideon Markman and

Dan Krause, sincerely for their most insightful and constructive

suggestions for improving this manuscript. I am also grateful for

helpful comments from participants of the 2015 Annual Meeting

of the Academy of Management and the STF paper development

workshop hosted in Denver, Colorado on May 2, 2015. In parti-

cular, I would like to thank Frank Montabon for his feedback.

Moreover, I much appreciated the support of my colleagues

Andrew P. Kach and Stephan M. Wagner.

Volume 52, Number 228

This research makes important scholarly, manage-

rial, and social contributions. First, it contributes to

the ongoing development of sustainable supply chain

management (SSCM) theory (Markman & Krause,

2014) by identifying and analyzing the causal path-

ways through which a supplier’s SRCs influence a

buyer’s performance, integrates these mechanisms into

a comprehensive framework for the study of buyers’

self-interests, and highlights extant trade-offs. Conse-

quently, this research mirrors a long-standing debate

from the extant corporate social responsibility

literature regarding the relationship between corporate

social performance and corporate financial perfor-

mance (McWilliams & Siegel, 2000; Orlitzky, 2001;

Perrini, Russo, Tencati & Vurro, 2011). Second, the

study helps to develop a “business case” (Carter,

2004, p. 10) for buyers to foster their decision-mak-

ing. Third, the study’s findings provide an incentive

for fostering supplier sustainability and offer a plat-

form for improved dialogue between stakeholders and

buyers.

The following section establishes the conceptual

background of the study. The first subsection reviews

the literature, which is aimed at elaboration of the

research question and development of an initial theo-

retical framework. Next, instrumental stakeholder the-

ory is introduced as the theoretical perspective for this

research. The following four sections scrutinize differ-

ent mediating pathways through which a supplier’s

SRCs might influence a buyer’s economic perfor-

mance. The section thereafter synthesizes the results

into a comprehensive theoretical framework. Before

concluding the paper, scholarly, managerial, and

social implications are discussed, and future research

paths are depicted.

CONCEPTUAL BACKGROUND

Literature Review

Attention to sustainability in supply chains has

increased in recent years, primarily in response to

influential initial studies (Carter, 2000; Carter &

Carter, 1998). “Sustainable” supply chain research

denotes scholarship that considers not only the eco-

nomic dimension traditionally studied within supply

chain management but also encompasses at least

some green (environmental, ecological) or social–ethi-

cal aspects (Carter & Rogers, 2008; Pagell & Shev-

chenko, 2014; Winter & Knemeyer, 2013). Relevant

SSCM research has focused on problems such as scar-

city of natural resources (Bell, Autry, Mollenkopf &

Thornton, 2012), the greenhouse gas effect (Wu, Ell-

ram & Schuchard, 2014), problematic working condi-

tions (Thornton, Autry, Gligor & Brik, 2013), or other

instances in which sustainability is lacking (Pagell &

Shevchenko, 2014).

This research is specifically concerned with a sup-

plier’s SRCs from the perspective of the buyer. The

critical concept of SRCs is first suggested in this study.

The underlying idea is to (1) maintain the broad

umbrella character (Hirsch & Levin, 1999) of supply

chain sustainability, while (2) focusing only on the

ordinary states of operational processes. With respect

to item 1, supply chain sustainability encompasses

numerous green, social, and ethical attributes (Carter

& Rogers, 2008; Schleper & Busse, 2013). SRCs

are also multi-dimensional, comprising green (e.g.,

consumption of natural resources and emissions),

social (e.g., wages and occupational safety), and ethi-

cal issues (e.g., compliance with laws and abstinence

from corruption).

However, regarding item 2 above, it may occasionally

be commendable to not view all aspects of supply

chain sustainability in tandem, in the spirit of Mark-

man, Waldron and Panagopoulos (2015) observation

that “trumpeting the excellent conditions for the stitch-

ing of jeans is of little use when activists reveal that the

cotton was harvested unsustainably.” Consider the ficti-

tious example of a shirt that is woven from sustainably

grown cotton and promoted by the buyer as a “sustain-

able” garment, even though it was sewn by a Banglade-

shi supplier under highly unsustainable conditions.

The example highlights that by viewing product and

process sustainability in tandem, unsustainable condi-

tions in production processes may be hidden from

view. Conversely, the notion of SRCs excludes effects

related to product sustainability, focusing only on oper-

ational processes. Moreover, the concept of SRCs focuses

on the sustainability-related states of the production

processes, rather than on specific incidents. Thereby, the

concept illuminates the ordinary conditions that exist

in day-to-day operations when no additional triggers

draw attention to sustainability questions.

Prior research has shown that buyers’ stakeholders

care substantially about suppliers’ SRCs. They scruti-

nize suppliers, expecting to find strong green (Ehrgott,

Reimann, Kaufmann & Carter, 2013; Wu et al., 2014)

and social–ethical conditions (Jiang, 2009; Klassen &

Vereecke, 2012), and they often demand improve-

ments. Prior research also calls for such action (Jiang,

2009). Indeed, buyers are capable of influencing

suppliers’ SRCs using tools such as supplier codes of

conduct (Jiang, 2009) and audits (Carter & Rogers,

2008). Moreover, buyers can bring about improve-

ments in suppliers’ SRCs through supplier evaluation

and selection (Ehrgott, Reimann, Kaufmann & Carter,

2011; Thornton et al., 2013), as well as supplier

development processes (Ehrgott et al., 2013; Sancha,

Longoni & Gim

enez, 2015). Furthermore, buyers may

also be able to negotiate higher levels of SRCs or issue

suppliers with factual directives, given extreme power-

dependence constellations.

April 2016

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