Exploring sub-suppliers' compliance with corporate sustainability standards

Abstract

Firms face the challenge for ensuring compliance with their corporate sustainability standards (CSS) in their supply chains, i.e. internally, by their suppliers, and also upstream by subsuppliers. Supplier management strategies to ensure compliance with CSS in the supply chain usually focus on suppliers. These strategies fall short when ensuring compliance of sub-suppliers. Firms' sustainable supplier management practices focusing on first-tier suppliers have been studied extensively, while little is known on how firms reach out to sub-suppliers. Firms' challenges include the identification of sub-suppliers, the evaluation of compliance levels, and the execution of corrective action. This study investigates the management of sub-suppliers to ensure sub-suppliers' compliance with CSS of two focal firms in the electronics and retail/food industries using case study research. It focuses on the activities of the focal firm and its perception of sub-suppliers' compliance with its CSS. The findings propose that firms can improve sub-suppliers' compliance with CSS by actively managing sub-suppliers through assessment and collaboration. It was found that (1) public attention on the mediating first-tier supplier, (2) perceived risks of sub-supplier's non-compliance with CSS, and (3) a firm's channel power are antecedents to sub-supplier management. Involving strategic business partners suggests amplifying the positive effect of managing sub-suppliers on sub-suppliers' compliance with CSS. This paper is one of the first studies addressing the management of sub-suppliers from a sustainability perspective. It proposes a framework for understanding sub-supplier management to achieve compliance with sustainability standards, which can also be used for further research and theory development.