Transparency Fosters Trust and Justice in Global Supply Chains

Abstract

Despite growing pressure on manufacturers and retailers across industries to disclose more information about their supply chains, companies still view transparency as a double-edged sword. Companies fear that the more information about suppliers and supplier conditions they disclose, the more they open themselves up to criticism from the outside, while, simultaneously, hiding such information causes criticism and suspicion. Through two online experiments we compare how supply chain transparency—namely, the disclosure of information about supplier names, supplier locations, and supplier working conditions—affects consumer perceptions. We do this under conditions of both positive and negative information, while also identifying the underlying mechanisms of this relationship. We find that the relationship between the disclosure of supply chain information and consumer perceptions of a firm is mediated by firm trustworthiness and perceptions of interpersonal justice in the supply chain. Furthermore, our results provide evidence that transparency, whether it reveals positive information or negative information, is more beneficial for firms than staying silent about supply chain practices. Our results suggest that it may be of interest for companies to prioritize the voluntary disclosure of supply chain information, especially in regard to social sustainability initiatives, whether or not they fear what is disclosed.