Apparel companies did not go untouched by the pandemic-driven volatility of supply and demand. Department store retailer Nordstrom faced a supply-demand mismatch during the 2020 holiday quarter, with their usual firm grip on inventory disrupted from the shipping delays hitting supply chains across the globe. But the apparel industry was also met with a challenge unique from other retailers last year, as the US blocked cotton imports from the Xinjian region of China over possible human rights violations. With both raw material and finished goods imported from overseas, apparel retailers find themselves in a double-bind of both meeting pandemic-driven demand and maintaining sustainability across their supply chains.
With the rise of global supply chains as buying firms outsourced to manufactures in developing countries, the focus of sustainability has centered primarily on social and environmental issues within supply networks. Pressure from institutional actors to implement sustainable supply management (SSM) practices has been mounting, but how exactly do these pressures affect the actual implementation of SSM practices in the case of multitier suppliers? In their recently published paper, JBL authors Shobod D. Nath of both Massey University and the University of Dhaka, and Gabriel Eweje and Ralph Bathurst of Massey University, teamed up to investigate in “The Invisible Side of Managing Sustainability in Global Supply Chains: Evidence from Multitier Apparel Suppliers.”
Most of the focus on the apparel industry in terms of sustainability has fixated on social sustainability, but the industry has been accused of contributing greatly to global warming and having a poor record of environmental sustainability implementation. Their environmental impact in developing countries is poised to expand greatly across the next few years, across carbon dioxide emissions, water, and land use. Intervening to create a more socially and environmentally sustainable supply chain is important, but with supply networks composed of multiple tiers, the actual implementation of SSM practices is met with challenges unique to each level, making the relationships between suppliers the fundamental building block for understanding those challenges and how to address them.
First tier suppliers experience more coercive pressures, exercised by other formal and informal powerful organizations within a network, upon which the suppliers find themselves dependent. Particularly influential is buyers’ selection and assessment – buyers focus not only on price, quality, flexibility, speed, and delivery commitment when choosing a supplier to place product orders with, but also environmental and social requirements. Buyers also examine a supplier’s following of their code of conduct and third-party certification showing their compliance with social and environmental standards, aiming to monitor, audit, and evaluate suppliers’ sustainability practices and performance.
First tier suppliers also experience mimetic pressures, driven by their competitors. They are compelled to abide by the best practices of their peers due to the competitive market pressure for obtaining business, also participating in best-practice sharing groups and voluntary frameworks. And Tier 1 suppliers also experience normative pressures, with buyers collaborating with them to offer awareness-training support for the implementation of SSM practices. These normative pressures can also come from external stakeholders, such as government bodies, NGOs, nonprofits, and industry associations.
But most apparel sector research stops at the first tier, despite many companies using a multitier system for their end product. Although Tier 1 suppliers are more receptive to pressures for SSM practices from multiple sources, does the same apply to further down the supply chain?
Tier 2 suppliers are also subject to coercive pressures from two main sources: selection and assessment requirements of direct buyers, and selection and assessment requirements from buyer-directed third parties and Tier 1 suppliers. Second-tier suppliers also cited legal obligations from government agencies as a coercive pressure for SSM implementation. Mimetic pressures from competition also play a role, as Tier 2 suppliers are motivated to follow best practices from rival apparel suppliers. But relatively few owners and managers of Tier 2 supplier experience normative pressures from awareness training and workshops from external stakeholders. The contrasting views point to top-level management sometimes participating in collaborative training, but the diffusion of the knowledge to general works being rather limited.
Further, Tier 3 suppliers experience only coercive pressures – in particular, meeting local buyers’ business requirements is considered the influential prerequisite for securing business. Third-tier suppliers are primarily selected by the second tier based on operational issues and select social criteria, meaning the pressures from government agencies and other external stakeholders were less effective despite the presence of social and environmental rules and regulations. Tiered suppliers mostly cite high implementation costs, a lack of positive attitudes and commitment of factory management, and a lack of consistency in buyers’ sustainability standards and transparency as the main hurdles to SSM practice implementation.
Identifying which institutional pressures and governance mechanisms have an impact on each tier of the extended supply chain can help managers of global buying firms and apparel manufacturers manage and effectively implement SSM practices. It’s also important for buying firms to predict their suppliers’ areas of vulnerability and consider how they can be found and avoided. Buying firms and first-tier suppliers should also engage with each direct and indirect supplier and collaborate with government, NGOs, and industry associations to improve understanding of traceability and tackle upper-tier suppliers’ supply chain implementation challenges. Additionally, policymakers should also work to develop sustainability standards based on the needs of multitier suppliers, making compliance standards universal and easier for supplier adoption.
[KTT2]US blocks cotton imports from leading producer in Xinjiang region of China | Supply Chain Dive