This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Sarah Castaldi (Radboud University, Netherlands), Miriam M. Wilhelm (Vienna University of Economics and Business, Austria), Sjoerd Beugelsdijk (University of South Carolina, USA), Taco van der Vaart (Groningen University, Netherlands).
In Short: Global supply chains have recently come under greater scrutiny following several high-profile cases of labor abuses, particularly in the wake of the Rana Plaza factory collapse in Dhaka that claimed over a thousand lives. Although international guidelines such as the UN Universal Declaration of Human Rights and ILO International Labour Standards provide a framework for ethical labor practices, their effectiveness is contingent upon consistent enforcement. This can be a formidable challenge when suppliers operate independently from developed-country buyers, often in regions marked by weaker legal systems.
Amid mounting global scrutiny of labor practices, multinational corporations are increasingly recognizing the importance of tailoring their social sustainability efforts to the distinct local realities of their supplier countries. Recent research by Castaldi and her colleagues reveals that a “Glocal” approach can enhance the effectiveness of governance strategies in driving sustainable labor practices. Rather than uniformly applying globally accepted norms to suppliers worldwide, global brands should deploy supply chain governance strategies in a manner that aligns with local institutional pressures, such as legal and civil society norms, within supplier countries. To arrive at these findings, the researchers examined the influence of different supply chain governance strategies on the social sustainability practices of garment and footwear suppliers across 11 emerging markets. They combined survey data from 356 suppliers with country-level data on legal and civil institutions, to assess the various factors that drive the implementation of social sustainability policies by suppliers.
Their work counters the belief that international buyers wield limited influence over supplier sustainability practices. Instead, it demonstrates that firms can effectively govern social sustainability through audits and collaboration, provided these efforts are adapted to the specific regulatory and societal contexts of supplier countries. Audits significantly bolstered social sustainability, particularly in countries with robust legal frameworks where enforcement mechanisms support compliance with international standards. Conversely, cooperation was most effective in nations possessing strong civil society institutions, where grassroots advocacy and local stakeholder engagement amplify the impact of cooperative efforts.
Managerial Implications
Audits remain the most prevalent tool for global buyers to guarantee compliance with standards. However, sporadic audits may enable temporary concealment of violations. More frequent audits create an environment of continual accountability and offer invaluable opportunities to disseminate knowledge. When paired with constructive feedback, these audits can empower suppliers to integrate ethical practices into their operations, fostering long-term improvements. And while audits can empower suppliers to integrate ethical practices into their operations, their efficacy diminishes without enforcement, making them less effective in countries with weak legal systems.
In parallel, empowering workers directly in emerging markets through education about their legal rights, including safe working conditions and fair compensation, can encourage bottom-up pressure on employers to improve labor practices. Informed workers become advocates for their own well-being, compelling companies to abide by legal standards. However, executing this strategy requires careful consideration of local contexts. In regions where freedom of association is curtailed, such initiatives could face resistance or even endanger market access. Hence, a nuanced understanding of the local political and social landscape is vital before implementing empowerment and education programs.
Finally, in certain situations, strategically selecting suppliers that align with sustainability standards and prioritizing partnerships with ethically committed companies creates a powerful incentive for others in the industry. By choosing only better-ranked firms, global buyers exert pressure on other companies to enhance their reputations in order to access international markets.
Ultimately, global buyers should tailor global standards to local contexts instead of implementing uniform practices across all countries. This means adapting strategies to respect the specific laws, social norms, and values of each region rather than imposing a one-size-fits-all solution.
Original Work
Castaldi, S., Wilhelm, M. M., Beugelsdijk, S., & van der Vaart, T. (2023). Extending social sustainability to suppliers: The role of GVC governance strategies and supplier country institutions. Journal of Business Ethics, 183(1), 123-146.
Contact
If you are interested in learning more about this work, contact Professor Sarah Castaldi at sarah.castaldi@ru.nl.