Jörg H. Grimm

Institutionalizing Proactive Sustainability Standards in Supply Chains: Which Institutional Entrepreneurship Capabilities Matter?

External stakeholders have built up sustainability consciousness and expectations, putting companies under regular surveillance by nongovernmental organizations (NGOs) and by the media (Doh & Guay, 2006). Stakeholders often do not differentiate between a company’s operations and its suppliers’ operations; they hold the company responsible for all practices involved in the making of the product, including any potential sustainability concerns (Rao, 2002). Thus, suppliers not complying with the company’s promised values are likely to damage corporate reputation or harm customer confidence. Levi’s, Nike, and Mattel are prominent examples that show how brands can suffer as a result of using noncompliant suppliers (Wagner, Lutz, & Weitz, 2009). A proactive supply chain sustainability strategy is therefore vital (Handfield, Scroufe, & Walton 2005; Rao & Holt, 2005). To implement such a strategy, companies provide specific sustainability standards for their supply chains (Bansal & Hunter, 2003; Luo & Bhattacharya, 2006). These standards, known as proactive supply chain sustainability standards (PSCSS) may provide statements to comply with legal requirements and may add elements that go beyond the law. Having introduced these PSCSS, companies still face the challenge of ensuring that their supply chain partners comply. Monitoring supplier processes and assessing the quality of procured products is challenging, because global supply chains have become more complex (Matten & Moon, 2008; Roth, Tsay, Pullman, & Gray, 2008). The large number of suppliers, as well as the organizational and geographical distance between the company and its direct and indirect suppliers, hinder a company from controlling its suppliers’ sustainability practices (Bremer & Udovich, 2001). Further problems may arise when suppliers are located in developing countries, as local legal standards may not conform to the main company’s requirements (Detomasi, 2007).

Conceptualizing the Capability of Supplier Sustainability Risk Management

External stakeholders have built up high expectations on “sustainability”, putting firms under constant watch by non-governmental organizations, media, etc. (Bellmann, 1999; Kudla & Stolzle, 2011). Stakeholders usually do not differentiate between a firm’s and its suppliers’ operations.