Sabine Benoit and Julia Hartmann at the Surrey Business School at the University of Surrey have been researching consumer perception of sustainability in supply chains (video here) They have been researching the question of whom consumers hold responsible and blame in case of irresponsible supplier behaviour and the subsequent reactions in consumer behaviour.
The publication that’s the foundation of the above video was recently published in one of the top journals in the world in its field, the Journal of Operations Management.
I sent them a few questions based on the video, here’s what they had to say in response:
TW: What is “chain liability” in supply chains?
SB/JH: Chain liability means that consumers hold the focal firm that they buy from responsible for unsustainable supplier behaviour. This means that they see the supply chain as one entity producing goods, and expect the focal firm to have full control over this entity and to make sure that all of its suppliers behave responsibly. Remarkable about this is that consumers do not differentiate whether this is a direct supplier, meaning a supplier contracted directly by the focal firm, or a so-called tier-3 supplier, meaning that there are two independent companies between the focal company and the unsustainable supplier. In other words, a tier-3 supplier is a supplier of a supplier of a supplier of the focal firm. This result challenges the conventional wisdom of many Supply Chain Managers, who act under the assumption that consumers do not hold the focal firms responsible, because they lack control about what happens higher up their supply chains, with firms whom they have not directly contracted.
TW: What research have you done on this, tell us about the methodology
SB/JH: We ran a series of experiments with consumers in which we subdivided the participants into different groups. With this we were able to compare the reaction (in particular responsibility attribution, anger and boycotting) towards different scenarios of unsustainable supplier behaviour, e.g. whether the incident happens at a direct supplier or at a third-tier sub-supplier. Researchers frequently use experiments to compare such different scenarios and are one of the most stable methods to identify causality.
TW: You suggest consumers differentiate in levels / types of blame depending on the causation. How do you know this?
SB/JH: We investigated whether there are any situations that shield the focal firm from being held responsible for supplier wrongdoing and subsequently being punished by consumers. In total, we investigated seven different influencing factors that can lead to reduced responsibility attribution to focal firms in the case of unsustainable behaviour. The result show that only three factors actually act as shields: when the incident was caused by force majeur, e.g. an earthquake; when the incident was caused by an individual rather than through company policy; and when the incident is of minor severity. The following other factors did not have any shielding effect on responsibility attribution: the size of the focal firm, the importance of the supplied part, having an environmental management system in place and how high up in the supply chain the incident happened. Thus, when a supplier behaves irresponsibly it does not matter whether they have produced the glue for a shoe (a minor part) or the actual leather or laces for these shoes (a major part); it also doesn’t matter how big the focal firm is, so consumers have high expectations not matter whether they buy from a multinational conglomerate or a small company. All of them alike have to get in involved in sustainable supply chain management.
TW: Does your research suggest consumers have become that much more engaged than in the past, and now nuance their blame much more? I know lots of people who say things to me like “Nike has kids in sweatshops” still, so how widespread is this?
SB/JH: First of all, what we see is that those companies that have had an unsustainable supplier incident often turn the wheel around. Nike for example is now a leader in sustainability and has been recognised having morphed from “Villain to Hero.” Further, our research was done at one point in time, so we cannot credibly make statements about trends. But as researchers in this area we do feel that consumers place more importance than ever on sustainability in supply chains. And for companies it becomes more relevant than ever, since our research shows that consumers hold the focal firm responsible for whatever happens in its supply chain.
From the consumer perspective, holding the focal firm responsible this makes total sense, since they only have a direct relationship with the focal firm and not with any of the suppliers. This might not be perceived as fair, but think of a restaurant: when the food wasn’t good guest will complain to the waiter and might tip him/her less, even knowing that it was not the waiter who cooked it. In essence, consumers can only exercise their power towards the focal firm, by e.g. reducing their buying behaviour and not towards the supplier.
TW:How should companies respond to this, and are their opportunities for them here, or is this just reputation risk management pure and simple?
SB/JH: In our view, there are huge opportunities for those firms that place importance on sustainable supply chain management. On one hand and this is more a defensive strategy that will reduce the risk of chain liability. But on the other hand, we also feel that companies can gain competitive advantages through ensuring of sustainability in their supply chain as a less defensive approach.
Upcoming events from Innovation Forum related to this, with supporting publishing alongside, can be found here.