2.1. Sustainable Supply Chain Strategies
In the context of Supply Chain Management (SCM), the business case to integrate sustainability and foster sustainable supply chains has been developed, since sustainability becomes a growing demand within global business settings [9
]. Different definitions and interpretations are available for Sustainable Supply Chain Management (SSCM), ranging from a narrow focus towards environmental issues (also referred to as Green Supply Chain Management, GSCM), to a holistic interpretation of economic, environmental, social, and ethical aspects in the supply chain [10
]. One of the working definitions of SSCM, which is adopted in the context of this paper as well, is: “The integration of sustainable development and supply chain management [in which] by merging these two concepts, environmental and social aspects along the supply chain have to be taken into account, thereby avoiding related problems, but also looking at more sustainable products and processes” [11
] (p. 132). Different conceptual frameworks regarding SSCM have been presented in the literature, focusing on triggers, risks and performance issues, and sustainable products [12
], or on triple bottom line approaches [13
]. In the latter, focus is set on finding a balance between economic, environmental, and social performance, however Carter and Rogers [14
] state that they “are not suggesting that organizations blithely undertake social and environmental goals relating to the supply chain”, thereby referring to the extra costs that these goals would bring to an organization [14
] (p. 369).
Such interpretations, in which SSCM is reduced to the supremacy of financial and economic dimensions over environmental and social dimensions, are however criticized [15
]: “the question of how to create truly sustainable supply chains remains unanswered” [15
] (p. 44). A ‘truly sustainable supply chain’ might then be defined as follows: “To be truly sustainable a supply chain would at worst do no net harm to natural or social systems while still producing a profit over an extended period of time; a truly sustainable supply chain could, customers willing, continue to do business forever” [16
] (p. 38). Traditionally, the economic dimension received more attention in business (e.g., [17
]), but as customers have emerged as a driving force, more attention should be paid to environmental and social issues. This approach is supported by research stating that customers are more interested in these two aspects, and therefore, firms concentrating on them will see a positive impact on their overall sustainability performance [4
The growing awareness of negative effects due to unsustainable behavior results in the demand on firms to take responsibility. Emotions may play a major role in sustainability scandals. In the last few years, many sustainability scandals linked to companies have been exposed. Well known cases include the Rana Plaza factory collapse, which was linked to Primark [19
], child labor at a factory for Nike products, as well as harmful ingredients in Mattel products [4
]. While in the past, this was mainly communicated via TV and newspapers, today’s social networks and media spread information faster than ever and reach people all over the world [20
]. This resulted in a demand for transparency along the entire supply chain, and increased attention towards the effects of individual processes on sustainability [21
The focus on sustainability shifts from the individual firm level to the entire supply chain. Different shoring and sourcing strategies have been developed throughout the years, each having a positive or negative effect on supply chain sustainability. One strategy is to wholly own the supply chain by the focal company, such that every link of the chain is located in proximity to the other. When parts of the supply chain are moved to other countries but are still operated by the focal company, this strategy is called offshoring [22
]. Whenever a service is purchased from a supply chain partner, it is no longer wholly owned by the focal company and we talk about outsourcing [23
]. Outsourcing can take place in the same country or it may involve going abroad, which is then called offshore outsourcing. Reasons for offshoring are lower wages, extended working hours due to the presence in different time zones, or proximity to important resources [22
]. Offshore outsourcing causes negative environmental impacts, such as an increase in (global) carbon emissions [24
] and agricultural land grab in impoverished regions [25
The increasing complexity of global networks and sourcing strategies are challenging companies to act sustainably. Production processes are often spread across continents and the supply chain partners are linked by the flow of information, material, and capital [12
]. Different factors influence the supply chain and lead to increased uncertainty, which needs to be understood and managed [26
], and global sourcing should be interpreted within the context of sustainability [27
]. Each process step has environmental and societal effects and often it is the focal company that will be held responsible for these outcomes. This poses a challenge for the focal company to manage processes within their supply chain, including relations with direct, second, and third tier suppliers. Therefore, the company has to ensure that corporate sustainability is practiced internally and that these values are followed equally by their supply chain partners [12
Two more strategies gained popularity in recent years. Reshoring aims to bring the business back home, especially manufacturing. These initiatives are responses to the decreasing income gap between the West and its offshore locations and a growing supply chain complexity [28
], as well as the result of economic crisis and customer demand for flexibility and improved cost performance [29
]. Similarly, nearshoring moves the business not fully home but closer to home, i.e., to a nearby country [3
]. In order to ensure sustainability at the supplier, effective supplier management needs to be in place. Therefore, the reason to offshore in order to save costs has lost in importance, while closer ties with the supplier, made possible by geographical proximity, have become a priority. However, the process of moving offices and people as well as creating new ties is costly. Different initiatives have been presented to encourage reshoring and local sourcing, such as a framework to ‘right-shore’, which considers the initial decision making process to offshore and then re-evaluates that decision [30
], sustainability factors for reshoring [3
], and carbon footprint tax [31
]. Local businesses and firms with global businesses also apply different sustainability strategies. For local firms, traditional supply management (SM) is a sufficient prerequisite for sustainable behavior. For global companies, in addition to SM, SSCM has to be introduced to show significant improvement in sustainability performance. Adopting global sourcing strategies does increase supply chain complexity, but may at the same time push a company to introduce SM and SSCM, improving environmental and social performance [4
2.2. Customer Demand and Perception of Sustainability
In the literature, different drivers to integrate sustainability are identified, such as compliance to laws and regulations. More and more however, customers demand sustainability and companies find ways to meet this demand, e.g., by analyzing and lowering product carbon footprints [32
]. Attention towards sustainability can lead to an increase in sales and a growing customer base. This has resulted in companies reporting on their Corporate Social Responsibility (CSR) [33
]. Also, the attention to supply chain scandals leads to increasing customer demand towards sustainability and transparency [4
An important aspect of customer demand is the perception of the focal company and its supply chain. Irresponsible behavior of one supply chain partner can have a negative impact on the reputation of the remaining partners. Following Molet et al. [5
], an individual will be evaluated negatively when associated with someone else who has a bad reputation. This is called ‘association by guilt’ and can be compared to a supply chain contagion [5
]. Referring back to the differentiation between offshoring and outsourcing, this concept indicates that outsourcing a sustainably weak part does not necessarily increase the reputation of the focal company’s sustainability. It will still be associated with the focal company’s supply chain, and thus, whenever a problem is identified at a supplier, this can also negatively impact the focal company. The opposite, association by honor or the ‘halo effect’, is also possible. Products sold by companies that engage in social initiatives will automatically be perceived as more valuable or sustainable even though the product itself might have no link to any of the initiatives [34
]. Often, this is the main reason for businesses to engage in CSR. It is assumed that the closer a customer is to a company, whether considering spatial or social distance, the stronger is the effect that corporate social performance may have on customer perception, as well as customer willingness to continue buying from that firm and even pay a price premium for sustainable products [35
]. This leads to the following hypotheses:
Hypothesis 1 (H1).
Customer perception of a company’s sustainability is expected to have a direct impact on willingness to continue buying from the focal company.
Hypothesis 2 (H2).
Customer perception of a company’s sustainability is expected to have a direct impact on willingness to pay a price premium for sustainable products from the focal company.
On the other hand, it is suggested that consumers have adopted a globalized perception. CSR initiatives to them are global initiatives, and therefore are not necessarily linked to an individual country [18
]. Further, people tend to project their own traits onto others, which is called ‘Spontaneous Trait Transference’ [5
]. This could mean that consumers who act sustainably might expect firms to act the same. For this study, it is important to consider whether the transference of traits differs with distance. Accordingly, it is valuable for companies to know what is important to their customers and which initiatives can evoke the greatest emotions and identification with the cause. Regarding age and gender characteristics, a report by Morgan Stanley [36
] has also taken a look at the influence of age or gender. It shows that Millennials, people born around 1980–1999, and especially female customers are interested in sustainability [36
]. The dispositions regarding customer interest lead to the following hypotheses:
Hypothesis 3 (H3).
Customer interest in sustainability has a moderating effect on the link between customer perception of a company’s sustainability and the willingness to continue buying from the focal company.
Hypothesis 4 (H4).
Customer interest in sustainability has a moderating effect on the link between customer perception of a company’s sustainability and the willingness to pay a price premium for sustainable products from the focal company.
Furthermore, business oriented CSR increases trust in the company while philanthropic CSR supports the consumer’s identification with the company [37
]. Accordingly, satisfaction, trust, and identification are important values that contribute to strong customer support [18
]. If the relationship between company and customer scores is low on these three values, then there is a greater chance of the customer boycotting the brand in case of a scandal [38
] or switching to a different brand [39
]. The (spatial, social) distance to the focal company has an effect on customer perception, willingness to continue buying, and even pay a price premium [35
]. Distance to the company surpasses the spatial element and comprises other factors, such as linguistic, cultural, economic, and political differences. Therefore, this study interprets distance as psychic distance, as defined by Johanson and Vahlne [40
], and further elaborated upon in international outsourcing context [41
]. For this study, it is assumed that customers identify more easily with companies of low psychic distance, and, thus, are more loyal to those than to foreign companies of high psychic distance:
Hypothesis 5 (H5).
Psychic distance is expected to have a direct impact on customer perception of a company’s sustainability.
Hypothesis 6 (H6).
Low psychic distance of the supplier’s country of origin is expected to have a direct positive impact on customer perception of a company’s sustainability.
Hypothesis 7 (H7).
Low psychic distance of the focal company’s country of origin is expected to have a direct positive impact on customer perception of a company’s sustainability.
The strong focus on the link between customer and company has led to the question whether customers are purely interested in the point of sale, and thus, only the sustainability of the focal company. This would indicate that consumers take a great interest in corporate social performance of businesses with low psychic distance, but are likely to ignore the rest of the supply chain. Further, consumers might show less interest in sustainability when there is high psychic distance or intuitively evaluate these companies as less sustainable. Therefore, the discussion about customer-company is extended by ‘country’ and it suggests that customer perception of sustainability can be influenced on all three levels.
Country sustainability indices, like the one for companies, vary in size as well as in indicators. Some of them only measure the ecological footprint, or, like the Human Development Index [42
], mostly social and economic sustainability. One index measuring all three indicators of the triple bottom line is the Sustainable Society Index (SSI). The SSI analyzes 151 countries and includes 21 indicators in three categories: economic wellbeing (5), human wellbeing (7), and environmental wellbeing (9) [43
]. It is unclear whether there is a direct relationship between environmental and social factors [42
]. The Sustainable Society Foundation (SSF), however, has found at least some negative correlation in their SSI, and therefore decided to publish separate rankings for each indicator instead of an overall sustainability index [43
]. For instance, while Mozambique as well as the Central African Republic score very low on human wellbeing, they can both be found in the top 10 of the environmental index.
Corporate sustainability efforts are related to a country’s national culture, more specifically the degree of individualism and uncertainty avoidance [44
]. Moreover, costumer perception of a country’s industry and corporate landscape impact their perception of that country’s sustainability [45
]. Therefore, this study takes a closer look at a country’s effects on consumer opinion about company sustainability. The question is, whether the sustainability of individual sourcing countries and the focal company’s country of origin influence customer perception of the brand’s sustainability. This is reflected in the formulation of the following hypothesis:
Hypothesis 8 (H8).
Customer perception of a country’s sustainability is expected to have an impact on customer perception of the company’s sustainability, when associated with that country.
presents an overview of all the hypotheses analyzed in this study, as well as the main sources from which they are derived; Figure 1
provides the research model for this study.