Managing Supplier Sustainability Risk

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http://hdl.handle.net/10138/44842
Title: Managing Supplier Sustainability Risk
Author: Harilainen, Hanna-Riitta
Contributor: Hanken School of Economics, Department of Marketing, Supply Chain Management and Corporate GeographyGeography
Publisher: Hanken School of Economics
Date: 2014-04-14
Belongs to series: Economics and Society – 266
ISBN: 978-952-232-220-3 (printed )
978-952-232-221-0 (PDF)
ISSN: 0424-7256 (printed)
2242-699X (PDF)
URI: http://hdl.handle.net/10138/44842
Abstract: Supply chains are increasingly global, often reaching to developing regions. The media pressure brand owners to be responsible, but a product is only as sustainable as the practices of all the companies involved in manufacturing it are. It’s not enough that the brand owner acts responsibly; sustainable practices have to reach component and raw material suppliers upstream. Image risk has often been recognized as reason for investing in sustainability. In the supply chain context, supplier misconduct also presents a supply risk. Smooth flow of goods is at stake. Examples of this are strikes and the breaking of environmental laws that cause line stops at supplier factories. These realized supplier sustainability risks seldom receive media attention or reach consumer consciousness; however, they potentially cause challenges in availability and supply. The sophistication of supplier sustainability risk management varies by company, and managers are often unaware of its enablers. The topic of supplier sustainability risks is not yet sufficiently addressed in the literature, despite its increasing importance. This research utilizes grounded theory methodology, an inductive approach in which theory is seen as emerging from the data. The chosen methodology particularly suits situations where the subject area has not yet been studied and can give fresh insights. Empirical data were gathered from the managers of six Finnish multinational companies, and the perceptions of the interviewed supply chain and sustainability managers were used to relate the findings at the company level. The key finding of this study is the importance of supply risk as a potential driver for investments in supplier sustainability. A company’s supply chain strategies are linked to its vulnerability to incidents in the supply chain, while the sophistication of sourcing practices is linked to the vulnerability to outcome of such incidents. A company’s position in the supply chain drives risk focus on reputational risk and/or supply risk and sourcing’s incentive structure together with risk awareness drive the proactive or reactive management of supplier sustainability risk. This research contributes to both supply chain risk management and sustainable supply chain management literature. Managers can utilize the framework to understand when proactive supplier sustainability risk management makes sense and what its enablers are.
Subject: supply chains
sustainability
risk management
sourcing


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