Long Range Planning 40 (2007) 341e356 http://www.elsevier.

com/locate/lrp

Corporate Social Responsibility

in Global Supply Chains: A
Procedural Justice Perspective
D. Eric Boyd, Robert E. Spekman, John W. Kamauff
and Patricia Werhane

Integrated supply chains are becoming a critical part of the competitive landscape as firms
seek to create strategic advantages. In response to customer and shareholder concerns for
corporate social responsibility (CSR), many buying firms are implementing programs within
their supply chains aimed at ensuring suppliers act in a socially responsible way with re-
spect to such labor practices and/or environmental issues. An important aspect of im-
plementing such supply chain CSR initiatives involves achieving supplier compliance.
Buyers have recently come under pressure to increase monitoring of suppliers behaviors
to bolster CSR compliance. This article argues that higher levels of monitoring will not
necessarily increase compliance, and may even damage buyer-supplier relationships. As an
alternative, the article suggests that a CSR implementation regime characterized by pro-
cedural justice rather than by greater monitoring is more likely to increase supplier com-
pliance, and can improve rather than damage a buyers exchange relationships with their
suppliers.
2006 Elsevier Ltd. All rights reserved.

Introduction
An integrated supply chain represents a vertically coordinated network of firms that engage in var-
ious activities associated with the production and distribution of a firms products to its end cus-
tomers. Integrated supply chains improve a firms competitive capabilities by lowering production
and transaction costs, accelerating the development of new products, and providing the firm with
access to needed resources and knowledge. As firms rely more heavily on outsourcing to reduce
total costs in their supply chains, a new set of issues related to the corporate social responsibility
of suppliers surface that are not always fully appreciated by supply chain managers.

0024-6301/$ - see front matter 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.lrp.2006.12.007
 Corporate social responsibility (CSR) in a general sense reflects obligations to society and stake-
holders within societies impacted by the firm.1 To illustrate the increasing importance of CSR with
respect to supply chain management, consider the case of Wal-Mart and the Kathie Lee Gifford line
of womens clothing. Despite the fact that items with the Kathie Lee Gifford brand carried a Made
in the USA label, news items started appearing in 1996 suggesting that the garments were actually
being produced in Honduran sweatshops. This news about its suppliers damaged the Wal-Mart
brand name and tarnished its reputation. The public outcry also affected its ability to raise public
funds, playing an important role in the removal of Wal-Mart public stock from the investment
portfolios of socially responsible mutual funds like the Domino 400 Social Index.2 The Wal-Mart
case is not an isolated one, as shown by the experiences of other well-known firms such as Nike,
Gap and Starbucks.
However recently, in stark contrast to its previous behavior, Wal-Mart has been aggressively
pursuing a variety of environmental strategies that have profoundly impacted its highly integrated
global supply chains. CEO Lee Scott has been at the forefront of this green revolution, and has
announced that the company will invest $500 million in sustainability projects, that already
involve its vehicle fleet, energy usage, packaging, agribusiness, organic clothes and food, and eco-
stores themselves. The trend towards embracing CSR has become so significant that Hau Lee,
a global authority on supply chain management (SCM), claims that socially responsible supply
chains are, indeed, a new paradigm.3

. implementing CSR initiatives within supply chains effectively

[involves] ensuring supplier compliance

Many issues are involved in implementing CSR initiatives within supply chains effectively, not
least of which is ensuring supplier compliance. Recently, firms have come under pressure to raise
the level of supplier monitoring as a means of increasing such supplier compliance. For instance,
the International Labor Organization (ILO) initiated the Better Factories Program to raise working
conditions in Cambodias garment factories. Relying on unannounced visits to factories, it moni-
tors a 500-item checklist, notes progress made in remedying problems and reports its findings pub-
licly. Its success is attributed to the fact that all factories are involved and share a similar set of
objectives, it is transparent and credible to foreign buyers, and meets the needs of the workers.4
This ILO initiative is based on monitoring, and it is not clear from prior interorganizational
research that high levels of monitoring will lead to greater supplier compliance. High levels of mon-
itoring may also carry unintended consequences relating to managing the exchange relationships
that make up a supply chain. Although the ILO is a neutral body, monitoring (or inspection) itself
tends to convey an adversarial rather than a collaborative stance. We believe that such monitoring
implicitly conveys a posture more akin to that of a supply chain bully rather than a CSR cham-
pion, seeking to gain compliance with its agenda through the use of coercive mechanisms, rather
than working hard to achieve the shared goals of the different supply chain members.5

monitoring tends to convey an adversarial stance .. more like

a supply chain bully than a CSR champion

We argue in this article that a CSR implementation regime characterized by procedural justice
offers an alternative and potentially more effective means of increasing supplier CSR compliance

342 Corporate Social Responsibility in Global Supply Chains

than that offered by high levels of supplier monitoring. In a general sense, procedural fairness means
that the procedures and criteria used for making and executing decisions are unbiased, ethical, trans-
parent and correctable. In addition, we discuss how a procedurally fair implementation process can
provide the opportunity for a buying firm to enhance the performance of its supply chain. Prior
research suggests perceived fairness can improve commitment and trust within buyeresupplier
exchange relationships, which have been repeatedly shown as important to achieving the level of
interaction and knowledge exchange necessary for high performing supply chain relationships.6

Corporate Social Responsibility and Supply Chains

Davis and Blomstrom assert that CSR obliges decision-makers to take actions that protect and im-
prove the welfare of society along with serving their own interests.7 One approach would be simply
to follow the dictum first, do no harm, and another would suggest that business should proactively
provide positive benefits to society. Several factors drive firms to accept responsibility for managing
supplier CSR, including customer and stakeholder expectations and the potential threat of legal
liability.
Boiral has observed that firms primarily use three instruments in implementing socially respon-
sible behavior among their subcontractors: social labels, socially responsible investment, and codes of
conduct.8 Social labeling informs the public of the firms compliance to an established set of criteria,
and tends to be more effective in certain situations than in others. Labeling seems to work more
efficiently in export markets involving the retail trade, and is often associated with niche products
aimed at affluent consumers who are not price-sensitive and are willing to trade price for support of
the espoused social issue. For instance, Starbucks might label its coffee as being grown by producers
who received a premium price because Starbucks negotiated directly with the source. That pre-
mium is then passed on to the consumer.
Socially responsible investing arises when financial decisions are based on achieving a socially
desirable end and acceptable economic returns. For instance, large state pension funds in the United
States, such as Californias, have for a number of years invested in companies that align with the
funds position on certain social issues. American universities also have directed investments in
their endowment portfolios to support certain social programs and avoided investing in companies
that espouse views contrary to the schools moral conscience. However, in practice, very few funds
own enough shares to affect the stock prices of nonconforming companies.9
Codes of conduct are applied to corporate policies and actions rather than to goods, and imply
that the firm observes and/or enforces the policy advocated. For instance, Levi Strauss 1992
code stipulates that it will seek to do business with partners that do not use child or forced labor,
do not discriminate, and do not use corporal punishment. Several different types of codes exist,
and, more important, the circumstances under which they are used and their ability to engender
compliance to prescribed behavior also varies. In 1999, United Nations Secretary-General Kofi
Annan, for example, launched the Global Compact to bring companies together with UN agencies,
labor, and civil society to support universal environmental and social principles.working to advance
universal principles in the areas of human rights, labor, the environment and anticorruption.10

... operational codes allow a firm to articulate commitments to

acceptable forms of conduct for itself and its business partners

A firm can apply operational codes in which it articulates commitments to a set of acceptable
forms of conduct for itself and its business partners. Such codes are referred to as subscription codes
when they articulate actions to be taken by business partners. Cisco, for example, working in part-
nership with other companies in the IT sector such as Sanmina-SCI, began the process of

Long Range Planning, vol 40 2007 343

addressing both human rights and environmental issues in 2004. They adopted a code for suppliers
that outlined standards to ensure safe working conditions, where workers are treated with dignity
and respect and manufacturing processes are in conformance with stated environmental consider-
ations. The code also includes the expectation of full compliance with host countrys laws and
regulations, as well as compliance with internationally accepted standards. In collaborating with
Intel, HP and Microsoft on this initiative, Cisco states that it is committed to supporting socially
responsible business practices across the globe, and reinforces its overall commitment to its supply
chain CSR efforts through its Corporate Citizenship Report.11
Model codes of conduct also exist that are more generic, in that they set guidelines but allow busi-
ness partners to establish their own codes. Such codes are often issued by trade associations, unions
and governments rather than operating directly within the firm. Adopted in 1998, the ILO Decla-
ration on Fundamental Principles and Rights at Work is an expression of commitment by govern-
ments, employers and workers organizations to uphold basic human values that are vital to our
social and economic lives. The Declaration covers four areas:

 Freedom of association and the right to collective bargaining;

 The elimination of forced and compulsory labor;
 The abolition of child labor;
 The elimination of discrimination in the workplace.12

Although there is an increasing trend for companies to see the value of CSR across their extended
supply chains, in extreme instances governments may implement commercial and legal codes to en-
force standards of CSR behavior and compliance. For example, many countries are developing and
enforcing intellectual property protection standards throughout their extended supply chains in an
effort to assign accountability and responsibility. WRAP (Worldwide Responsible Apparel Produc-
tion) is dedicated to certifying lawful, humane and ethical manufacturing throughout the world.
The principles range from compliance with laws and workplace regulations, to prohibitions against
harassment, forced labor, and child labor, to customs compliance, security, and the freedom of as-
sociation and collective bargaining. WRAP monitors supplier factories for compliance with detailed
practices and procedures implied by adherence to these standards.13

Supplier CSR Monitoring

Regardless of whether labels, codes of conduct or investing describe the method a buyer employs in
implementing CSR within its supply chain, some form of supplier monitoring is typically embed-
ded as part of the implementation process. Formal monitoring serves two purposes with respect to
a firms CSR initiatives. First, it enables a buying firm to signal its commitment to CSR to interested
stakeholders and, in the process, to build legitimacy for the firms CSR efforts. Second, monitoring
represents an attempt by the buyer to ensure supplier adherence to CSR guidelines and gauge prog-
ress in CSR implementation. Table 1 reflects the CSR initiatives and accompanying monitoring
practices of several individual companies with respect to one area of CSR within supply chains:
workers rights. A review of this Table reveals that, with references to workers rights requirements,
there is variance both in buyer firms monitoring arrangements and suppliers actions in response.
The level of each firms commitment towards its own involvement in monitoring also varies: Fed-
erated, for example, states it will make unannounced inspections while McDonalds only reserves
the right to make inspections of supplier operations.14
The inconsistent manner in which firms monitor supplier CSR behavior has drawn criticism
from researchers and practitioners alike. Current criticism focuses on how this variance, primarily
in terms of frequency, depth and breadth, makes it difficult for consumers, investors and other
interested parties to compare the performances of different supply chains. Critics have also stated
that this monitoring variance has led to suppliers questioning the seriousness of their buyers com-
mitment toward CSR.15 In face of this apparent lack of uniformity, supply chain practitioners have

344 Corporate Social Responsibility in Global Supply Chains

Table 1. Recent Examples of Individual Firm Supply Chain Codes of Conduct

Federated Department McDonalds Hewlett-Packard Intel

Stores1 Corporation2 Corporation3 Corporation4

Employees No stated No stated Recognizes rights of No stated

Collective requirement. requirement. workers to organize requirement.
Activity into labor unions
in accordance with
local laws and
established practices.
Mandatory Suppliers should pay Suppliers should pay Suppliers should provide No stated
Wages for workers at least the workers a fair wage wages to workers that requirement.
Employees minimum required and provide benefits meet or exceed legal
by law or the that comply with requirements in regard
prevailing industry applicable national to regular wages,
wage, whichever and local laws. overtime hours, and
is higher, and provide legally mandated benefits.
legally mandated
benefits.

Mandatory Workers regular hours Workers regular hours Workers regular hours No stated
Limit on should not exceed 60 should not exceed 60 should not exceed requirement.
Hours hours per work week, hours per work week, 60 hours per work week,
and employees will and workers will not and workers will not be
not be required to be required to work required to work more
work more than more than either than either (a) the limits
either (a) the limits (a) the limits on regular on regular and overtime
on regular and and overtime hours hours allowed by local
overtime hours allowed by local law, or (b) 60 hours
allowed by local law, or (b) 60 hours per week inclusive
law, or (b) 60 hours per week inclusive of of overtime.
per week exclusive of overtime.
12 hours of overtime.

Monitoring Supplier self- Supplier self-verification Supplier verification No stated

of Supplier verification; required on an annual through periodic requirement.
Operations Federated will basis, and McDonalds self-assessments in
make unannounced retains right to make regard to meeting
inspections of unannounced inspections requirements.
supplier operations. of supplier operations.

1
Source: Federated Department Stores, Inc.s Vendor Supplier Code of Conduct, downloaded on 5/1/05 from http://www.fed
erated-fds.com/company/fds_code_of_conduct.pdf
2
Source: McDonalds Code of Conduct for Suppliers, downloaded on 5/1/05 from http://www.mcdonalds.com/corp/values/so
cialrespons/market/accountability/code_of_conduct_for.RowPar.0001.ContentPar.0001.ColumnPar.0002.File.tmp/Code%20of%20
Conduct%20for%20Suppliers%20(10-27-04).pdf
3
Source: HP Supplier Code of Conduct, downloaded on 5/1/05 from http://www.hp.com/hpinfo/globalcitizenship/environ
ment/pdf/supcode.pdf
4
Source: Intel Supplier Code of Conduct, downloaded on 5/1/05 from https://supplier2.intel.com/static/supplier/
CoCRev02.pdf

Long Range Planning, vol 40 2007 345

also called for more and more uniform supplier monitoring. Michael Kobori of Levi Strauss, for
example, recently identified increasing the uniformity and effectiveness of supplier monitoring as
a top priority for supply chain managers looking to the future.
The argument for greater efforts towards supplier monitoring with respect to the implementation
of CSR initiatives within supply chains is based on the assumption that higher levels of monitoring
will increase the likelihood of supplier compliance by reducing information asymmetry between
buyers and suppliers. With more perfect information, the unsupported hypothesis is that suppliers
will not be able to resist complying with supply chain CSR initiatives. Yet the literature suggests
higher levels of monitoring may not be the best strategy for increasing supplier compliance. For
example Murry and Heides study of retailer compliance with manufacturer initiatives within dis-
tribution channels finds a negative relationship between manufacturer monitoring of retailers and
retailers compliance with established promotional agreements with manufacturers. They argue that
high levels of monitoring can signal distrust on the part of the monitoring party, and note that
a common reaction by the distrusted party is retaliatory behavior such as noncompliance. This
finding is consistent with earlier work by John illustrating how obtrusive control mechanisms
(such as monitoring) can lead to opportunistic acts including noncompliance with established
agreements. Monitoring also increases the tendency of the supply chain partner who is being bul-
lied to push the boundaries and engage in non-productive, even harmful, activities just to show its
dislike for the bullys actions.16
In addition to its negative effect on supplier compliance, high levels of monitoring can also have
negative implications with respect to important relational variables in the buyer/supplier exchange
relationship. High monitoring levels can reduce supplier autonomy, typically leading to buyer/sup-
plier conflict. This will tend to militate against the development of the high levels of trust and com-
mitment that prior research suggests are integral to successful joint action and information sharing
in exchange relationships, and consequently lead to poor performance.17

High monitoring levels lead to buyer/supplier conflict, militating

against the trust and commitment integral to successful performance.

While the need for some level of monitoring for legitimacy purposes is recognized, the extant
literature suggests that high levels of supplier monitoring can actually lower supplier CSR
compliance and negatively affect the performance of supply chain relationships. An ideal CSR
implementation would be one in which a firm could employ a low level of monitoring (thereby
building legitimacy) while also gaining a high level of supplier compliance. This approach
respects the importance of relationships in the effective management of supply chains. In the
next section, we discuss procedural justice as an implementation mechanism that can increase
supplier compliance while also providing buyers with the opportunity to enhance supply chain
performance.

Supply Chain Management and Procedural Justice

Procedural justice considers the fairness with which decisions between individuals are made and
implemented. Procedural justice is different from its theoretical cousin distributive justice in that
procedural justice focuses on the means by which outcomes arise from the interaction between
exchange partners, whereas distributive justice focuses on perceptions of fairness associated with
the outcomes of the exchange between persons. One stream of work in the procedural justice
area focuses on procedural justice from an instrumental perspective, where emphasis is given to
issues of individual control and voice and their effects on perceptions of fairness. The general

346 Corporate Social Responsibility in Global Supply Chains

expectation is that greater perceptions of fairness arise in situations where individuals have greater
control and a voice in an exchange.18
A second stream of research considers procedural justice from a group rather than an individual
perspective. Lind and Tylers group-value model, for example, focuses attention on whether the
processes involved in an exchange strengthen or weaken an individual members attachment to
the group involved in the exchange. Three key aspects of exchange are considered important in
determining perceptions of procedural justice in the group-value model: the neutrality of the de-
cision-making process; the benevolence of the actors motives; and whether the exchange process
respects the individual and their status.
A framework that combines procedural justice considerations associated with both the instru-
mental and group-value considerations is offered by Leventhal, who suggests that six principles
can be used in determining how fair suppliers will consider a buyers CSR implementation
from a procedural perspective. Those principles include consistently applying criteria; suppressing
bias; using accurate information; affording opportunity for correcting errors; providing adequate
representation in the decision-making process; and ensuring ethical treatment.19 One way a CSR
implementation characterized by these principles increases the likelihood of supplier compliance
is by ensuring that suppliers feel their interests are being respected. As suggested by the instru-
mental model of procedural justice, the supplier seeks to advance its own interest through the
exchange relationship by achieving greater financial performance. But there is often more at stake
than financial returns; suppliers also want a voice d they want to be heard. In the present con-
text, procedural justice helps ensure the supplier that their concerns are represented in the buyers
decision-making process and their interests are being protected in the long run. Thus buying
firms can improve supplier CSR compliance by addressing suppliers financial and non-financial
motivations.

buying firms can improve CSR compliance by addressing suppliers

financial and non-financial motivations.

In many cases, suppliers will sacrifice short-term financial gains when the buyer signals an inter-
est in establishing a longer-term relationship. Whereas monitoring suggests a transactional relation-
ship, an investment in procedural justice inherently conveys a deeper and more meaningful
commitment across the exchange relationship, implying an episodic relationship where past inter-
action influences how firms will behave in the future. Each positive interaction adds to the virtuous
cycle of commitment, and acts of trust are met with greater trustworthiness, serving to build a com-
mon bond among supply chain members. With heightened commitment comes the greater likeli-
hood that common goals will emerge and both parties will work toward a common vision,
decreasing the likelihood of the opportunistic behavior monitoring is intended to minimize.
Heightened commitment means the supplier is more likely to be responsive to the needs of the
buyer, and also to be flexible in its interpretation of contractual commitments in the face of chang-
ing environmental conditions.
To that end, the second way by which an implementation characterized by procedural justice
helps ensure high levels of supplier CSR compliance is by communicating to each supplier that
they are valued by the buying firm as an exchange partner and as a member of the buying firms
supply chain. That is, suppliers are valued to the extent that they bring more than low cost to
the supply chain. Although low cost might appear to be the primary reason for going offshore
for outsourced manufacturing and services, not all low-cost country-sourcing decisions employ
the same set of evaluation criteria, nor are the firm characteristics the same. Tyler and Linds group
value model suggests that by implementing initiatives in a procedurally just manner, a buying firm
communicates relational information regarding their status and value as a supply chain member to

Long Range Planning, vol 40 2007 347

its suppliers. This relational information, in turn, serves as a socialization mechanism through
which suppliers will increase their identification with the buying firm and its supply chain, raising
the probability that the suppliers will adhere to the buying firms management initiatives.20
For instance, it is likely that when firms negotiate they strive to design a future together rather
than take a zero-sum perspective. When differences arise supply chain members see them as oppor-
tunities for creating new solutions. Parties remain flexible and do not rush to the contract to rene-
gotiate terms and conditions. Trust breeds loyalty, a tendency to compromise, and greater
agreement on roles and performance expectations.
Evidence supporting the effect of procedural justice on compliance behavior in an interorgani-
zational context has recently appeared in several different settings. Johnson, for example, studying
joint ventures and the adoption of parent company strategic directives by joint venture managers,
found that adoption was significantly higher when managers viewed the parent firms procedure in
establishing the joint venture strategy as more just. Perceptions of procedural justice can even
motivate one party to accept directives that may appear to be against their best interests. Kim
and Mauborgne studied the adoption behavior of managers in strategic business units relative to
strategies recommended by corporate headquarters of multinational companies. They found that
managers were willing to accept strategies that were not necessarily in their best interest when
they viewed the strategy implementation procedures as fair. It appears that acceptance of
decisions that support the greater good supplants a more narrow view of an individual gain over
the larger entity. If the buyer and supplier behave as members of an integrated supply chain,
what is important is the overall gain achieved by all supply chain members, not the gain of one
party to the detriment of another.21

In an integrated supply chain, the overall gain of all supply chain

members [matters], not of one party to the detriment of another
An approach to implementation that relies more heavily upon procedural justice rather than high
monitoring levels may actually enhance the performance buyer/supplier exchange relationships. Re-
call that high levels of monitoring can lower supply chain performance by increasing conflict and
lowering trust and commitment across exchange relationships: procedural justice can have a very
different effect. Johnson, Korsgaard and Sapienza, for example, find evidence linking procedural
justice with higher levels of commitment by joint venture managers, and Johnson provides similar
evidence in an international context.22

CSR Implementation and Procedural Justice

While involving high levels of procedural justice in implementing CSR initiatives is warranted based
upon prior research on compliance and exchange relationship performance, the question of how
a buying firm can embed procedural justice into its CSR implementation is not immediately clear.
Leventhals six principles identified earlier provide general guidance rather than specific methods.
This section builds on these principles to identify several practices that a buying firm can follow if it
chooses the procedural justice towards CSR implementation in its supply chains.
Steps to accomplishing a procedurally just CSR implementation broadly involve:

Looking internally
Suppliers will not view a buying firm as applying CSR consistently if it asks seller firms to follow
a course of action it is unwilling to undertake itself. Such a lack of internal consistency will only
lead to lower perceptions of procedural justice, as suppliers will be quick to see the hypocrisy
involved. Managers should therefore ensure their own organization is prepared to do what is being
asked of its external partners. The issues here are less concerned with ethical sourcing (although it is
essential that this be done internally) and more focused on the integrating factors allowing seamless

348 Corporate Social Responsibility in Global Supply Chains

flows of information and goods across parts of the business. Transparency and open/honest
communication flows are essential to the process e but setting up mechanisms for the sharing
the requisite information when and where it is needed is often easier to do than achieving the
willingness to share, especially when the information has to cross organizational boundaries. The
present culture and values of the firm need to be taken into account, and senior managers must
understand the need for, and support, internal consistency.
American Express recently announced a Red branded product to be marketed to an estimated
1.5 million British conscience consumers. This initiative involved linking up with such companies
as Converse, Gap and Giorgio Armani to leverage their respective brands and supply chains to in-
corporate products from Africa, and dedicate some of the resulting revenues to fight AIDS in Africa.
To achieve a successful rollout, American Express had to ensure that all aspects of the service de-
livery were consistent with its CSR goals, effectively acting as the supply chain champion to leverage
the capabilities and financial and nonfinancial interests of its partners.

Defining your code of conduct

A firm cannot manage its supply chain partners if it has not articulated precisely what its intentions
are, what it is doing itself and what it expects from its suppliers and its suppliers suppliers. The
codes represent the efforts of each company to put into writing a statement or set of expectations
regarding supplier corporate social responsibility. There can be no ambiguity as to what the goals
are, the penalties for those who violate the letter and the spirit of the code, and resources are avail-
able to help suppliers (current or potential) become and remain compliant. Accuracy of information
is essential as are consistency in criteria used in selecting and evaluating suppliers, as well as the need
for objective (i.e., unbiased) application of the criteria.
To ensure procedurally just CSR implementation, supplier representation and input into the craft-
ing of CSR initiatives is needed. Representation by both buying and supplying firms will ensure
codes align with the stated strategies of all involved parties. As suppliers feel their concerns and
interests are being taken into consideration by the buying firm, supplier CSR compliance is likely
to be easier to ensure and performance will be improved. That action will require a change in mind-
set; many buying firms engaging in low-cost country sourcing tend to take a more paternalistic view
of working with such suppliers. Our position is that these suppliers want, and should have, a voice,
and that any action that encourages involvement or participation in supply chain issues will go
a long way to building commitment and a common CSR vision.
To complete the circle, a corporate policy or statement of the buying companys commitment in
the form of a corporate social responsibility report should be developed and endorsed. Companies
such as Disney, Gap and McDonalds Corporation publish CSR reports that both illustrate their
commitment to their codes of conduct, and also highlight the benefits they derive from their efforts.
More important, they measure the effectiveness of those efforts, and embrace those supply chain
partners whose behaviors epitomize CSR.23

Mapping the process

Above all, CSR initiatives and supplier compliance must be based on accurate CSR information. The
attempt should be made to show the entire flow of goods through the pipeline from the simplest
raw material to the most complex subassembly. Building a complete flow chart of how all materials
move through the supply chain, and then replicating those maps for different product families or
stock-keeping units (as each may have a unique set of suppliers), is a daunting task; but it is just the
first step. After the map is built, data should be collected on each of the firms so the players become
familiar, followed by an audit to evaluate the quality of goods produced, costs, commitment to
workers rights, and labor and wage practices, as well as local regulations and managements
philosophy toward its workers. (The mapping procedure is also another way by which to increase
supplier representation in the process.) In the end, though, CSR in the supply chain is only as effec-
tive as its weakest link. Consistency and congruency in operationalizing the tenets of CSR must be
reinforced by a supply chain champion recognizing the needs and interests of all representative

Long Range Planning, vol 40 2007 349

partners. Companies such as the Body Shop use the mapping process as a means to identify a base-
line from which to spot specific CSR problem areas.24

Making sure each relationship fits with buyer company strategy

Post audit, a buyer firm may need to cull its list of suitable suppliers. If a lack of trust exists, or if
there is a gap in values and beliefs it holds dear, the supplier must be dropped: there is no compel-
ling reason to work with suppliers who do not share core values. Conducting supply chain post
mortems and ascertaining what works and what does not is essential to organizational learning
across the extended enterprise. Embedding a CSR perspective into such activities is an essential
way of ensuring that it will be institutionalized. It is important, however, to maintain an error cor-
rection mechanism by which noncompliant suppliers can alter their practices and come into com-
pliance with CSR initiatives. For a buyer firm which wishes its CRS initiatives to succeed, price
differentials, delivery, quality and so forth, cannot be so advantageous as to justify working with
a supplier who does not fit your profile; the risks to the entire extended enterprise are too great.

Assisting suppliers in adopting CSR initiatives

A CSR implementation must treat suppliers ethically if it is to be considered procedurally just.
Beyond compliance issues, having the supply base understand the intricacies of the code of conduct,
and knowing what a violation is and what the remedy is for each infraction, it is equally valuable to
educate suppliers to understand the process by which they can become compliant. Helping them
understand the barriers and obstacles and sharing approaches to compliance with them allows
them to appreciate better the journey they face. Knowing the law is one thing; developing in sup-
pliers an understanding of buying firm culture, values, and the importance it attaches to its CSR
programs will go a long way to developing shared norms. In turn, the culture and values of sup-
pliers needs to be understood, and with such knowledge the distance they have to travel to adopt
the buying firms policies and procedures can be appreciated.

The intent is to not to [develop buyer/supplier understanding] for its

own sake; but to build a common set of values and beliefs ...

The intent here is to not that each firm gain an appreciation for the contract and the rights and
obligations of the supplier and the firm for its own sake; rather the goal is to begin the process of
building a common set of values and beliefs centered on the rights of people to earn a living wage
working in a safe environment where they are treated with dignity and respect. The Walt Disney
Companys internal International Labor Standards (ILS) organization has endeavored to engage
merchandise suppliers as well as licensees in embedding CSR into their practices in a procedurally
just manner. Although initially an audit mechanism, ILS has evolved into an organization that
works to engender a sense of shared responsibility across its supply chain partners, as well as among
those who produce for its licensees, and has had considerable success in assisting suppliers and sub-
tier suppliers to adopt CSR standards.

Communicating the code to suppliers

Discussion, up and down the supply chain, should be conducted with complete transparency with
respect to the information exchanged. If there is no trust among supply chain members and they do
not share both a common vision and a commitment to workers rights, nothing will happen. There
can be no exceptions made; once a code has been established it must be enforced in an unbiased
manner (subject to consideration for the local customs, governmental regulations and so on).
A companys actions and words must be consistent over time: the course must be set, with the
acknowledgement that different circumstances (laws and customs) might affect how policy is

350 Corporate Social Responsibility in Global Supply Chains

implemented at different times. Suppliers must be advised of the consequences for noncompliance.
Federated Department Stores, for example, has articulated a three-step process of action the
company will undertake if a supplier violates its code of conduct. The actions include suspending
further shipments until compliance is documented and measures enacted to prevent future non-
compliance. The issue here is communication, both of what is expected of the supplier and the
repercussions associated with noncompliance. Monitoring is important, but it is equally important
that the plan has teeth, and that it is clear what the price on noncompliance is to all parties in the
supply chain.

There can be no exceptions; a code must be established [and then]

enforced in an unbiased manner

Procedural Justice Thrives in a Collaborative Supply Chain

The importance of trust, communication and commitment has already been noted in our discus-
sion of procedural justice, and we suggest that these characteristics form the foundation on which
such programs are built. A growing literature dedicated to understanding the benefits to be derived
from collaborative behavior in supply chains, and the documented networkwide gains attributed to
integrated supply chains, add credence to our position. That body of work is based primarily on
transaction-cost theory as first developed by Coase and refined by Williamson, and on a re-
source-based theory as developed by Wernerfelt and others. Hipkin and Naude present a case
history in which they conclude that a shared vision of the future; open and frequent informa-
tion-sharing; an acknowledgement of and an ease with mutual interdependence; less rigid control
mechanisms; and constant feedback result in better performance and a stronger competitive
position.25
Similarly, there is a great deal written about the success factors of strategic alliances,26 and it is
interesting to note that the factors that contribute to competitive advantage, better performance,
and greater learning also rest at the core of those antecedent relational variables that enable proce-
dural justice to take root, survive and replace a more guarded strategy that anticipates opportunism,
relies on heavy monitoring, and is founded on low trust, little cultural compatibility, and a lack of
shared norms.
Huxham and Vangen build a case for collaborative advantage that is driven by the need for
greater efficiency, greater access to resources, sharing of risk, and for coordination and integration
between trading partners. In the context of this article such collaboration allows both buyer and
supplier to reach a common understanding of the level of corporate social responsibility to which
the supplier is to conform. Despite the natural tensions that can exist between the buyer and the
supplier, collaborative advantage builds a common bond, a shared framework that guides the
implementation of a code of conduct. The authors go on to say that there is a moral imperative
to collaborate. There is no other way to address such complex problems.27

A Caveat
Though these steps are essential to the process, following each one can be an arduous and lengthy
process. It is possible to learn from others who have gone before and who can provide insights,
short cuts, and lessons from which firms can, and should, learn. To begin, it makes perfect sense
to benchmark others inside and out the same industry, with a focus on best in class, not just
best in industry. In addition to benchmarking, industry associations and trade groups can provide
guidance as well as being the catalyst for standards setting. There are third-party companies that
work with firms to both monitor compliance and help initiate programs. However firms learn at
different rates due to their ability to absorb information. Absorptive capacity is a function of
how open management is to new ideas and approaches; the firms structure and processes and

Long Range Planning, vol 40 2007 351

whether information is easily shared and disseminated throughout the firm; and the degree of im-
portance they associate with the issue at hand.

.procedural justice is built on mutual respect, shared goals and trust.

Implications and Future Directions

A Managerial Perspective
For managers, it should be clear that procedural justice is a different approach to managing ones
supply base. Indeed, the term managing as used here might be the wrong way to describe the
relationship, given that one cannot control what one does not own. Instead, procedural justice is
built on mutual respect, shared goals and trust. Although it might appear that this approach is
less costly than monitoring, the time and effort needed to build trust and establish a shared perspec-
tive between buyer and supplier should not be underestimated. In addition, the attributes by which
potential suppliers are evaluated will alter. Suppliers will no longer be evaluated on hard metrics
and quantitative measures alone; instead buyers will have to understand better suppliers motiva-
tions, levels of trust and commitment, openness to sharing information and the like. Such data
points are not found on a fact sheet or in a prospectus, and the process by which a buyer performs
its due diligence will now reflect these new attributes and characteristics. In addition, managers
must acknowledge and be prepared for the tensions that arise between partners in spite of prepa-
ration and use of best practices. Trust, for example, is a very powerful tool and is essential to
procedural justice, but is also very fragile, and must be regularly reinforced and encouraged.
A second implication for managers is to not simply follow accepted thinking regarding CSR im-
plementation within the supply chain without giving careful consideration to the implications as-
sociated with a particular type of implementation. Aragon-Correa and Rubio raise the similar point
with respect to the implementation of environment strategies, identifying six myths associated with
environmentally related CSR initiatives. The discussion presented in this article suggests that there
is somewhat of a myth regarding the role of monitoring in CSR implementation within supply
chains. Rather than being a panacea for compliance, we illustrate the negative impact supplier mon-
itoring can have on CSR implementation.28

An Academic Perspective
Our research is best positioned within the stream of work that considers the conditions that enable
a firm to achieve its strategic business objectives and its CSR objectives simultaneously. Although
this article also considers CSR from a strategic perspective, our focus is different from prior
research. For example, Burke and Logsdon identify five conditions (centrality, specificity, proactiv-
ity, volunteerism, and visibility) as important in determining the degree to which a firm can achieve
strategic benefits through CSR initiatives undertaken by the firm. This article complements their
work by taking a dyadic view in identifying the conditions enabling a firm to gain volunteerism
from its supplier towards implementing its CSR objectives. By implementing these in a manner
characterized by procedural justice, we suggest that a firm can lessen the need for formal monitor-
ing, and depend instead on the discretionary choice or volunteerism of its suppliers in carrying out
such initiatives within its supply chain. Our discussion further demonstrates how gaining supplier
volunteerism aids in building the strong bond between the buying firm and its suppliers which
contributes to high-performing supply chains.29

gaining supplier volunteerism aids the strong bond between buyers

and suppliers which contributes to high-performing supply chains.

352 Corporate Social Responsibility in Global Supply Chains

 Regarding volunteerism, this article also adds to researchers understanding of voluntary compli-
ance decisions relative to CSR. Prior research focuses heavily on demand-related issues like
consumer concern, and supply-side issues like competitors investments in CSR, in explaining vol-
untary firm compliance with CSR. Procedural fairness in the implementation of a CSR initiative
within a global supply chain is offered as an alternative mechanism that affects suppliers voluntary
compliance with a buyers CSR strategy.
This article also extends recent work considering collaboration with respect to CSR implemen-
tation. Husted, for example, views collaboration as a governance mode in discussing how cooper-
ation between a firm and a nonprofit or NGO is one way for a firm to seek to accomplish a CSR
objective. We also focus on this collaboration but from a different perspective, in that our research
treats cooperation as endogenous; that is, the level of cooperation between a firm pursuing a CSR
initiative and its partners depends upon the level of procedural fairness with which a firm imple-
ments its initiative.30
Finally, ours is not the first work to consider the implementation of interfirm relations from a pro-
cedural justice perspective. Prior research has employed procedural justice to consider commitment
and strategic performance within alliances and joint ventures.31 But we reach further to address calls in
the corporate social responsibility literature for research considering a firms interorganizational re-
lationships from a procedural justice perspective and its role in understanding CSR implementation.

Directions for Future Research

Both sets of implications imply the need for future research that enables supply chain members to
assess better the kinds of characteristics potential partners are likely to possess. This inquiry is in-
tended to provide a foundation for procedural justice to flourish: a supplier might appear a suitable
candidate but lack the relational attributes required to build the rapport and trust needed. In ad-
dition, research is needed to understand better the mechanisms for moving from a compliance-
based model built on heavy monitoring to a commitment-based model built on a common set
of beliefs and understanding. For both buyer and seller, changes in how they interact with each
other will be needed, and greater insight would help to reduce the anticipated tensions. Keep in
mind that an implicit, albeit subtle, assumption here is that the buyer is more powerful relative
to the supplier. What if the relative power base was reversed, how might that affect the buyers abil-
ity to establish CRS based on procedural justice? Research into asymmetrical power bases, how they
are used, and their immediate and long-term effects on potential partners might prove to valuable.
The opportunity to determine the success or failure of those organizations that have embraced
these behaviors lies in quantitative empirically based research and/or case-based research. Specif-
ically, it is necessary to test whether adapting procedural justice in the manner suggested by Lev-
enthals six principles delivers the intended results from both a CSR and a supply chain
perspective. Another important consideration is to determine whether these relationships exist
across the spectrum of CSR initiatives (e.g., environmental, child labor, etc.), or whether proce-
dural justice perspective can have a greater influence on certain activities within this subset.

Some buyers shut their eyes and avoid facing the issues e others try to
accept a level of responsibility for influencing their suppliers [attitudes]

Conclusion
The common belief is that tension exists between competitive opportunity and human rights in
managing a supply chain. Firms turn to outsourcing supply as a means to lower product costs
and thus remain competitive. Yet, the cost advantages available from a supply chain often come
at the expense of supplier firm workers. Some buyers simply shut their eyes and try to avoid facing

Long Range Planning, vol 40 2007 353

these issues, while others try to resolve this tension by accepting a level of responsibility for influ-
encing their contract manufacturers or foreign suppliers relations with their workers. This article
provides one potential solution to firms choosing to follow this strategy in its consideration of
several important issues arising in the course of managing corporate social responsibility within
a supply chain.
We present a managerial framework for addressing the challenges associated with developing
an ethical sourcing program. We have described different codes of conduct and have offered
an approach to implementing a viable ethical sourcing program. Although we believe our
approach has merit, and will assist managers to understand better the issues that contribute to
such efforts, certain limitations remain, specifically the practical uncertainty of any normative
discussion about the success rate. At this juncture, we have attempted only to map the process
to help managers think more about these complex issues. To be sure, any argument that suggests
the need to reduce a firms reliance on formal monitoring will be met with some level of skep-
ticism; especially by those who subscribe to the trust but verify notions of supply chain man-
agement as it pertains to CSR. We recognize that some level of monitoring is required to
provide for measuring achievement with respect to CSR and to achieve legitimacy with some
stakeholder groups. However we believe we have presented both a logical counter-argument
and provided sufficient evidence of current practice to sway opinion and practice with respect
to the benefits associated with high levels of monitoring. Our aim has been to contribute to
the debate and provide guidance for those who wish to move from the normative to the realities
of implementing CSR within their supply chains

Acknowledgement
The authors acknowledge the thoughtful comments of Darden colleagues Tim Laseter and Andrew
Wicks. We also acknowledge the Batten Institute at the Darden School for providing the funds that
supported this research.

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Biographies
Eric Boyd is Assistant Professor of Marketing at James Madison Universitys School of Business. He received his
PhD from the University of Virginias Darden School of Business. His current research interests focus on the
contribution of marketing strategy to firm performance from both a financial and ethical perspective. College of
Business, James Madison University, Harrisonburg, VA 22807, tel (540) 568-2721, e-mail: boydde@jmu.edu
Robert Spekman is the Tayloe Murphy Professor of Business Administration at the University of Virginias Darden
Graduate School of Business. He is a recognized authority on business-to-business marketing strategy, channels of
distribution design, and the implementation of go-to-market strategies. He is also well known for his research and
corporate consultancy work in strategic alliances, partnerships, and supply chain management. Darden Graduate
School of Business, University of Virginia, Darden Blvd, Charlottesville, VA 22906. tel (434) 924-4860, fax (434) 243-
7677, e-mail: spekmanr@virginia.edu
John W. Kamauff is a Principal with Archstone Consulting who specialize in supply chain strategy and operations
and strategic sourcing. He has more than 25 years of experience in international business across government,
academia, and consulting. He earned his PhD from the University of Virginias Darden School of Business.
Archstone Consulting, 4 Stamford Plaza, 6th Floor, 107 Elm Street, Stamford CT 06902, tel 443-838-9736,
email: jkamauff@archstoneconsulting.com
Patricia H. Werhane is the Ruffin Professor of Business Ethics and Senior Fellow of the Olsson Center for Applied
Ethics, at the Darden School of Business and holds a joint appointment there and at DePaul University where she is
Wicklander Chair in Business Ethics and director of the Institute for Business and Professional Ethics. She is
a prolific author, an acclaimed authority on employee rights in the workplace, one of the leading scholars on Adam
Smith, and founder and former editor-in-chief of Business Ethics Quarterly, the leading journal of business ethics.
Darden Graduate School of Business, University of Virginia, tel 434 924 4840, e-mail: Werhanep@darden.virginia.edu

356 Corporate Social Responsibility in Global Supply Chains