A More Sustainable Supply Chain

Key Insights for Managers

How can multinational corporations (MNCs) ensure that all of the suppliers in their global production network adhere to fair labor practices and environmental protections? Authors Verónica Villena and Dennis Gioia studied three sustainability-driven MNCs and found that it is not enough for MNCs to set their own long-term sustainability goals: they need to make sure the suppliers who work with them do the same, overseen by a point person within the MNC who disseminates best sustainability practices across the network.

This paper describes four specific sustainability strategies found to be beneficial for MNCs: direct, indirect, collective, and global. The direct approach sees MNCs set and monitor clear social and environmental targets for first-tier suppliers regarding second-tier suppliers. The indirect method lets its first-tier suppliers oversee part of lower-tier-supplier sustainability management. A collective approach means its MNCs collaborate with competitors and major suppliers to create and implement industrywide sustainability standards. Finally, the global strategy has MNCs collaborate with international organizations and NGOs in working towards the same goals.

The study analyzed data collected from the supply networks of three MNCs in the automotive, electronics, and pharmaceutical industries, respectively. The sample included 9 top-tier and 22 lower-tier suppliers located in Mexico, China, Taiwan, and the United States.