Responsibility Boundaries in Global Value Chains: Supplier Audit Prioritizations and Moral Disengagement Among Swedish Firms

Key Insights for Managers

With limited resources to monitor suppliers’ labor standards, most buyer firms audit only a subset of their suppliers and need to prioritize. By interviewing managers at 12 Swedish CSR-leading firms from a variety of industries that source from countries with weak labor regulations, author Niklas Egels-Zandén identified four factors they often used to prioritize audits. Specifically, managers were more likely to audit a supplier when at least one of these factors were present: 1) when suppliers lived in what the buyer firm perceived as a high risk country (those unlikely to have strong legal institutions to protect workers), 2) when the suppliers were larger (in terms of size or its procurement), 3) when substituting to a different supplier for a given product is more difficult or costly, and 4) when the supplier sells goods intended for external customers directly to the firm (first-tier). As a result, buyers deprioritized auditing smaller suppliers, those that less frequently purchased from, and those that supply intermediate (rather than final) products. Managers should consider how they prioritize supplier audits and, in doing so, which suppliers they might be leaving out that may still be at high risk to violate their code-of-conduct.