Virtue Out of Necessity?: Compliance, Commitment and the Improvement of Labor Conditions in Global Supply Chains
Key Insights for Managers
Firms often audit their global suppliers using a traditional compliance-based approach that threatens to sever the relationship if suppliers fail to comply with the buyer’s code of conduct. This study by Richard Locke, Matthew Amengual, and Akshay Mangla suggests that firms will be more successfully achieve their goals of suppliers’ complying with codes of conduct if the firms instead embrace a more cooperative auditing approach that emphasizes a shared commitment to improvement through root cause analysis, joint problem solving, information sharing, and best practice diffusion.
This conclusion results from the analysis of a major apparel company’s global supply chain, including more than 300 interviews with the apparel firm’s managers, auditors, and supply chain factories’ managers and workers in Bangladesh, China, Dominican Republic, Honduras, and India. The study provides detailed examples of how using a commitment-oriented approach led to better labor standards in factories in the Dominican Republic, Honduras, and India.