The Missing Link? The Strategic Role of Procurement in Building Sustainable Supply Networks

The increasing number of scandals about supplier violations of environmental and social regulations has put multinational companies’ (MNCs) reputations at risk. Customers make MNCs accountable for such violations, regardless of whether the violations involve tier-one or lower-tier suppliers. To address this pressure, some MNCs require their tier-one suppliers to comply with their sustainability requirements and ask them to “cascade” such requirements to their (lower-tier) suppliers. This research investigates why this cascading effect often fails. I used inductive research to study three supply networks in the automotive, electronics, and pharmaceutical/consumer product industries. Three MNCs, 9 tier-one suppliers, 22 lower-tier suppliers, and 3 industry associations participated. This research (a) reveals that to cascade a buyer's sustainability requirements, the buyer's procurement unit needs to directly engage the supplier's procurement unit; (b) identifies three key interlinked procurement processes—assessing, training, and incentivizing—involving both suppliers and procurement personnel who are instrumental in building sustainable supply networks; and (c) shows how the lack of collaboration between procurement and internal (i.e., sustainability and R&D) and external stakeholders (i.e., industry associations) limits an MNC's effort to promote sustainability throughout the supply network. Thus, this study highlights procurement's strategic role in building sustainable supply networks and suggests important research directions for how to achieve sustainability throughout the supply networks.