Sustainability in multi‐tier supply chains: Understanding the double agency role of the first‐tier supplier

Abstract

In light of the growing complexity of globally dispersed, multi-tier supply chains, the involvement of first-tier suppliers has become instrumental in the quest for achieving sustainability compliance along the supply chain. We describe this new responsibility as the double agency role. We employ agency and institutional theory arguments to explore the conditions under which first-tier suppliers will act as agents who fulfill the lead firm's sustainability requirements (i.e., the primary agency role) and implement these requirements in their suppliers' operations (i.e., the secondary agency role). The findings from three in-depth case studies embedded in different institutional contexts highlight the importance for lead firms to incentivize each agency role separately and to reduce information asymmetries, particularly at the second-tier level. In addition, our inductive analysis reveals several contingency factors that influence the coupling of the secondary agency role of the first-tier supplier. These factors include resource availability at the first-tier supplier's firm, the lead firm's focus on the triple-bottomline dimension (i.e., environmental or social), the lead firm's use of power, and the lead firm's internal alignment of the sustainability and purchasing function. We integrate our findings in a conceptual framework that advances the research agenda on multi-tier sustainable supply chains, and we subsequently outline the practical implications of assigning the double agency role to first tier suppliers.

Tackling the sustainability iceberg

“…Therefore, from a risk and compliance perspective, buying firms should consider extending their sustainability strategies and practices to distant tiers further upstream in their supply network (Wilhelm et al, 2016a).…”

“…While some buying firms interact only with their direct suppliers which act as gatekeepers and help them to approach suppliers at distant tiers (Wilhelm et al, 2016a), other firms approach lower tier suppliers directly to control and monitor their sustainability performance (e.g., Grimm et al, 2016). However, the missing direct business relationship with second-or third-tier suppliers and the resulting opaque supply network structures often cause information deficits for buyers (Busse et al, 2017a).…”

Sustainable Global Sourcing: A Systematic Literature Review and Bibliometric Analysis

“…Some recent studies have already made an effort in this regard: Fayet and Vermeulen (2014) [153] investigate sustainable standards for smallholder farmers in the Indian multi-tier cotton SC. Bregman et al (2015) [170] examine the relationship between the ethical judgment of firms engaged in GS and consumers' intentions to purchase a firm's products; Wilhelm et al (2016) [171] discuss the double-agency role played by first-tier suppliers in managing sustainability in three-tier SCs, i.e., first-tier suppliers need to first fulfil focal companies' sustainability requirements as an agent, then implement the requirements in their suppliers' operations as a principal.…”

Sustainable Supply Chain Management Implementation–Enablers and Barriers in the Textile Industry

“…Distinct social supply chain policies within the textile industry involve not only working conditions and wages, but also housing and home worker conditions. Through the complexity of the textile supply chain, it has been found that there is a need to implement the SSCM strategy towards the sub-tier supplier level [13]. Thus, previous research is concerned with the sustainable management of supply chains, analyzing the textile sector, but, due to the complexity of the issue, there are still various research gaps.…”