Closing the accountability gap for sustainability:The ...

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Jury Gualandris, U. College Dublin: Smurfit, [email protected] Mark Pagell, U. College Dublin, [email protected]


ID 14709 CLOSING THE ACCOUNTABILITY GAP FOR SUSTAINABILITY: THE AID COMES FROM NGOs AND THEIR SUPPLY CHAINs

ABSTRACT Even if stakeholders’ expectations for supply chain sustainability are growing fast, focal firms appear to be unable to keep pace with it. For instance, recent research conducted by the Chartered Institute of Purchasing and Supply (CIPS) revealed that 11% of UK businesses polled thought it “likely” that some sort of modern slavery exists in their supply chains. Anecdotal evidence is emerging about the importance of non-governmental organizations (NGOs) to help focal firms close the abovementioned accountability gap because of their high degree of environmental knowledge and social embeddedness within multiple informal networks. This study uses complementary literatures and field interviews to inductively provide three main contributions. First, we identify and characterize two main roles NGOs can potentially play when tackling the accountability gap of producing firms’ multi-tier supply chains. Second, we provide an explorative analysis of the complex networks of organizations NGOs have been constructing to scale-up their societal contribution. Third, using Transaction Cost Economics, the paper provides insight on the rationale NGOs seem to apply when designing such networks. Finally, relevant implications for theory and practice are provided.

Keywords: cross-sector collaboration; grounded theory; societal stakeholders; supply chain design; service systems

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ID 14709 1. Introduction Focal firms in a variety of industries are held increasingly accountable for environmental and social practices and performance in their multi-tier supply chain. This new operating context is the cumulative result of demands from diverse groups of stakeholders including investors, consumers, legislators, and non-governmental organizations (NGOs) (Sarkis, Gonzalez-Torre, & Adenso-Diaz, 2010; Sharma & Henriques, 2005). Such demands are encoded into a set of stakeholder specific expectations that cumulatively define ‘stakeholder accountability’ which is the extent to which stakeholders expect a focal firm to account for sustainable actions and behaviours in its multi-tier supply chain (Parmigiani, Klassen & Russo, 2011). Stakeholders, however, construct their expectations without considering if the focal firm is in the right position to collect reliable and accurate information on supply chain members or purposefully disrupt existing practices and performance in their global productive systems (Hartmann & Moeller, 2014). Supply chains were been built over time while pursuing priorities such as efficiency and responsiveness (Fine, 2000; Fisher, 1997), not sustainability and have developed complex structures that likely hinder the diffusion of new operating paradigms (Roberts, 2003; Vurro, Russo, & Perrini, 2009). Accordingly, even if stakeholder accountability is growing fast, focal firms appear to be unable to keep pace with it. For instance, recent research conducted by the Chartered Institute of Purchasing and Supply (CIPS) revealed that 11% of UK businesses polled thought it “likely” that some sort of modern slavery exists in their supply chains (Noble, 2014). We define this gap between “what a firm is expected to do’ and ‘what a firm can actually do given the structures and capabilities characterizing their existing supply chains’ as the accountability gap. Despite limited research, anecdotal evidence is emerging on how this gap can be

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ID 14709 closed. Documented cases such as Pembina Institute in Suncor’s biotech business, Greening Australia in Alcoa’s mining network, Conservation International and CARE in Starbucks’ coffee supply chain and Oxfam and WWF in Unilever’s supply chain suggest that cross-sector collaborations between firms and NGOs have been developing with the aim of putting together resources and capabilities that overcome the accountability gap (McDonald & Young, 2012; Park & Brorson, 2005). NGOs are self-governing, private, not-for-profit organizations that are geared to improving social and natural systems (Vakil, 1997) - based on their high degree of environmental knowledge, social embeddedness within multiple informal networks and ambidexterity in dealing with diverse stakeholder groups (Webb, Kistruck, Ireland, & Ketchen Jr, 2010), they are in the position to help focal firms closing the accountability gap. These societal stakeholders purposefully “buy”, “produce” and “sell” a variety of social and environmental services by engaging with front running multinationals, SME’s, unions and civil society organizations. In other words, with the aim to scale up their societal contribution, they select, target and engage simultaneously with diverse organizations, constructing ad hoc supply chains able to deliver environmental and social services such as sustainable evaluation and improvement. To illustrate, the Fair Trade Center (FTC) initiated the Swedish Clean Clothes campaign, engaging H&M, Lindex, Indisca, swedish Unions and local NGOs operating in developing coutries to “produce” and “sell” independent monitoring to all Swedish garment retailers interested in extending their social responsibility to suppliers in the Far East (Egels-Zandén & Hyllman, 2006). In this example, Swedish garment retailers can be seen as customers offering inputs in the form of problems and resources to the service providers such as FTC and its partners. The service providers convert the input into analysis and report, and this output is delivered back to customers causing changes into their multi-tier supply chains.

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ID 14709 Despite growing attention over new forms of engagement led by societal stakeholders, our understanding of NGOs’ own service supply chains or roles in the supply chains of others is limited. The sustainable supply chain management literature says these collaborations exist (Ansett, 2007; Pagell & Wu, 2009; Perez-Aleman & Sandilands, 2008) but little else, while the literature on cross-sector collaboration doesn’t yet consider NGOs’ service supply chains and how these combine with producing firms’ multi-tier supply chains (McDonald & Young, 2012). Practitioner-based literature is also not yet able to shed light on such an issue (Global Reporting Initiative, 2014; United Nation Global Compact and Business for Social Responsibility, 2010). Yet, well-known engagement failures such as the case of presumed cooptation between Chiquita and Rainforest Alliance provide strong stimulus for further research on this topic. Therefore, this paper focuses on the NGO perspective in an attempt to answer the following research questions: (RQ1) what are the different roles NGOs can play to close the accountability gap? (RQ2) Is there an emergent taxonomy of NGOs’ service supply chains? (RQ3) How do NGOs design and adapt their service supply chains? This study addresses the above questions by applying a grounded theory approach, using complementary literatures and field interviews to develop a set of tentative propositions. Because of scant empirical research on NGOs’ roles and service supply chains, this paper will be largely of an exploratory nature conducted primarily through inductive theory building. Overall, we provide three contributions. First, we identify two main roles NGOs can potentially play when tackling the accountability gap. Far from being an exhaustive result, this opens interesting avenues for future research, which should explore the various functions societal stakeholders can play with respect to the development of sustainable supply chains. Second, we provide an explorative analysis of the complex structure

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ID 14709 characterizing NGOs’ service supply chains. In our exploration we have considered three levels of analysis along an interactive process: dyad, chain and network. Analyzing dyads allowed comparisons between relationships at different positions of the chain, providing insights into chain behaviors; aggregation of the information at the dyad and chain levels offered more insights on networks. This methodology is consistent with prior literature on service supply chains (Sampson & Froehle, 2006) and manufacturing supply chains (Harland, 1996). Third, this paper examines NGOs’ behavior when constructing their service supply chains. Specifically, using Transaction Cost Economics (TCE) to build on prior literature and empirical observation, we shed some light on the rationale NGOs apply when designing their service systems. This paper is structured into six sections. Section 2 focuses around the accountability gap, its sources and its remedies. Section 3 is focused on methodology. Section 4 presents an NGO’s typology and concludes with our first proposition. Section 5 analyzes NGOs’ service supply chain and NGOs’ rational when designing them. Section 6 summarizes main findings and future research. 2. The accountability gap A sustainable supply chain has been recently defined as “economically viable supply chain that at a minimum creates no harm and may even have positive or regenerative impacts on social and environmental systems” (Pagell & Shevchenko, 2014). This definition captures expectations that stakeholders form about practices and performance in multi-tier supply chains. Such expectations form a sense of ‘accountability’ or the extent to which stakeholders expect a focal firm to account for sustainable behaviors and actions in its extended supply chain (Gualandris, Klassen, Vachon & kalchschmidt 2015; Hartmann & Moeller, 2014; Parmigiani, Klassen, & Russo, 2011). Prior studies have recognized that boundaries of accountability can be ambiguous for focal firms, as multiple stakeholder groups have

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ID 14709 competing and evolving requirements that they are unwilling or unable to clearly articulate in advance (Hall & Vredenburg, 2005). To illustrate, consider the case of electronics supply chains (Gualandris, Klassen, Vachon & kalchschmidt 2015): (i) in 2007, the image of focal firms was undermined by Greenpeace’s campaign against hazardous materials in devices (Greenpeace, 2007); (ii) in 2011, focal firms were then contested aggressively by the ‘China Labor Watch’ and other NGOs about perceived labor exploitation (Duhigg & Barboza, 2012); (iii) the same year, the Chinese Institute of Public and Environmental Affair raised concerns about carbon footprint and environmental pollution violations by Chinese suppliers; (iv) more recently, the U.S. government and other NGOs (Friends of the Earth, 2012) raised concerns over “conflict minerals” and tin mining practices in Africa. While it is understandable that stakeholder groups might not be uniformly aligned in their expectations, it is not clear if supply chain practice can effectively cope with evolving stakeholder accountability. Indeed, there is extensive evidence of the accountability gap or the divergence between ‘what a firm is expected to do’ and ‘what a firm can actually do’ in their multi-tier supply chain (Gualandris, Klassen, Vachon & kalchschmidt 2015). For instance, Egels-Zandén and Hyllman (2007) study of Chinese suppliers of Swedish toy firms found no factories in compliance with the Swedish firms' codes of conduct, with two-thirds of them violating all but one of the studied criteria. A recent study of Wal-Mart’s Chinese suppliers found that Wal-Mart’s monitoring program has had little impact on worker protection at the supplier factories (Chan & Siu, 2010). In fact, two of the factories that collapsed in Rana Plaza (Bangladesh) had recently passed audits commissioned by focal firms (Surawiecki, 2013). Although monitoring teams are continuously dispatched, firms such as H&M, Samsung and Unilever are still struggling with how to assure the development of sustainable practices and performance throughout their supply chains (Arthur, 2012; Smedley, 2013).

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ID 14709 Pre-existing configurations and structure, strategically established over time to match product characteristics and market dynamics (Fine, 2000; Fisher, 1997), represent a potential barrier in the development of sustainable supply chains. First, supply chain configurations cascade down into specific capability sets that in turn foster the adoption of certain sustainability practices while constraining others (Gualandris, Klassen, Vachon & kalchschmidt 2015; Wiengarten, Pagell, & Fynes, 2012). For instance, Parmigiani et al. (2011) predict that efficient supply chains will lack capabilities in eco-design and servicizing. Conversely, the authors suggest that responsive supply chains will lack capabilities in pollution prevention, safer manufacturing methods and monitoring systems to track information. Second, focal firms’ ability to align with stakeholder accountability can be constrained by the existing supply chain structure. Focal firm’s with low centrality are connected with few supply chain members resulting in a lack of influence over partners’ practices and performance (Kim, Choi, Yan, & Dooley, 2011; Roberts, 2003). Low density or poor interconnectedness within the network further impedes the transmission of stakeholder pressure throughout the supply chain, thus potentially generating or worsening the accountability gap. Third, global supply chains are often characterized by high degree of cultural distance between members, with focal firms facing significant knowledge gaps in terms of the values, beliefs and norms of suppliers in developing countries (Ghemawat, 2001; Webb et al., 2010). Evidence is emerging that closing the accountability gap might require firms’ to engage with non traditional chain members such as NGOs, Unions and governmental agencies (Gualandris, Klassen, Vachon & kalchschmidt 2015; McDonald & Young, 2012; Park & Brorson, 2005). Establishing relationships with such parties could be critical to offset the negative effects due to lack of capabilities, centrality and interconnectedness. Consistently, related literature points out that integration with NGOs allows focal firms to

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ID 14709 acquire localized knowledge and ambidexterity in dealing with diverse stakeholder groups (Ritvala, Salmi, & Andersson, 2014; Webb et al., 2010). Engagement with salient stakeholders is also seen as instrumental to acquire societal legitimacy and construct a web of influence and responsiveness (Butterfield, Reed, & Lemak, 2004; Welcomer, Cochran, Rands, & Haggerty, 2003). A variety of examples can be used to illustrate this point: e.g., (i) the British NGO Fairtrade Foundation initiated a pilot projects to assist companies in developing codes of practice to guide relationships with their suppliers (local communities); (ii) The Ethical Traditing Initiative is a network of companies, NGOs, and trade union organizations working together in identifying and promoting good labor practices, including monitoring and independent verification (Bendell, Collins, & Roper, 2010); (iii) Unilever, a large British-Dutch food corporation which supplies 20 percent of the frozen fish market in the U.S. and Europe, engaged with the WWF to develop a certification system that would identify fish products being harvested on a sustainable basis (Wymer Jr & Samu, 2003). The above cases present a variety of cross-sector collaborations or social problem-solving mechanisms that combine organizational resources from a different economic sector in a cooperatively way (Austin, 2000; King, 2007; Seitanidi & Crane, 2009).

3. Methodology The study presented in this paper is of exploratory nature. In order to better understand the under-researched topic of how NGOs can close the accountability gap of productive firms’ multi-tier supply chains, we have studied the dynamics of six NGOs. Indeed, while we might be able to apply TCE theory, the context on NGOs is not known well enough to obtain sufficiently detailed premises that could be used in conjunction with this theory to deduce testable hypotheses. Thus, our approach is one of “theory elaboration” – in other words we

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ID 14709 aimed at refining existing theory and providing new original insights based on our field interviews (Ketokivi and Choi, 2014). The selection of cases was based on two criteria: NGOs size and NGOs mission. We tried to assure data from both small and large NGOs, as size may influence NGOs’ role in the supply chain of productive firms (Austin, 2000; Vakil, 1997). For the same reason, we tried to assure data from both advocacy-oriented and development-oriented NGOs. The cases were selected for theoretical and not statistical reasons. The researchers relied on public available information from The Guardian and Forbes for the selection of NGOs for this study. These outlets have substantial credibility for being source of reliable information about sustainability-related trends and initiatives. Faircoop, A&S, NTFP, Cesvi, FSC and Greenpeace are the NGOs involved in this research. We used a semi-structured interview protocol to collect our data, which is provided in Appendix A. Case study research is a theory-building approach deeply embedded in rich empirical data coming from a variety of data sources (Eisenhardt & Graebner, 2007). Documentation and semi-structured interviews were used in this research. The participation of various researchers in this study ensures that multiple perspectives are provided, which generally reduces bias and provides complementary insights, enhancing the confidence on the preliminary findings (Eisenhardt, 1989). A synthesis of relevant information from our analysis is provided by in appendix B (Table A).

4. NGOs: prior categorizations and emerging typology During our empirical exploration we observed considerable heterogeneity in NGOs characteristics. First, in accordance with prior research (Argenti, 2004; Vakil, 1997), two dimensions seemed to capture such a diversity in our sample: level of operation and orientation. Level of operation refers to the system level at which the NGO operates, ranging

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ID 14709 from a local/community-based level to an international level. Orientation refers to the type of activity an NGO engages with, ranging from advocacy to development. Advocacy-oriented NGOs mainly aim at influencing policy or decision-making related to particular issues and building social support around these issues thourgh education and networking. Advocacyoriented NGOs tend to develop a more antagonistic approach with firms (Argenti, 2004) and to mainly emphasize their relational capability. Development-oriented NGOs conduct participatory research and deliver services which have as their ultimate goal the improvement in the capacity of a business or community to provide for its own basic needs in an environmentally and socially sustainable way. Such NGOs are usually open to collaboration with firms and emphasize their technical expertise in designing and executing auditing and improvement assignments. According to our cases (see Table A part a, in appendix B), level of operation and orientation seem to constrain the role an NGO is able to play when addressing the accountability gap (Gualandris, Klassen, Vachon & kalchschmidt 2015). Specifically, we could observe two prevailing roles, which we named as “analysts” and “arrangers”. NGOs such as A&S, NTFP and Faircoop were behaving as analysts who “provide analysis and expertise and help monitor and implement international agreements” (Edwards, 2000). Based on our observation, they operate at the local level and tend to be more oriented at working with emerging entrepreneurs in developing countries or even small businesses in developed countries. Their mission is to help SMEs at scaling up their business in a sustainable manner and to educate their workforce to behave more sustainably. For example, NTFP works with emerging businesses to improve worker safety and avoid cutting trees to speed up the production of non-timber forest products. Similarly, A&S helps SMEs in developed countries to implement sustainable sourcing practices based on a total cost of ownership approach.

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ID 14709 Greenpeace, FSC and Cesvi, differently, were behaving like arrangers, building and orchestrating impact-oriented coalitions of front running multinationals, SME’s, civil society organizations, governments and other stakeholders (Gualandris, Klassen, Vachon & kalchschmidt 2015). These NGOs work with the intention of disrupting current business practice by building social support, both among like-minded organizations as well as in society at large. While operating at the international level, educating businesses and citizens about inequity, debt and sustainable consumption, they also channel information and provide assistance to lower-level NGOs and other societal stakeholders (see Table A part b, in Appendix B). Overall, combining literature (Gualandris, Klassen, Vachon & kalchschmidt 2015) and empirical data leads to the following proposition: Proposition 1. Based on their orientation and level of operation, NGOs develop different sets of technical and relational capabilities that can be of use when addressing the accountability gap of producing firms’ multi-tier supply chain. 5. NGOs’ service supply chains NGOs may purposefully “buy”, “produce” and “sell” a variety of social and environmental services to close the accountability gap of producing firms’ supply chains. Thus, beyond understanding the multifaceted role NGOs may play, in this section we develop an understanding of NGOs’ own supply chains and the rationale applied when designing them. The main discriminant of a service is the customer input or anything a customer puts into a service system to achieve a certain output (Davis & Heineke, 2005; Sampson & Froehle, 2006). Prior research has identified three types of customer inputs (Sampson & Froehle, 2006): (i) the actual customer, (ii) their belongings, and (iii) information. Having customer inputs defining what services are implies a customer-supplier duality: service processes are bidirectional since customers are suppliers of process inputs prior to being recipients of process outputs (Fitzsimmons & Fitzsimmons, 2006; Sampson, 2000; Sampson 11


ID 14709 & Froehle, 2006). Therefore, we discuss service dyads, chains and networks in terms of customers or stakeholders who provide inputs into the service system, the inputs themselves and the supplied outputs. The discussion also touches on the association form established between customers and service providers. Here, the available options are positioned along the continuum from transactional to partnership (Austin, 2000; Seitanidi & Crane, 2009; Seitanidi & Ryan, 2007). While transactional associations are generally based on a charity model in which the NGO receives cash/food/equipment or a sponsorship fee in exchange of a specific social service, partnerships commonly grow through the constitution of an independent organization created by pooling tangible and intangible assets from the parties involved (Vurro, Dacin, & Perrini, 2010; Wymer Jr & Samu, 2003). The cases of A&S, NTFP and Faircoop offered consistent insights to characterize the dyad system level, which refers to the relationship between a local, development-oriented NGO and a business entity. The dyad is configured as a single level service supply chain where the local NGO in the role of service provider receives inputs from an SME in the role of the supplier and in turn supplies the necessary solution back to the SME who is now the customer. The single level service supply chain constructed by these NGOs share common traits: customer inputs are ‘customer self’ (i.e., SMEs’ workforce) and ‘customer information’ (i.e., info about SME’s resources and needs); the supplied output is ‘analysis’ and ‘know-how’ on how to improve operational performance while having positive impacts on social and environmental systems. In this setting, NGOs engage with SMEs that inhabit their more proximate geographic area. SMEs, however, can be very different organizations: in one of its ongoing projects, here denominated as project A, NTFP engages with landowners harvesting non-timber forest products in Southeast Asia; in the cases of A&S and in one of the projects implemented by

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ID 14709 Faircoop, SMEs are small manufacturers and retailers operating in Italy (i.e., see Table A part c, in appendix B). Considerable diversity is also observed with regard to the association form characterizing the relationship NGOs establish with other parties. In the case of NTFP, partnerships are established to guide/support the SMEs along their long developmental journeys. Differently, in the case of A&S and Faircoop (project B) limited interaction levels, limited scope of activities and short-term orientation characterize the relationship between the NGO and SME. The NGOs’ main objective here is to tackle specific issues for Italian businesses, which are mainly reacting to new legislation requirements such as the 2013 EU law covering sustainability disclosure or international advocacy campaigns. In all these cases, however, clear objectives and genuine motivation were highly regarded by NGOs when deciding whom to engage with and how. A project leader in NTFP, for examples, said that “… you don’t want to engage with who doesn’t have a clear idea of where to go and why … this would most likely end into poor project’s performance and subsequent critiques, even from other NGOs … our credibility as sustainability experts is one of our most valuable resources.” This reasoning is in line with the governance (or rentseeking) branch of TCE as applied by King (2007). King (2007), indeed, suggested that cross-sector collaborations would likely include firms whose social reputation is an important asset as this selection reduces the likelihood of post-engagement reputational “costs” for the NGO. -----------------------------------------Insert Figure 1 about Here -----------------------------------------The cases of NTFP and Faircoop also offered consistent insights to characterize the ‘chain’ system level, which is composed by two service relationships: (i) the relationship between a local, development-oriented NGO and a local SME; (ii) the relationship between

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ID 14709 the same NGO and an international buying firm. This chain is configured as a two level service supply chain where the local NGO in the role of service provider receives customer inputs from both the SME and the international buying firm in the role of suppliers and in turn supplies the necessary solution back to them who are now the customers. In this setting, the international buying firm can also be seen as an indirect customer of the SME (Fitzsimmons & Fitzsimmons, 2006; Sampson, 2000; Sampson & Froehle, 2006) as the output supplied by the NGO to the buying firm is based on the input supplied by the SME to the NGO. In the analyzed service chains, SMEs are from developing countries, buying firms are based in more advanced economies and NGOs can be located in either. The association form is once again specific to each relationship composing the service chain. In the analyzed cases, for instance, revenue sharing agreements, high commitment of resources and extensive interaction characterizes the relationship between NGOs-SMEs; differently, the relationships involving international buying firms are more transactional in nature as we observed no strategic value, limited interaction and lack of understanding of reciprocal needs (see NTFP and Faircoop cases, Table A part d, in Appendix B). -----------------------------------------Insert Figure 2 about Here -----------------------------------------The cases of Greenpeace, Cesvi, FSC, Faircoop and NTFP provided consistent insights about the system level of ‘network’ or a multi-level service supply chain (Figure 4). At the center of the network there is the international NGO in the role of service provider, who receives customer inputs from international buying firms (suppliers) and in turn supplies the necessary information and solution back to them (customers). To provide this service, the international NGO has to act as a hub, outsourcing parts of the service to a variety of different stakeholders working in the field (service suppliers), from local NGOs to unions and governmental agencies. Such local entities, do not just engage each other to supply outputs to

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ID 14709 the international NGO, they also receive customer inputs from local SMEs (suppliers) and in turn supply the necessary solution back to them (customers). As in the case of chains, the international buying firm can be seen as an indirect customer of local NGOs and SMEs. -----------------------------------------Insert Figure 4 about Here -----------------------------------------Partnership is the prominent association form in the analyzed networks. International buying firms have offered highly valuable inputs such as private information over firms’ supply base as well as skilled workforce with the aim to resolve the lack of visibility and social responsiveness within their multi-tier supply chains (see Greenpeace and FSC cases, Table A in appendix B). Similarly, international NGOs, local NGOs and other societal stakeholders (unions, governmental agencies) seem to engage each other’s through a series of strategically valuable interactions, satisfying reciprocal needs and exchanging knowledge. For instance, international NGOs were observed to bring managerial expertise and technical solutions while local NGOs, unions and governmental agencies were observed to offer their embeddedness in communities at the bottom of the system, orchestrating the descending flow of know-how to local SMEs (focal firms’ suppliers) and the ascending flow of field data towards focal firms (see Faircoop and Cesvi cases, Table A part c, in appendix B). According with the literature (King, 2007), societal actors composing the network were observed to set specific goals and roles in a way that limit the likelihood of postengagement conflict of interests in respective roles, so as to preserve existing ties for future engagements. For instance, NGOs in the role of analysts were observed to establish partnerships in order to acquire personal legitimacy from the relationship with well-known, largely independent NGOs such as Greenpeace. As explained by its president, Faircoop’s participation into the international clean-cloth campaign had two potential returns: on the one hand, this would have empowered the initiative by filling the void of local presence in Italy

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ID 14709 and Bangladesh; on the other, the participation could potentially enhance Faircoop’s image and create opportunities for future socially-oriented engagements with profit and non-profit organizations. Our observation suggests that resource complementarity can also be traced back to the selection of candidates for partnership-based associations, complementing preliminary findings from McDonald and Young (2012). For instance, NGOs in the role of arrangers were observed to target international buying firms on the basis of their technical expertise and market knowledge. As explained by a project leader in Greenpeace, “beside identifying problems, one must also be able to provide solutions … if we stop acquiring industry-specific knowledge about new green technologies and market dynamics, neither our threats to businesses will remain credible nor our contribution to their performance will remain meaningful.” This insight is in line with Baur and Schmitz (2012): accessing complementary knowledge about technologies and markets can open opportunities for NGOs to target and work with a much larger spectrum of firms, thereby reducing power asymmetry. Overall, the following propositions emerge: Proposition 2. Different service supply chains can be observed across NGOs, based on their customer variety and predominant association form; Proposition 3. NGOs design and adapt their service supply chains in a way that maximize post-engagements knowledge accumulation and minimize postengagements legitimacy loss.

6. Conclusion Related literatures assume that willingness, rather than ability, has been driving sustainability-oriented changes in the business world (Bansal & Roth, 2000; Handfield, Walton, Seegers, & Melnyk, 1997). In this paper, however, we emphasize ‘ability’ to outline that path dependency also significantly constrain the development of accountability for sustainability in firms and supply chains (Gualandris & Kalchschmidt, 2014). Based on 16


ID 14709 this accountability gap, we have then explored NGOs’ roles in producing firm’s multi-tier supply chain as well as NGOs’ own service supply chains. NGOs may be able to offer commentary resources and capabilities to mitigate the rigidity of existing productive systems (McDonald & Young, 2012; Perez-Aleman & Sandilands, 2008). We have revised sustainable supply chain management and cross-sector collaboration literatures. Also, we have collected and analysed data from six NGOs namely A&S, NTFP, Faircoop, Cesvi, FSC and Greenpeace. These have been selected on the basis of publicly available information signalling an active sustainability-oriented engagement with producing firms operating in a variety of industries. Important implications stem from our research. First, according to related literatures and our observation, NGOs play a number of active roles when tackling the accountability gap. Future research is thus advised to look beyond stakeholders’ pressure; threatening and pressuring might actually be the top of the iceberg, with unobserved jobs and complex engagement processes yet to be understood. Despite the rigor applied when selecting cases and analysing data, we must recognize that saturation is not been reached in our research (Yin, 2009). Specifically, NGOs that operate locally with an advocacy orientation and NGOs that operate globally with a developmental-objective are not included in our analysis (Vakil, 1997). Considering these NGO typologies would allow confirming or revising our results. Second, we find that NGOs may construct different service supply chains, which differ in terms of the number of stakeholders providing inputs to the system, and association forms. Their design is the result of the NGOs’ attempt to scale up the societal impact, while preserving their legitimacy and maximizing knowledge accumulation; legitimacy and knowledge appear in fact to be the most valuable recourses for NGOs’ business model. This result complements prior literature reviling that the character of the

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ID 14709 interaction process between NGOs and firms may differ among sustainability issues and institutional environments (King, 2007; Van Huijstee & Glasbergen, 2010). As changes in scope and institutional environment alter the risk profile on an engagement, NGOs react by establishing the ‘optimal’ customer diversity and association form in their service supply chain. Thus, Future research might be targeted to understand if rigidities determining the accountability gap in producing firms’ supply chain also cascade down into diverse designs of NGOs’ service supply chains. For instance, building on our third proposition, one might argue that density and centrality of a firm’s supply chain negatively associate to customer variety and partnership-based association forms in NGOs’ supply chain. In fact, a one level transaction-based service chain might represent the optimal structure when the accountability gap is mainly due to a lack of specific skills, but control over the extended supply chain is at a good level. Practical implications also arise. First, this research has the potential to help NGOs of different kind to understand how they ‘should’ configure effective service supply chains, setting customer variety and association forms in a way that minimize opportunity costs and legitimacy risks. Guidance can also be offered to supply chain managers that want to disrupt current supply chain structures in order to account for sustainable practices and performance beyond tier-1.

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APPENDIX A. Interview protocol: A. What sustainability issues does your NGO care about (Environment, Labor practices, Human rights, product responsibility, society)? B. What’s the mission of your NGO? C. In which part of the world does your NGO operate? D. Is your NGO interested in collaborating with companies? In both cases, Why is it so? E. Which kind of firms do you engage with (big-small; local-global; industry)? F. Which kind of services does your NGO provide, directly or indirectly, to business and society at large? G. Please, concentrate on the most recent project carried out during the last few years. a. Could you describe it? (What was the purpose and main sustainability issue to be addressed? Which were the organizations involved? What was your role?) b. Focusing on the engaged firm: i. Can you describe the main product produced/distributed by the company? ii. Can you describe the supply chain of such product (global-interconnected-agile)? iii. What was the sustainability issue to be addressed? Which stakeholders where requiring this information/improvement? iv. Why the company couldn’t solve the gap? c. Focusing on the relationship NGO – firm: How did you select the company and coordinate the engagement (short-long term perspectives – exchange of info and dedicated investments by both parties - meetings and workshop vs. formal requirements)? d. Focusing on the relationship NGO – supplier: How did you engage the company and coordinate the engagement (short-long term perspectives – exchange of info and dedicated investments by both parties - meetings and workshop vs. formal requirements)? e. Focusing on the relationship NGO- other societal stakeholders: How did you identify the stakeholder and coordinate the engagement (short-long term perspectives – exchange of info and dedicated investments by both parties - meetings and workshop vs. formal requirements)? F. Was the project successful for all the parties involved? What was good and what didn’t work out well? Why?

APPENDIX B. -----------------------------------------Insert Table A about Here ------------------------------------------

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FIGURE 1 Service dyad or single level bidirectional supply chain (NGOs’ perspective)

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FIGURE 2. Service chain or two level bidirectional supply chain (NGOs’ perspective)

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ID 14709 FIGURE 3. Service network or multiple level bidirectional supply chain for NGOs (NGOs’ perspective)

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TABLE A. Single-case synthesis and cross-case comparison (PART A) FAIRCOOP

A&S

NTFP

CESVI

FSC

Greenpeace

Interviewed peoples

President

President

Project Leader

President; Corporate relationships manager

Key Account Manager

Project leader of several campaigns

Size

5 empl - 0.1 mln Euro

3 empl - 0.1 mln Euro

40 empl - 2 mln Euro

611 empl - 24 mln Euro

1000 empl - NA

1000+ empl - 73 mln Euro from small donations

Foundation Legal structure

2005 No-profit

2007 Non-for-profit (Noprofit unit + for-profit branch)

1998 Non-for-profit (Noprofit unit + for-profit branch)

1985 No-profit

1995 Non-for-profit (No-profit unit + for-profit branch)

1971 No-profit

Orientation

Sustainable communities development is the main mission

Sustainable Business development is the main mission

Sustainable Business development is the main mission

Advocacy and sustainable communities development are the main goals

Sustainable business development is the main mission

Advocacy, research and networking are strong priorities.

Level of operation

Local level

Local level

Local level

International (headquarter in Italy + Local teams in over 20 countries)

International and national levels

International

issue covarage

Labor practices, decent work

Sustainable operations, sustainable procurement

Sustainable operations

Human rights and decent work

Environmental management and deforestation

Deforestation; product responsibility; bad emissions

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ID 14709 (PART B)

Major (recent) projects

FAIRCOOP

A&S

NTFP

CESVI

FSC

Greenpeace

Project A. Developing Italian-bangladeshi fair trades so to help local communities in Bangladesh selling their hand-made garment

Workshops and seminars with a number of Italian SMEs and universities; the focus is on how to develop sustainable operations and sustainable procurement

Project A. Involve in several projects with local communities in south-est Asia to produce and sell their Non-Timber-ForestProducts to international buying firms in healthcare, fashion and food industries. Project B. Working with other NGOs to develop a new certification for harvesting NonTimber-ForestProducts

Leader of Child-labor free campaign. In this campaign the NGO is coordinating the work of small NGOs and other institutions (ANPCCAN Kenya, RUBICOM, Probation Department, Legal Resources Foundation, Child Welfare Society of Kenya, Department of Children Services, Watoto Ciao, Kenya Magistrates and Judges Association, Federation of Kenya Employer) in Kenia to foster the human rights and decent work in local SMEs.

FSC is providing IKEA with an effective and trasparent platform to engage a variety of IKEA's stakeholders and identify material/salient environmental and social issues to be tackled in the near future

Leader of Detox campaign (engaging luxury and fast fashion companies to track and remove hazardous chemicals from products)

Mainly technical (e.g., helping SMEs in creating a sustainable culture, benchmark performance, devloping accounting and communication skills)

Mainly technical (e.g., developing local communities' ability to evaluate their sustainability performance and overcome trade-offs)

Evolving from technical (e.g., human rights evaluation and rural development) to relational (e.g., educating local communities and influencing local governements and companies - coordinating other NGOs at the local level);

Technical (e.g., high high percentage of engineering staff) but also relational (e.g., engaging governamental organizations, other NGOs and enterprises to come up with new sustainability priorities and standards)

Strong technical capability (e.g., research unit at Exeter university; high percentage of engineering staff) combined with strong ability to influence culture and behaviours of decision-makers (consumers; policy-maker; international firms)

Project B. Involved into the Clean-cloths campaign (helping italian SMEs changing manufacturing processes to avoid hazardous materials and implement sustainable procurement systems) NGO's Capabilities and activities

Mainly technical (e.g., developing fairtrade systems while also helping local communities in developing countries to implement more safe and respectful operations)

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ID 14709 (PART C)

Inputs from different customers

FAIRCOOP

A&S

NTFP

CESVI

FSC

Greenpeace

Project A: garment samples and workforce from bangladeshi communities; quality and price requirements from Italian 'retailers';

Private information and workforce from Italian SMEs;

Project A: NTFP sample and workforce from communites in south-east Asia; quality and price requirements from international buying firms;

Information about local needs and workforce from local NGOs; Information and legitimacy from local institutions (e.g., Child Welfare Society of Kenya, Department of Children Service)

Information about needs and certifications limits from IKEA.

Workforce, market knowledge and reserved information from MNCs; workforce and field information from local NGOs

Instruction, workforce and legitimacy to local NGOs; analysis and knowledge about how to overcome social-economic trade-offs in local SMEs to local institutions

Access to a variety of IKEA's stakeholders.

Field information and legitimacy to MNCs; instruction, workforce and legitimacy to local NGOs

Project B: instruction and legitimacy from international NGOs; workforce and reserved information from Italian 'retailers'; Supplied outputs to different customers

Project A: analysis and know-how to Bangladeshi communities; information and warranty to Italian 'retailers' Project B: analysis and know-how to Italian 'retailers'; reporting to International NGOs

Project B: information and legitimacy from other NGOs;

Analysis and know-how to Italian SMEs;

Project A: analysis and know-how to local communities in southeast Asia; information and warranty to international Buying firms Project B: information on local manufacturing processes and existing know-how to other NGOs

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ID 14709 (PART D)

Association form with different customers.

FAIRCOOP

A&S

NTFP

CESVI

FSC

Greenpeace

Project A: partnership with Bangladeshi entrepreneurs (economically sustained by sponsorship/donation proportional to the amount of generated business) ; transactional with Italian retailers (no formal contracts); Project B: transactional with italian retailers (signed memorandum of undertanding without economic exchange); partnerships with international NGOs without economic exchange (formalized with memorandum of undertanding)

Transactional with Italian SMEs formaly supported by sponsorship and extrafees in case customized service is required (formal contract in case of extrafees)

Project A: partnership with local communities in south Asia (economically sustained as a sponsorship/donation proportional to the amount of generated business) ; transactional with international buying firms (no formal contracts); Project B: Partnership with other NGOs (signed roadmap of action without economic exchange)

Partnership with local NGOs and Institutions without economic exchange (signed memorandum of undertanding without economic exchange). An formal joint venture was created to collect money from the European Union.

Partnership with IKEA which actually seats in one of the three governance chamber within FSC. Formal agreement where IKEA declare to augment the amount of FSC certified products in its business, thus generating income for FSC.

Partnership with MNCs (signed memorandum of undertanding and sustainability roadmap without economic exchange); long-term trust based relationships with local NGOs (formalized with a memorandum of undertanding)

Continue …

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ID 14709

Management process (drivers, enablers and barriers in establishment and governance)

FAIRCOOP

A&S

NTFP

CESVI

FSC

Greenpeace

The NGO initited the engagement with a variety of stakeholders to scale up its social impact; commitment between parties was created by leveraging arguments of "survival" (with Bangladeshi communities) and legitimacy (with Italian retailers). Although mitigated by the ties with international NGOs, often Italian retailers resisted to provide information about supply base.

The objective is to help business overcoming speciifc trade-offs in production and procurement while colecting economic resources. The engagement is often initiated by Italian companies (because of the European Legislation about trasparency), but the NGO select them considering their "real" objective and the availability of resources (i.e., opportunity cost); there is usually a flow of knowledge from the NGO to the company and a flow of economic resources from the company to the NGO. Disengagement follows after the accomplishment of specific objectives

The NGO initited the engagement with a variety of local communities and NGOs to scale up its social impact, while the engagement with international buying firms is iniatiated by them in an attept to source scarce resources (NTFP from sustainable sources); the engagement with other NGOs is governed by creating task forces with members coming from different organizations; disengagement with international buying firms often occurs because them were not willing to adjust the price/quality ration for NTFP.

The NGO initiated the engagement with local NGOs in Kenia, that in turn selected most of the engaged SMEs; the selection of local NGOs and institutions was based on the extent of local embeddedness and accumulated experience in humanitarian projects as CESVI wanted to learn more about specific contrains to sustainable development in Kenia; A project leader was nominated in CESVI and a team was created pooling resources from CESVI, local NGOs, institutions and SMEs;

IKEA initiated the engagement with the objective to reach a broad set of stakeholder and undertand their expectations for the firm; FSC accepted only once the social chamber has evaluated the reputational risk (thorugh open consultation with other sociatal groups) and IKEA's sincere and genuine motivaton to engage.

Greenpeace initiates the engagement selecting international firms on the base of risk of failure (measured considering firms' prior committment to sustainability, financial robustness and legitimacy exposure) and learning and reputation opportunities (recognition and Market intelligence for the NGO). For buying firms the necessity to develop bottom-up system for environmental and social risks and also the opportunity to strengthen control/influence over supply chain partners provide momuntum. Cost expenditure and fear to not being able to deliver according to the expectations constitutes significant barriers on the firms' side. Thus, a negotiation phase constitutes the first step in the relationship to come up with a roadmap based on the resources available on both sides; Virtual teams are then created to develop manageral ties that facilitate knowledge exchange and value renewal (finding new challenges to takle together)

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