Improving Working Conditions in Global Supply Chains: The Role of Institutional Environments and Monitoring Program Design

Abstract

Activism seeking to improve labor conditions in global supply chains has led transnational corporations to adopt codes of conduct and monitor suppliers for compliance, but it is unclear whether these formal organizational structures raise labor standards. Drawing on thousands of audits conducted by a major social auditor, we identify structural contingencies in the institutional environment and in program design under which codes and monitoring are more likely to be associated with improvements in working conditions. At the institutional level, suppliers improve more when they face greater risk that NGOs and the press will expose harmful working conditions and when their buyers have experienced negative publicity for supply chain working conditions. At the program design level, suppliers improve more when the monitoring regime signals a cooperative approach, when auditors are highly trained, and especially when both are true. These findings should inform strategies for improving working conditions in global supply chains.

Keywords: Monitoring, Supply Chain, Supplier Relationship, Supply Chain Management, Corporate Social Responsibility and Impact, Labor, Working Conditions, Sustainability, Sustainability Management, Sustainable Operations, Sustainable Supply Chains, NGO