Improving Social Compliance in Supply Chains
59 Pages Posted: 5 Apr 2019 Last revised: 3 Aug 2019
Date Written: April 1, 2019
Corporations try to convince us that they are good global citizens: “Brands take stands” by engaging in cause philanthropy; CEOs of prominent corporations tackle a variety of issues; and social values drive marketing strategies for goods and services. But despite this rhetoric, corporations regularly fall short in their conduct. This is especially true in supply chains where a number of human rights abuses frequently occur. One solution is for corporations to engage in meaningful human rights due diligence that involves monitoring human rights, reporting on social and environmental performance, undertaking impact assessments, and consulting with groups whose human rights they can harm. The challenge is how to encourage corporations to make these changes.
We often rely on two types of tools to improve corporate compliance: legal institutions and reputational mechanisms. However, each of these faces significant limitations when it comes to human rights compliance in the supply chain. This Article develops a strategy based on complementarity between the two so that each compensates for the limitations of the other. Specifically, reputational mechanisms can help create incentives for compliance with international legal institutions with weak or absent enforcement mechanisms. Alternatively, legal institutions can create “focal points” regarding corporate best practices that can improve reputational markets for corporate social responsibility.
The reputational typology developed in this Article offers three important contributions to policy and academic discussions concerning corporate misconduct. First, it allows us to create better human rights institutions by revealing the types of “carrots and sticks” that we should include to encourage corporate cooperation; this lesson is particularly timely because an international treaty on business and human rights is in development. Second, this typology illustrates how corporations may voluntarily undertake organizational change in response to a reputational crisis. Finally, this typology identifies drivers of cross-border compliance for transnational corporations.
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