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Research Article

Companies’ contribution to sustainability through global supply chains

Tannis Thorlakson, Joann F. de Zegher, and Eric F. Lambin
PNAS February 27, 2018 115 (9) 2072-2077; first published February 12, 2018; https://doi.org/10.1073/pnas.1716695115
Tannis Thorlakson
aEmmett Interdisciplinary Program in Environment and Resources, Stanford University, Stanford, CA 94305;
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  • For correspondence: thorlaks@stanford.edu elambin@stanford.edu
Joann F. de Zegher
bStanford Graduate School of Business, Stanford, CA 94305;
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Eric F. Lambin
cSchool of Earth, Energy & Environmental Sciences, Stanford University, Stanford, CA 94305;
dWoods Institute for the Environment, Stanford University, Stanford, CA 94305;
eGeorges Lemaître Earth and Climate Research Centre, Earth and Life Institute, Université Catholique de Louvain, 1348 Louvain-la-Neuve, Belgium
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  • For correspondence: thorlaks@stanford.edu elambin@stanford.edu
  1. Contributed by Eric F. Lambin, January 8, 2018 (sent for review September 26, 2017; reviewed by Greg Distelhorst and Peter Kareiva)

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    Fig. 1.

    Percent of companies that use a given SSP. Colors refer to major SSP groupings. A single company can use multiple SSPs.

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    Fig. 2.

    Type of audit conducted for external and internal standards. First-party audits are self-audits conducted by the supplier; second-party audits are conducted by the buying company; third-party audits are conducted by an independent body. “No Info” indicates that companies did not disclose whether an audit was conducted.

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    Fig. 3.

    How far down the supply chain each SSP applies for each SSP group.

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    Table 1.

    Definitions of SSPs based on empirical analysis of company documents

    GroupSSPDefinition
    External standardNGO-led standardStandard developed by an NGO
    Multi-stakeholder standardStandard developed by multiple parties, typically including companies, NGOs, producers and/or government agencies in governance positions
    Sector standardStandard developed by industry participants
    Voluntary government standardStandard developed by a government but voluntarily adopted by companies
    Geographic indicationThe product is sourced from a specific region where indication of the source is regulated, e.g., Appellation of Origin
    Internal standardCode of conductThe company policy, code of conduct or standard is developed unilaterally by a company and applicable only to that company’s supply chain
    Geographic exclusionExclusion of suppliers from a particular geographical region
    Product/process exclusionExclusion of products that are produced with a certain practice or that are in themselves considered unsustainable
    Approved supplierSupplier must pass a screening before becoming a supplier
    Preferred supplierCompany gives preferential treatment (prices, payment terms, volumes) to specific suppliers
    Reformulated productCompany changed the formulation of the product specifically to make it more sustainable
    Internal interventionDirect sourcingDirect contract between the focal company and producer or production cooperative, where the contract is implicitly contingent on social and/or environmental criteria
    Local sourcingProduct is produced and sold within the same subnational region
    Investment in supply chainCompany provides resources (materials, capital, and so forth) to actors in the supply chain
    Training of suppliersCompany provides training to actors in their supply chain
    Recycled claimProducts made at least in part with recycled materials, where the term “recycled” is not defined by a body external to the company
    • To be categorized as an SSP, the practice must relate to social and/or environmental issues. See SI Materials and Methods for examples of each SSP.

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    Table 2.

    First-difference results of the simple logit model with Lasso model selection and estimation

    VariableFirst difference95% CI
    Independent variable
     High brand value (0/1)0.07**0.00, 0.17
     Top-10 market share (0/1)0.00−0.09, 0.12
     Revenue: log 5-y average0.11***0.05, 0.18
     Serves North America (0/1)0.01−0.04, 0.11
     Serves Europe (0/1)0.05**0.00, 0.16
     Serves Asia-Oceania (0/1)−0.15***−0.25, −0.05
     Serves multiple markets (0/1)−0.01−0.12, 0.04
     HQ environmental stringency−0.02−0.10, 0.06
     HQ NGO density, logged0.11***0.04, 0.21
     Operational risk (0/1)0.09***0.02, 0.17
     Consumer-facing (0/1)0.11**0.02, 0.23
    Control variable
     Consumer Goods Forum member (0/1)−0.05−0.16, 0.19
     Adheres to GRI (0/1)0.13**0.03, 0.31
     Food sector (0/1)−0.06−0.13, 0.03
     Wood-products sector (0/1)0.11**0.02, 0.32
     Textile sector (0/1)0.07**0.00, 0.20
     Sustainability report (0/1)0.35***0.25, 0.47
     Return on assets: 5-y average0.00−0.02, 0.04
    • *, **, and *** denote (two-tailed) significance at the 10%, 5%, and 1% level, respectively. Significance levels are computed by bootstrapping observations. These results can be interpreted as the change in the predicted probability of adopting an SSP when moving from 0 to 1 for binary variables or from the 25th percentile to the 75th percentile for continuous variables, holding all else constant. Binary variables are denoted as (0/1).

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    Table 3.

    Independent variables used in logit model

    VariableMeasurement
    High brand valueCompany in the Interbrand or Reputation Institute list of companies with high brand value (56, 57)
    Top-10 market shareWhether firm is one of top 10 companies by revenue in their sector
    Size of companyLogged average company revenues over last 5 y
    Markets servedIf company derives 10%+ of revenues from Europe, North America, Asia-Oceania, and rest of world
    Serves multiple regionsCompany derives revenue from more than two continents
    HQ environmental stringencyAn equally weighted index of the World Economic Forum’s 2015 Executive Opinion Survey questions on perceived stringency and enforcement of environmental regulations and number of ratified international environmental treaties (58)
    HQ NGO densityLogged number of international NGOs per 1,000 citizens (59) (International NGOs per country from the Yearbook of International Organizations; population data from the US Census Bureau’s International Database 2016).
    Operational riskCompany mentions environmental, social, reputation, or regulatory risk of supply in corporate sustainability documents
    Consumer-facingCompany has a brand visible to end consumers

Data supplements

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Sustainability in global supply chains
Tannis Thorlakson, Joann F. de Zegher, Eric F. Lambin
Proceedings of the National Academy of Sciences Feb 2018, 115 (9) 2072-2077; DOI: 10.1073/pnas.1716695115

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Sustainability in global supply chains
Tannis Thorlakson, Joann F. de Zegher, Eric F. Lambin
Proceedings of the National Academy of Sciences Feb 2018, 115 (9) 2072-2077; DOI: 10.1073/pnas.1716695115
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