An exploratory assessment of sourcing criteria of fair trade apparel supply chains
Date
2021-12
Authors
Schumm, Caroline Zoe
Major Professor
Advisor
Niehm, Linda S
Eike, Rachel J
Grawe, Scott J
Committee Member
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Abstract
Apparel supply chains are experiencing major shifts regarding how products are sourced and produced due to changes in consumer behavior, pressure from grassroots fashion activism, political governance, and global disruption (e.g. COVID-19) (Awaysheh & Klassen, 2010; Ganesan et al., 2009; Perry & Towers, 2013). In response, apparel companies have implemented corporate social responsibility (CSR) practices and have reexamined the complexity, dependency, and distance of their supply chains (Abbasi, 2017; Awaysheh & Klassen, 2010; Ganesan et al., 2009; Perry & Towers, 2013). Third party auditing firms, such as Social Accountability International (SAI) implement SA8000 for fair trade practices and certify products through fair labeling organizations (FLOs), have made it easier for large corporations to implement fair trade practices in their supply chains (Awaysheh & Klassen, 2010; Carter, Beal, & Collins, 2016; Reed, 2009).
However, fair trade verified (FTV) companies function much differently than larger corporations (Lamy, 2019; Mason & Doherty, 2016). They typically have fewer than 100 employees (Carter et al., 2016), have annual sales of $5 million or less (FTF, n.d.), and behave akin to small businesses with limited resources (human and financial) and social enterprises, balancing their mission-based goals with maximizing profits (Dorado, 2006; Hunter, 2011; Lamy, 2017; Mason & Doherty, 2014). In today’s competitive marketplace, it is imperative for FTV companies to clearly differentiate themselves from larger corporations that implement fair trade practices as a part of their larger CSR efforts (Carter et al., 2016; Littrel & Dickson, 1998).
Despite the overall growth in fair trade, relatively little is known about the FTV supply chain. The majority of literature focusing on fair trade supply chains revolves around how large corporations implement fair trade practices into their robust operations (Awaysheh & Klassen, 2010; Perry & Towers, 2013; Reed, 2009).
The purpose of this study is to explore the supply chain functions and characteristics of fair trade verified (FTV) for profit apparel companies and the relationship of these factors to their sourcing activities. For fair trade to continue to grow and give meaningful work to marginalized artisans in developing countries (FTF, 2020, p.7), it is crucial for fair trade verified (FTV) companies to clearly differentiate themselves from larger corporations that merely implement fair trade practices as a part of their larger CSR initiatives (Carter et al., 2016; Littrel & Dickson, 1998).
This grounded theory study utilized one-on-one interviews and secondary source documents (e.g., company website) to explore the functions and characteristics of sourcing activities within the FTV for profit company. It was found that FTV companies select artisan groups based on a mixture of relational and functional capabilities, with relational criteria being more germane. The right balance of relational and functional capabilities is constantly negotiated based on FTV company resources, in-country structure, and culture. The ‘right’ fit of relational and functional capabilities along with FTV company resources could create a sustainable competitive advantage. Outcomes of the ‘right’ fit may be trust, viable products, and firm performance (financial and non-financial outcomes). Based on the findings of this study, four propositions are proposed to guide future empirical investigation.
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