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The ethics of outsourcing: when companies fail at responsibility

The ethics of outsourcing: when companies fail at responsibility PurposeThe purpose of this paper is to demonstrate that costs reduction is no longer a complete indication of performance and should not be attained at the expense of the firm’s sustainable social responsibility and environmental aspects. The question of whether outsourcing is a “blessing” or a “lesson” remains unresolved in the minds of practitioners and researchers alike. The literature is replete with the up- and down-sides of outsourcing, all going in different directions, making it very cumbersome particularly for practitioners to articulate when and what to outsource (if at all) and how to contain or mitigate outsourcing downsides.Design/methodology/approachOutsourcing as a two-edged sword can be value creating strategy or a firm’s soft spot. This paper focusses on the latter through a review of sourcing in two leading multinational companies: Benetton, in the fast fashion industry, and Nestlé, in the food industry.FindingsBenetton experienced the biggest catastrophe in the garment industry, the Rana Plaza collapse. Nestlé went through the horse meat scandal, perhaps one of the most complex food crime cases in history. Both cases illustrated the strategic vulnerability that arises from the international outsourcing of production.Research limitations/implicationsClearly, production costs are no longer a complete indication of performance as the two cases unveil. Management control systems should be especially vigilant when outsourcing transfers social and environmental responsibility from one contract to another in a global business context. Monitoring costs cannot be outsourced when it comes to sustainable social responsibility and environmental aspects.Practical implicationsFirms can leverage relationships with stakeholder groups, activists and NGOs to help them to monitor their international operations. Institution-based trust to protect brands, increased integration and control are necessary mechanisms.Originality/valueIndeed, global outsourcing in any industry should transfer not only industrial operations but also credible and responsible social and environmental benchmarks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Strategy Emerald Publishing

The ethics of outsourcing: when companies fail at responsibility

Ndubisi, Nelson Oly; Nygaard, Arne
Journal of Business Strategy , Volume 39 (5): 7 – Sep 17, 2018
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0275-6668
DOI
10.1108/JBS-03-2018-0037
Publisher site
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Abstract

PurposeThe purpose of this paper is to demonstrate that costs reduction is no longer a complete indication of performance and should not be attained at the expense of the firm’s sustainable social responsibility and environmental aspects. The question of whether outsourcing is a “blessing” or a “lesson” remains unresolved in the minds of practitioners and researchers alike. The literature is replete with the up- and down-sides of outsourcing, all going in different directions, making it very cumbersome particularly for practitioners to articulate when and what to outsource (if at all) and how to contain or mitigate outsourcing downsides.Design/methodology/approachOutsourcing as a two-edged sword can be value creating strategy or a firm’s soft spot. This paper focusses on the latter through a review of sourcing in two leading multinational companies: Benetton, in the fast fashion industry, and Nestlé, in the food industry.FindingsBenetton experienced the biggest catastrophe in the garment industry, the Rana Plaza collapse. Nestlé went through the horse meat scandal, perhaps one of the most complex food crime cases in history. Both cases illustrated the strategic vulnerability that arises from the international outsourcing of production.Research limitations/implicationsClearly, production costs are no longer a complete indication of performance as the two cases unveil. Management control systems should be especially vigilant when outsourcing transfers social and environmental responsibility from one contract to another in a global business context. Monitoring costs cannot be outsourced when it comes to sustainable social responsibility and environmental aspects.Practical implicationsFirms can leverage relationships with stakeholder groups, activists and NGOs to help them to monitor their international operations. Institution-based trust to protect brands, increased integration and control are necessary mechanisms.Originality/valueIndeed, global outsourcing in any industry should transfer not only industrial operations but also credible and responsible social and environmental benchmarks.

Journal

Journal of Business Strategy – Emerald Publishing

Published: Sep 17, 2018

References

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