The Organizational Factors Influencing Socially ...

The Organizational Factors Influencing Socially Responsible Apparel Buying/Sourcing Haesun Park

Louisiana State University

Sharron J. Lennon

University of Delaware

Abstract The purpose of this study was to investigate organizational factors that influence buying/sourcing professionals’ socially responsible buying/sourcing (SRB) effort. Survey responses from buying/sourcing professionals from U.S. apparel/shoe companies were analyzed using MANOVA. Analysis revealed that SRB consisted of three dimensions: employment/human rights, environment, and consumer safety. The presence of vendor monitoring and perceived top management support were significantly related to the extent to which buying/sourcing professionals consider SRB when making buying decisions. Buying policy, punishment system(s), a special SRB department or specialist, and perceived ethics and social responsibility of peers had no significant multivariate effects on SRB. Suggestions for industry practitioners in organizational control issues and for researchers in future research issues are also discussed.

Key Words Apparel Industry, Business Ethics, Organizational Control, Peers, Socially Responsible Buying, Top Management

uring the past decade, both manufacturers and retailers involved with business practices such as using sweatshops and child labor have frequently received negative attention in the national news. Such practices have been documented in both domestic production and production in Third World countries (e.g., CBS Evening News, 1996; Greenhouse, 1997) and continue today (e.g., “Report Says Nike Plant,” 2001). Companies in the apparel industry have struggled to reverse the damaging effects associated with socially irresponsible production processes. Such problems have accelerated because

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Authors’ Addresses: Haesun Park, School of Human Ecology, Louisiana State University, 231 Human Ecology Building, Baton Rouge, LA 70803-4300, [email protected] and Sharron J. Lennon, Department of Fashion and Apparel Studies, University of Delaware, 213 Alison Hall West, Newark, DE 19716-7301, [email protected]

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some companies in the apparel industry have experienced a loss of competitiveness and profits because of the rising costs of labor and trade imbalances. In a search for cheap labor to survive competition, some have ignored the rights of workers and overlooked consumer concerns. The contemporary apparel product supply chain is highly diversified and includes many levels of channel members. Most U.S. companies use contractors to produce products. Retailers also use contractors for private label production and/or buy from manufacturers or through agencies. Businesses are responsible for those who are influenced by their actions (e.g., customers, suppliers, unions, competitors, communities, and the general public) as well as for stockholders and employees (Pearce & Robinson, 1982). Acknowledging the international scope of apparel businesses, Littrell and Dickson (1999) noted that VOL. 24

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social responsibility involves “a system-wide range of business practices where manufacturers, retailers, and consumers make decisions based on how their actions affect others within the marketplace” (p. 3). That is, businesses are accountable for what their suppliers do in addition to their own behaviors (Maignan, Hillebrand, & McAlister, 2002). Although retailers and manufacturers may not appear directly involved in production, they are ultimately responsible for producing and distributing products in a socially responsible manner. Therefore, socially responsible buying/sourcing of merchandise has become a priority for apparel companies to fundamentally improve their socially responsible performance. In both scholarly and trade publications, a proper implementation of socially responsible buying/sourcing has been suggested as the ultimate solution to the social responsibility problem in the industry (Dickson, 1999; Ramey & Barrett, 1996). A few studies have addressed the increasingly important concept of socially responsible buying/sourcing (hereafter SRB), especially in the organizational purchasing context (Drumwright, 1994; Maignan et al., 2002). However, they have been qualitative and narrative in nature. That is, there is a lack of empirical studies dealing with the SRB of business organizations. In addition, most studies in the corporate social responsibility field have focused on corporate-level social performance using businesses as the unit of analysis (e.g., McGuire, Sundgren, & Schneeweis, 1988; Oneill, Saunders, & McCarthy, 1989). An examination of the influence of individual decision makers’ ethical perspectives on corporate social responsibility has been suggested as essential (Hopkins, 1997). Accordingly, focusing on the influence of individual decision makers, this study attempts to operationalize the concept of SRB and investigates organizational factors that affect SRB. The purpose of the research was to investigate the effects of organizational environment factors on SRB. The results can be used to generate recommendations for practitioners who want to bring SRB to their organizations for future planning. This research used business ethics theories to study the importance of the organizational environment 230

in making SRB decisions. The empirical results of this study demonstrate the applicability of the ethics theories to socially responsible decision making and can be used in future research and theory development related to SRB.

BACKGROUND Social Responsibility Issues in the Apparel Industry Socially responsible buying is related to social issues that are closest to the organization’s core businesses (Drumwright, 1994). Even though labor issues in the apparel industry have been the focus of the attention, we elected to focus on more than just labor issues covering various areas of social responsibility. SRB entails a system-wide consideration of causes and impacts of the buying/sourcing decisions on all constituents of society, which includes considerations of employment/human rights, environment, and consumer safety. For example, a company is responsible for the treatment of workers in their contractors’ facilities even though the company does not actually hire the workers. This is one of the evaluation criteria of the buying/sourcing decision with regard to its social impact throughout the supply chain. According to social screening criteria, which have been used by socially responsible investing firms (e.g., Domini Social Investment and Calvert Social Investment Fund), a company’s stance on social responsibility is evaluated in terms of four broad categories of criteria: (a) the environment, (b) workplace issues, (c) product safety and impact, and (d) international operations and human rights. In the context of production in the highly globalized apparel industry, workplace issues and international operation and human rights issues can be subsumed into a category of employment. In the sections that follow, three dimensions of SRB are reviewed: (a) employment/human rights, (b) environment, and (c) product/consumer safety. Employment/human rights. In the U.S. apparel industry, many well-known manufacturers and retailers have been found to neglect ©2006 INTERNATIONAL TEXTILE & APPAREL ASSOCIATION


employment/human rights standards by operating sweatshops (e.g., CBS Evening News, 1996; “Report Says Nike Plant,” 2001; Noble, 1995), both in the United States and in Third World countries. For example, illegal immigrants working in El Monte, California, were found living behind barbed wire and spiked fences, making $2 an hour and being forced to work excessive hours (Noble, 1995). Such unfair employment practices are more likely to happen in the apparel industry than in other industries because (a) apparel production is labor-intensive and automation is limited (Dickerson, 1999), and (2) the competitive pressure to lower production costs has intensified because of increasing imports by domestic apparel makers and retailers (Cho & Kang, 2001). Responding to the intensive media exposure of the issues in the mid-1990s, the Department of Labor announced its commitment to eradicating unfair employment practices and forcing the apparel industry to comply with U.S. labor laws by encouraging manufacturers to be aware of their contractors’ labor practices and by voluntarily monitoring their compliance with U.S. labor laws (U.S. Department of Labor, 1997). President Clinton introduced the Apparel Industry Partnership Code of Conduct, which emphasizes external and internal monitoring of labor practices, especially for factories in Third World countries (Verschoor, 1997). In addition, the U.S. Department of Labor also released a trendsetter list, started in 1995, to encourage compliance by image-conscious apparel companies. The intended purpose of the list was to generate publicity recognizing companies in the apparel industry that attempted to comply with labor laws. Criteria for inclusion were (a) demonstration of commitment to labor laws, (b) cooperation with law enforcement officials when violations are found, (c) education of suppliers regarding the Fair Labor Standards Act requirements, and (d) monitoring workplaces including suppliers (Seiden, 1998). Similar to government efforts, the consumer movement toward social responsibility has also played a significant role in improving working conditions. U.S. consumers state that they are prepared to pay a few dollars more for garments made under good working conditions (American ©2006 INTERNATIONAL TEXTILE & APPAREL ASSOCIATION

Chamber of Commerce [AMCHAM], 1997). U.S. consumers are not only asking about product quality and cost but also about who made the products and the conditions under which they were made. A survey assessing socially responsible consumer concerns with sweatshops reported that 74% of respondents supported banning products manufactured by child labor (Dickson, 1999). Seventy-one percent of the respondents also believed that government regulations protecting garment workers in the clothing industry should be increased. The survey indicated that consumers have intentions to correct the pervasive labor problems in the apparel industry. Although actual changes in behavior were not assessed in any of the studies, consumers are evidently concerned with how the products are made, which may affect purchasing behavior. Recognizing the impact of the issues on their business, companies are also moving toward correcting and improving such problems. Since the Apparel Industry Partnership Code of Conduct, companies have been developing and implementing codes of conduct that cover the use of child, prison, and forced labor, wages, hours of work, discrimination, harassment, and general working conditions. Because apparel production frequently involves multi-level contracting, developing codes of conduct to apply the same standards throughout the supply chain is also critical (Coats, 1996). Many companies have made an effort in this matter and have been successful. For example, in Reebok International’s Human Rights Exchange Program, production line workers and human rights staff from its five footwear factories in Thailand and Indonesia traveled to one another’s facilities to learn about new approaches to code of conduct compliance (“AAFA Salutes,” 2003). Environment. Environmental protection and maintenance of ecological sustainability have become primary concerns of our society. As a minimum environmental standard, a company is required to comply with federal, state, and local environmental regulations. In addition, some companies develop proenvironmental technologies (e.g., development of dyes or fabrics that use nontoxic ingredients) and programs (e.g., recycling programs) to improve environmental performance. VOL. 24

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In the apparel industry, because the greatest environmental impact comes from the production process, environmental concerns have been primarily focused on developing environmentally friendly products. Textile manufacturer Dupont uses a biological method of producing fibers that is environmentally friendly and renewable (J. Hoffman, 2003). Some manufacturers have developed an environmentally friendly production process to decrease the toll on the environment by using recycled materials and eliminating harmful chemicals. For example, Levi Strauss & Co.’s line of naturally colored cotton jeans for men and women, called Levi’s Naturals, was distributed nationwide in 1992 (Moore, 1992). The Recycled Trash Company, a clothing manufacturer, produces its logo shirts by using recycled cotton from waste fabrics recovered from the spinning, weaving, and cutting processes (Jacobson-Gardner, 2000). Using recycled cotton not only reduces waste materials but also reduces the use of pesticide chemicals used to grow cotton. Patagonia, a leader in environmentally friendly clothing, started to use recycled polyester for their outdoor clothing line (“Apparel Makers,” 1994). Patagonia now uses 100% organic cotton, which reduces a significant amount of chemical pesticides, and recycled bottles to make inner fleece for clothing (Hutchinson, 2004). Other companies, such as Nike, Gap, and Levi Strauss have also begun to blend organic cotton into the cotton they typically use (Bonner, 1997; Seglin, 1999). Environmental responsibility should be involved in the entire process from production resource management (i.e., raw materials acquisition) to waste management and distribution (Drumwright, 1994; Prince & Denison, 1992). That is, environmental responsibility is not limited to the production; rather, it is a consideration that continues throughout the life of the product, including its distribution and use. Apparel manufacturers have tried to reduce packaging and use more recyclable materials. For example, American & Efird, Inc. was awarded an Excellence in Social Responsibility Award by the American Apparel and Footwear Association for recycling more than 90% of its generated waste (“AAFA

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Salutes,” 1993). Patagonia uses recycled materials for its distribution center’s plumbing, insulation, and glass (Bonner, 1997). Other various environmentally friendly products are also available in the market for environmentally conscious companies, such as compressing packaging systems for cut or finished garments and labels/hangtags made of recycled ink and paper (“Eco-Friendly Products,” 1997). Product/consumer safety. Since the 1970s, regulations on behalf of consumers have covered comprehensive problems in business-consumer relations. The Federal Consumer Product Safety Commission (CPSC, 2004), an independent government agency, deals with regulations related to various consumer rights issues as well as product-specific regulations for each product category. The Federal Trade Commission Act (FTC) enacted in 1914, and its amendments, specify textile/apparel product issues. Under the FTC, labeling, invoicing, and advertising of all textile fiber products should specify the type and the source of materials (e.g., fiber content and country of origin) to ensure the products are distributed and treated properly. In addition to compliance with regulations, social investment firms evaluate companies on the basis of companies’ voluntary actions to protect consumer safety and improve quality of life. These issues include (a) the enhancement of consumer health/safety, quality control, and customer satisfaction; (b) voluntary and prompt reaction to product safety issues relative to the products; (c) integrity in advertising and labeling; and (d) the removal of, or viable rationale for, animal testing (Calvert Online, 2002). In the apparel industry, flammable products are frequently found in the market, which violates the Federal Flammability Law (“Government Orders Recall,” 1994). Both apparel manufacturers and retailers have demonstrated responsibility toward consumer safety by voluntarily recalling products found highly flammable. For example, Susan Bristol, Inc. recalled its fur-trimmed women’s clothing because of the flammable fir trims (CPSC, 2004), and Target Corporation recalled its men’s

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hooded sweatshirts because the fleece used was found in violation of flammability standards (CPSC, 2002). In addition to flammability issues, children’s clothing is a source of concern for some companies. For example, Lands’ End, Inc. recalled its children’s parkas because they presented a choking risk because of a detachable zipper box (CPSC, 2003). Wear Me Apparel Corporation recalled its infant girls’ sweat jacket because the zipper pull attached to the garments contained lead that could cause poisoning (CPSC, 2002). Major children’s wear manufacturers, such as Bugle Boy, Hush Puppies, Billy the Kid, Barbie for Girls, Barney the Dinosaur, Mickey and Co., Nike, Oshkosh B’Gosh, and The Walt Disney Company decided to remove drawstrings from their products and replace them with encased elastic or cotton ribbing because drawstrings can be dangerous when caught on or in various objects such as playground equipment, escalators, or fences (Hill, 1994). In 1996, the CPSC (2004) issued guidelines to help prevent children from getting entangled on the neck and waist drawstrings from garments. Although many companies have voluntarily acted to fix any problems they find, CPSC’s efforts in communicating with the companies with potential or reported consumer safety risks by encouraging voluntary recalls have greatly improved consumer safety.

HYPOTHESES DEVELOPMENT Theories of Corporate Social Responsibility and Business Ethics The concept of social responsibility has traditionally been treated as a special type of business ethics. The contemporary concept of social responsibility emphasizes ethical responsibility for social welfare beyond the economic and legal obligations of businesses. According to Anderson (1989), corporate social responsibility is defined as “the obligation of both business and society to take proper legal, moralethical, and philanthropic actions that will protect


and improve the welfare of both society and business as a whole” (p. 9). Ethics concerns the carefully thought-out conduct, related rules, and moral philosophy held by individuals and the organizations they comprise (Robin & Reidenbach, 1987). That is, social responsibility involves ethics in a social structure, which may vary across societies whose expectations for business institutions are various and changing, yet business ethics may provide a fundamental explanation of the individuals’ ethical and socially responsible decision making. Among the empirical studies that support diversity in the concept of corporate social responsibility (e.g., an ethics perspective, corporate social performance, and stakeholder perspective frameworks), the ethics framework has received a great deal of scholastic attention (Carroll, 1999). Unlike corporate social performance and stakeholder perspectives, the business ethics perspective enhances corporate social responsibility by emphasizing the role of the individual participants in the business. Cognitive ethics theories have been well documented in the business ethics field. Ferrell and Gresham’s (1985) ethical decision model explains that individual decision making is cognitive in nature, and the decision process is influenced by organizational factors and the existence of opportunities for ethical behaviors. The model includes three broad categories of variables: (a) individual factors such as knowledge, values, attitudes, and intentions; (b) significant others; and (c) opportunity such as professional codes and corporate policy. Among these, the opportunity factors were viewed as by-products of interactions between individuals and organizational variables. Later, Ferrell, Gresham, and Fraedrich (1989) acknowledged the predominant role of organizational culture and integrated it into a model in which the ethical decision-making process follows a sequence of Awareness-Cognition-Moral evaluation-IntentionAction. The concept of organizational culture was conceptualized as a main situational moderator factor in each stage of the ethical decision-making process, along with opportunity and individual moderators.

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Similar to Ferrell et al. (1989), Jones (1991) proposed an ethical decision model that conceptualizes the interactive nature of the individual cognitive process in relation to organizational factors. According to the model, cognitive reasoning follows a sequence of “recognition of moral issues—moral judgment— moral intent—moral behavior.” Readers note that the term judgment has been used as an alternative or a necessary condition of decision/behavior in ethics literature, depending on the ethical situation studied. Group dynamics, authority factors, and the socialization process were incorporated into the model as moderators of the process of ethical decision making, emphasizing individual learning. Although these ethical decision models outline the ethical decision as a cognitive process in which individuals process ethical issues, they all include the organizational environment as a factor that influences the process itself and the outcome of the process. This study focuses on the effects of the organizational environment on the outcome of the process, SRB. Organizational Factors in Ethical and Socially Responsible Decision Making A body of business ethics research has identified the critical role of organizational culture in promoting employees’ ethical decision making (Ferrell et al., 1989; Key, 1999; Vitell, Rallapalli, & Singhapakdi, 1993). Individuals are socialized into an organization. They learn organizational values and may adapt their individual values from organizational values (Key, 1999). Organizational culture is formed by (a) individual members and by (b) the reinforcing effects of the organization (Sathe, 1985). Individuals frequently found influential with regard to ethical organizational culture include peers and top management, called interpersonal factors in this study. Reinforcing effects of the organization include organizational control systems such as policy statements that are designed to manage (i.e., either encourage or limit) employees’ behaviors and/or decisions within the organization. On the other hand, the impact of the organizational environment seems to be affected by the number of years of employment

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in the organization as it affects the degree of organizational learning. Harris (1990) found that individuals who had been employed with the company for a longer period of time were more likely to be influenced by organizational ethical values than ones who had shorter tenure. Interpersonal factors. Top management’s and peers’ commitments and behaviors have been found to influence ethical judgments and decisions (e.g., Chonko & Hunt, 1985; Drumwright, 1994; Fritz, Arnett, & Conkel, 1999; Zey-Ferrell & Ferrell, 1982). Top management plays a critical role in creating an ethical climate in an organization and affects the nature and scope of a firm’s social responsibility (Adams, Tashchian, & Stone, 2001; Carlson & Perrewe, 1995). In fact, ethical beliefs and behaviors of top managers have been found to affect employees’ perceived ethical problems and/or ethical behaviors (Chonko & Hunt, 1985; Zey-Ferrell & Ferrell, 1982). Similar to corporate ethics and compliance management (Trevino, Weaver, Gibson, & Toffler, 1999), SRB implementation was found to require top management’s commitment to ethics and social responsibility and its support (Drumwright, 1994). Whereas the role of top management is focused on its commitment and support, the role of peers has been found to be more behavior oriented. Peers have a strong influence over an individual’s ethical behaviors (McDonald & Zepp, 1989). Organizational studies have documented that peers provide a norm of acceptable behaviors in an organization to which each individual tries to conform (Greenberg, 1987; Salancik & Pfeffer, 1978). Scholars have found that perceived ethical behavior of peers (Zey-Ferrell & Ferrell, 1982) and discussion with peers about ethical standards (Fritz et al., 1999) are influential in raising awareness of ethical standards and ethical behaviors in business organizations. Humans are social in nature and therefore learn from others in an organization. That is, an individual’s perception of his or her top management’s and peers’ ethical behavior affects his or her own behavior. Accordingly, we hypothesized that how buying/sourcing professionals perceive top management and peers will affect SRB.


Hypothesis 1: As compared to buying/sourcing professionals who perceive top management as supportive, those who perceive top management as less supportive will be less likely to make socially responsible buying decisions. Hypothesis 2: As compared to buying/sourcing professionals who perceive their peers as ethical and socially responsible, those who perceive their peers as less ethical and less socially responsible will be less likely to make socially responsible buying decisions.

Organizational control systems. Organizational control systems are defined as “formal programs that are aimed at standardizing employee behavior within the domains of ethics and legal compliance” (Weaver, Trevino, & Cochran, 1999, p. 42). Specific organizational systems that can promote the ethical behavior of employees include codes of ethics and/or policy statements, ethics audits, ethics training, hot lines, specialists (e.g., ethics officers and ethics committees), and reward plans (W. M. Hoffman, 1995; McDonald & Zepp, 1989). According to Lindsay, Lindsay, and Irvine (1996), 49.1% of the 171 Canadian companies surveyed had at least one “ethics related corporate control mechanism.” Such control systems have been found to positively influence ethical judgments and behaviors (e.g., Weaver et al., 1999). There are several organizational control systems considered in the SRB context. First, the most common form of organizational control system for organizational ethics has been formal codes (Lindsay et al., 1996). Empirical studies confirm that ethics codes reinforce ethical organizational culture and are an essential factor in encouraging employees’ ethical behaviors (Adams et al., 2001; Turner, Taylor, & Hartley, 1995). A formal code found in the SRB decision context is a buying/sourcing policy that addresses ethics and social responsibility. A buying policy based on organizational values has been suggested as an essential step in implementing socially responsible buying (Maignan et al., 2002). Second, educational programs or training are other ways to deliver organizational ethical objectives and standards along with policy or


codes. Educational programs have been suggested as a way to raise employees’ awareness and understanding of issues and motivate them to act in a socially responsible way (W. M. Hoffman, 1995; Hunt & Auster, 1990). Empirically, ethics training has been found to increase the ability to recognize ethical issues (Gautschi & Jones, 1998), and educational programs in which codes are communicated positively have been found to affect a choice of an ethical alternative (Weeks & Jacques, 1992). Third, having a special department or employing specialists who provide legal, technical, and customer relations information and consultation in terms of ethics and social responsibility is also important in fostering socially responsible decision making in a business organization (Prince & Denison, 1992). The role of a special department or specialists is significant because of the associated expertise; the role is much more significant if the situation is uncertain (Drumwright, 1994). Hunt and Auster (1990) studied the nature of proactive environmental companies and found that legal counsel in those companies was an essential component in determining environmental proactiveness. Fourth, because social responsibility problems in the apparel industry have been raised, the U.S. government introduced an Apparel Industry Partnership Code of Conduct emphasizing external and internal monitoring of labor practices of contractors as well as their own factories (U.S. Department of Labor, 1997; Verschoor, 1997). Vendor audit systems encompassing social responsibility criteria have been suggested to encourage environmentally responsible buying efforts (Drumwright, 1994). Empirically, such systems have been found to relate positively to being a socially responsible business (Hunt & Auster, 1990). Last, reward and punishment systems are also corporate governance systems that may affect SRB. Reward systems are considered to be a motivational reinforcement for ethical behavior in an organization, whereas punishments associated

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with unethical behaviors have been considered discouraging of unethical behaviors (Trevino et al., 1999; Velasquez, 1996). Rewards, especially monetary, have been found to positively influence ethical decisions (Trevino & Youngblood, 1990). Reward systems specifically for ethical behaviors, however, have been reported to be uncommon or nonexistent among companies. Rather, policies that penalize unethical behaviors are more common (Lindsay at al., 1996). In Laczniak and Inderrieden’s (1987) quasi-experiment, sanctions stated such as possible dismissal for unethical behavior were found to positively influence participants’ ethical decisions. Specifically, individuals who received a sanction message along with the president’s endorsement letter and code of ethics were more likely to disapprove of unethical scenarios than individuals who received only the endorsement letter or those who received the endorsement letter and the code of ethics, but no sanction message. These considerations led to the following hypotheses. Hypothesis 3: Compared with buying/sourcing professionals from companies with a formal buying/sourcing policy, those from companies without a formal buying/sourcing policy will be less likely to make socially responsible buying decisions. Hypothesis 4: Compared with buying/sourcing professionals from companies with an educational program(s), those from companies without an educational program will be less likely to make socially responsible buying decisions. Hypothesis 5: Compared with buying/sourcing professionals from companies with a special SRB department or an SRB specialist, those from companies without a special SRB department or an SRB specialist will be less likely to make socially responsible buying decisions. Hypothesis 6: Compared with buying/sourcing professionals from companies with a vendor monitoring system(s), those from companies without a vendor monitoring system will be less likely to make socially responsible buying decisions. Hypothesis 7: Compared with buying/sourcing professionals from companies with a punishment system(s), those from companies without a punishment system will be less likely to make socially responsible buying decisions.

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METHOD Sampling and Procedure Data were collected using a mail survey, a useful way to reach a nation-wide sample at relatively low cost. The first mailing included a questionnaire, a postage-paid return envelope, and a cover letter. Two weeks after the first mailing, postcard reminders were mailed, followed by telephone contacts, to increase the response rate. Upon request, a second questionnaire was mailed. The sample consisted of buying/sourcing professionals affiliated with large U.S. apparel/shoe companies (more than $100 million in sales). Hoovers Online Company Directory under the categories of “Retailing: Clothing, Shoe & Accessory” and “Nondurable Consumer Products: Clothing” (www.hoovers.com) was used to identify companies that satisfied the sales volume criterion. Companies include several types of organizations such as department store chains (e.g., JC Penney, Inc.), specialty apparel retailers (e.g., Limited, Inc.), and apparel manufacturers (e.g., Liz Claiborne). Given the sensitive nature of assessing company social responsibility, we made individual contacts with buying/sourcing executives in each company for cooperation and to obtain reliable/appropriate lists of buying/sourcing professionals. Fifty-two companies agreed to participate and provided lists of the buying/ sourcing professionals in their companies or agreed to distribute questionnaires to their buying/sourcing professionals without releasing employee names. Instrument Twenty-one scale items were developed to measure SRB based on the social investment criteria used by socially responsible investment firms: (a) employment/human rights, (b) the environment, and (c) consumer safety. These items assessed the extent to which the buying/sourcing professionals considered social responsibility issues as they made supplier/product selection decisions. Social investment firms generally separate workplace


issues and international operation/human rights issues. However, because of the high level of global production for apparel products, the two categories were merged into the employment/human rights dimension. Respondents were asked to indicate the degree to which they considered each issue when making buying/sourcing decisions. Examples of the items are later found in Table 1. Items used 7-point Likert-type scales (1 = strongly disagree, 7 = strongly agree). Because of the exploratory nature of the scale, a “nonapplicable” choice was also provided to identify inappropriate items in the apparel buying/sourcing context. A scale tapping perceived top management support and one tapping perceived ethics and social responsibility of peers were developed based on business ethics and social responsibility literature (Adams et al., 2001; Chonko & Hunt, 1985; Drumright, 1994; Fritz et al., 1999; Zey-Ferrell & Ferrell, 1982). The Top Management Scale (7 items) was developed to measure the degree to which respondents perceive top management to be ethical and socially responsible and their commitment to SRB (e.g., “Top-management of the company is committed to socially responsible buying”). The Peers’ Scale (7 items) was developed to measure the extent to which respondents perceive peers to be ethical and socially responsible and how they communicate with peers in terms of SRB (e.g., “There is frequent encouragement of ethical and socially responsible buying from my peers”). All of these items used a 7-point Likerttype scale (1 = strongly disagree, 7 = strongly agree). Respondents were asked to indicate dichotomous yes or no answers to determine the existence of SRB organizational control systems (i.e., existence of a buying policy, specialists/special departments, use of vendor monitoring systems, educational programs, use of reward systems, and use of punishment systems) that foster SRB. In addition to demographic factors such as age and gender, respondents were also asked to indicate their buying/sourcing experience for the present company in years/months, which was designed to be included as a covariate.


RESULTS In this section, preliminary analyses (descriptive statistics, factor analysis, and reliability analyses), the MANCOVA analysis, and the ANOVAs are reported. Because of missing data, the numbers of respondents and corresponding degrees of freedom vary across the analyses. Preliminary Analyses Characteristics of the respondents. Out of 891 questionnaires mailed, 164 were returned. After careful review of the returned questionnaires, 6 were excluded from the analysis because of a significant number of missing values. The resulting response rate was 17.7%. This response rate is comparable to that found in other surveys of business professionals on business ethics and social responsibility (e.g., Paolillo & Vitell, 2002, 15.1%; Valentine & Barnett, 2002, 12.7%). Of the remaining 158 respondents representing 42 companies, 104 (65.8 %) were women and 54 (34.2%) were men. Schminke (1997) reported that men and women did not differ in ethical beliefs and judgments. A t test on the SRB scale revealed no significant difference between men and women. The average age of those who responded (N = 154) was 40. Most of the respondents (f = 130, 82.3%) had a bachelor’s degree. One hundred two respondents were buyer/sourcing professionals (64.6%), and 53 (33.5%) held executive positions. Average buying/sourcing professional experience was 14 years. Buying/sourcing experience with the current company averaged 8 years. Average company sales volume reported by the respondents was $3.1 billion. Most companies’ sales were between $200 million and $5 billion (n = 81, 51.3%). Thirty-seven percent of respondents indicated that they designed their products and used contractors to make them, and 39 percent indicated that they typically purchased from a group of selected manufacturers. Only 1.9% indicated they used wholesalers. In some cases, multiple responses from the same company were received, which did not affect the purpose of this study, an investigation of individual buying/sourcing professionals’ SRB consideration.

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Validation of SRB Scale. The SRB Scale developed in this study was analyzed using exploratory factor analysis. Comprehensive Exploratory Factor Analysis (CEFA) software, version 1.03 (Browne, Cudeck, Tateneni, & Mels, 1999) was used. The program was preferred as it provides a comprehensive factor analysis, varying the analysis process depending on the concept and nature of the factors and assessing factor correlations. Out of 21 SRB items, 5 were excluded because of significant numbers of “not applicable” answers and missing values. After the listwise deletion of missing values, a total of 120 cases were included. Maximum least square estimation with direct quartimin rotation, which is appropriate for factors that are not conceptually orthogonal, was used (Browne et al., 1999). That is, the three dimensions of SRB all deal with social responsibility issues, and it is reasonable that individuals who are concerned with one dimension of SRB would also be concerned with other SRB dimensions. Thus, the three dimensions would not be orthogonal. Items that cross-loaded above .4 on multiple factors and items without at least a .5 factor loading on one factor were deleted. Accordingly, 4 more items were deleted, leaving a total of 12 items in the scale (see Table 1). The resulting factors were identical to the categories considered in the scale development; therefore, the factors were labeled corresponding to the predetermined dimensions, Employment/Human Rights (7 items), Environment (2 items), and Consumer Safety (3 items). Reliability coefficients (Cronbach’s alphas) were .96 for the Employment/Human Rights dimension, .85 for the Environment dimension, and .91 for the Consumer Safety dimension, respectively, indicating relatively high reliability for an exploratory scale. With the 12 SRB items, a confirmatory factor analysis was performed to examine the convergent validity of the SRB Scale. Convergent validity assesses the extent to which independent measures (items) of a construct (factor) represent that same construct. In confirmatory factor analysis, the factor loadings are freed on the factor the items represent and restrained to be zero on other

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factor(s) (i.e., factor loadings of 0). Convergent validity is achieved when the confirmatory factor analysis model is significant and the loading coefficients on the designated factor are significant. As shown in the result of the confirmatory factor analysis (see Table 2), the t tests of factor loadings were all significant. The chi-square (χ2) value was 75.67 (df = 51, p = .014), the Goodness-of-Fit Index (GFI) was .90, the Adjusted Goodness-of-Fit Index (AGIF) was .85, the root mean square residual (RMSR) was .082, and the root mean square error of approximation (RMSEA) was .064, suggesting the model was acceptable. The overall mean (based on 7-point scales) for the Employment/Human Rights dimension was 5.68 (SD = 1.70), 4.22 (SD = 1.52) for the Environment dimension, and 5.7 (SD = 1.20) for the Consumer Safety dimension. Results of t tests confirmed that the mean score for environmental issues was significantly different from the mean for Employment/Human Rights (t = 12.50, df = 102, p < .001) and from the mean for Consumer Safety (t = 9.60, df = 102, p < .001). Thus, buying/ sourcing professionals considered employment/ human rights and consumer safety issues more than environment issues in making buying decisions. Organizational control systems, top management, and peers. The most common form of organizational control system reported in this study was a buying/sourcing policy (74.1%), followed by vendor monitoring (51.9%), a punishment system (43.0%), and a specialist(s) or a special department (29.7%). Educational programs (11.4%) and reward programs (2.5%) were not commonly reported in the companies with which the respondents were affiliated. Top management (7 items) and peer (7 items) scales both achieved appropriate reliability coefficients: Cronbach’s alphas were .82 and .86, respectively. A t test confirmed that the mean scores for the Top Management Scale and for the Peers Scale were significantly different (t = 9.43, df = 136, p < .001). Inspection of the overall means for the two scales revealed an overall mean for the Top Management Scale of 4.49 (SD = .97) and an overall mean for


Table 1. Exploratory Factor Analysis of SRB Scale Items

SRB Items Compliance with equal opportunity standards Compensating workers fairly Good labor-management relations Programs and benefits to support workers and their families A safe and healthy workplace Adoption of human rights standards to govern international operations Combat against human rights abuses and environmental degradation in international operations Reducing environmental impact Environmental performance management Quality control and customer satisfaction Ability to respond promptly to correct problems with product safety issue Integrity in advertising and labeling

Factor 1 Employment and Human Rights

Factor 2 Environment

Factor 3 Consumer Safety

Cronbach’s Alpha

0.771

.111

0.015

.96

0.801 0.930

.127 −.002

0.001 −0.022

1.015

−.067

−0.104

0.904 0.737

−.097 .151

0.123 0.097

0.657

.229

0.052

−0.054 0.150

.882 .796

0.004 −0.041

.85

0.031

.014

0.886

.91

−0.065

.017

1.019

0.127

−.068

0.750

Note. Crawford-Ferguson Criterion: 0.532. Italicized values indicate significant loadings. Factor loadings greater than 1.0 can be obtained from the rotation process and are considered appropriate (personal communication with Michael Browne, 2001). SRB = socially responsible buying/sourcing.

the Peers Scale of 5.24 (SD = .91). That is, respondents reported they perceived their peers to be more ethical and socially responsible than top management were on average. To assess overall relationships among independent and dependent variables, respondents were classified into two groups for all independent variables. The organizational control variables were dichotomous (presence or absence). For example, a company would either have (presence) or not have (absence) a vendor monitoring system. For two of the six organizational control variables (i.e., educational programs and reward system), cell sizes were extremely unequal. Therefore, these two variables were not included in the analyses. A median-split method on the top management


summed score (median = 31) and peers summed score (median = 37) was used to group the continuous variables. For example, each response unit was placed into either a high top management support group or a low top management support group. Multivariate Analysis MANCOVA was used to examine the effects of organizational factors on three dimensions of SRB. The independent variables were buying policy (presence vs. absence), vendor monitoring system(s) (presence vs. absence), punishment system(s) (presence vs. absence), a special SRB department or specialist (presence vs. absence), perceived top management support (high vs. low),

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Table 2. Confirmatory factor analysis of SRB scale items Factor Loadings Factor 1 Employment and Human Rights Compliance with equal opportunity standards Compensating workers fairly Good labor-management relations Benefits to support workers and their families A safe and healthy workplaces Adoption of human rights standards Combat against human rights abuses and environmental degradation Reducing environmental impact Environmental performance management Quality control and customer satisfaction Ability to respond promptly to correct problems with product safety issue Integrity in advertising and labeling

Factor 2 Environment

Factor 3 Consumer Safety

.87* .91* .91* .93* .90* .89* .85* .76* .91* .89* .96* .81*

Note. Factor loadings shown are standardized. * indicates t-value > 2.0.

and perceived ethics and social responsibility of peers (high vs. low). The dependent variables included in each analysis were the extent to which the buyers considered the three dimensions of SRB (Employment/Human Rights, Environment, and Consumer Safety) when making their buying decisions (i.e., the extent to which they made socially responsible buying decisions). The length of buying/sourcing experience for the company (in months) was treated as a covariate because the degree of internalization of organizational culture and systems may depend on the length of stay in the company. Multivariate analysis of variance techniques are useful when multiple dependent variables are correlated to decrease Type I error inflation (Hair, Anderson, Tatham, & Black, 1992). To test the appropriateness of MANCOVA for the analysis, Bartlett’s test of sphericity was performed (χ2 = 113.00, df = 8, p < .01), and the result indicated that three dimensions of SRB were, in fact, correlated. The MANCOVA (Pillai’s test) revealed that the existence of vendor monitoring, F(3, 51) = 6.17, p < .01, and perceived top management support, F(3, 51) = 2.96, p < .05, had overall significant

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effects on the dependent variables. No other multivariate main effects were significant: buying policy, F(3, 51) = 2.08, p > .1; punishment system(s), F(3, 51) = 1.70, p > .10; a special SRB department or specialist, F(3, 51) = .58, p > .10; and perceived ethics and social responsibility of peers, F(3, 51) = 1.75, p > .10. The effect of the covariate, the length of buying/sourcing experience for the company, was also not significant, F(3, 51) = .18, p > .10. None of the interactions were significant and are not reported for the sake of clarity. Thus, the analysis indicated that only Hypotheses 1 and 6 were supported. Univariate Analyses Because the covariate was nonsignificant at the multivariate level, it was dropped for the univariate analyses. For the two significant independent variables (vendor monitoring, top management support), univariate ANOVAs were probed. A 2 × 2 factorial ANOVA was performed for the two independent variables that were significant at the multivariate level on each dependent variable. There was a significant main effect for perceived top management support, F(1,


Table 3. Mean Scores by Vendor Monitoring and Top Management Vendor Monitoring Dependent Variables (SRB dimensions) Employment/human rights Environment Consumer safety

Top Management

Presence (n = 54)

Absence (n = 46)

F

High (n = 47)

Low (n = 53)

F

36.34 (1.31) 8.45 (0.41) 17.58 (0.56)

31.04 (1.47) 7.87 (0.49) 16.44 (0.56)

7.24** .84 2.10

36.20 (1.45) 9.01 (0.49) 17.27 (0.57)

31.19 (1.33) 7.31 (0.42) 16.74 (0.55)

6.49* 7.04** .45

Note. Numbers in parentheses are standard deviations. SRB = socially responsible buying/sourcing.

108) = 6.49, p < .05, on the extent to which buyers considered employment/human rights issues when making buying decisions. Buying/sourcing professionals working for companies whose top management was perceived as supportive of SRB tended to agree that they considered employment/human rights more when making buying decisions than those whose top management was perceived as less supportive of SRB (see Table 3 for cell means for vendor monitoring and perceived top management support on the dependent variables). There was also a significant main effect for perceived top management support on the extent to which respondents considered the environment dimension of SRB when making buying decisions, F(1, 96) = 7.04, p < .01. Inspection of cell means (Table 3) reveals that those who perceived a high level of top management support tended to agree that they considered the environment dimension of SRB more when making buying decisions than those who perceived a low level of top management support. There was also a significant main effect for vendor monitoring, F(1, 108) = 7.24, p < .01. Inspection of the cell means revealed that those working for companies with vendor monitoring system(s) tended to agree that they considered employment/human rights more when making buying decisions than those working for companies without vendor monitoring systems. Neither vendor monitoring nor perceived top management support was significantly related to the extent to which buyers considered the consumer safety dimension of SRB when making buying decisions.


Discussion The purpose of this study was to investigate the effects of organizational factors, which include interpersonal factors and organizational control systems, on socially responsible buying/sourcing. As an initial step, we developed an exploratory SRB Scale and were able to test the scale successfully. The test resulted in a SRB Scale with three dimensions of social responsibility (i.e., Employment/Human Rights, Environment, and Consumer Safety) in the context of the apparel industry. The three dimensions found were consistent with social screening criteria used by social investment firms. The organizational factors were selected by reviewing business ethics literature and considering the apparel industry context. They were the following: perceived top management’s commitment/support, perceptions of peers’ ethics and social responsibility, and the existence of six organizational control systems (i.e., a buying policy, educational programs, a special department or specialists, vendor monitoring, reward systems, and punishment systems). The most common types of organizational control systems reported in this study were buying policies and vendor monitoring systems. Consistent with previous work (Ethics Resource Center, 1990; Lindsay et al., 1996), an educational system was reported as uncommon, and punishment systems were more common than reward systems. We found significant effects for vendor monitoring and perceived top management support among the organizational factor variables investigated. We

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found that buyers in companies with vendor monitoring systems were more likely to consider employment/human rights when making buying decisions than buyers from companies without such systems. However, vendor monitoring was not associated with consideration of the environment or consumer safety issues when making buying decisions. This may be due to the fact that most vendor audit/monitoring systems have been implemented as a response to criticism especially with regard to the human rights abuses found in facilities where apparel/shoe products are manufactured or sourced. Therefore, such systems tend to be focused on workers’ rights issues, specifically on sweatshop issues. Attention has also been given to U.S. corporations for their environmental responsibility overseas, especially in terms of their environmental impact on developing countries (e.g., Jenkins, 2001). In the long term, it will be beneficial for the companies to systematically manage social responsibility issues beyond human rights issues. Perceived top management support was significantly related to the consideration of both employment/human rights and the environment when making buying decisions. In this study, respondents indicated that they perceived their peers were more ethical and socially responsible than top management. However, only perceived top management support was significant in influencing SRB. Literature on strategic leadership generally accepts the fact that values and commitment of top management greatly influence organizational strategic actions and performance (Finkelstein & Hambrick, 1990; Hambrick & Mason, 1984). Ethics researchers also stress that top management’s commitment/support to social responsibility affects the nature and scope of a firm’s social responsibility (Adams et al., 2001; Carlson & Perrewe, 1995; Hunt & Auster, 1990). The finding in this study supports the importance of top management in implementing socially responsible buying/sourcing. The significant role of top management also has an implication for organizational planning, especially for organizational control systems. Top management’s awareness and commitment to ethics significantly

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relates to the scope of organizational control systems (Weaver et al., 1999) and implementation of ethics codes (Lindsay et al., 1996). Top management has the power and the authority in developing and maintaining systematic organizational controls that may work with the organizational culture and societal needs. Personal involvement by top management in such organizational control systems is also recommended. For example, when the chairperson of Levi Strauss was himself involved in the internal monitoring program of fair employment in Third World countries, the program became more effective (Ramey & Barrett, 1996). On the other hand, the way top management approaches the issues may matter. Drumwright (1994) reported there was a tendency for employees to reject top management’s mandated strategic approaches toward environmental buying. Therefore, top management needs to be careful when considering possible negative psychological reactions of employees toward top management’s actions. In the apparel industry, social responsibility issues are critical at the present time and are receiving a great deal of legal and public attention. This may have encouraged a top management approach to SRB of mandating an immediate solution as a short-term solution rather than exchanging concerns with, and seeking long-term solutions from, employees. Rather than such strategic or mandatory approaches, creating a supportive environment through personal/cultural encouragement, such as discussion forums, may be more persuasive and effective in enabling employees to learn and expand their capabilities for socially responsible buying. We only found support for two of the seven hypotheses. No support was found for hypotheses involving perceived peers’ ethics and social responsibility, buying/sourcing policy, a special department or specialists, and punishment systems. These factors have been found significant in numerous business ethics studies. The lack of support may be due to employee unfamiliarity with SRB issues as compared to ethics. SRB is an innovative, fairly new concept in business,


especially for apparel businesses. Most large companies have at least one ethics control system to deal with traditional ethics matters (e.g., bribery), and what it deals with is well recognized by the employees (Vitell et al., 1993). However, apparel companies recently began to institute control systems to regulate SRB issues, and employees may not be well-informed or understand them. In addition, systems may have not been successfully implemented. On the other hand, top management tends to be involved in the SRB process as a response to increased public and legal attention. Vendor monitoring is recommended by the Department of Labor along with codes of conduct. It appears that top management is actively involved in SRB governance and that vendor monitoring has been well implemented in those apparel businesses. However, other organizational systems may have not been well established to govern SRB issues at the time of this study, which might have resulted in insignificant impacts on SRB practice. Based on what we know from business ethics studies, the implementation of SRB will be more successful if companies develop various organizational control systems. A buying/sourcing policy that articulates various areas of social responsibility, educational systems that facilitate communications on emerging issues and concerns related to social responsibility, a special department/specialist that professionally handles social responsibility issues, and reward/punishment systems that encourage/discourage socially responsible business decisions should improve SRB performance by forming a supportive organizational culture. Developing such an organizational culture will increase awareness and communications among employees in the organization, and this will lead to higher standards of SRB over time. Vendor monitoring had no effect on either the environment or the consumer safety dimensions of SRB, nor did perceived top management support have a significant effect on the consumer safety dimension of SRB. Environment and consumer


safety issues are somewhat well regulated in the United States, and most companies tend to comply with federal regulations. If this is the case, then it is reasonable to find no effects because there would be little variation in companies’ responses. Among those three dimensions of SRB issues, employment/human rights and consumer safety issues were reportedly considered more than environment issues. It is possible that environment and consumer safety issues are not well communicated within the companies or that only special departments handle the issues without communication with buying/sourcing professionals. Environment and consumer safety issues as well as human rights are critical business obligations toward society. Institutional investors also use social screening to determine funding, acknowledging that individual investors are unwilling to pay a premium for corporate behavior that was described as socially irresponsible (Pava & Krausz, 1996). Employment/human rights issues have been highlighted in the apparel industry but constitute only one dimension of social responsibility as evidenced in social screening criteria. If companies wish to build a total management system for social responsibility, control systems and organizational atmosphere should encompass all aspects of social responsibility, beyond areas receiving present public attention. This may lead to more sustainable companies in the long run. Being socially responsible pays off by improving the company’s economic performance in the long run as well as its social performance. For example, in one study, management reported that they perceived that their organizations’ social responsibility positively affected their market share (Owens & Scherer, 1993). Many companies that adhered to ethical behaviors toward their stakeholders had higher financial performances than those did not (Verschoor, 1998). The definition of corporate social responsibility has evolved over the decades. Some scholars argue that ethics and social responsibility are different concepts and should not be treated the same way (e.g., Robin & Reidenbach, 1987). However, the contemporary definition of social responsibility has evolved, emphasizing ethical responsibilities in

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addition to traditional economic and legal obligations to society (e.g., Anderson, 1989). In fact, the most prominent issue found in the body of literature of corporate social responsibility is business ethics (Carroll, 1999). This study responded to Hopkins’s (1997) call for research that links ethical framework and socially responsible decision making in businesses. Similar to Wolfe and Dickson’s (2002) study, in which codes of conduct concerning child labor used by apparel companies were analyzed using the theory of virtue ethics, we believe using an ethics framework to study social responsibility issues is ideal in advancing corporate social responsibility. This study investigated SRB considerations by individual buying/sourcing professionals. Individuals in a business organization are critical in the sense that they form organizational culture, which, in turn, influences others’ social responsible behaviors in an organization. Knowing that most corporate social responsibility studies deal with businesses as a unit of analysis (e.g., McGuire et al., 1988; Oneill et al., 1989), this study expands the body of knowledge in corporate social responsibility by focusing on individual decision makers. This exploratory study contributed to the textiles and apparel field by suggesting a theoretical framework supported by empirical data to guide research in socially responsible buying/sourcing. Finally, the importance of perceived top management support cannot be overlooked. Management in apparel companies who are serious about SRB cannot just pay lip service to SRB but need to be perceived as supportive of SRB if companies really want to foster SRB decision making in their companies. Limitations and Future Research There are some limitations of this study and suggestions for future research. One area of concern is the SRB measure. We asked respondents their subjective perceptions of SRB considerations. Assessing perceptions is commonly used to infer behaviors in behavioral science. However, social desirability may have been a factor in this study. In ethics and social responsibility studies, it is always a challenge for researchers to address social desirability bias. To rule out social desirability bias, a

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qualitative approach to measure SRB might be employed in combination with the quantitative approach. In this way, the possible discrepancies in the links between perceptions, intentions, and actual behaviors may be discovered and tested in further studies. Second, this study is exploratory in nature, and further investigations will deepen the understanding of SRB. It may be valuable to compare the status of SRB within other industries, where the relative significance of issues and market values vary. For example, although employment and human rights issues are critical in the apparel industry, environment issues will be more critical for chemical product buying/sourcing. The focus of this study was to investigate the effects of organizational factors on SRB. Given that business ethics theories emphasize the complex, individual ethical decision-making process, to study individual cognitive factors (e.g., ethical values) as antecedents of SRB and their interactions with organizational factors will be valuable. This, along with the findings of this study, will guide us to develop a rigorous framework to study SRB decisions. This study was an initial effort in developing a comprehensive instrument for assessing SRB practices from the perspective of buying/sourcing professionals in the apparel industry. Therefore, generalizability of the SRB Scale we developed was limited in terms of its applicability to other industries. It may need to be modified for the industry to be studied. The insignificant results for many of the factors we studied might be due to the scale. We recommend testing the scale with a new sample of data to confirm the scale’s validity and reliability. A follow-up study that incorporates a more exhaustive set of SRB items developed through focus group interviews or in-depth interviews along with assessment of validity and reliability of the SRB Scale may contribute to development of a more rigorous scale of SRB.

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