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Turning suppliers into sustainable agents of the firm

Abstract

Pressures to achieve sustainability for firms has led them to work in three dimensions of social, environmental and economic ones. Organizations have also realized that sustainable practices cannot be achieved in isolation and needs to be integrated with their key partners in a comprehensive effort. This paper attempts to use the perspective of agency theory to study sustainable efforts by manufacturing firms in turning their suppliers into their sustainable agents. The three dimensions of social, environmental and economic sustainability are investigated in order to study the triple bottom line (TBL) effect. Social dimension is represented by the lack of unethical buying practices of the firm, environmental dimension is represented by the environmental assessment of suppliers and the economic dimension is covered by the purchase performance of the firm. Quality of information sharing is studied as an antecedent of these dimensions since the quality of information is a key component that acts as a starting point in avoiding deceptive behavior of principal while applying agency theory. Data is collected through a self-administered survey conducted through 108 manufacturing firms operating in Pakistan. Data is analyzed through structural equation modelling software of SmartPls version 3.2.8. The results are very promising and demonstrate that when firms exchange high quality of information with their suppliers, the firms achieve TBL effect of sustainability and enables them to turn their suppliers into sustainable agents of their principal firms. This paper strongly contributes by extending the applicability of agency theory in sustainable development of firms by integrating the theory with TBL framework. It also provides meaningful insights to managers in understanding the interplay of relationship and functionality with their suppliers.

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