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Autre Publication Scientifique Documents de travail du Centre d'Économie de la Sorbonne Année : 2022

Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms

Résumé

Non-governmental organizations (NGOs) exert pressure on multinational enterprises (MNE) to force the application of social and environmental standards for subcontractors in developing countries. Non-governmental regulation relies on voluntary standards defined by the NGOs,or by the MNE themselves. This leads to an uncertainty and social regulation. In this respect, external pressure from NGOs constitutes a reputational risk for the company. MNEs, in turn, try to manage those risks by increasingly monitoring the environmental and social impact of their global suppliers. Two forms of non-governmental enforcement currently prevail: warning (i.e.disclosing information of a violation to the company) versus immediate punishment (i.e. penalizing a company without disclosing information). A theoretical model is developed to determine whether disclosing (or not) information to the MNE about reputational risk is more effective. The results demonstrate that MNEs with a low reputation (or a high degree of out-sourcing) will have a higher incentive to conduct inspections of its global suppliers in a warning regime. Conversely, when MNE visibility is high, disclosing information in advance does not provide additional incentives.
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Dates et versions

halshs-03704334 , version 1 (24-06-2022)

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  • HAL Id : halshs-03704334 , version 1

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Michela Limardi, Francesca Battista. Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms. 2022. ⟨halshs-03704334⟩
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