Linking Moral Disengagement To Supply Chain Practices: David Eriksson

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World Review of Intermodal Transportation Research, Vol. 4, Nos.

2/3, 2013 207

Linking moral disengagement to supply chain


practices

David Eriksson*
School of Engineering,
University of Borås,
SE-501 90 Borås, Sweden
Fax: +46-33-435-40-08
E-mail: david.eriksson@hb.se
*Corresponding author

Per Hilletofth
Department of Industrial Engineering and Management,
School of Engineering,
Jönköping University,
P.O. Box 1026, SE-551 11, Jönköping, Sweden
E-mail: per.hilletofth@jth.hj.se

Olli-Pekka Hilmola
Lappeenranta University of Technology,
Kouvola Research Unit,
Prikaatintie 9, FIN-45100 Kouvola, Finland
Fax: +358-5-344-4009
E-mail: olli-pekka.hilmola@lut.fi

Abstract: The purpose of this paper is to identify if and how supply chain
practices are linked to moral disengagement techniques and thus might cause
moral decoupling (MD). The research uses a literature review and multiple case
study approach to investigate this issue. The literature review links moral
disengagement to supply chain practices, while the case study observes the
existence of the practices, and in what supply chain configurations those
practices might arise. Identified configurations that might cause MD are
suppliers and external partners responsible for upstream activities, division of
tasks, aggregation of materials, auction-like settings, long supply chains,
production in low-cost countries, production where people are not considered
as equals, and configurations made to reduce costs.

Keywords: moral disengagement; moral decoupling; ethics; corporate social


responsibility; supply chain management; SCM.

Reference to this paper should be made as follows: Eriksson, D., Hilletofth, P.


and Hilmola, O-P. (2013) ‘Linking moral disengagement to supply chain
practices’, World Review of Intermodal Transportation Research, Vol. 4,
Nos. 2/3, pp.207–225.

Copyright © 2013 Inderscience Enterprises Ltd.


208 D. Eriksson et al.

Biographical notes: David Eriksson is a PhD student of textile management


at the University of Borås. As well as lecturing and research project
responsibilities, he is completing his PhD studies. His research interests include
demand and supply chain management, innovative logistics solutions in mature
markets, and ethical aspects of supply chain configurations.

Per Hilletofth is an Assistant Professor of Logistics at Jönköping University


in Sweden. His research interests include supply chain management,
customer-orientation, demand and supply alignment, outsourcing, and
information technology. He is currently a member of the editorial board of
Industrial Management and Data Systems, World Review of Intermodal
Transportation, and International Journal of Logistics Economics and
Globalization.

Olli-Pekka Hilmola is working as a Professor in Lappeenranta University of


Technology (LUT), in Kouvola, Finland. He is affiliated with numerous
international journals through editorial boards, including Baltic Journal of
Management, Industrial Management and Data Systems, Decision Support
Systems, and International Journal of Shipping and Transport Logistics. He has
published more than 110 refereed journal manuscripts.

1 Introduction

Supply chains of today have an increasing complexity and span. As such, actors and
consumers get further and further apart in global networks (Cavinato, 2004).
Collaboration in global supply chains entails high difficulty, due to distances not only in
geography, but also in culture (Lowson, 2001, 2003; Warburton and Stratton, 2002). As
these distances grow, it is hard for companies to oversee operations, which may result in
that operations are not being conducted as intended. Whereas quality issues have been a
prevalent area of concern, ethics issues in supply chain management (SCM) are now
gaining attention (Svensson, 2009).
The need for ethical values on a global level in order to match ethical dilemmas
brought on by global supply chains have been stressed (Berenbeim, 2000). It has been
shown that ethical codes of conduct have a positive impact on ethical behaviour (Adams
et al., 2001; Ferrell and Skinner, 1998; McCabe et al., 1996; Pierce and Henry, 1996;
Schwartz, 2001; Somers, 2001; Stohs and Brannick, 1999; Wotruba et al., 2001). Besides
ethical guidelines, supply chains with high visibility, both upstream and downstream,
have been deemed necessary to uncover ethical dilemmas in the supply chain (Svensson,
2009). Ethical performance has also shown to have an indirect impact on performance
through its positive relationship with perceived reputation (Eltantawy et al., 2009)
showing that the potential benefits of ethical efforts are not only social, but also
economical.
Despite the interest for ethically produced products, reports of social misconduct are
prevalent in the news. In recent years, Apple has made the headlines on numerous
occasions due to the working conditions in China. Low wages, poor working conditions,
and even suicides at subcontractor facilities have been reported (New, 2010; Sacom,
2011). The issues are not confined to physical flows, but also concern monetary issues.
Due to taxing through daughter companies (typically abroad), Apple (2011) managed to
Linking moral disengagement to supply chain practices 209

reduce its taxing by just over 15% units (also tax exemptions domestically improve the
situation) compared to official corporate tax of 39.5% in the USA (Kocieniewski, 2011).
Similarly, General Electric (2011) paid 28.5%, and Microsoft (2011), paid 17.5% in taxes
(Feierstein, 2012). Most recently, e.g., India has been completing harsh taxation checks
due to argued transfer pricing mal-practices in multinational units (could enable to
transfer profits in more favourable low tax location), which are located in the country.
Companies, such as Nokia and Shell have been suspected of this, and tax officials
demand billion dollar figures (Economic Times of India, 2013).
Research has started to explain how globalisation, visibility, and collaboration affect
ethical issues in the supply chain (e.g., Carter, 2000; Lim and Phillips, 2008; Svensson,
2009). However, this research, has not tried to explain why decent people will engage in
business, somewhere in the supply chain, where people might get hurt, abused, or risk
their health. To fill this gap, moral decoupling (MD) has been introduced (Eriksson et al.,
2013). If MD occurs in a certain place in a supply chain, it is called a moral decoupling
point (MDP). The concept of MD and MDPs has been suggested as an explanatory model
for how actors in the supply chain stop taking moral responsibility for unethical
behaviour. The concept of MD stems from a combination of moral disengagement
(Bandura et al., 1996) and supply chain configuration (Eriksson et al., 2013).
The purpose of this research is to identify if and how supply chain practices are
linked to moral disengagement techniques and thus might cause MD. The main research
question is: ‘What supply chain configurations may result in MD?’ In order to illustrate
the different conditions in which this may occur, a multiple case study is used. The cases
are theoretically sampled (Yin, 2009) for illustrative purposes. The theoretical base of
this research is mainly based on the works of Bandura et al. (1996, 2001) and Bandura
(1999), and a literature review of supply chain configuration (e.g., Cavinato, 2004;
Gibson et al., 2005; Harland, 1997). This research contains theoretical relevance, as it
explores a novel area, and practical as well as social relevance as it (in the future) may
help practitioners to construct supply chains that are likely to encourage the actors to
engage in ethical behaviour.
The remainder of this paper is structured as follows: to begin with, the research
approach is presented and discussed in Section 2. After that, a literature review on supply
chain practices and moral aspects of supply chain practices is presented in Section 3.
Thereafter, moral disengagement is linked with supply chain practices in Section 4. Next,
the case study is presented in Section 5. Finally, the research is analysed in Section 6 and
concluded in Section 7.

2 Research approach

This research aims to illustrate how supply chain configurations are linked to moral
disengagement techniques. In line with the focus to identify active supply chains with
various configurations, it was chosen to do the sample based on the individual samples’
unique characteristics, a method sometimes referred to as theoretical sampling (Yin,
2009). A list of potential and previously researched companies was compiled and their
individual supply chains were sketched. From these early sketches a few could be
dismissed straight away, and there was a need to find more supply chains to fully comply
with the research purpose. When the sketches were compiled, the case companies were
210 D. Eriksson et al.

approached, so that the sketches of the supply chains could be completed and corrected
for errors.
Despite that this research is mainly focused on SCM, it also draws a lot of knowledge
from the field of psychology. Using knowledge from other fields is not uncommon within
the field of logistics. Stock (1997) lists 13 research disciplines that have been used in
logistics research. Among these, psychology is found. Thus, this is not the first time that
psychology has been used in SCM related research. It was seen as a necessity to look
outside the field of SCM, in order to understand and explain the research phenomenon.
However, this research is still conducted within the field of SCM.
Three cases are used in the case study. For anonymity these are referred to as
Cottonco, Flowerco, and Furnitureco. The companies have not been chosen due to a
history of misconduct, but based on their explanatory properties. The goal with all data
collection was to construct models of the companies’ respective supply chains. Since the
focus is to present the basic structure of the supply chain, the data presented from each
company is kept short. Prior to selecting these three cases, several cases were
investigated for explanatory purposes. In the flower and cotton industries several
companies were contacted during data collection. In the flower industry, the findings
were confirmed by a second company but due to the uniqueness of the flower-trade, there
was no benefit in presenting findings from both companies. In the cotton industry, several
companies were investigated and revealed the same data. Cottonco was, however, the
company most willing to share sensitive information about their upstream supply chain.
The cases were continuously matched with theory, matching and rematching theory with
empirical findings and the used framework [see systematic combining (Dubois and
Gadde, 2002; Kovacs and Spens, 2005)]. The three cases presented contained supply
chain configurations that could be matched with the used theory, and was therefore used
in the article. As this research contains multiple cases, it gives ground to credible
discipline development as suggested by Flyvbjerg (2006).
Data from Cottonco was gathered from two telephone interviews, where notes were
taken. The interviews were then followed up by e-mail, confirming that the structure of
the supply chain was correctly understood. Data from Flowerco was gathered from one
telephone interview, which was then confirmed by e-mail. Moreover, a second competing
company was also interviewed. Due to the structure of the global flower trade, the second
flower company aided in triangulating data and confirming that the conclusions were
correct. Furnitureco has been part of a research collaboration that begun in 2008. Prior to
this study, their supply chain has already been thoroughly mapped using interviews, visits
to suppliers and collaborating partners, as well as taking part in their daily activities over
the course of approximately five years. In order to ensure that data was correctly
interpreted in this interview, one of the managers at the company was presented with a
model of the supply chain, to which slight modifications and comments were made.
Following the literature review, the research is conducted in a three-step process.
First, theory about SCM and moral disengagement is presented. Second, moral
disengagement is linked with supply chain practices. Third, the practices are compared
with the supply chains of the case companies, to identify if the linkages are likely to
occur in an empirical setting.
The use of familiar cases with data confirmation has helped to improve the quality of
the research. It has ensured that the data is correctly interpreted, is a good representation
of the studied cases, and that the data is of value for this research. The use of previously
established contacts also allowed the researchers to first familiarise with the cases to
Linking moral disengagement to supply chain practices 211

better develop them for this research. This technique allowed the investigators to gain a
more complete understanding of the studied objects (Scandura and Williams, 2000).

3 Literature review

The literature review is divided in two parts. The first part presents an overview of how
SCM has changed in recent decades, and what areas that are now included in the concept.
The second part focuses on the moral issues that have gained increased attention, and also
presents the literature used to analyse how the structure of the supply chain may result in
morally questionable behaviour.

3.1 Supply chain practices


SCM is the management direction responsible for the processes necessary to fulfil
consumer demand (Hilletofth, 2011; Lummus and Vokurka, 1999; Mentzer et al., 2001).
Processes encompassed within SCM are those dedicated to integration and coordination
of materials, information, and financial flows across a supply chain. The processes are to
be carried out in accordance with consumer requirements and with cost-efficient supply,
production, and distribution, ensuring that the right products are delivered to the right
place at the agreed time with the right quality (Gibson et al., 2005). The inbound flows
are of key interest in this research since much of the ethical miss-conduct takes place in
raw-material extraction and the early value-adding stages of a supply chain. Two
functions working with inbound flows are sourcing and purchasing (Harland, 1997).
Reliability in the upstream supply chain is affected by factors such as resource
depletion, raw-materials scarcity, political instability, competition, and accelerating
technological change. In some markets the availability is high and reliable, while some
markets are denoted by low availability and reliability. Depending on the situation, the
purchasing actor needs to device his strategy accordingly (Kraljic, 1983). It follows that
strategic important materials that are hard to acquire demands that the buyer forms
strategic alliances with suppliers, while materials with low importance and abundant
supply allows the buyer to push for low prices (Harrison and Van Hoek, 2005). It should
here be noted that the size of the actors sets limitations of the negation power of the
supply side. Retailing, for example, is being more and more dominated by large global
actors. In turn, this means that small and medium sized suppliers lose negotiating power.
In recent decades, there have been changes in the world market. These include
globalisation, increased competition, and maturing of markets. Underlying mechanisms
facilitating the changes include reduction in trade barriers, improved IT, and global
transportation infrastructure (Hilletofth et al., 2007). An inherent effect of these new
conditions on SCM is that actors in the supply chain move further apart (Cavinato, 2004).
However, the increase in distance is not only geographical, but also cultural, which
complicates collaboration (Lowson, 2001, 2003; Warburton and Stratton, 2002).
Concurrently with increasing complexity in supply chain, an increased need for
collaboration has risen. Companies nowadays need to understand consumer needs, not
only the technology of the product they are producing (Christopher et al., 2004). As such,
companies encounter differentiation areas that are related to supply chain issues, such as
delivery options, or installation support (Hilletofth, 2012; MacMillan and McGrath,
1997). The importance of adjusting supply chains and allowing the consumer to have
212 D. Eriksson et al.

influence over its structure is not new (e.g., Christopher, 1972; Leonard and Sasser, 1982;
Takuechi and Quelch, 1983). Thus, there have long been incentives, and maybe even a
necessity, for companies to integrate and collaborate with actors in the supply chain.
Given the nature of how a supply chain is managed, it ought to imply that companies
have great knowledge of the events that take place upstream in the supply chain. Still,
ethically questionable behaviour by large companies is common in the news. Might it be
the case, that long, complex, supply chains provide excuses, allowing companies to
engage in unethical behaviour?

3.2 Moral aspects of supply chain practices


With a societal focus on ethics, companies may not only gain a competitive advantage by
producing ethical products, it may also be seen as an obligation to provide consumers
with information about the conditions in the supply chain, to enable the consumers to
make informed choices (Beekman, 2008). However, purchasing departments might face
intense pressure to reduce costs, which can cause the employees to deviate from the
ethical guidelines (Carter, 2000; Razzaque and Whee, 2002). If activities are outsourced,
it might not be sufficient to rely on codes of conduct to ensure ethical standards upstream
in the supply chain. There is evidence suggesting that companies need to shift from
arms-length relationships to collaborative relationships, to ensure that ethical guidelines
are followed (Lim and Phillips, 2008).
Given the common knowledge about working conditions in upstream supply chain,
and that there is a need to not only focus on cost and transactions, it is hard to understand
how companies construct their ethical guidelines as if to facilitate room for unethical
behaviour. Certain industries, such as shoes and apparel, are more likely to encourage
unethical behaviour. The reasons being that the production is labour intensive and with
limited automation, cost-reduction pressure is being increased to produce in low-cost
countries, and complex supply chains (Park-Poaps and Rees, 2010). Thus, textile
companies should be extra weary. H&M, however, has chosen to not take responsibility
for raw-material extraction (Svensson, 2009), despite the fact that cotton harvesting made
the news being performed by school children financing a military regime (Eriksson et al.,
2013). Sony Ericsson has chosen a similar delimitation in their ethical guidelines, which
only takes responsibility for their suppliers (Svensson, 2009).
Even if direct labour costs do not hold that significant proportion from total costs (5
to 10% at best, e.g., in textiles or electronics), a rather unequal world salary system
creates temptation to utilise low cost countries in the labour-intensive phases. Labour
competitiveness is not only due to the brutto salaries paid to the workers, but to all
indirect costs incurred (social costs, pension costs and unemployment insurance costs,
etc.). In advanced economies (like Finland, Germany, Sweden and Switzerland) salaries
are then at an entirely different level as compared to lower East European and Asian
countries. Actually, wage difference to Philippines and Sri Lanka, as being compared to
Swedish total manufacturing wages, is more than 95% – even to Poland the difference is
80% (Bureau of Labour Statistics, 2012). As typically global corporations try to achieve
earnings levels of 5 to 10% in profit and loss statement (from revenues), quite frankly
large proportion out of this arise from low cost country wages. It is not a source of
sustainable competitive advantage, but could be useful to fulfil short-term profitability
targets.
Table 1

China-Germany trade pair


Year China (import) German (export) Diff. (%) Year China (export) Germany (import) Diff. (%)
2007 $45,384,335,446.00 $41,106,431,000.00 9.4% 2007 $48,744,144,230.00 $75,047,643,000.00 –54.0%
2008 $55,789,930,102.00 $50,173,850,000.00 10.1% 2008 $59,208,951,160.00 $86,711,078,000.00 –46.4%
2009 $55,764,084,071.00 $51,092,285,000.00 8.4% 2009 $49,919,564,279.00 $77,501,267,000.00 –55.3%
2010 $74,251,272,075.00 $71,067,793,770.00 4.3% 2010 $68,047,133,397.00 $101,377,132,937.00 –49.0%
2011 $92,726,219,513.00 $90,496,735,985.00 2.4% 2011 $76,399,999,430.00 $112,184,062,343.00 –46.8%
China-Sweden trade pair
Nation’s Comtrade service

Year China (import) Sweden (export) Diff. (%) Year China (export) Sweden (import) Diff. (%)
2007 $4,141,799,598.00 $3,291,192,166.00 20.5% 2007 $4,550,029,712.00 $5,296,175,458.00 –16.4%
2008 $5,038,148,391.00 $3,990,538,432.00 20.8% 2008 $5,116,283,777.00 $5,686,115,037.00 –11.1%
2009 $5,453,817,411.00 $4,114,584,653.00 24.6% 2009 $4,156,381,490.00 $4,558,648,777.00 –9.7%
2010 $5,907,904,520.00 $4,860,657,220.00 17.7% 2010 $5,708,835,421.00 $7,407,657,439.00 –29.8%
2011 $7,116,605,579.00 $6,061,758,408.00 14.8% 2011 $6,566,883,398.00 $6,842,224,071.00 –4.2%
Germany-Sweden trade pair
Year Germany (import) Sweden (export) Diff. (%) Year Germany (export) Sweden (export) Diff. (%)
Linking moral disengagement to supply chain practices

2007 $19,454,572,000.00 $17,666,346,299.00 9.2% 2007 $29,737,171,000.00 $27,986,155,929.00 5.9%


2008 $20,914,525,000.00 $19,083,565,483.00 8.8% 2008 $30,494,306,000.00 $29,875,826,497.00 2.0%
2009 $14,533,525,000.00 $13,357,551,850.00 8.1% 2009 $22,181,990.000.00 $21,472,299,555.00 3.2%
2010 $17,526,308,620.00 $15,246,295,431.00 13.0% 2010 $26,015,441,243.00 $26,758,232,370.00 –2.9%
2011 $19,709,846,825.00 $17,980,753,706.00 8.8% 2011 $30,626,907,153.00 $32,127,539,051.00 –4.9%
Source: Data, rest contribution of authors: United Nations (2013)
Import and export of trade pairs as reported by respective three countries in United
213
214 D. Eriksson et al.

Companies do not only have an agenda for shareholders or profitability to go abroad,


motivation could also be at individual level. During recent years several suspected
practices from Asian supplier bribing or attempting to bribe managers or decision makers
of west have been reported in newspapers (Jung et al., 2010; BBC, 2013). One of them
was an Apple employee bribed by Asian suppliers during years 2005–2010 (Jung et al.,
2010) and another one was a large contract manufacturer in hunt for new orders from
west (BBC, 2013). How is this possible? Table 1 illustrates this situation further from
macro economics point of view. To exemplify we have taken import and export figures
from three countries, namely China, Germany and Sweden. The idea was to check import
and export statistics of each country among the group of these three countries. Basically,
Chinese import from Germany should match German export to China. Or Chinese export
to Sweden should match Swedish imports from China.
As can be noted in Table 1, Chinese export reported among Chinese officials, is much
lower than what has been reported in Germany or Sweden as import. Especially in
China-German pair this difference is very significant. Basically, German tax officials
report import to be 50% higher in comparison to Chinese officials reported export. The
situation is somewhat better with regard to China-Sweden pair. It is understandable that
statistics from customs could not match entirely (e.g., due to transportation logistics time
delay and consumer market intensity for the end of the year), and a difference of 0 to
10% is understandable (like between Germany-Sweden pair). However, the shown
large-scale differences enable bribes and monetary transfers. We are not saying that they
especially exist between China and Germany or China and Sweden, but they are possible,
and individuals in power could make decisions from their own point of view (instead of
bringing benefits for the business or shareholders, or home country tax officials).
Trying to explain, why otherwise decent people engage in questionable behaviour
with regards to SCM, Eriksson et al. (2013) suggested that the structure of the supply
chain might be the cause. The terms MD and MDP were coined to explain the
phenomena. MD is defined as “a psychological process, used to separate moral from
transactions so that materials, information, and money may be transferred, while the
moral responsibility is diffused or separated from the transaction”, and an MDP is
defined as “a place where materials, information, and money may pass, but not the moral
responsibility” [Eriksson et al., (2013), p.13]. An MDP is the result of a physical point in
a supply chain that is likely to encourage moral disengagement. Moral disengagement is a
set of mechanisms that, when active, obfuscates morality, while engaging in ethically
questionable activities and behaviours (Aquino et al., 2007; Bandura et al., 1996, 2001;
Vollum and Buffington-Vollum, 2010). Eight forms of moral disengagement are
described by Bandura (1999):
1 Moral justification: When people, prior to acting, justify the behaviour to
themselves. In essence, negative behaviour is made acceptable by picturing it serving
socially or moral worthy purposes. An example is to participate in war, and justify
taking human lives by claiming it is part of fighting the ruthless oppressors. The
perpetrators act on moral imperative and view themselves as moral agents.
2 Euphemistic labelling: When personal responsibility is reduced through relabeling of
harmful behaviour. An example is to use the term ‘neutralise a target’, instead of
‘kill the enemy’, or ‘bomb the airport and those inside’. The result is that people
become crueller when the actions are verbally sanitised.
Linking moral disengagement to supply chain practices 215

3 Advantageous comparison: When harmful behaviour is made to appear good. An


example is to compare the effects of a war with the oppression of the current leaders
of the country. In contrast misconduct can seem righteous.
4 Displacement of responsibility: When perpetrators of cruelty consider themselves to
engage in their behaviour due to external circumstances. An example is perpetrators
who consider themselves to just follow orders. Thus, they are just performing what
others have told them to do, with no power to control the situation.
5 Diffusion of responsibility: When personal accountability is reduced by diffusing the
effects of the actions performed. An example is routinised, subdivided tasks that tend
to shift focus from the end result to operational details and efficiency. This also
occurs in group decisions, where everybody has responsibility, but the sense of
responsibility is reduced.
6 Disregard or distortion of consequences: When the harmful results of activities are
ignored, minimised, distorted, or disbelieved. An example is to disregard reports
from those who are victims of the actions. In war time the technique has also
manifested in putting distance between the perpetrator and the victim of the
activities.
7 Dehumanisation: When a person is stripped from his human qualities. An example is
to call the victims ‘dogs’ or refer to them negatively due to their ethnicity. Someone
that is dehumanised does not have feelings, hopes, and concerns, and is considered a
subhuman object.
8 Attribution of blame: When the actions are blamed on another part. An example is a
conflict that escalates reciprocally and each new step is blamed on the counterpart’s
previous step. It can also be caused when people feel themselves forced by an
authority to engage in a certain behaviour.

4 Linking moral disengagement with supply chain practices

MDPs are the combination of moral disengagement and the physical structure of a supply
chain, and MD is the process separating moral responsibility from the logistics flows.
Thus it is important to establish in what way a supply chain could cause MD before
presenting the case companies’ supply chains. The first step is to link each
disengagement technique with common supply chain practices. The linkages are
summarised in Table 2.
Moral justification can be linked to SCM when there are activities that have both
consequences and benefits. A common consequence linked to SCM is the emissions of
green-house gasses. The choice to ship products, despite the pollution, could be that the
transported goods are needed to sustain the health of the population in a region. For
example, transporting food or medicine using air, boat, and road transport will emit
pollution, but it will feed and treat people. Thus, the consequences are excused by a
greater good.
Several SCM activities and practices have been given euphemistic labels. ‘Low-cost
countries’ are use to denominate underdeveloped countries to which business areas are
outsourced. These countries might be in war, known for corrupt politics, and notorious
216 D. Eriksson et al.

for neglecting the wellbeing of workers. ‘Child labour’, even though not socially
acceptable, is a label that pales in comparison to what these labourers really are subject
to, such as lack of education and low salaries.
Table 2 Linking moral disengagement with supply chain practices

Moral disengagement Supply chain practice


Moral justification Engaging in activities due to a greater good
Euphemistic labelling Labels such as ‘low-cost country’ and ‘child-labour’
Advantageous Comparing working conditions with economical consequences for the
comparison workers if jobs are moved
Claiming to do business as competitors might have hidden agendas
Displacement of Suppliers are responsible for upstream events
responsibility Buyers are responsible for downstream events
Diffusion of Tasks are divided over the supply chain/within a company
responsibility Aggregation of materials reduces traceability
Auction-like setting where everyone takes part
Disregard or distortion Separation of extraction and production from purchasing and
of consequences consumption
Dehumanisation Portraying employees as ‘working class’
Using workers with mental abilities for dull and repetitive tasks
Producing where caste-systems are existent
Attribution of blame Hunt for lower cost to increase competitiveness
Managers push employees/suppliers to reduce costs

The use of suppliers in countries with poor working conditions is reminiscent of


advantageous comparison. Sometimes an alternative scenario including not doing
business with a specific country is constructed, often including effects such as
unemployment and slowed social progress. It could also be to excuse the selling of war
material to unstable regions claiming that another country would do it otherwise and that
they might have hidden agendas.
Displacement of responsibility is similar to the common supply chain practice of
signing over the responsibility for upstream supply chain activity to the supplier, but it
also applies downstream the supply chain. Responsibility for operational actions and
decisions may also be put on managers and strategy. For example, the suppliers are
contracted to ensure that their suppliers live up to certain codes of conduct, and an
ammunition producing company could stipulate that their products are only to be used in
peace-keeping actions.
Diffusion of responsibility applies in three ways to SCM. First, within a supply chain,
different tasks are often divided among different companies, and different departments
within a company. Second, supply chains which rely on aggregation of materials from
several producers by a, for example, wholesaler, reduces the possibility to trace the origin
of the materials. Third, materials and products which are sold in auctions presents a
situation similar to group decisions, being that several buyers at once, are taking part in
the purchase.
Linking moral disengagement to supply chain practices 217

Disregard or distortion of consequences might be more likely to occur in a global


trade. In global supply chains extraction and production are often separated with
purchasing and consumption by great distance. It is unlikely that a purchaser in an
industrialised country will have to face the day-to-day struggles of an under paid worker
in a sweatshop on the other side of the globe. Thus, the consequences are either
disregarded or distorted.
There are situations in which humans are stripped of their human value and
properties, i.e., dehumanised. Different families, for example, might be perceived to have
different status, such as ‘work class’. Workers with mental disabilities are used for
routine tasks that are considered dull and repetitious for ‘intelligent’ workers. The
caste-system is also likely to encourage this behaviour as the people in the lowest castes
are considered to have less value and have received that caste due to their own actions.
Attribution of blame can occur if miss-treated workers are blamed for the conditions
in which they work. For example, they could be blamed for not improving their lives or
that they are free to leave for another work.

5 Case study

In this section, the actual practices of the three case companies are presented. As
mentioned earlier, the cases have been selected based on their unique properties in
relation to this research, and for anonymity auxiliary information is kept minimal.

5.1 Cottonco
Cottonco is a Swedish-based company selling clothes using both stores and distance
retailing. The upstream cotton supply chain is allocated to low-cost countries with
suitable climate, including Bangladesh and India. The supply chain consists of farms,
gins, yarn makers, fabric producers, and garment makers. The garment makers are the
suppliers to Cottonco. Fibres from several farms can be mixed prior to the gin stage.
Hence, the farms and gins have an aggregating structure, which reduces the possibility to
trace the origin of the cotton. If the cotton is a part of a sustainable collaboration, such as
Better Cotton Initiative, it is possible to trace the cotton from the gins, but not to
individual farms. However, certified farms are used. External organisations, such as
Textile Exchange and Control Union, monitor factories working with ecological cotton,
in order to ensure that ecological cotton is separated from conventional cotton. For the
clothes produced with ecological cotton, Cottonco demands transaction certificates from
independent companies monitoring the inbound and outbound flows of cotton in the
upstream processes, making sure that conventional cotton is not being relabelled as
organic cotton. Conventional cotton, however, is harder to trace upstream the supply
chain. Given that the garment maker has vertical functions, it is possible to trace the
chain back to the yarn. In most cases, however, only the supplier of the fabric is known.
The conventional cotton supply chain is illustrated in Figure 1.
218 D. Eriksson et al.

Figure 1 Conventional cotton upstream supply chain structure

Several aspects of Cottonco’s supply chain are interesting to highlight. Upstream


activities are placed in low-cost countries that are also known for focus on societal
classes. Moreover, the upstream activities are hard to trace and subdivided among several
actors. The aggregation of materials prior to processing stages further complicates
traceability. Efforts made to increase the standards of the supply chain are reliant on
external parties monitoring supply chain partners. The supply chain has a global reach, so
great geographical and cultural distances are inherent. And, finally, the configuration of
the supply chain is part of a quest to reduce prices.

5.2 Flowerco
Flowerco is as Swedish-based wholesale and retailing company. Flowers are sold using
both stores and distance retailing, and are sold through own stores and by agents. The
upstream supply chain consists of farms, an auction, and export companies. Flowers are
supplied from all around the world. Flowerco is focusing on retailing flowers that are
grown according to fair-trade and ecological guidelines. The structure of the chain
facilitates traceability and farms may choose to take part in external certifications. Export
companies visit the auction and take part in a Dutch auction on batches of flowers. The
principle of the auction is that it starts with a price that quickly drops. The batch is sold to
the first bidder. Thus, the setup is used to facilitate short trading times and keeping the
product fresh. Expected demand is thus a big factor affecting the day-to-day price of
flowers. The setting of the auction is very high-tempo and stressful. From the auction,
flowers are distributed all across the globe. The flower supply chain is illustrated in
Figure 2.
The most defining trait of Flowerco’s supply chain is the auction. This is not unique
for the business, but specific to their business area. The Dutch-auction setting creates a
high-pressure situation, where several companies are engaged simultaneously. Even
though production is placed in low-cost countries, it is not primarily a choice by
Flowerco in pursuit of low prices, it is a result of climate and how global flower-trade is
conducted. Certifications are used to control that the flowers are farmed according to
specifications. The supply chain is dispersed on a global scale, with great distance
between the actors.
Linking moral disengagement to supply chain practices 219

Figure 2 Flower upstream supply chain

5.3 Furnitureco
Furnitureco is a Swedish-based furniture developer and wholesaler. Furniture is sold to
consumers via independent retailers. The upstream supply chain consists of
raw-material and manufacturers. The manufacturers are located in China. Production in
low-cost countries is considered as a key to economic feasibility. Due to the distance,
Furnitureco employs agents in China. Those agents have the responsibility to oversee
daily operations and are present at the manufacturing plants. Sourcing of raw-material is
done by the manufacturers, but Furnitureco is confident in their ability to trace the origin
of the material when needed. The furniture upstream supply chain is illustrated in
Figure 3.

Figure 3 Furniture upstream supply chain

Furnitureco has focused on production in a low-cost environment to reduce the purchase


price for products and parts. Manufacturing is monitored by external agents, who mainly
focus on quality and logistics issues. The agents are those who have the primary insight
to working conditions. Moreover, they are used to try and bridge the issues that are
connected with the global scale of the business, such as communication and conformance
to specifications.
220 D. Eriksson et al.

6 Analysis

The case study has identified and described several supply chain practices that have been
linked to moral disengagement techniques. There was, however, no evidence of practices
linked with moral justification, advantageous comparison, or attribution of blame.
Euphemistic labelling was evident at both Cottonco and Furnitureco, in that activities are
performed in low-cost countries. All companies have separation between extraction and
production, from purchasing and consumption, which has been linked to disregard or
distortion of consequences. Cottonco has production facilities in India, a country with a
history of segregation due to their caste system. Note that no misconduct has been
discovered in this specific case, but it is nevertheless a setting where dehumanisation has
an increased likelihood to occur. Practices linked with attribution of blame were evident
in both Cottonco and Furnitureco, since decisions were made due to lower costs, to
maximise competitiveness.
Displacement of responsibility was discovered in all case companies and also in
different shapes. Cottonco had no insight to upstream activities in their conventional
cotton supply chain and no traceability to the farms in any supply chain. Third,
competitive situations forcing purchasers to pursue low prices. Thus, the fabric
manufacturers are basically responsible for the upstream events in the conventional
cotton supply chain and due to the structure of farms and gins, the gins have a
responsibility in the ethical cotton supply chain. Flowerco relied heavily on certifications,
which in essence moves responsibility for the ethics to an external company hired to
monitor farming. Furnitureco, due to geography, relies on external agents situated close
to the manufacturing. Finally, evidence of pursuing practices due to cost was found,
which removes the responsibility from the purchaser to the manager and competitive
situation.
Due to the inherent nature of global supply chains with divided tasks, diffusion of
responsibility was evident at all case companies. Cottonco also exemplified how
traceability to individual farmers may be removed due to practices in the upstream supply
chain, thus removing insight to what raw-material is used, and also how much of it that
can be expected to be found in a specific product. The flower auction also displays
practices linked to diffusion of responsibility as several bidders at once, under a stressful
setting, take place in the same bidding for products.
To answer the research question, it must be clarified what kind of supply chain
configurations are likely to result in MD. No examples were found of configurations that
caused MD by moral justification. Euphemistic labelling was identified at both Cottonco
and Furnitureco, since production was located to low-cost countries. This could raise the
tolerance for poor working conditions, and thus be regarded as MD. No examples of
advantageous comparison were found or could be illustrated. Displacement of
responsibility was evident in three ways. First, when suppliers were responsible for
upstream actions. Second, when external parts (agents, certifications) monitored the
upstream supply chain. Thus, both evidence of MD and MDPs have been found.
Diffusion of responsibility was evident in three ways. First, accomplished by divided
tasks in the supply chain. If the tasks are considered as ‘production’, there could also be
an MDP reaching over several stages of the supply chain. Second, aggregation reduces
traceability and diffuses to what extent the raw-material of a product can be traced, and
thus to what extent the product has been produced in an unwanted way. In that sense,
points that aggregate and mix inbound flows can act as an MDP. Third, a highly stressful
Linking moral disengagement to supply chain practices 221

auction setting is similar to a group activity and may give rise to an MDP. Disregard or
distortion of consequences could arise in all companies due to the supply chains being
global. Thus, not the structure per se, rather the structures’ distance can induce MD and
create MDPs. Workers that are treated poorly and not considered equals to the
management or owners might be dehumanised. This is likely to occur in countries where
there are big differences in social classes, and the separation between classes is
contributed to the actions of the individual. In such a case, the moral of the actions are
given less consideration. Hence, a factory with those conditions result in both MD and an
MDP. The identified practices causing MD and MDPs are summarised in Table 3.
Table 3 Summary of MD and MDPs

Moral
Supply chain practice MD MDP
disengagement
Euphemistic Labels such as Cottonco and Furnitureco No specific point
labelling ‘low-cost country’ produced in ‘low-cost’
and ‘child-labour’ countries
Displacement of Suppliers are responsible Cottonco had suppliers that Moral responsibility
responsibility for upstream events were responsible for their is decoupled at an
Buyers are responsible own supply. Flowerco and upstream actor
for downstream events Furnitureco had external
companies responsible for
upstream events
Hunt for lower cost to Cottonco and Furnitureco No specific point
increase competitiveness strived to reduce prices
Managers push
employees/suppliers to
reduce costs
Diffusion of Tasks are divided over Tasks were divided among If viewed together,
responsibility the supply chain/within a several companies in the ‘production’ can be
company supply chain considered an MDP
Aggregation of materials Aggregated materials Points of aggregation
reduces traceability reduced traceability can result in MDPs
Auction-like setting Auction creates a setting An auction where
where everyone takes that might create excuses several people are
part stressed and acting in
competition as a
group can result in an
MDP
Disregard or Separation of extraction All companies had long, A long transport link
distortion of and production from and global supply chains can act as an MDP
consequences purchasing and
consumption
Dehumanisation Portraying employees as Production was located in A factory where
‘working class’ India, known for its caste managers do not see
Using workers with system workers as their
mental abilities for dull equals can act as an
and repetitive tasks MDP

Producing where
caste-systems are
existing
222 D. Eriksson et al.

It is evidently possible to make connections between supply chain practices and MD.
MDPs seem to be a suitable way to explain MD in relation to activities in, or the structure
of, a supply chain. It could also be an easier way for both academics and practitioners to
understand the concept, given that SCM has a focus on nodes and links.

7 Concluding remarks

This research aimed to identify if and how supply chain practices are linked to moral
disengagement techniques and thus might cause MD. The research has used some
knowledge from psychology, which in combination with SCM theories has allowed to
explain the studied phenomenon. By linking moral disengagement techniques with
supply chain practices, the two research directions could be joined. Then, the case study
observed the existence of the practices and in what supply chain configurations those
practices might appear. Identified configurations that might cause MD are production in
low-cost countries, suppliers and external parts responsible for upstream activities,
division of tasks, aggregation of materials, auction-like settings, long supply chains,
production where people are not considered as equals, and configurations made to reduce
costs.

7.1 Theoretical contributions


This research has contributed to theory, as it has illustrated how common supply chain
configurations can result in practices reducing the sense of moral responsibility by the
practitioners in the supply chain. The research present a combination of two areas in a
novel way, embarking on a path to understanding and explaining the relation between
supply chain configuration and moral issues in a both deterministic and voluntaristic way.
This, in turn, opens the door for a new way of understanding moral issues in global SCM
using existing models developed by Bandura (1999), and Bandura et al. (1996, 2001).
These aspects are also important if the quality requested is dependent on the moral
aspects of the product. Especially since conventional SCM does not focus on ethical
issues. Aspects that might be even more pressing in manufacturing environments, similar
to those described by Park-Poaps and Rees (2010), are signified by low automation and
as labour intensive.

7.2 Practical contributions


This research contains practical contributions, as it can be used to guide companies on
how to construct a supply chain likely to live up to the ethical expectations put on it. The
research can be seen as a guide to potential pit-falls, where moral standards are likely to
be reduced. If a supply chain is guided by these findings it will also have social
implications. Responsibility for upstream activities can no longer be transferred to
external or upstream parts in the supply chain. A conclusion that is similar to the
transparency idea put forth by Svensson (2009), but here also explained from a
psychological standpoint. The company seeking to improve the moral actions in its
supply chain must be committed to the activities taking place. Commitment, however, is
hard to obtain with the global distances present in many supply chains. Thus, companies
Linking moral disengagement to supply chain practices 223

have basically two choices: to move production closer to the consumption, or to be


present where the production takes place.

7.3 Limitations and further research


The main weakness of this research is the depth of the research. Given that the field is
novel, it was decided to do first a broad overview of the field. This has, however, helped
to introduce research to this area and to provide a platform for future research. Keeping
this in mind, the findings need to be subject to further investigations. Mainly, there is a
need to investigate each configuration likely to cause MD and give rise to MDPs
in-depth. One big issue with continued research, which also was a part of the decision
resulting in this research taking the broader perspective, is that companies are reluctant to
admit to un-ethical practices and practitioners are aware of what answers are considered
correct. Companies with an outspoken ethical agenda are especially interesting to
investigate in future research. If they have succeeded to improve their ethical
performance it should, according to this research, be possible to find key choices made in
SCM that eliminate practices and configurations that are likely to lead to MD and MDPs.
Finally, it should once again be clearly stressed that none of the companies included in
this research has been subject to critique due to misconduct in their supply chains. They
were only chosen to exemplify practices and configurations.

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