Sustainable social supply chain practices and firm social performance: Framework and empirical evidence

Abstract

Concerns about social sustainability issues such as child labour, inequality, excessive overtime, and abusive working and living conditions in developing countries' manufacturing sectors have prompted an urgent study on sustainable social supply chain practices. The social pillar of sustainability has then been unnoticed, favouring the more regularly discussed environmental and economic dimensions. This study aims to expand the social sustainability framework to investigate the impact of sustainable social supply chain practices on firm social performance. The electronic survey was conducted on firms that adopted sustainable social practices. The 144 data sets were received from manufacturing firms. The data were analysed using structural equation modelling with PLS-SEM to examine domains and outcomes of sustainable supply chain practices. The result found that social supply chain practices impact the firm's social performance. However, the results indicate that the social element of sustainable procurement does not affect the firm social performance. The results show social fairness challenged manufacturing firms to comply with sustainable production and distribution. Most manufacturing firms are still not aware of their role and social responsibility to develop the local suppliers and community. Sustainability framework has proposed to raise awareness of sustainable practices that drive firms to implement sustainable social supply chain practices and leverage social performance. By being socially responsible, firms can gain improved brand awareness, a favourable corporate reputation, increased sales, observed firm growth and enhanced customer loyalty.

Introduction

Sustainable supply chain management (SSCM) has gained popularity in recent years, attracting the attention of both academics and industry. As concerns about social consequences and environmental protection have grown, SSCM adoption has become a topic of interest in the manufacturing sector (Moktadir et al., 2018; Dai et al., 2021). However, among the three aspects of sustainability, the social pillar of sustainability has been overshadowed by the more frequently discussed environmental and economic dimensions. Understanding how firms affect people and society is critical to social sustainability. According to Fernando et al. (2022a), awareness of the green economy influences people's behaviour and well-being in society. Firms that prioritise social sustainability recognise the importance of interactions with people, communities, and society. As a result, social sustainability principles are increasingly being incorporated into firms' operations and supply chain management plans, making it an essential component (Mani et al., 2018; Tseng et al., 2021; Yavari and Ajalli, 2021). Social-oriented supply chain practice leads to sustainable development initiatives that concern socially inclusive, resource efficiency and productivity. Sustainable social supply chain management (S3CM) treats people well and improves their quality of life while generating incomes without compromising environmental degradation.

According to Affolderbach (2022), the initiative on the green economy has established during a post-financial crisis. The industry should address the environmental, economic and social problems while generating incomes. The green economy is achieved when all stakeholders perceive benefits from sustainability outcomes. More jobs are created based on renewable energy, clean technology and material efficiency. The upstream and downstream flow in the supply chain to support the sustainable development initiative can create new green-related job opportunities and better financial contribution to the country's GDP. The global supply chain involves many people from various countries and has a large aggregate to contribute toward a green economy.

To move toward a green economy, it is necessary to focus on solutions to social problems. Liu et al. (2019) argued that labour conflicts, safety, and other social issues have become more prevalent. However, these issues have not been thoroughly investigated in the literature. Firms are drawn to implement sustainable practices and policies for various reasons, including stakeholder satisfaction, enhanced reputation, and increased competitive advantages (Baah et al., 2021). For instance, Fernando et al. (2021) argued that firms must have a distinct value proposition to compete globally. Focusing on the social domain of sustainability can help a company stand out from the crowd. Firms that emphasise the social domain of sustainability prioritises society and customers over the company's interests. The company's strategy must be based on consumer needs and community development's interests. This strategy makes the firm distinct and difficult for competitors to replicate, as many only see customers and society as sources of profit.

In the past, conventional supply chain strategy did not prioritise sustainability elements in practice, such as sustainable development, whether from an economic, social, or environmental standpoint. Firms must now comply with sustainability requirements due to increased stakeholder pressure. According to Govindan et al. (2020), firms have been prompted to consider the social consequences of their actions, among other pillars. As a result, integrating sustainable social practices into a company's operations is critical. Satyro et al. (2022) argued that in a rush for efficiency, performance, and competitiveness, the human element was overlooked, with sustainability relegated to a secondary role. As a result, the social dimension has been undervalued and understudied. In developing countries, the manufacturing industry frequently encounters social issues. Consider the recent Top Glove incident, which involved forced labour abuses. It has demonstrated that human rights, safety, and welfare issues are always present (Ding et al., 2018). As a result, it is necessary to investigate business practices' impact on employee safety and welfare. Each supply chain member has a critical role in achieving the long-term goal of improving social responsibilities within the firms and toward the community across firms' supply chains, whether direct (employees, vendors, and customers) or indirect (government and non-governmental organisations). The supply chain members that practice socially responsible initiatives contribute directly to community development. Opposite to this, the government plays an indirect role in monitoring social responsibility practices with enforcement. The successful implementation of social responsibility can assist the firm in achieving the long term goals. For example, the employees' morale and productivity are improved when the company takes care of them as they care for customers. In the same vein, sustainability with a socially responsible focus built a strong corporate image, customer satisfaction, and retention.

To improve long-term competitive advantages, firms have shifted their focus from the environment and social and ethical sustainability (Rajesh et al., 2021). During the COVID-19 crisis, the semi-conductor industry failed to anticipate the rapid demand for chip-based devices required for socially distant communication (Hervani et al., 2022). It implies that firms are unprepared for the unprecedented crisis, necessitating an investigation into firms' social performance to ensure that their operations do not hurt individuals or the community. Furthermore, despite the importance of supply chain sustainability and resilience, firms require more comprehensive and effective performance evaluation methods (Negri et al., 2021; D'Amico et al., 2021), highlighting the need to assess a firm's social performance. Furthermore, customers are putting pressure on businesses to develop more environmentally friendly and socially responsible products (Raoufi et al., 2017). This necessitates the development of sustainable products and does not harm customers. Aside from that, today's consumers care more about how products are made, distributed, and the materials utilised and procured in ethical and safe ways. For example, suppose end-customers oppose the use of child labour. In that case, firms risk losing customers if their products are not produced ethically and following sustainable methods, whether at the manufacturer level or through supply chain partners such as suppliers.

This argument aligns with Fernando et al. (2019), where manufacturers create long-term partnerships with suppliers. However, because supply chain relationships change, relationship engagement in sharing best practices and jointly reviewing innovative approaches for new product development are required to achieve sustainability goals. In addition, supplier mishap influences manufacturers (Mani et al., 2016, Mani et al., 2016); a well-known example is Apple's supplier Foxconn, which has seriously impacted Apple's brand image (Zimmer et al., 2017).

Globally, societal issues continue to be a struggle. Labour issues, gender equality, health, and human rights, to name a few, are among the issues that the United Nations (UN) is constantly addressing (United Nations, 2021). According to Zhao (2021), with the economy's rapid growth and increased competition, an increasing number of business leaders and academics recognise the importance of having a good and healthy human resource attitude. Despite this interest, work-health research has largely been decontextualized. As a result, traditional occupational health literature lacks a thorough understanding of how labour contributes to health disparities (Fujishiro et al., 2021).

The social aspect is an important factor in regulating supply chain processes and influencing labourers' health and safety in community improvement (Klassen and Vereecke, 2012). According to Hadi et al. (2021), the International Labour Organization (ILO) study 2020 highlights the challenge surrounding occupational safety and health (OSH) issues, estimating that approximately 2.78 million employees die each year (7500 workers per day) due to work-related accidents and illnesses worldwide. As a result, the greatest challenge is a lack of OHS disclosure (OHSD) in the industrial sector, which necessitates evidence to investigate the quantity and quality of OHSD in low and middle-income countries (Fan et al., 2020). Firms need to be responsible and follow safety standards to ensure zero issues with occupational accidents. The current practice on employees' health and welfare is urgently needed for the investigation.

Furthermore, gender equality has emerged as a critical issue, particularly during the COVID-19 pandemic, where women are disproportionately affected by the unemployment problem (Reichelt et al., 2021). Aside from that, labour issues have always been a major topic, with concerns about child labour, long working hours, and the use of hazardous products, to mention a few. It is in line with Shanmugasundar et al. (2021) findings that the importance of employees' safety, working environment, and security in all aspects of corporate activity has been an imperative discussion in the industry. However, ensuring well-being and safety is not only the responsibility of employers. A combined effort and commitment to health and safety programmes by both the employer and the employees necessitates effective occupational health and safety practices. With the pandemic affecting businesses worldwide, safety has become vital in ensuring a smooth transition to business operations while prioritising safety for employees and consumers. However, there is a limitation in the number of studies in this field.

Furthermore, ethical business conduct is worth investigating. Procuring materials ethically, for example, is critical, as is the process of acquiring goods and services that take into account the social impact of such purchases on communities while still providing value. Product-harm incidents may negatively impact a firm's image, reputation, and trustworthiness (Pangarkar et al., 2022). For instance, usage of harmful materials, chemicals exposure to employees and disposal of waste are closely related to the safety and health of employees (Kamali et al., 2018; Awasthy and Hazra, 2019). According to Sutherland (2016), firms are becoming more engaged in social concerns by paying more attention to issues like corporate social responsibility (CSR), brand reputation, transparency, and the social dimension of sustainability. However, according to Chen et al. (2020), the paths through which corporate philanthropy influences business performance are unknown; thus, it is worth exploring whether corporate philanthropy is a self-serving or charitable deed. It is also notable that there is a fine line between encouraging healthy philanthropy inside businesses and seeking tax incentives. Firms actively involved in philanthropy typically benefit from the tax deduction and exemption. Each country has a different policy on philanthropy activities and social welfare. The objectives of this study are twofold:

• To conceptualize the social impact of sustainable supply chain practices.

• To examine whether sustainable social supply chain practices impact firm social performance in the manufacturing industry.

This study extends the literature on the development framework and sustainable social supply chain measurements with several justifications. (1) This study conceptualises the social domains of sustainability and its measurements to understand the complex assessment of the sustainable social supply chain practices. The previous studies overlooked the social pillar of sustainability and frequently discussed environmental and economic performance as outcomes of sustainable supply chain practices; (2) This study develops the social sustainability framework to investigate the relational outcome of sustainable social supply chain practices on firm social performance. This study argues that the social sustainability framework needs to integrate into firms' operations and supply chain management strategies. The framework improves corporate social responsibilities to benefit the community development; and (3) Concerns with social sustainability issues on human trafficking, child labour, inequality, excessive overtime, using hazardous materials, abusive working and living conditions in developing countries, this study argues that the outcome has triggered the urgent study on the sustainable social supply chain practices. The framework of firm social performance has contributed to United Nations (UN) Sustainable Development Goals (SDGs) initiative to improve good health and well-being, reduce inequality and promote responsible consumption and production.

The framework is utilised to improve the industry's awareness of social issues. The results have provided information on developing a sustainability strategy and generating positive outcomes if firms are socially responsible. By being socially responsible, firms can gain improved brand awareness, a favourable corporate reputation, increased sales, observed firm growth and enhanced customer loyalty. Yıldızbaşı et al. (2021) argued that the social aspect had been neglected in the past. It has gained little attention compared to economics and environmental domains. This study argues that establishing a sustainable social supply chain framework is urgent to avoid abuse of human rights in the workplace. It is the firms' responsibility to provide better societal benefits. Firms with best practices on the sustainable social supply chain benefit from an excellent corporate image and avoid unnecessary costs and productivity.

This study is organised into six sections. The second section develops the conceptual model, while the third section details the methodology and data collection. Section 4 presents the analytic results, followed by a discussion of the findings in Section 5. Section 6 concludes with a conclusion and implications section.