Consumers care and firms should too: On the benefits of disclosing supplier monitoring activities

Stakeholders increasingly put pressure on firms to ensure their suppliers' adherence to corporate social responsibility principles and standards. A firm's supplier monitoring activities (SMA) are, thus, central to achieving supply chain transparency. In an effort to help build a business case for SMA, this research explores the effect of SMA disclosures on consumers' attitude toward the firm and purchase intention. In so doing, we also examine how consumer attitude and purchase intention vary as a function of SMA disclosure characteristics. The results of three behavioral studies reveal more positive consumer attitude and higher purchase intention when a firm discloses that its supplier monitoring extends to lower-tier suppliers (SMA depth) and the firm monitors its lower-tier suppliers directly rather than relying on its first-tier suppliers or third parties to do so (lower-tier supplier monitoring mechanism). Greater SMA breadth—monitoring both suppliers' social and environmental activities—in turn, is not associated with more positive consumer attitude and higher purchase intention. Further, attitude toward the firm mediates the relationship between SMA disclosure characteristics and purchase intention. Collectively, these findings underline that consumers value firms' SMA and point toward an economic rationale for a firm's transparency regarding its supplier monitoring efforts.