Governance of sustainable supply chains in the fast fashion industry

European Management Journal 32 (2014) 823–836

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European Management Journal journal homepage: www.elsevier.com/locate/emj

Governance of sustainable supply chains in the fast fashion industry Yongjian Li a,⇑, Xiukun Zhao a, Dan Shi a, Xiang Li b a b

China Academy of Corporate Governance, Business School, Nankai University, Tianjin 300071, PR China College of Economic and Social Development, Nankai University, Tianjin 300071, PR China

a r t i c l e

i n f o

Article history: Received 30 August 2013 Accepted 1 March 2014 Available online 14 April 2014 Handling Editor: Tsan-Ming Choi Keywords: Fast fashion Sustainability Corporate social responsibility Supply chain governance

a b s t r a c t This paper examines the impact of corporate social responsibility behavior on the sustainability performance of focal companies and their partners in fast fashion supply chains. The attributes of sustainability and the mechanism of sustainability governance of the fast fashion supply chain are also discussed. From the perspective of strategic corporate social responsibility, we first analyze the motives for adopting sustainability governance in fast fashion supply chains, and identify seven competitive sustainable attributes of the fast fashion product based on sustainable development theory. Then, by establishing a sustainability governance framework, we identify seven factors that affect the sustainability governance decisionmaking and evaluate the efficiency and legitimacy mechanism of sustainability governance from internal and external perspectives. Finally, we explore the application of the governance mechanisms via a case study based on H&M’s seven sustainability commitments. The findings suggest that the core influence and centrality of a corporation should be strengthened from the perspective of internal governance, and stakeholders should collaborate to achieve sustainability governance throughout the entire fast fashion supply chain from the perspective of external governance. Ó 2014 Elsevier Ltd. All rights reserved.

Introduction According to a survey conducted by Price Waterhouse Coopers in (2013), 45% of highly efficient supply chains not only apply new technologies but also emphasize sustainable improvement strategies. With the current trend of economic globalization, environmental sustainability, and social responsibility, fast fashion industries are more aware of the importance of sustainable development in the economy, environment, and society. For example, famous international companies, such as ZARA, H&M, GAP, and UNIQLO, are using green marketing to affect consumers’ selections to lead suppliers into strategic alliances. Meanwhile, Livex, Cocoon, and Semir etc., the emerging fashion brands in China, employ the returns policy in their supply chains. The policy indicates that the retailers can return any leftover by the end of the season, and then the brands sell them directly online through some companies (Li, Choi, & Cheng, 2013). By doing so, these companies alleviate conflicts of interest among participants and reduce pollution and over-consumption of energy (Koplin, 2005). Taking social responsibility and improving sustainable consciousness has become an effective measure in sustainable development strategies for supply chains. ⇑ Corresponding author. Tel.: +86 22 23505341/13389061528; fax: +86 22 23501039. E-mail addresses: [email protected], [email protected] (Y. Li). http://dx.doi.org/10.1016/j.emj.2014.03.001 0263-2373/Ó 2014 Elsevier Ltd. All rights reserved.

Studies show that it is crucial for companies to regard sustainable initiatives as strategic behavior, especially when those companies operate in market-sensitive industries (Smith, 2003). As an industrial practice and trend in fashion retailing, fast fashion offers a continuous stream of new merchandise to the market. The fashion reflects the latest trend, and helps capture the hottest design that the market most prefers (Choi, 2014; Choi and Hui, 2014). So, the fashion industry experiences more pressure on the sustainability issues exerted by media and consumers due to its higher public profile (Caniato, 2012). In the fast fashion industry, many companies are adopting sustainable strategies on supply chain redesign to achieve coordination among stakeholders and to balance among economic, environmental, and social performance (Clarke & Clegg, 2000). With the business model innovation of supply chain, such as ‘‘quick response (Choi, 2013; Gérard & Cachon, 2011)’’, ‘‘fashionable clothes mostly for consumers under 40’’, ‘‘affordable prices’’ and ‘‘frequent assortment changes’’ (Caro & Martínezde-Albéniz, 2014), the companies in the fast fashion industry achieve strategic shift from meeting consumer’s demands to leading consumers’ behaviors (Gérard & Cachon, 2011). The new business model improves the economic performance through reducing the uncertainty and risk of consumers’ strategic choices, but environmental and social problems also widely exist in the fast fashion industry. For example, some suppliers of famous fast fashion brands ignore environmental protection policies, and some OEMs treat their employees unfairly. These problems show the

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separation between the pursuit of maximizing the economic benefits and the social responsibility. As the external forces, these potential exists disrupt the fast fashion setting as it currently exists (Divita & Yoo, 2013, Chapter 3). The decision-makers realize that, beyond maximizing profits, the fast fashion strategy should also seek minimizing emissions throughout its supply chain (Nagurney et al., 2013). Therefore, a re-examination of performance based on sustainable development has gained increasing attention in the field of fast fashion supply chains. Motivated by above facts, we seek to find answers to a set of questions that have not been addressed in the previous academic research. For example, how many competitive sustainable attributes of the fast fashion product can be identified based on the sustainable development theory? Which are the motivations for adopting sustainability governance in the fast fashion supply chain? Which are the factors of affecting the sustainability governance decision-making? What are the mechanisms of sustainability governance of the fast fashion supply chain? In practice, how do the sustainability governance mechanisms work in the fast fashion supply chain? In order to answer these questions, we point out seven competitive sustainable attributes (i.e., time, cost, quality, service, environment, resource, and people) related to the fast fashion product. And we find the interaction of the two motivations, internal inducements and external needs, leads to the behavior of sustainable supply chain governance (SSCG). Meanwhile, we extend the types of governance structures to study the transformation process of the sustainability governance structure as an aid to identify the factors determining the collaborative behavior of supply chain members. Meanwhile, we analyze four SSCG models, including transactional SSCG, dictatorial SSCG, acquiescent SSCG, and participative SSCG (Vurro, Russo, & Perrini, 2009), and show how the supply chain network density and centrality of the focal company influence the choice and changes of governance models. Then seven factors are identified, i.e., the characteristics of consumer demand, the regulatory capacity of governments, the capacity of disclosure by NGOs, the density of a supply chain, the complexity of transactions, the centrality of the focal company, and the capabilities of suppliers. Furthermore, two governance mechanisms are generated, that is, an efficiency mechanism and a legitimacy mechanism. Besides, we illustrate the application of the sustainability governance mechanisms by providing sustainability governance practices adopted by H&M Company which finished the seven sustainability commitments in 2012. The findings suggest that the core influence and centrality of a corporation should be strengthened from the perspective of internal governance, and stakeholders should collaborate to achieve the sustainability governance throughout the entire fast fashion supply chain from the perspective of external governance. The paper is organized as follows. In the next section, we provide the theoretical foundation of this study. In a ‘Sustainability governance framework’ is established for a fast fashion supply chain in which the influencing factors and decision mechanisms of supply chain governance (SCG) are analyzed. In ‘Case study’, we provide a case study to discuss the applicability of the governance mechanisms. Finally, we conclude our findings and discuss further research in ‘Conclusion’.

Theoretical construction Three important theories related to our paper are introduced in this section: sustainability theory, corporate social responsibility (CSR), and SCG. Sustainability theory is a measurement of performance of the entire fast fashion supply chain, focusing on the

benefit maximization based on the balance among economy, environment, and society. The CSR theory is a benchmark of behavior for participants in the fast fashion supply chain, and emphasizes strategic capability building. However, any one of the both theories is inadequate to explain sustainable supply chain management (SSCM) at a strategic level. Hence, new streams of research have arisen, such as SCG theory. The purpose of this section is to build the theoretical basis to determine the sustainable attributes of a fast fashion supply chain, and to examine the impact of CSR behavior on the sustainability performance of the focal company of the supply chain. Sustainability theory Sustainability means that development (of products) meets the needs of the current generation without compromising the ability of future generations to meet their needs. To be more explicit, the ‘‘Triple Bottom Line’’ (TBL) of sustainability is frequently used. TBL theory includes three components: economic, environmental, and social performances (Elkington, 2004), focusing on the balance of all three. TBL also indicates that social capital (such as employee treatment and fair trade) and environmental capital (such as conserving natural resources and preserving ecological environments) are important to the traditional financial capital theory. This requires corporations to change their performance objectives from the single maximization of economic profit to the overall maximization of the three profit areas defined by TBL (Seuring & Muller, 2008). Existing studies have indicated inherent connections among economic performance, environmental performance, and social performance with a positive correlation (Cruz, 2009; Margolis & Walsh, 2003). On the one hand, the cost of activities by corporations who participate in environmental protection and fulfill social responsibility can be compensated by an increase in long-term benefits (Brammer & Millington, 2008). On the other hand, higher economic benefits empower corporations to take greater social responsibility. They can spend more money on pollution treatment, provide more benefits for society, and improve the welfare of their employees. Therefore, the SSCM is a strategic weapon available to the supply chain partners to improve their core competitiveness (Cao & zhang, 2011; Wu & Pagell, 2011). According to the arguments regarding sustainability and TBL, SSCM is defined as the management of material, information and capital flow, as well as cooperation among companies while integrating goals from all three dimensions of sustainable development, i.e., economic, environmental, and social (Seuring & Muller, 2007). In this special supply chain, excluding the economic criterion, the environmental and social criteria also need to be fulfilled by the members to remain within the supply chain. Competitiveness will be maintained by meeting customer needs and related economic criteria (Seuring, 2013). The core of SSCM is the comprehensive consideration of economic, environmental, and social performance; deeper cooperation among supply chain partners leads to achievement of long-term strategic goals and non-imitative attributes. As a virtual organization, a sustainable supply chain can be formed by crucial stakeholders, i.e., suppliers, manufacturers, the focal fast fashion company, governments, customers, and nongovernmental organizations (NGOs), as depicted in Fig. 1. In this virtual organization, the actors have a common strategic goal to integrate economic, environmental, and social equilibrium development. Through this common goal and by the collaboration of internal and external stakeholders, the virtual organization can ensure internal coordination and external balance of the entire supply chain. Similarly, the stakeholders of a fast fashion supply chain not only include internal members of the supply chain, but

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Government

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also external ones, e.g., related NGOs and governments. In summary, we can depict a fast fashion supply chain as shown in Fig. 1. We can also identify the sustainable attributes of a fast fashion supply chain by understanding the features of sustainable products during the product life cycle. Based on the conventional core competitiveness system of products ‘‘TCQS’’, i.e., time (T), cost (C), quality (Q) and service (S), and considering the environmental (E) impact, resources (R) consumption, and social impact on people (P), we constitute seven competitive sustainable attributes applicable to fast fashion products -TCQSERP, as depicted in Fig. 2. Effective coordination of the seven attributes is important for the sustainability governance of a fast fashion supply chain. Corporate social responsibility CSR mean that companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (Dahlsrud, 2008). The CSR construct is built on five dimensions: environmental, social, economic, stakeholder, and voluntariness (European Commission, 2001; Dahlsrud, 2008). CSR is consistent with reasonable social expectations, which not only increases the corporation’s benefits, but also improves its competitiveness and reputation. Inasmuch as the exposure of unfair practices by OEMs and polluting behavior of suppliers, famous fast fashion brands (Zara, H&M, Gap, etc.) have begun to recognize that the CSR performance of their partners, e.g., suppliers and manufacturers, directly affects their reputation and benefits. Therefore, CSR is increasingly becoming an indispensable element of globalization brand strategy through SCG in the fast fashion industry. The existing research on the CSR mainly focuses on the topic of corporate finance performance (CFP), and finds three kinds of relationships between CSR and CFP, i.e., positive relationship, negative relationship, and mixed relationship (Brammer & Millington,

Time

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Fig. 2. Sustainable attributes of fast fashion product.

2008). A positive relationship shows that a larger proportion of social responsibility actions can contribute to improving the financial performance, since the consumers who pay close attention to social responsibility are willing to choose products with sustainable attributes at higher prices. A negative relationship shows that in rare cases, a company is not able to obtain benefits from CSR actions. A mixed relationship shows that better social behavior can promote financial performance but decreases the marginal revenue of social performance. Through providing honest information to the public, a company can change the perception of its social responsibility held by stakeholders and consumers. Furthermore, in comparison to conventional customer focused orientations, multi-stakeholder orientations can significantly improve financial performance (Murphy et al., 2005; Weber, 2008). Eventually, the company establishes a strategic long-term competitive advantage by fostering a healthy and open company image (Hooghiemstra, 2000). Thus, to obtain the maximum benefit, a company should choose an optimal level of investment in CSR (McWilliams, Siegel, & Wright, 2006). In empirical studies, CSR can be mainly classified as strategic CSR, altruistic CSR, or coerced CSR (Husted & Salazar, 2006). Additionally, strategic CSR promotes the growth of corporate performance that may be weakened by altruistic CSR (Hillman & Keim, 2001). In particular, from the strategic CSR perspective, a company should focus on the goals of achieving the economic benefit and social benefit simultaneously by the means of: (1) obtaining long-term benefits through participation in social projects that coordinate the relationship of CSR and the corporate strategy, and (2) attracting customers who pay more attention to the sustainable attributes of a product (McWilliams et al., 2006). Therefore, strategic CSR represents an effective tactic to coordinate and facilitate the sustainability governance of the fast fashion supply chain. Some new studies on the supply chain management find that granting purchasing social responsibility to a supplier has not only a direct and positive impact on the supplier’s performance, but also an indirect, mediated effect through the improvement in trust and cooperation (Carter & Jennings, 2002). It is shown that closer relationships can lead to lower the overall cost of the supply chain, lower risks, lower prices, higher product transactions, and higher profits (Cruz, 2008, 2009; Cruz & Liu, 2011). In addition, many studies develop the taxonomy of logistics social responsibility practices to deal with socially responsible management of the supply chain under a cross-functional perspective. Meanwhile, some studies explore the influence of CSR and the behavior constraints of a purchaser in the supply chain (Carter & Jennings, 2002; De Vlieger, 2006), and the results show that firms with strategic CSR profiles are more likely to innovate in both products and processes (Bocquet et al., 2013).

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As discussed, from the special perspective of CSR, we find that there are distinctive characteristics of the supply chain system as follows: (i) the focal company controls internal and external codes of CSR followed by the other supply chain partners; (ii) each partner shares the benefits derived from the implementation of CSR throughout the entire supply chain process; (iii) the level of CSR of the focus corporation can affect their own and other’s performance; (iv) there are asymmetric economic benefits and social responsibilities among partners in the supply chain; (v) the changing CSR risk is directly influenced by international industry structures; and (vi) CSR is embedded in a supply chain with the characteristics of inheritance, transitivity, and traceability. By undertaking the social responsibility, companies not only show their own culture and values, but also build a reputation that creates a favorable external environment for sustainable development. Meanwhile, the behavior of the focal company promotes sustainable improvements in other supply chain partners that are helpful to achieve the objective of SSCG. Therefore, the interactive and complementary relationships between CSR and the sustainable development of the entire supply chain is a basic theory for further study on the SSCG.

Supply chain governance The literature on the SCG is emerging, yet is still in its infancy. Recent studies have shown that the biggest challenge for SCG is cooperation. With the improvement of a competitive strategy by internal integration to external partnerships, and the increasing worldwide attention to the product quality, environmental issues, and cost-benefit trade-off, implementation responsibility has been assumed by the supply chain coordinator through monitoring and coordination of suppliers and distributors (Vurro et al., 2009), especially the suppliers and famous brand businesses in the fast fashion supply chain. Besides the cooperation and coordination among the supply chain partners, a key concern of the SCG is reputation risk. Any mistakes made by the focal company in the role of coordinator of the supply chain, such as choosing suppliers without considering environmental or ethical concerns, would cause severe and increasing criticism on their social and environmental responsibilities. To manage and anticipate potential risks to the focal corporate legitimacy and reputation, sustainable governance is a common practice applied to supply chains (Blowfield & Dolan, 2010). SCG focuses on gathering resources of all participants in a supply chain. The perspective of resource-based-view (RBV) of the corporation reflected in SCG provides an optimistic view (win–win cooperation) for the relationships among stakeholders in comparison to the pessimistic approach of transaction cost economics (TCE) viewed as a competition for benefits. SCG places greater emphasis on the importance of sustainability, where the coordinator reduces the vulnerability of a supply chain network by practicing SSCG with TBL rules (Bitran, Gurumurthi, & Sam, 2006; Vurro et al., 2009; Crisan & Parpucea, 2011). While various studies have been conducted on the SCG, there is no uniform definition for its concept. Different companies, especially, the focal company, play real roles in a supply chain so the study on corporate governance is the logical starting point for the SCG research. Some studies indicate that corporate governance is an institutional arrangement, including a set of formal or informal, internal or external, institutions or mechanisms that coordinate all stakeholder interests to ensure that the decision-making is more scientific and safeguards all corporate interests (Gillan, 2006; Jensen, 2002; Zingales, 1998). More accurately, the point of corporate governance is to make scientific decisions that help to balance and maximize all shareholder interests.

Based on the theory of corporate governance and related concepts of supply chain: supply networks (Vurro et al., 2009), internal organizational relationships (Ghosh & Fedorowicz, 2008), global value chains (Gereffi, Humphrey, & Sturgeon, 2005), and value chains (Sivakumar et al., 2010), we conclude that SCG focus on the institution, the structures and the mechanisms that guide, regulate and control the activities which are emanated from stakeholders of the supply chain. SCG is neither a decision making process, nor a management activity, but a framework in which decision making is carried out in a supply chain situation (Crisan & Parpucea, 2011). Specifically, in order to coordinate relationships and maximize the benefits among stakeholders, the focal company of a supply chain designs a special set of institutional arrangements for the supply chain stakeholders (i.e., economic contract and relational contract), and combines it with a range of governance mechanisms. The economic contract and relational contract are the compositions of ‘‘social relations’’. The economic contract theory focuses the motivation of human behavior on pursuing self-interests; however, the relational contract theory emphasizes the double motivation composed by self-interests and altruism and criticizes the deficiency of hypothesis of rational man. With the theory of relational contract, it is possible for inter-company collaboration and implementation of social norm in a supply chain. Hence, based on the integration of economic contract and relational contract theories, the mechanism design of sustainability governance can make a better performance balance among economy, environment and society. The focal company can ensure the maximum benefit for all supply chain participants by coordinating them, inhibiting opportunistic behavior, and maintaining sustainability of the supply chain. The focus of SCG is to set governance mechanisms for reducing opportunism, and to make scientific decision to help lower risk during the mechanism designing process. Opportunism, as considered in our discussion, is the behavior of acting unethically and inappropriately in one’s self-interest to distort, camouflage, and confuse real information by lying, stealing, cheating, and deliberately misleading to satisfy selfish interests (Williamson, 1996). The behaviors of deceiving consumers, polluting the environment, exploiting workers, etc., attributed to fastfashion international brands in their supply chain operations, are essentially caused by opportunistic behavior. Meanwhile, the ‘‘Economic Man’’ hypothesis is also an effective way to understand how opportunism occurs in the fast fashion supply chain. The idea emphasizes that the sole benchmark for CSR is shareholders’ profit maximization (Margolis & Walsh, 2003). Therefore, opportunistic behavior inevitably happens when seeking the maximum benefit is considered as a responsible behavior by economic agents who have the capacity for rational expectations and decisions. However, with increasing modern social awareness regarding moral, environmental and economic behavior of corporations, people doubt about the reasonableness of the ‘‘economic man’’ hypothesis. Many consumers pay more attention to the environmental and social benefits neglected in the traditional supply chain management strategy that pursues the minimum operating cost to maximize the economic benefit only. Based on the above discussion we find that the balance of economic, environmental, and social benefits is the primary issue in the sustainability governance. To implement this theory into a fast fashion supply chain, we introduce the integrated sustainability governance framework into it with a strategic CSR perspective and theoretically examine the role of sustainability governance in a fast fashion supply chain with this framework. In the next section, we will provide the framework of sustainability governance, including the motives, content, and factors of governance, and discuss the governance mechanisms derived from the interplay of various factors.

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Sustainability governance framework Motivations and connotations of governance Motivation by internal inducements Based on the organizational equilibrium theory presented by Barnard (1948), an organization is a system that consciously coordinates the activity and strength of human beings. It consists of three basic factors, i.e., willingness to collaborate, common goals, and information communication. The equilibrium of an organization is the essential requirement for its maintenance and development. It requires not only the balance of various elements within the organization, but also the equilibrium of an external collaboration system and environment. The balance within an organization is the equilibrium between incentives offered by the organization and the sacrifices made by people within the organization. If this equilibrium is broken, it can lead to either organizational inefficiency (when incentives are greater than sacrifices) or organizational unsustainability (when sacrifices are greater than incentives). A supply chain is a system formed by suppliers, manufacturers, distributors, retailers, and customers that are connected by the focal company. As a virtual organization involving the coexistence of multiple partners, a supply chain needs to achieve an effective equilibrium of the three factors presented above (i.e., willingness to collaborate, common goals, and information communication among the supply chain members), to ensure its sustainable development. According to the analysis in Section 2, the strategic behavior of CSR and the establishment of sustainable strategic objective will contribute to sustainability improvement of the fast fashion supply chain. Through the strategic behavior of sustainability, the focal companies in the supply chain should be able to improve their reputation and achieve a strategic competitive advantage. Based on the analysis of organizational equilibrium theory, the improvement of the individual interests and the overall supply chain sustainable effectiveness (economic, environmental, and social effectiveness) are inducements for the focal companies to undertake social responsibility. These inducements lead to changes in corporate behavior. Therefore, the focal companies involved in a fashion supply chain need to actively focus on their social responsibilities and actively promote the sustainability governance of a supply chain. SSCG is an externalizing form of behavior that is generated by the strategic behavior of CSR resulting from corresponding inducements. The primary purpose of SSCG is to achieve self-protection and self-satisfaction of the focal companies, and thus promotes sustainable development of a supply chain. Motivation by external needs From the strategic perspective of customer satisfaction (CS), different products meet different consumer needs based on the need-hierarchy theory, including physiological need, safety need, love need, esteem need, and self-actualization need (Maslow, 1943). Therefore, the external needs include: Inducement

(i) Physiological need (D1): consumers only require a general function from products. (ii) Safety need (D2): consumers pay attention to the physical effects caused by products. (iii) Love need (D3): consumers are concerned about whether the product may help to improve their social image. (iv) Esteem need (D4): consumers pay attention to the symbolism of products. (v) Self-actualization need (D5): consumers have individual fixed brand preferences. As discussed above, we find that the higher the requirement hierarchy, the more difficult it is to satisfy consumer demands. Due to increasing public awareness regarding the environment and social responsibility, consumers set higher requirements for the environmental and social attributes of products. The seven sustainable attributes of a product as given above (TCQSERP) essentially correspond to the hierarchy of different consumer needs. The specific attributes of a product will reduce the risk of demand uncertainty. The sustainability governance of a fast fashion supply chain can achieve sustainable improvements in product attributes and meet different consumer needs, thereby reducing the risk of market uncertainty and improving supply chain performance. Indirectly, it will improve the environmental and social efficiencies to achieve a desirable equilibrium among economic, environmental, and social factors. Therefore, the sustainability governance of the focal companies in a fast fashion supply chain is motivated by both internal inducements and external needs. The interaction of the two motivations leads to the behavior of SSCG, as depicted in Fig. 3. Connotations of SSCG According to the analysis of governance motivation and the definition of supply chain governance, we find that SSCG is a long-term, continuous and strategic behavior motivated by both internal inducements and external needs. It is oriented by the strategic behavior of the focal companies to undertake CSR. Through appropriate governance mechanisms (such as monitoring, relationship building, and contractual agreements), it aims to reduce conflicts among stakeholders and to restrain opportunistic behavior to achieve sustainable development. Influencing factors of SSCG Based on the study of governance structures (Si) and models (Mj), we build a theoretical framework to explain sustainability governance issues in a fast fashion supply chain and identify the influencing factors (Fk) of SSCG, as depicted in Fig. 4. Governance structures The starting point to explain the theoretical framework is through the governance structure in a fast fashion supply chain. There are three variables that play an important role in determining Demand

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D3 Sustainable governance Fig. 3. Motivations of sustainable supply chain governance.

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the changes of governance structures: the complexity of transactions, the ability to codify transactions, and the capabilities of the supply base (Gereffi et al., 2005). Due to the interactions among these three factors, governance structures can be divided into five types – hierarchy, captive, relational, modular, and market. Furthermore, governments and NGOs also play an important role by providing guidance and monitoring activities. Consequently, monitoring, as a specific governance structure, is added to this framework, where the governments and NGOs are regarded as governance influences. Thus, our typology identifies six basic types of SSCG, as shown in Fig. 5. The first five types focus on the governance of inter-corporations. Each governance type corresponds to a different trade-off between the levels of explicit coordination and power asymmetry. The sixth type, monitoring, is an extension of inter-company governance that includes the role of external stakeholders.

manage complex transactional information. The suppliers in a modular supply chain provide products to customer specifications. (3) Relational structure (S3): This structure highlights the dependencies among supply chain members. It is typified by frequent transactions of complex information and high levels of asset specificity. According to different characteristics of transaction, environment, and capability in the supply base, many types of network ties, such as reputation, ethics, and trust, can be used to coordinate and manage exchanges within a supply chain. (4) Captive structure (S4): This type of structure is characterized by a high degree of control by the focal companies. Other members in the supply chain are closely dependent on these focal companies, i.e., they are captive to the leading companies and rarely diverge from the established network. (5) Hierarchy structure (S5): This is an evolutionary form of a captive structure. In contrast with the market structure, this governance form is characterized by vertical integration, a relatively common form of managerial control on other members within the supply chain. Under this situation, transactions are usually done in-house.

(1) Markets structure (S1): This is the simplest structure in spot markets. The essential points are adequate information, simple transactions, and high supply capability. (2) Modular structure (S2): This structure focuses on work divisions using industry generic tools and standards. It is characterized by a high supply capability that can codify and

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Degree of Power Asymmetry Fig. 5. Evolution of the supply chain governance structure.

(6) Monitoring structure (S6): The influence of government and NGOs on the evolution of governance structures is considered under this type of structure. From the perspective of external stakeholders, three elements affect behavioral motivation and interest distribution among the supply chain members, including the policies formulated by governments, the monitoring from NGOs, and consumer choices. Governance structures evolve over time. As the business environment changes, an existing structure may no longer be effective to coordinate the supply chain. Thus, the governance structure is changed from one type to another to re-coordinate among multiple stakeholders and to adapt to changes in the external environment. A vertical shift from market-based coordination to hierarchy reflects the optimization of supply chain efficiency and the centralization of corporate rights. When small companies in supply chains obtain critical resources through improvement of their capacity, they can gradually become new focal companies and gain new governance subjects. A monitoring structure is a horizontal expansion of internal SSCG. As various problems (i.e., poor quality, environmental pollution, sweatshops, child labor, and similar problems) arise due to excessive opportunistic pursuits in the supply chain development, the regulatory policies of governments and supervision by industry watchdog associations have an important impact on the evolution of governance structures. During the early stage in the supply chain growth, the market and modular types are the dominant governance structures. With the improvements in information technology, capability of suppliers, and relationships among partners, the relational governance form plays a more important role in the supply chain. Gradually, the relational form evolves into the captive form and eventually becomes the hierarchy form. Changes in the supply chain structure produce a dynamic evolution process throughout the life cycle of the supply chain. Meanwhile, the monitoring form is associated with the entire life cycle of the supply chain (See Fig. 5). Governance models From the perspective of the life-cycle of a supply chain, governance structures may vary from one stage of the chain to another. These dynamics and variations are associated with particular transaction characteristics and relationships. The differences in relationships and transactions determine the scope and depth of SSCG, the role of the focal companies, the conditions for success, the objectives of coordination, etc. These can be summarized as the supply chain density and the centrality of the focal company (Oliver, 1991; Rowley, 1997). The supply chain density represents the interconnectedness of partners in the supply chain (Vurro et al., 2009). To the focal company (e.g., H&M or Zara) in the fast fashion supply chain, it is a determinant factor for the decision whether to implement a sustainability-related activity, e.g. environmental

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certification, sustainable policy, moral standard, and so on. As the supply chain density is increasing, the information sharing is promoted among partners, and the focal company will pay more attention from upstream to downstream partners, thus increase the capability to monitor the supply chain (Neville & Menguc, 2006). Additionally, in high-density supply chains, it becomes easier to execute knowledge transfer, thus facilitating the sharing of sustainability norms and implementation of SSCG (Roberts, 2003). The centrality of the focal company refers to its power and position relative to other members in the supply chain, which represents the extent of its influence and control on the other supply chain partners. For the focal company with strong centrality, interested in implementing sustainability, it becomes easier both to resist adaptation requests from the supply chain partners and to further influence them into implementing sustainability governance. Depending on the supply chain density and centrality of the focal company, four different styles of SSCG models are formed: transactional models, dictatorial models, acquiescent models, and participative models (Vurro et al., 2009). From the analysis of governance structures and models, we find that five factors play a main role in SSCG, including the density of the supply chain, the complexity of transactions, the transparency of information, the centrality of the focal company, and the capability in the supply base. The density affects the complexity of transactions. The interactions among these factors define the complexity derived from the supply chain network. The complexity of transactions and transparency of information principally affect the relationships among partners. Thus, in a relational governance structure, the focal company in a supply chain often adopts trust as the primary mechanism to implement sustainability governance (Fabrice & James, 2012; Griffith & Myers, 2005). Accordingly, changes in the focal company’s relative power or status in the supply chain are bound to drive corresponding changes in governance structures and result in a re-division of rights and obligations of the other supply chain members. Similarly, as the capability in the supply base increases, the power of the focal company to control its upstream partners decreases. Thus, the capability of supplier also plays an important role in the choice of governance structures and models. Influencing factors In addition to the five factors above, the monitoring and guiding by governments and NGOs, as well as the role played by customer demand should also be taken into account. Therefore, we summarize the influencing factors of SSCG based on the following three dimensions: (1) the characteristics of internal members that include the centrality of the focal company and capabilities of suppliers; (2) the characteristics of transactions, including the density of a supply chain and the complexity of its transactions; (3) the characteristics of external stakeholders, including the characteristics of consumer demands, the regulatory capacity of government and the capacity of information disclosure by NGOs. Thus, seven critical factors are identified in SSCG, as shown in Fig. 6. Mechanisms of sustainability governance A ‘‘mechanism’’ is described as a set of plausible hypotheses that may serve as an explanation for some phenomenon resulted from the interaction of one or more factors (Hedstrom & Swedberg, 1998). Obviously, governance mechanisms consider factors as a set and focus on the effects of this set. From the motivations of sustainability governance, we need to consider not only the driving factors inside the system but also the external uncertainty factors due to the complexity of the supply chain system. Therefore, to make a scientific governance decision, we should ensure that the complex system is under control of a rational open system and

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Factors

Internal members characteriscs

Transacon characteriscs

External stakeholders characteriscs

Capabilies Of supplier

Density of Supply Chain

Centrality of the Focal Company

Complexity of transacons

Consumer demands Government regulaon Informaon disclosure of NGO

Fig. 6. Influencing factors in supply chain sustainability governance.

integrate the enclosed internal strategy with the external open one. As for the sustainability governance in a fast fashion supply chain, the subjects of SSCG are participants in the process of governance, and the objects are the consequences resulting from various problems (such as quality loss, environmental pollution, sweat shops, child labor) due to the uncertainties of the environment. The environment of an organization is divided into a task environment and an institutional environment. The task environment consists of environmental elements that affect attempts by the organization to achieve its objectives, such as competitors, suppliers, capital markets, customers, and production technology (Daft, Sormunen, & Parks, 1988; Dill, 1958). The institutional environment refers to other environmental elements that have an impact on the organization, including governments, economic situations, and cultural elements (Peng, 2002; Peng, Lee, & Wang, 2005). Although the task environment is the fundamental element directly affecting the operations of an organization, the institutional environment should not be neglected. Sustainability governance in the fast fashion supply chain is precisely a behavioral decision under the dual influences of both the task environment and the institutional environment. A behavioral decision refers to the choice of governance mechanisms. The role of governance mechanisms is simply to reduce the negative impact of environment uncertainty on the supply chain performance. From the perspective of external and internal governance, we analyze the corresponding subjects and objects of governance based on the institutional theory of economics and organizational sociology. Depending on the impact of the seven influencing factors identified above (including the characteristics of consumer demand, the regulatory capacity of governments, the capacity of disclosure by NGOs, the density of the supply chain, the complexity of transactions, the centrality of the focal company, and the capabilities of suppliers) and the analysis of governance, companies are

encouraged to implement SSCG following two styles – an efficiency mechanism and a legitimacy mechanism, as shown in Table 1. Efficiency mechanism of sustainability governance Institutional theory of economics shows that the goal of decision-makers is to maximize their own utility (Meyer & Rowan, 1977). The underlying mechanism is the efficiency mechanism. For internal governance in the fast fashion supply chain, the efficiency mechanism is usually dominant. In this situation, the governance subjects are international brands recognized as the focal company, and the objects of governance are various risks, such as reputation risk caused by environmental pollution caused by suppliers and the resulting cost and interest risks. The factors that affect the choice of governance styles are the density of the supply chain, the complexity of transactions, and the centrality of the focal company and capabilities of the suppliers. The interactions among these factors determine the corresponding governance structures and models. Given the choice of a specific governance model, some effective means of governance, including technical support, information sharing, risk sharing, revenue sharing etc., are useful to facilitate the sustainability governance in the fast fashion supply chain. Legitimacy mechanism of sustainability governance Institutional theory in organizational sociology follows the logic of a legitimacy mechanism, where the purpose of organizational structure design is to satisfy the requirements of the institutional environment (Meyer & Rowan, 1977). When the existing legal and cultural environments become widely accepted, they have a strong binding effect on organizations and regulate the acts of their partners (DiMaggio & Powell, 1983). Organizations should improve their legitimacy in institutional environments. Regarding the social and environmental problems that have arisen in the fast fashion industry, the legitimacy mechanism is recognized as the main form

Table 1 Sustainability governance mechanisms in fast fashion supply chain.

Internal governance

External governance

Subjects

Objects

Factors

Means

Mechanisms

Focal company VS Supplier Government VS Focal company NGO VS Focal company

Reputation risk economic benefit business benefit Environmental performance social performance Environmental performance social performance Customer needs on social responsibility

Density of supply chain, complexity of transactions, centrality of the focal company, capabilities of suppliers Regulatory capacity of government

Technical support, information sharing, risk sharing and revenue sharing Policy guidance, legal control

Efficiency mechanism

Capacity of disclosure by NGOs

Information disclosure, monitoring

Characteristics of consumer demand

Green consumption

Consumer VS Focal company

Legitimacy mechanism

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of external governance. In this case, the subjects of SSCG are not only the focal company representing international brands and its supply chain partners, but also external stakeholders, such as governments, NGOs, and consumers. The objects to be governed are the imbalances between environmental and social performance. Three factors, that is, the characteristics of consumer demand, the regulatory capacity of governments, and the capacity of disclosure by NGOs, are playing critical roles in external governance. The governance model of monitoring naturally arises from the interactions among them. The objects that usually apply to policy guidance, legal control, information disclosure, and green consumption are the means applied by external governance to ensure the sustainability of the fast fashion supply chain. From the analysis above, the sustainability governance mechanisms in fast fashion supply chains are strategic decisions made to balance the economic, environmental, and social performance, aiming at alleviating conflicts among economic, environmental, and social factors. To determine how supply chains should be governed and changed, both the internal partners of the supply chain (i.e., suppliers, manufacturers, retailers, etc.) and the external stakeholders (such as governments, NGOs, and the public) should be taken into account. Depending on the interactions among the seven factors, the focal company can use the internal efficiency mechanism and the external legitimacy mechanism together to facilitate the efficiency and legitimacy of SSCG. The next section conducts a case study to discuss the sustainability issues existing in fast fashion supply chains and highlights the applicability of the governance framework. Case study Design of a case study Purpose The purpose of this case study is to show, why H&M Corp. should ‘‘go sustainability’’ and how it can be accomplished as the focal company in the fast fashion supply chain. By depicting a series of implementations and achievements of the sustainability governance in this company, we further explain the causal relationship between influencing factors and sustainability performance discussed in the governance framework to explore the application of the sustainability governance mechanisms indicated in the above sections. Analysis Based on the logic of the interpretive case study, we try to answer the issues of ‘‘Why’’ and ‘‘How,’’ and the reasons why H&M should ‘‘go sustainable’’ and how it can be done. The content of the case analysis will include some aspects as follows: (1) What are the sustainability issues in H&M? (2) What are the difficulties and challenges in dealing with the pertinent sustainability issues? (3) How to solve these difficulties and challenges? (4) What is the recommended implementation and achievement of sustainability governance? (5) What is the impact of sustainability governance on sustainability performance? Criteria The criteria related to the H&M case are based on three points as follows: (1) The strong representation of the focal fashion company that faces the challenges of sustainability.

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(2) The better practicality and effectiveness gained by implementation of sustainability governance. (3) The better applicability of governance measures used by other focal companies and suppliers involved in the fast fashion supply chain. Sources The sources used for the case study are all from publicly available information, such as official records (H&M Conscious actions sustainability reports, 20102012; H&M CSR Report, 20022011), procurement databases, and company websites (www.about.hm.com). Meanwhile, the information involved in commercial operations of the corporation has been omitted. Analysis of the case: H&M seven sustainability commitments ‘‘Adding sustainability value to our products is one of the keys to strengthen our customer offering. There is no way for us not to think about and invest in our sustainability, because it simply makes business sense.’’—Karl-Johan Persson, H&M CEO. (H&M’S Conscious actions sustainability reports, 2012.) During 2012, H&M noted that to continue a strong growth and simultaneously implement sustainability is the biggest challenge it faces to maintain successful in business operations, due to the issues regarding environmental pollution, impact on the water resource used by the textile supply industry, and unfair treatment of workers in supplier factories. To stay at the forefront of sustainability and to offer fashionable products at a reasonable price simultaneously, H&M works hard to continuously improve its sustainability. Together with their colleagues, stakeholders, and business partners, H&M makes ongoing, visible sustainability changes. To be a leader in sustainability innovation in the fashion industry, H&M implements the recycling of old clothes as a standard in the industry. Workers in their supplier’s factories negotiate wages and working conditions in fair dialogue with their employers. H&M and its suppliers try to make clothes with minimal impact on water resources and cater to consumers all over the world, who can easily build their personal style with sustainable fashion products. To achieve sustainability change, H&M collaborates together with stakeholders to balance the correct priorities that apply to the industry. They have also shown their commitment to guarantee that all workers in supplier factories earn enough pay to live on while working an acceptable number of hours. Engaging more closely with stakeholders and customers is a key step to achieve these goals. With tackling these challenges, H&M have taken some steps towards sustainability change since 2012. Fig. 7 shows that H&M, has built their own strategic framework of SSCG as a strongly expending multinational fashion company. Initially, H&M’s aim to create more sustainable fashion future based on the vision that their operations should be run in a way that is economically, socially and environmentally sustainable. They focus on the sustainable relationship of people, planet and profit. At H&M, they believe conscious of interconnected nature of these three elements is the key to the long term success of their business. With the goal of sustainability governance, H&M recognizes that, they need to collaborate with stakeholders by the scientific captive structure (S4), monitoring structure (S6) and participative model (M4) to fulfill seven commitments and tackle the complex challenges, no matter who are the internal partners, i.e., suppliers and manufacturers, or the external monitors, i.e., customer, government and NGOs. Within the captive structure, H&M, with the

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Fig. 7. Framework of SSCG in H&M.

high controlling and collaboration ability, learns more about the sustainability and CSR issues in their meetings with stakeholders. For example, with joining force for fair dialogue between employees and employers, H&M helps trade unions and employers to find lasting solutions in fair collective bargaining processes. The improvement of confrontational relations benefits the workers and creates a stable market. Under the monitoring structure, in order to create lasting improvements, H&M promotes systemic change that involves everyone concerned and considers the influence of customer, government and NGOs. For example, the H&M CEO met with Sheikh Hasina, Prime Minister of Bangladesh, to express H&M’s support to raise the minimum wage for fashion workers. Meanwhile, since 2009, H&M set new standards for water stewardship in industry in cooperation with WWF, and they worked together towards implementing a holistic water stewardship. Based on the above actions, H&M, as the focal company of its supply chain, has formed the scientific participative governance model with the characteristics of strongly interconnectedness of partners and centrality in the supply chain. Through participative model and global information system H&M has accomplished the following tasks: they collected old clothes to recycle them; they played a very active role in initiatives such as the Sustainable Apparel Coalition and the Global Compact; they got the support from authorities to make ethical and legal business decisions, etc. As Kate Fletcher, the author of the book – Sustainable Fashion and

Textiles, noted that H&M has the strength and ability to bring sustainability ideas to the marketplace at scale. In the future we would like to see new business models – fewer products and different ideas about fashion. However, the sustainability changes will not be rapidly achieved without the implementation of the seven commitments on sustainability, i.e., to provide fashion for conscientious customers; to choose and reward responsible partners; to be ethical; to be climate smart; to reduce, reuse, recycle; to use natural resources responsibly and to strengthen communities. With seven ambitious strategic commitments, H&M is bringing systemic change to their industry and across the entire supply chains to create a more sustainable future for the fashion industry. The implementation and achievement of seven sustainability commitments are as follows: (1) To provide fashion for conscious customers. Specifically, H&M should use more sustainable cotton and support innovation in other sustainable fibers. For conscientious customers, H&M should work hard to promote more sustainable leather and introduce conscientious wash and care instructions to reduce pollution, and to translate a new website dedicated to sustainability into multiple languages. Results show that 11.4% of the cotton used by H&M comes from more sustainable sources; their products include 7.8%

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(2)

(3)

(4)

(5)

(6)

(7)

organic cotton and 3.6% better cotton; 7.4 million pairs of shoes have been manufactured using water-based adhesives; H&M uses recycled polyester equivalent to 7.9 million plastic bottles, and receives 375,000 annual visitors to their sustainability website. To choose and reward responsible partners. For instance, H&M chooses responsible partners and helps these suppliers to strengthen their sustainability ownership. For that, H&M has conducted 2,541 audits at its supplier factories. More than 100,000 workers and middle managers in Bangladesh have received additional training in fire safety. H&M’s supplier sustainability performance index increased from 76.5 to 78.4 in 2012. To be ethical. It means to do the right things, such as to treat partners fairly, to ensure awareness and understanding of H&M’s Code of Ethics, to launch a new Group-wide Human Rights Policy, to promote diversity and equality among their colleagues, to ensure good workplace relations, and to maintain open dialogue with their colleagues in all markets. Results of this commitment are as follows: 60% of H&M’s colleagues are covered by collective bargaining agreements; 100% of H&M’s commercial goods suppliers and 47% of all concerned colleagues have received dedicated training in the Code of Ethics; 74% of H&M’s managers and 50% of board members are women, and H&M became a Corporate Supporter Member of Transparency International Sweden in January 2013. Climate status. This relates to the activities in reducing H&M’s total greenhouse gas emissions, choosing and promoting environmentally conscious transportation, and promoting energy efficiency amongst its suppliers. In this aspect, H&M has reduced CO2 emissions by 5% relative to sales by offsetting and through improving energy efficiency in their stores. The company has raised its target to ultimately source 100% of its electricity from renewable sources such as solar and wind-generated power plants. Also, H&M engages 154 supplier factories in energy efficiency programs, and approximately 90% of transported goods from production countries to its distribution centers are made via sea or rail. To reduce, reuse and recycle used goods. For example, as an effort to close the loop on textile fibers, H&M encourages customers to reuse or recycle bags, and further promotes innovation and use of recycled fabrics. From these activities, H&M has almost achieved its goal of recycling at least 95% of waste handled in its distribution centers (92% of the waste in the distributions centers is recycled) and offered its customers the opportunity to discard old clothes at all H&M store locations. To use natural resources responsibly. For instance, through joining forces with WWF to implement a game-changing water stewardship strategy; H&M promotes water savings in the garment production. It has signed a unique three-year water stewardship partnership with WWF that aims to be a game changer for the industry and beyond. With BSR wastewater standards, it also ensures the compliance of supplier factories, and replaces solvent-based polyurethane (PU) with water-based alternatives. Based on these implementations, there are more than 3 million liters of rainwater harvested in distribution centers and stores, and 100% of the paper used in the H&M catalog is EU flower certified. To strengthen community status. With a series of ongoing activities geared towards creating and contributing to employment opportunities, empowering through education, engaging customers in charitable work to strengthen communities, and extending H&M’s Children Project in

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collaboration with UNICEF in Bangladesh, H&M has created 7,402 additional jobs around the world (net, full-time equivalent). Additionally, the business contributes to job opportunities for more than 1.3 million people employed by its suppliers. And about 42 million SEK (approx. 6.3 million USD/5 million EUR) have been invested in communities supported by H&M and the H&M Conscious Foundation. Consequently, the improvements of sustainability in the entire supply chain of H&M, since the start of seven commitments, are substantial. Furthermore, H&M is gradually tackling the sustainability challenges across its entire supply chain and is creating new opportunities for long-term business success for each partner in the supply chain. As discussed, we find that sustainability challenges are most closely related to H&M core operations. For instance, H&M can make a difference by choosing eco-friendly raw materials and responsible business partners, and by collaborating with stakeholders, NGOs, and governments to tackle challenges as they arise. Moreover, we also find that H&M actively engages with its stakeholders and joins forces to implement solutions in sustainability governance challenges. For example H&M maintains regular dialogs with each major group, including customers, colleagues, communities, suppliers and their employees, industry peers, NGOs, policy-makers, and investors. That is, a close collaboration with stakeholders, both internal and external, is essential in enabling the focal company to tackle new or existing challenges. Since no company can solve sustainability challenges on its own, the focal company needs to team up with other entities. Meanwhile, they can make the entire fast fashion supply chain more sustainable by sharing best practices and developing ways to take sustainability further. Based on the analysis of sustainability governance mechanisms in Section 3.3 and the above facts in H&M, we find that the conscious actions of seven commitments come from internal efficiency mechanism and the external legitimacy mechanism, as depicted in Fig. 8. Two sustainability governance mechanisms together facilitate the efficiency and legitimacy of SSCG in H&M. On the one hand, according to the efficiency mechanism, H&M makes full use of the capabilities of suppliers, such as to choose and reward responsible partners (Commitment 2). Together with the responsible partners, H&M decides to implement some sustainability-related activities, e.g. to be ethical company (Commitment 3); to consider the climate status (Commitment 4); to reduce, reuse and recycle used goods (Commitment 5). With the increasing supply chain density, the information sharing is promoted among partners, and it becomes easier to execute knowledge transfer, so the complexity of transactions is reduced. Based on the increasing supply chain density and the decreasing complexity of transactions, H&M can pay more attention from upstream to downstream partners, thus increase the capability to monitor the organization and the centrality of H&M own company to take effective sustainable actions. On the other hand, in accordance with the legitimacy mechanism, H&M takes advantage of the characteristics of consumer demand by providing more sustainable cotton and fibers fashion (Commitment 1), a series of the environmental products, to satisfy the needs of conscious customers. Beyond that, H&M creates an opportunity to lead consumers from unconsciousness to green consumption by providing fashion for conscious customers for other customers. Furthermore, with integrating the regulatory capacity of government and the capacity of disclosure by NGOs, H&M cooperates with WWF and BSR wastewater standard to use natural resources responsibly (Commitment 6). Besides, the achievement of H&M’s Children Project in collaboration with UNICEF, which strengthens community status (Commitment 7) by a

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Fig. 8. Mechanisms, influence factors and sustainable commitments of the sustainability governance in H&M.

series of ongoing activities. Additionally, H&M’s business contributes to job opportunities for more people employed by their suppliers. Simultaneously, it also solves the social and environmental problem arisen in the fast fashion industry through balancing the requirements of the whole supply chain benefits on economy, environment and society. Therefore, three factors, the characteristics of consumer demand, the regulatory capacity of governments, and the capacity of disclosure by NGOs, are considered to play a critical role in the legitimacy mechanism. In summary, based on the interactions among the seven factors, H&M has used the internal efficiency mechanism and the external legitimacy mechanism together to facilitate the sustainability of the fast fashion supply chain. Especially, the action of strengthening the core influence and centrality of the focal company (i.e., H&M) is beneficial in leading the improvement of sustainability governance from the viewpoint of internal governance. Moreover, the collaboration with stakeholders, from the perspective of external governance, is helpful in increasing the influence level of the new standards setting in the focal company, and provides an effective means for long-term cooperation. Finally, combined with the internal and external actions, the sustainability challenges related to the fast fashion supply chain can be solved, and the goals of sustainable development across the entire industry can be maximized. Conclusion Sustainability governance plays an important role to obtain competitive advantages in sustainable business of the focal company in the fast fashion supply chain. With increasing uncertainties from rapidly changing internal and external environments, decision-making has always been the main challenge when balancing efficiency and legitimate implementation of changes. This study provides a framework for decision-makers regarding the sustainability of a fast fashion supply chain, although the framework can conceivably be applied in other industries. More specifically, we describe the positive relationships between CSR and fast fashion supply chains. From the perspective of products, we find seven

competitive sustainable attributes related to fast fashion products -TCQSERP, i.e., time (T), cost (C), quality (Q), service (S), environment (E), resource (R), and people (P). We demonstrate the seven SSCG influence factors, i.e., the characteristics of consumer demand, the regulatory capacity of governments, the capacity of disclosure by NGOs, the density of a supply chain, the complexity of transactions, the centrality of the focal company, and the capabilities of suppliers. They come from three dimensions, the characteristics of external stakeholders, the characteristics of transactions, and the characteristics of internal subjects. Based on institutional organization theories of economics and sociology, we propose the efficiency mechanism and legitimacy mechanism as applicable to the sustainability governance of the fast fashion supply chain. In addition, from the case study on H&M’s sustainability governance, we assess the impact of influence factors on the focal company’s performance (economic, environmental, and social), during the process of the sustainability governance. From a practical viewpoint, this paper provides managerial insights to improve the sustainable performance of SSCG across the entire fast fashion supply chain from both internal and external perspectives. First, the power of central influence of the focal company is the basic driving factor to improve the sustainable performance of the fast fashion supply chain, especially in the case of globally dispersed supply chains. Second, collaboration among all stakeholders will normally guarantee an increase in the level of sustainable performance in the global marketplace. Our paper can be regarded as the starting point for studying the sustainability governance in a fast fashion supply chain context. There are still some problems for future study regarding this subject. First, this paper only explores the application of influence factors, while the evaluation of the effectiveness of the governance framework in real-world situations still requires further research. Second, the case study on H&M is analyzed from the perspective of one company and lacks a comparative analysis between multiple focal companies. Therefore, further research can be conducted on the survey of the effectiveness of operating a fast fashion supply chain using SSCG principles.

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