The role of management control systems in sustainability: A case study from a developing economy

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1 The role of management control systems in sustainability: A case study from a developing economy ABSTRACT Little is known about the role of management control systems (MCS) in managing strategic responses to institutional pressures. To enhance our understanding of this phenomenon, this study examines (i) how organisations strategically respond to institutional pressures for sustainability? (ii) how organisations use MCS in strategically responding to institutional pressures for sustainability? and (iii) how competing institutional logics shape organisational strategic responses to institutional pressures for sustainability. Drawing on DiMaggio and Powell s (1983) notion of institutional isomorphism, Oliver s (1991) typology of strategic responses to institutional pressures, and Friedland and Alford s (1991) concept of institutional logics, the study employed a case study method. Data were collected from a key apparel manufacturing organisation operating in Sri Lanka through conducting semistructured interviews with sustainability managers, analysing internal and publicly available documents, and observations. The research provides evidence suggesting that contrary to the long standing belief that the survival and success of organisations operating in developing countries is a function of conformity to institutional pressures, the case organisation strategically responded to institutional pressures for sustainability, in particularly, using avoidance and manipulation strategies. While acquiescence was the most commonly used strategic rationality by the organisation, the study did not find any evidence to support the use of defiance strategy. Further, results also demonstrate that information generated by MCS play an important role in strategic responses to sustainability pressures subject to top management commitment, usefulness of MCS information, measurability and ability to collect sustainability data, nature of institutional pressures, and public image of the organisation. Of particular interest is the role of institutional logics, the data indicate that strategic responses to institutional pressures for sustainability are shaped by competing logics of organisational culture and the role of industry analysts. Keywords Management control systems, sustainability, institutional pressures, strategic responses, competing institutional logics 1. Introduction This study explores how organisations strategically respond to institutional pressures for sustainability using MCS. The question of how organisations respond to institutional pressures for sustainability has gained much attention due to its inevitable impact on organisational success and, in turn, consequences on the society at large (e.g., Ball and Craig, 2010; Bansal, 2005; Delmas and Toffel, 2008; Durden, 2008; Norris and O'Dwyer, 2004). Contemporary institutional researchers contend that organisations tend to strategically respond to institutional pressures with active agency and organisational self-interests rather than merely complying with them (Lounsbury, 2008; Oliver, 1991). From the MCS perspective, management accounting academics and professional bodies have been emphasising the necessity of integrating MCS into the implementation of sustainability practices (e.g., ACCA, 2013; Arjaliès and Mundy, 2013; Bebbington, and Thomson, 2013; CIMA, 2010, 2013; Durden, 2008; Gond et al., 2012; Merchant, 2012; Schaltegger, 2011). However, scant attention has been paid to reveal evidence on (i) how organisations strategically respond to institutional pressures for sustainability, (ii) how organisations use MCS in such responses, and (iii) how institutional logics shape strategic responses to sustainability pressures. 1

2 The study was motivated by several emerging themes in the literature and practice. While the role of behavioural accounting in sustainability has been utmost important in the contemporary organisational setting than ever before, recent literatures (see e.g., Arjaliès and Mundy, 2013; Berry et al., 2008; Durden, 2008; Gond et al., 2012; Herzig et al., 2012; Merchant, 2012; Moore, 2013; Schaltegger, 2011) accent that very limited attention has been paid to examine the role of MCS in sustainability implications. In fact, by proposing sustainability as an emerging theme in MCS, Berry et al. (2009) concluded that literatures of control and sustainability have not adequately developed yet. Moreover, according to Schaltegger (2011, p. 342), a more encompassing management control approach towards sustainability management is thus missing, so far. Interestingly, not only academics, but leading professional management accounting bodies (ACCA, 2013; CIMA, 2010, 2013) have also been claiming the usefulness and necessity of integrating MCS into sustainability responses. For instance, CIMA (2010, p. 2) highlight that management accountants have a key role to play in driving sustainable strategic and operational decisions. But CIMA s research shows that even where finance teams engage in climate change related activities, it has often been on an ad hoc basis. While there are few studies to support the role of MCS in sustainability as indicated above, to the best of our understanding, we did not find literatures on how organisations strategically respond to institutional pressures for sustainability using MCS. Thus, by responding to lack of academic research and practitioners demands, this study was motivated to examine the role of MCS in strategic responses to institutional pressures for sustainability. To fill this gap, the study builds on new institutional sociology (NIS), a strand of institutional theory (e.g., Ball and Craig, 2010). The cornerstone of the NIS bases on the perception that organisational success is a function of conforming to the institutional environment and, in turn, organisations become homogeneous (isomorphic) as being of compliance to common institutional expectations (DiMaggio and Powell, 1983). Conversely, researchers (Lounsbury, 2008; Oliver, 1991) focused on organisational self-interests and active agency oppose this early institutional thought of homogeneity by proposing that organisational success is not merely based on blind conformity to the institutional demands. However, strategic responses to institutional pressures (Oliver, 1991) and institutional logics (Lounsbury, 2008) explain the organisational heterogeneity and practical variances. The review of literatures summarises that this strand of research aligns with propositions that (i) organisations strategically respond to institutional pressures (Oliver, 1991), (ii) the use of MCS is a function of the institutional environment (Abernethy and Chua, 1996; Scott, 2001), and (iii) institutional logics, which prevails in the organisational institutional context (e.g., Lounsbury, 2008; Thornton et al., 2012), shape the strategic responses to institutional pressures (Guerreiro et al., 2012). Accordingly, this study provides evidence on how organisations use MCS in strategically responding to institutional pressures for sustainability with the aim of gaining legitimacy, and enhancing operational efficiency. The research underpinning this study is based on a depth case study conducted by interviewing sustainability managers and analysing corporate documents in a large scale apparel manufacturing Organisation based in Sri Lanka. The Organisation pursues proactive sustainability strategies aiming at corporate sustainability and social legitimacy. Contrary to the long standing belief that the survival and success of organisations operating in developing countries is a function of conformity to institutional pressures, the study demonstrates that the Organisation strategically responded to institutional pressures for sustainability, in 2

3 particularly, using avoidance and manipulation strategies. Further, the data reveal that MCS play a significant role in (i) specifying and communicating sustainability objectives through sustainability policies, sustainability planning, internal sustainability operational structures and procedures, (ii) monitoring sustainability performance through MCS tools, such as sustainability data collection, sustainability investment appraisals, sustainability budgeting, and life-cycle assessments, and (iii) motivating to accomplish sustainability objectives by linking rewards to sustainability achievements through performance measurement systems. In particular, the study demonstrates that information generated by MCS play an important role in supporting strong active strategies, such as compromise, avoidance, and manipulations. Finally, the findings assert that competing institutional logics of organisational culture and role of industry analysts reflect a hybrid influence on the strategic responses to institutional pressures for sustainability. By exploring the use of MCS in strategic responses to institutional pressures for sustainability, the study delivers several key contributions to accounting, sustainability, and organisational literatures. First, this study examines the role of MCS in strategically responding to institutional pressures for sustainability for the first time. Thereby, the study explores both formal and informal MCS from a holistic approach by responding the call for research to study MCS as a comprehensive package rather than individual aspects (Malmi and Brown, 2008), and to examine the role of formal and informal MCS in sustainability (e.g., Arjaliès and Mundy, 2013). Second, addressing the limitations of institutional theory, the study integrates different institutional perspectives in terms strategic responses to institutional pressures, and institutional logics by comprehensively expounding rationales behind organisational responses to sustainability pressures. This approach contributes the suggestions by Ball and Craig (2010) to examine combination of insights from new institutionalism to expound social and environmental accounting. For instance, Ball and Craig (2010, p. 292) underscore that a combination of insights would produce a more complete theory of change. This is important because explanations of actions to develop social and environmental accounting normatively have not made their understanding of action explicit. Next, the study examines how competing institutional logics, in terms of organisational culture and role of industry analysts, shape organisational strategic responses to institutional pressures for sustainability. Thereby, the study incorporates the impact of organisational culture to examine intra-organisational dynamics on organisational responsiveness to institutional pressures for sustainability (e.g., Colwell and Joshi, 2013; Wood, 1991). Finally, the focus of the research to examine MCS and sustainability practices in a developing economy addresses the contextual sustainability implications (Arjaliès and Mundy, 2013; Matten and Moon, 2008), the lack of studies in this context, and in particularly, implications in the context that matters sustainability issues mostly. Prior literatures (e.g., Bansal, 2005; Bansal and Roth, 2000; Schaltegger et al., 2012; Sharma and Henriques, 2005) outline that most of the leading sustainability studies have predominantly focused on developed economies, such as North America, Europe, and Australia thereby leaving a research gap on developing economies despite of their significant contribution to the world economy (e.g., Lodhia, 2003). The remainder of this paper is structured as follows. Next section presents the review of background literature and theoretical foundations followed by the study framework. Section 3 briefs the research method. Findings of the case study are presented in the section 4 followed by the discussions in the section 5. The concluding comments are presented in the last section. 3

4 2. Literature review and theory 2.1 Literature review Arguably, terms of sustainable development or sustainability have been the most discussed and challenging themes for business organisations in the 21 st century. While there is no unique definition of sustainability (see Montiel, 2008), the World Commission on Environment and Development (WCED) (1987, p. 43) defines sustainable development as the development that meets the needs of the current generation without compromising the ability of future generations to meet their own needs. Gray (2010, p. 53) refers sustainability as a state of human nature relationships while the sustainable development as a process through which we move towards that state. According to WCED (1987), the sustainable development essentially requires the simultaneous integration of environmental integrity, social equity, and economic prosperity principles. The environmental integrity principle guarantees that human activities are designed to protect the earths land, air, and water resources (Bansal, 2005). The aim of the social equity principle is to create a society where all members have the equal access to resources and opportunities (Bansal, 2005). Finally, economic prosperity principle ensures the quality of human life through creation and distribution of goods and services in a fair and a transparent manner (Bansal, 2005). Changing perceptions towards the sustainability have created enormous impact on business organisations to think of implementing sustainable practices, such as introducing green products, embedding sustainability into production and service processes, investing in energy efficient technologies, and enhancing corporate social responsibility. For instance, world leading business organisations, such as General Electric, Toyota, Xerox, Wal-Mart, and Home Depot have already taken various large scale initiatives to mitigate their negative social and environmental impacts, and to enhance their competitive advantage through sustainability. Literatures (e.g., Arjaliès and Mundy, 2013; Colwell and Joshi, 2013; Laszlo and Zhexembayeva, 2011) show the extent to which organisations are committed to sustainability would largely determine the corporate success, in particular achieving sustainable competitive advantage. However, the manner in which organisations approach to sustainability would be varied depending on different facts, such as the context in which the organisation operates, internal organisational philosophy, sustainability orientated strategies, and institutional pressures for sustainability. This study focuses on how organisations respond to institutional pressures for sustainability as a means of achieving corporate sustainability. Researches reveal that institutional pressures for sustainability have been rapidly increasing, and the intensity of such pressures varies depending on the nature of business and the context in which the organisation operates (Matten and Moon, 2008). Internal and external institutions that pressure sustainability include governments and regulatory bodies (Bansal, 2005; Colwell and Joshi, 2013; Clemens and Douglas, 2005; Delmas and Toffel, 2008), transnational organisations, such as International Labour Organisation (ILO), International Organization for Standardization (ISO), United Nations Global Compact (UNGC), Worldwide Responsible Apparel Production (WRAP), and Greenpeace (Hussain and Hoque, 2002), professional and industry associations (Bansal, 2005; Colwell and Joshi, 2013), competitors (Bansal, 2005), community and interest groups (Delmas and Toffel, 2004), customers and investors (Christmann and Taylor, 2001), and internal organisational directions such as board of directors (Basu and Palazzo, 2008; Norris and O Dwyer, 2004). Examining how organisations strategically respond to institutional pressures has been a popular research theme among academics over the last two decades (e.g., Abernethy and 4

5 Chua, 1996; Järvinen, 2006; Rautiainen and Järvenpää, 2012; Oliver, 1991). The strategic response approach explains that organisations do not merely accept institutional pressures, but, rather strategically respond based on organisational self-interests and active agency (Oliver, 1991). Typically, organisations implement sustainability practices for different reasons derived internally and external to the organisation, such as reconstructing eroded legitimacy and gaining competitive advantages (Bansal, 2005; Gond et al., 2009, 2012). In particular, with the increase of institutional pressures for sustainability, researchers in diverse disciplines have focused to understand how organisations strategically respond to such pressures. Prior researches in strategic responses to institutional pressures have examined how multinational corporations strategically respond to conflicting institutional pressures for global climate change (Levy and Kolk, 2002), organisational adoption of environmental management practices in respond to institutional pressures (Delmas and Toffel, 2008), intraorganisational factors that explain variance of ecological responsiveness to institutional pressures (Colwell and Joshi, 2013), and how firms respond to institutional pressures through strategic sustainability initiatives (Iarossi et al., 2013). However, scant attention has been paid to incorporate other aspects, such as the use of MCS as a means of strategic responses to institutional pressures, and how institutional logics shape such strategic responses. While the interest of the strategic responses approach is increasing as a mechanism of addressing sustainability pressures, researchers tend to contend the instrumental approach 1 of strategic responses which ignores the importance of institutional logics that is prevailing in the institutional context (see e.g., Lounsbury, 2008). The institutional logics concept itself reflects multiple and competing logics in organisational operations (Lounsbury, 2008; Marquis and Lounsbury, 2007). Recently researchers have attempted to enhance the explanatory capacity of accounting applications in responding to institutional pressures by integrating the competing institutional logics (see e.g., Guerreiro et al., 2012; Hyvönen, et al., 2009; Kantola and JÄrvinen, 2012; Lander et al., 2013; Rautiainen and Järvenpää, 2012; Reay and Hinings, 2009). It is therefore apparent that the application of institutional logics in accounting research is still in the emerging stage in the literature, and, thus, Lounsbury (2008) proposes that there is a great potential to contribute in other accounting applications, in particular, management control practices. With reference to the competing institutional logics, organisational responses to sustainability may be driven by either organisational culture (e.g., Bansal et al., 2012; Linnenluecke and Griffiths, 2010), or, on the other hand, organisations may take sustainability decisions based on recommendations drawn from industry analysts. Thornton et al. (2005) categorized these two competing factors under the informal control mechanisms of corporate logics (organisational culture) and market logics (industry analysts). Prior researchers have suggested that organisational cultural influences the design and implementation of MCS (Henri, 2006) and the implementation sustainability practices (Crutzen, 2013; Linnenluecke and Griffiths, 2010). Wood (1991, p. 707) suggests that it is worthy to examine the role of organizational culture in mediating the transmission of ideas, support, information, and resources relevant to social responsiveness. Hence, this study contends that organisational culture would shape the manner in which organisations strategically respond to institutional pressures for sustainability. In contrast to the organisational culture logic, the study argues that strategic responses to institutional pressures for sustainability may also be influenced by 1 Instrumental approach to rationality indicates that social actors are willing to take any action that would enhance their interest with the institutional change regardless of constrains exert by the existing institutional arrangements, such as individual values, culture, community, law etc. (Lounsbury, 2008; Seo and Creed, 2002,). 5

6 the industry analysts or consultations recommendations. Consequently, this study proposes that organisations may use MCS as a means of strategically responding to institutional pressures for sustainability, and competing institutional logics would shape such strategic responses. The term management control has been developed as a multifaceted practice: however, in general, MCS imply the applications of systematic and formal procedures (Simons, 1995). Typically, MCS reflect three components: (i) specifying and communicating objectives, (ii) monitoring performance through measurements (feedback/control), and (iii) motivating employees to accomplish objective by linking reward systems to objective achievement (Lindsay, 1996; Norris and O'Dwyer, 2004; Otley and Berry, 1980). The conventional wisdom of implementing MCS has been to provide information in enhancing technical and operational efficiency through planning and control (Burns and Scapens, 2000). Nevertheless, researchers (e.g., Burritt and Schaltegger, 2010; Durden, 2008; Gond et al., 2012; Norris and O Dwyer, 2004; Otley, 1994) contend this narrow focus nature of traditional MCS that merely based on shareholders financial interests that ignores the broader stakeholder needs, such as social, environmental, and economic concerns. In fact, organisational success is not merely based on technical and operational efficiency, but gaining social legitimacy is also essential (e.g., Abernethy and Chua, 1996; Järvinen, 2006). However, unfortunately, conventional management control approaches neglect sustainability issues as long as they are not directly expressed in monetary terms (Schaltegger, 2011, p. 341). Thus, organisations are expected to choose and use MCS by strategically understanding the environment in which it operates to better serve stakeholder needs (Merchant and Otley, 2007). According to Merchant (2012), sustainability is one of the prominent concerns that practitioners and organisations have been struggling to deal with, which in turn management accounting researchers are expected to contribute in resolving such complexities. Durden (2008) stressed that MCS should support practitioners in achieving not only shareholders, but all stakeholders goals including social responsibility. Contributing to this perspective, the extant literatures have largely focused on the role of management control in the environmental aspects (e.g., Bennett et al., 2011; Burritt et al., 2009; Burritt et al, 2010; Burritt and Saka, 2006; Henri and Journeault, 2010; Herzig, et al., 2006, 2012). In fact, as the role of MCS in sustainability is still in the emerging stage in the literature, it requires widespread research attention (e.g., Crutzen et al., 2013; Merchant, 2012; Rodrigue et al., 2013; Roth, 2008). Responding to this demand, Schaltegger (2011) introduced the concept of sustainability management controls based on sustainability balanced scorecard that delineates how to use key performance indicators and related information in corporate sustainability. Gond et al. (2012) examined diagnostic and interactive use of MCS in configuring sustainability into organisational strategies, and compared the traditional MCS with sustainability control systems. The growing awareness and concerns on the organisational impact of sustainability implications, particularly social and environmental impacts, have been influencing organisations to account and manage MCS, such as performance measurement systems (e.g., Gray and Collison, 2002), environmental performance indicators (Rodrigue et al., 2013), and sustainability strategy (Arjaliès and Mundy, 2013). While the interest on the role of management accountants in sustainability is growing, todate, limited research attention has been given to understand how organisations use MCS in strategically responding to institutional pressures for sustainability. For instance, CIMA 6

7 (2010, p. 2) emphasized that failure for management accountants to get involved now, when key decisions are being taken in areas like carbon trading and compliance with new climate change related regulations, could result in far higher costs, lost opportunities or reduced competitiveness. Further, Epstein (2010, p. 18) calls for further research indicating much research is also needed on the evaluation of stakeholder impacts and the integration into management decision making. By examining how management controls influence managers social responsive decision making, Norris and O Dwyer (2004, p. 176) also highlight that in order for corporate social responsiveness to prevail it therefore needs to be supported by a management control system which promotes or institutionalises decision making in this holistic vein. The adoption of MCS in respond to institutional pressures for sustainability is more likely to be an imperative managerial task for the achievement of competitive advantages by fulfilling stakeholders goals. However, in order for an organisation to operate in a socially responsible manner an integrative approach is required where there is alignment and fit of both external and internal social information needs (Durden, 2008, p. 677). Hence, it is apparent that the insignificant attention given on the role of MCS in sustainability highlights the scepticisms in the context. Consequently, the study aims to address following research questions. (i) (ii) (iii) how organisations strategically respond to institutional pressures for sustainability? how organisations use MCS in strategically responding to institutional pressures for sustainability? how competing institutional logics shape organisational strategic responses to institutional pressures for sustainability? 2.2 Theoretical foundations New institutional sociology NIS posits that the organisational survival is primarily based on conforming to social norms of acceptable behaviours because it promotes the success and survival of organisations (Covaleski and Dirsmith, 1988; DiMaggio and Powell, 1983; Meyer and Rowan, 1977). Therefore, the fundamental of the NIS is that organisations tend to become isomorphic by complying with the common institutional environment in attaining legitimacy (DiMaggio and Powell, 1983). Further NIS emphasises on legitimacy, the embededness of organizational fields, and the centrality of classification, routines, scripts, and schema (Greenwood and Hinings, 1996, p. 1023). DiMaggio and Powell (1983) proposed three mechanisms of institutional isomorphic changes, namely coercive, normative, and mimetic isomorphism. Coercive isomorphism is based on political influences and the problems of legitimacy (DiMaggio and Powell, 1983, p. 150), and, thereby institutions directly impose coercive pressures on target organisations. Sustainability coercive pressures may derive by imposition of regulations to control environmental pollutions, payment of minimum wages, and imposition of penalties on the violation of environmental and labour laws (e.g., Bansal, 2005; Clemens and Douglas, 2006; Colwell and Joshi, 2013). From DiMaggio and Powell s word (1983, p. 150), for instance manufactures adopt new pollution control technologies to conform to environmental regulations. Organisational inability to comply with coercive pressures would cause negative consequences, such as loss of earnings, a damaged reputation, or cancellation of license to operate (Bansal, 2005). 7

8 Mimetic isomorphism addresses organisational approaches to cognitive and socially established aspects. According to DiMaggio and Powell (1983), mimetic isomorphism underscores organisational voluntary imitation of highly legitimate organisations in the industry as a way of minimizing environmental uncertainties. DiMaggio and Powell (1983, p. 152) state that organisations tend to model themselves after similar organisations in their field that they perceive to be more legitimate or successful. According to Bansal (2005), organisations tend to capitalize the success of peers through imitation. Sustainability mimetic pressures include the modeling of energy efficient technologies, environmental friendly policies and corporate social responsibility practices implemented by peer organisations. Normative isomorphism focuses on organisation s social obligations, responsibilities, and conduct. DiMaggio and Powell (1983) note that organisations become socialised when they collaborate with peer organisations through the memberships and networks with professional and trade associations. Normative processes related to sustainability include the compliance with industry trade associations and professional bodies to implement environmental friendly businesses as a way of reflecting the industry membership. Typically, management accounting researchers have employed NIS to understand the impact of institutional pressures on changes in management controls (e.g., Hussain and Hoque, 2002; Munir et al., 2013). NIS examines the effect of both external (macro) and internal (micro) institutional context to understand changes of organisational practices from a general perspective (Burns and Scapens, 2000; Hussain and Hoque, 2002). This study draws on the NIS as it explains the organisational response to institutional pressures for sustainability (see e.g., Ball and Craig, 2010; Bansal, 2005; Colwell and Joshi, 2013; Delmas and Toffel, 2008). Bansal (2005) rationalised that institutional theory is relevant to sustainable development as (i) individual value and belief systems provides a considerable judgement on corporate commitment towards sustainability, (ii) actors diverse views on sustainability provide a comprehensive platform to establish norms and common beliefs, and (iii) sustainability characteristics increasingly become institutionalized through regulations and international agreements. Ball and Craig (2010, p. 283) also noted that neo-institutional theory can increase understanding of an organisation s general response to social and environmental issues and social activism. More particularly, it can frame an organisation s accounting responses. Further, prior researchers have employed institutional theory to examine organisational responsiveness towards the sustainability related practices conceptually (Delmas and Toffel, 2004; Jennings and Zandbergen, 1995), and empirically (Bansal, 2005; Bansal and Roth, 2000; Delmas and Toffel, 2008; Sharma and Henriques, 2005) Strategic responses to institutional pressures While the NIS widely describes that organisational success is a function of conforming to the institutional environment, on the other hand, the theory has also been criticised for its inability to expound organisational self-interest and active agency in their reactions to institutional pressures (e.g., Abernethy and Chua, 1996; Lounsbury, 2008; Oliver, 1991). Further, Ball and Craig (2010, p. 292) comment that new institutionalism fails to answer several central questions about people in institutions, and about social order. Therefore, organisational response to institutional pressures for sustainability is more likely to be based on internal dynamics, interests and agency determinants. In order to understand organisational rational responses and practical variations towards the institutional pressures, the study incorporates strategic responses to institutional process framework (Oliver, 1991), 8

9 and institutional logics concept (e.g., Friedland and Alfords, 1991; Lounsbury, 2001, 2002, 2007, 2008; Thornton and Ocasio, 1999; Scott et al., 2000). Oliver s (1991) strategic response framework which is based on institutional and resource dependence theories explains organisational strategic preferences for institutional pressures by outlining practical organisational phenomenon, such as self-interest and active agency. The framework emphasises that organisations are not merely driven by long standing economic rationality but social legitimacy as well. Oliver (1991) further clarifies that organisations do not irrationally conform or acquiesce to institutional pressures; rather, may attempt to strategically respond by implementing different resistance strategies. Oliver (1991, p. 159) highlights that logical organisations strategically respond to institutional pressures by raising the questions of why these pressure are being exerted, who is exerting them, what these pressures are, how or by what means they are exerted, and where they occur. Accordingly, organisational strategic responses to institutional antecedents of cause, constituents, content, control, and context are predicted by five responses, namely acquiescence, compromise, avoidance, defiance, and manipulation (Oliver, 1991). Acquiescence proposes that organisations are motivated to comply with institutional pressures as a way of enhancing legitimacy and social support. The conformity is described by three tactics namely, habit, imitation, and compliance. Compromise demonstrates how organisations strategically respond to institutional pressures in a balanced approach by means of balance, pacify, and bargain. Avoidance explains strategic responses that organisations tend to prevent from compliance in advance. Manifested by concealing, buffer, and escape, organisations avoid institutional pressures by implementing modifying strategies. Defiance respondents totally deny the institutional pressures. Characterised by dismissing, challenge, and attack, organisations with defiance opinions actively resist the institutional pressures. Manipulation reflects the optimum level of active strategic resistance to institutional pressures. In this circumstance, the organisations motivate to co-opt, influence or controls the pressures Institutional logics: institutional rationality and practical variations Emerging themes of institutional analysis have further intensified organisational responses and behaviour towards the institutional environment. Institutional logics, primarily conceptualised by Friedland and Alford (1991), identify the society as an integration of interinstitutional systems reflecting diverse institutional orders where individual institutions depict unique rationalities. Thornton (1999, p. 804) defined the concept of institutional logics as the socially constructed, historical pattern of material practices, assumptions, values, beliefs, and rules by which individuals produce and reproduce their material substance, organize time and space, and provide meaning to their social reality. The central logic characterised by individual institutions enables and constrains the behaviour of individuals, organisations and society (Friedland and Alford, 1991; Thornton and Ocasio, 2008). Further, the concept of institutional logics explains the institutional rationality prevailing in the institutional context (Guerreiro et al., 2012; Lounsbury, 2008) shapes organisational responses to institutional pressures. Researchers contend the long-standing proposition of institutional stability and homogenisation expected by the NIS to that of heterogeneity and practical variations based on the perception of institutional logics (e.g., Lounsbury, 2002, 2007, 2008; Marquis and Lounsbury, 2007; Seo and Creed, 2002). Types of diverse institutional rationalities include 9

10 markets, corporations, professions, states, families, religions, and communities (Guerreiro et al., 2012; Thornton, 2004). Accordingly, the study argues that organisational strategic responses to institutional pressures for sustainability is not merely explained by strategic response framework, but is also constrained by the prevailing competing institutional logics. Lounsbury (2008, p. 351) emphasised the importance of studying competing logics as the given a more intent focus on actors, one important new direction for institutional analysis is the study of organisational heterogeneity and practical variation. This study examines the impact of competing institutional logics of organisational culture and role of industry analysts to understand organisational practical variations in strategically responding to institutional pressures for sustainability using MCS (see Thornton et al., 2005). 2.3 Framework of the study Figure 1 depicts the framework of the study. The framework integrates the theoretical perspectives of institutional pressures, strategic responses to institutional pressures, components of MCS, and competing institutional logics. Following DiMaggio and Powell (1983), the study identifies institutional pressures for sustainability in terms of coercive pressures, normative pressures, and mimetic pressures. Strategic responses to institutional pressures for sustainability are drawn from Oliver s (1991) typology of strategic responses to institutional process which categorises strategic responses as acquiesces, compromise, avoid, defy, and manipulate. The three components of MCS include: (i) specifying and communicating objectives, (ii) monitoring performance through measurements (feedback/control), and (iii) motivating employees to accomplish objective by linking reward systems to objective achievement (Lindsay, 1996; Norris and O'Dwyer, 2004; Otley and Berry, 1980). Finally, competing institutional logics that shape the strategic responses to institutional pressures are termed as organisational culture and the role of industry analysts (Thornton et al., 2005). The framework demonstrates how different institutions influence sustainability pressures, and on the other hand, the dotted arrow reflects the organisational strategic responses to such pressures. The second association portrays how the organisational use of MCS supports the strategic responses to institutional pressures for sustainability. Finally, it shows how the competing institutional logics impact on strategic responses directly and through MCS. Figure 1: Framework of the study Institutional pressures Coercive pressures Normative pressures Mimetic pressures Strategic Responses Acquiesces Compromise Avoid Defy Manipulate Components of Management Control Systems Communicating objectives Monitoring performance Motivating to accomplish goals 3. Research method Competing Institutional logics Organisational culture Vs. Role of Industry analysts 3.1. Research design The study followed case study method that allows a holistic investigation on the organisational strategic responses to institutional pressures for sustainability. Case studies 10

11 provide a specific platform to examine how and why nature contemporary research phenomenon within its real life context (Yin, 2013). Further, case studies undertake depth investigations in a specific organisation in obtaining research evidence from different sources (e.g., Ferreira and Merchant, 1992; McKinnon, 1988; Scapens, 1990; Yin, 2013). In particular, as the use of MCS in sustainability is still in the emerging stage in the literature, the case study method is more suitable to establish the concept compare to other research methods. Further, existing few empirical studies on sustainability and control systems (e.g., Durden, 2008; Morsing and Oswald, 2009; Norris and O Dwyer, 2004; Rodrigue et al., 2013; Riccaboni and Leone, 2010) have also followed case study methods Contextual significance The study was undertaken in the apparel manufacturing industry. The apparel manufacturing industry is primarily based on low wage countries in Asia and Latin America with widespread supply chains across continents. The industry plays a significant role in the world market by supplying increasing demand for ready-made garments. Further, the apparel manufacturing industry has been an excellent example to realize how nations that finally consume products have transferred sustainability issues to manufacturing nations. On the other hand, the industry has also been highly criticized for unsustainable manufacturing practices, specifically manufactures based in the developing economies context (Ascloy et al., 2004). Major sustainability issues in the industry claim for poor working conditions, labour exploitations, gender discriminations, employment of child labour, human rights violations, issues with carbon and energy footprints, unsustainable waste disposals mechanisms, excessive usage of chemicals, and unequal profit distribution throughout the supply chain, to name a few (e.g., Ansett, 2007; Ascloy, et al., 2004). Excessive availability of cheap labour, flexible government regulations and less manufacturing cost mainly facilitate to locate apparel manufacturing factories in developing countries. The study identifies Sri Lankan apparel manufacturing industry as a suitable research context due to its significant contribution to the world apparel market and to the country s Gross Domestic Production and employment. For instance, (i) the country is among the top apparelproducers in the world relative to its population, (ii) more than 50 per cent of country s export income generates from the apparel sector, (iii) the apparel industry employs more than 15 per cent of country s workforce, (iv) increasing foreign investors interest on this sector due to the greater emphasis on sustainable manufacturing practices compare to other manufacturing countries, and (v) the industry s sustainability commitment and reputation for Ethical Business and Manufacturing Practices, and greater emphasis on the production of Garments Without Guilt campaign The case organisation The case study was conducted in a privately owned large scale apparel manufacturing Organisation which is headquartered in Colombo, Sri Lanka. The Organisation was selected based on theoretical sampling approach (Chua, 1996; Ferreira and Merchant, 1992; Scapens, 1990) by considering industry condition, sustainability practices, and Organisation s outstanding public image for the commitment towards the sustainability compare to similar type of organisations in the country. Special care was taken to select the Organisation that would provide sufficient resources and evidences to investigate the research theme which in fact ensures the validity of findings (e.g. Durden, 2008; McKinnon, 1988). The Organisation 2 Sourced from the Sri Lanka Apparels Web (2013). 11

12 is a major apparel manufacturer to most of the respected global brands. Currently the Organisation has 38 manufacturing facilities spread over ten countries. With the industry reputation as one of the largest manufacturers of intimate apparels, performance wear and swimwear, the Organisation s annual turnover surpassed AUS$ 1 billion by It employs over 55,000 people and also generates equal number of indirect employment opportunities. Therefore, the Organisation is an appropriate research site for several of reasons: (i) use of formal and informal management control practices, (ii) availability of specific managerial divisions for sustainability management practices, (iii) employment of professionals to manage sustainability projects and practices, (iv) has been implementing sustainability management practices for years with national and global recognitions and appreciations, such as from the United Nations, (v) reputation for innovations and industry leadership for sustainability initiatives, (vi) long term alliances and joint ventures with world leading apparel retailers, and (vii) outstanding public image for sustainability practices. Prior researchers reveal that larger and more visible organisations are highly inclined and influenced to implement sustainability strategies (Waddock, 2008), and use formal and tight management control practices (Widener, 2004) than in smaller counterparts. In fact, corporate philosophy, resources availability, the extent to which the local and global appearance and legal requirements may also determine such initiatives in large organisations. The researchers directly approached the Organisation by explaining the research aim and objectives, and the Organisation s contextual relevance to examine the proposed theme. Initial access was granted by one of the three divisions environmental sustainability team and other two divisions also facilitated the study subsequently. The researchers did not have any personal or professional relationships with the Organisations. In fact, getting access to the research site without personal relationships reduces the personal bias towards the outcomes, and on the other hand, enhances the reliability and validity of outcomes (McKinnon, 1988). 3.4 Data collection, variables, and analysis Following the commonly referred data triangulation (e.g., Chua, 1996; Ferreira and Merchant, 1992; McKinnon, 1988; Scapens, 1990; Yin, 2013), the study collected data from multiple sources, mainly semi-structured interviews, internal and publicly available documents, informal conversations, and plant visits. Semi-structured interviews were conducted with senior and middle level sustainability managers in November Semistructured interviews have certain credits in this nature of study: focused attention, conversational and flexible discussions, and exploration of new questions and ideas (Rodrigue et al., 2013). Informed by the confidentiality and ethical adherence of the research, participants responded freely by revealing sensitive and specific information. Out of the fifteen of total interviews twelve interviews were audio recorded, and three participants did not agree for audio recording. Detail notes of non-recorded interviews were taken to verify the record of data (McKinnon, 1988). Interview transcripts of the non-audio recorded interviews were sent to respective participants for checking and verification. Except one interview, other interviews were conducted in English. The interview that was conducted in Sinhala language, which is one of the national languages in Sri Lanka, was translated by the first author, a native Sinhala speaker, and was verified by a native Sinhala speaking doctoral researcher in social sciences. Table 1 depicts the demographic details of interview participants. Ten participants represent the senior and middle level sustainability managers from divisional head offices while the 12

13 rest of the five participants represent senior and middle level sustainability managers from manufacturing plants. Gender representation of participants includes four females and eleven males. Participants divisional representation consists of nine participants from the Division 1, four participants from the Division 2, and two participants from the Division 3. Interviews were conducted in the corporate head office, two divisional head offices, and three manufacturing plants by representing all three divisions of the Organisation. The study employed a sampling process to select potential respondents for interviews by informing the Organisation s contact persons (McKinnon, 1988). The sampling criteria included (i) senior and middle level managers whose job involvement directly relates to sustainability practices, (ii) by representing three major divisions of the Organisation, and (iii) with at least 2-3 years of experience in the organisation. The contacted persons of each division introduced the most relevant respondents at the division. By complying with ethical adherence of the study, the Organisation name, names and job titles of the interview respondents have been kept as much as possible confidential and anonymous. The participants positions, organisational representations, and time durations of interviews are presented in the table 1. Table 1 Details of respondents and interviews Designation Organisational Date of Representation Interview Duration Senior Manager 1 Division 1 04/11/ Senior Manager 2 Division 2 08/11/ Manager 1 Division 3 29/11/ Manager 2 Division 1 27/11/ Manager 3 Division 1 04/11/ Manager 4 Division 1 13/11/ Manager 5 Division 2 06/11/ Executive 1 Division 1 04/11/ Executive 2 Division 3 29/11/ Executive 3 Division 1 05/11/ Executive 4 Division 2 20/11/ Executive 5 Division 2 06/11/ Executive 6 Division 1 04/11/ Executive 7 Division 1 13/11/ Executive 8 Division 1 04/11/ Total time duration The interview guide encompasses four key themes by highlighting the focused research issues of the study as depicted in the study framework (see e.g. Alvesson, 2003; Dillard and Reilly, 1988): institutional pressures for sustainability, strategic responses to institutional pressures, use of MCS in strategic responses to institutional pressures, and influence of competing institutional logics. In addition to interviews, one day site visit was undertaken to the organisation s flagship green factory which is regarded as the world s first purpose built carbon neutral lingerie factory certified by the LEED Platinum certification of the US Green Building Council (Ralapanawe, 2011). The site visit was also facilitated with presentations about the Organisation s sustainability practices followed by extensive discussions and informal conversations with operational and factory managers. These informal conversations were very useful to further understand and clarify the Organisational sustainability practices. In addition to that, two observational visits were also undertaken to the rest of the manufacturing plants where the interviews were conducted. In fact, plant visits gave an important opportunity the researcher to observe how the Organisation practices sustainability in the real life context. Internal and publicly available documents referred in the study 13

14 include: sustainability reports, annual Communication on progress (COP) reports submitted to the UNGC, external sustainability research publications on the Organisation, sustainability policy documents, in-house magazines, news archives, and web information. In order to ensure the consistency of participants interview responses, interviews were compared with the documents obtained from internal and external sources (McKinnon, 1988). Further, the site observations also largely assisted to enhance the reliability of respondents responses and information appeared on variety of documents (McKinnon, 1988). The Nvivo qualitative data analysis software was employed for coding data. First, codes were identified from interview transcripts, and then analysis of corporate documents were incorporated into identified codes. Based on that, five main codes, namely current sustainability practices of the organisation, institutional pressures for sustainability, strategic responses to institutional pressures, use of MCS in strategic responses, and influence of institutional logics were identified including sub codes for each main code. The main codes were then analysed using within-category analysis method where sub codes were analysed separately, and then main codes were summarised as the integration of sub codes. Finally, relationships and trends were identified and compared with other main codes. 4. The Case Study 4.1. Sustainability practices at the case Organisation The Organisation has been practicing sustainability from its inception. The interview participants and documents analysis reveal that the Organisation engages in sustainability by understanding of the true meaning of sustainability rather than merely following a taken for granted approach or as a marketing slogan or branding campaign. The Organisation s annual COP report highlights that, During the past 25 years of operation, [the Organisation] has gradually evolved from a socially responsible corporate citizen to an organization that has strongly committed to creating sustainable livelihoods for their associates, and the communities which we operate in. It was never part of a plan, it was never strategic marketing. For [the Organisation], community endorsement has always been our licence to operate (COP, 2012, p. 56). Most of the interview respondents highlighted that the Organisation was the pioneer to initiate sustainable apparel manufacturing practices in the industry and to embed the apparel industry with professional qualities and social dignity. For instance, the Executive 4 stressed that the Organisation approached to sustainability practices primarily with the aim of changing the negative social perspective given to the apparel industry in 1990s. While it was the leadership that initiated sustainability practices with a strong belief that it is the right thing to do, respondents also informed that the external institutional influences have further intensified leadership s sustainability inspirations. Thus, it is the blend of external and internal institutional forces that drive the sustainability practices in the Organisation. The Organisation s sustainability agenda includes all three sustainability practices: environmental, social, and economic aspects. With the gradual improvements, the Organisation s key environmental sustainability practices are basically categorized into two streams: sustainability practices implemented external to the Organisation and internally. According to the Executive 3, external practices are more focused on the environmental 14

15 Corporate Socially Responsible (CSR) projects, such as working with schools and community to train on waste management projects and enhancing environmental friendly attitudes among young communities. In particular, external environmental sustainability practices are largely driven by the Eco-Go Beyond programme which is implemented with the collaborations of UNICEF and the ministry of education. Internal environmental sustainability practices consist of eight work streams: energy, water, emissions, waste, reporting, standards, products, and branding. The figure 2 depicts the Organisation s environmental sustainability strategic framework. Figure 2 The Organization s environmental sustainability strategic framework the to that the om run ating to to to to Source: COP (2012, p. 36) Social sustainability initiatives include various internal and external programmes that ensure employees receive the best facilities in all aspects, such as complying with labour laws, worklife balance, skills development, career advancement, rewarding excellences, wages, health, safety and wellbeing. In particular, the Organisation has launched a specific programme called the Women Go Beyond with the aim of empowering women who represent more than ninety per cent of the Organisation s work force. From women empowerment to environment sustainability, from creating opportunities for rural youth to sustainable education development, from uplifting the country s health infrastructure to strengthening sports facilities in rural schools, [the Organisation] has been creating and nurturing many sustainable initiatives across the country (COP, 2012, p. 56). The Organisation contributes to the economic sustainability by various means, such as operating a successful business that significantly contributes the country s gross domestic production, distributing income among over 55,000 employees and their dependents, contributing to the livelihood of indirect employees, and establishing manufacturing plants in the rural area. For instance, with the support of the USAID, recently the Organisation initiated to build two of their new manufacturing bases in the war affected areas in the Northern Province in Sri Lanka. The COP (2012, p. 11) explains the objective of the project: 15

16 The project is supported by USAID, as part of its Public-Private Alliances program. Collaborations such as this are helping recently-resettled populations in recovering regions resume their livelihoods. [The Organisation] is positive about the potential in [the City A in the Northern Province] and the great opportunity this affords us to progress together by providing more than just job opportunities, but working towards the prosperity of the community. Almost all the participants informed that the Organisation s sustainability practices are well ahead not only to the Organisations in the apparel industry, but the country at large. For instance, a leading global cement supplier to build the flagship Eco-Factory mentions the viability of the all three sustainability aspects of the factory: We must not forget that [the Eco-Factory] is a true proponent of sustainability because it combines not only environmental and social performance, but is also economically successful against stringent competition from other, less sustainability-minded manufacturers in the garment industry. [The Eco-Factory] clearly shows that a company can indeed do well by doing good (The Cement Limited, 2008, p.5). The Organisation has been rewarded by the industry and commended globally for the strong commitment towards the sustainability. For instance, the Globe Award for Sustainability Innovation in 2010, LEED Gold certification by the U.S. Green Building Council for New Construction under LEED Version 3 (2010), Award for Carbon Footprint Accounting at Asia s Best CSR Practices in 2012, appreciations from the UN Global Compact, to name a few. In summary, the Organisation implements sustainability practices encompassing all three principles with a strong internal commitment and by taking into account the external sustainability expectations as well. 4.2 Strategic responses to institutional pressures for sustainability Strategic responses to coercive sustainability pressures Coercive institutional pressures that influenced the Organisation to implement sustainability practices include regulatory pressures generated by the government, pressures from transnational organisations, and board of directors sustainability directions. Sustainability pressures generated by regulatory bodies Participants indicated that the regulatory pressures related to environmental sustainability are primarily generated by the Central Environmental Authority (CEA), Board of Investment (BOI), and Sri Lanka Sustainable Energy Authority (SLSEA). The CEA requires organisations, depending on their pollution potential, to compulsorily obtain Environmental Protection License (EPL) in accordance with the National Environmental Act. The BOI is responsible for promoting country s investment climate where the organisations registered under the BOI should comply with prescribed regulatory requirements by the authority. As an energy conservation authority, the SLSEA has initiated an energy management scheme by proposing manufacturing organisations to appoint energy managers with the aim of establishing systematic energy management programs under an extraordinary gazette. The regulatory pressures imposed on social and economic sustainability practices mainly include labour laws, such as payment of minimum wages, overtime payments, working hours, 16

17 minimum employment age, health and safety conditions, employee welfare, employee grievances such as harassment and abuse. When asked about the Organisational responses to regulatory pressures, the Senior Manager 1 emphasised that the Organisation s rationality behind the practicing of sustainability is not the regulatory pressure at all; however, the Organisation is passionate to comply with sustainability as a habit. the basis of our sustainability practices is not the regulatory pressures it s not the reason we do sustainability, and we are ahead of the regulatory requirements. The whole idea is we are not doing it [sustainability] because of regulatory requirements. (Senior Manager 1) Most of the interview participants and Organisational document analysis highlight that while the Organisation fully adheres to regulatory requirements, in many situations the Organisation is over complying with them. For instance, when the government reduced the employment entry age to 16 years in 2011, still the Organisation keeps the minimum employment entry age as 17 years. We exceed all applicable regulatory requirements and implement programmes and processes to achieve greater protection, and develop innovative programmes that provide safeguards for the community, the workplace and environment. (COP, 2012, p. 19) In responding to contradictory institutional demands, the Organisation has also negotiated with relevant third parties to fulfil customers excessive requirements by compromising the excess use of resources in government owned industrial zones where manufacturing plants are located. However, the respondents stressed that the Organisation always obeys and committed to sustainability standards (Manager 1). At the time of building the Eco-Factory, the law did not have provisions for consumers to buy renewable energy from outsiders other than the Ceylon Electricity Board (CEB). In that situation, the Organisation was able to force regulators through influential people with the support of consultants to make special arrangements. For instance, The energy supply system in Sri Lanka is another locked-in factor that inhibits low carbon innovation. Although there is expressed intention to move national electricity supply away from the monopoly CEB, there is, as yet, no framework that enables consumers to buy their electricity from anyone else, and CEB generates electricity from imported coal, supplemented with some hydro the team and their consultants have good personal connections with influential people, they were able to create a special arrangement to supply them with renewable energy (Reason et al., 2009, p. 66). As indicated by the Manager 3, while the regulatory pressures have motivated the Organisation to some extent at the very beginning, it is apparent that the Organisation has developed a passion of doing sustainability practices going beyond the regulatory requirements. Sustainability pressures from transnational organisations The Organisation has also been influenced to implement sustainability practices by various pressures generated by transnational organisations, such as ILO, ISO, UNGC, WRAP, and Greenpeace. Pressures generated by the ILO are most likely to have compulsory obligations towards the sustainability practices. A number of respondents (e.g., Executive 3 and 4) 17

18 informed that ILO has the strictest regulations, such as minimum wages and ages, working conditions, and health and safety towards the apparel manufacturing industry compare to other transnational organisations. The Executive 4 commented that; Because since there is a very big requirement from our major customer, on the labour aspect we do consult them [ILO] and we do get their feedback because as customers what they force is ILOs when it comes to labour issues it s compulsory...there are some instances that say our customers require something and ILO says something, so always the ILO supersedes the customer requirements. Sometimes it s lean and sometimes it s most stringent but mostly the ILO is the superior one. As all the manufacturing facilities of the Organisation are certified by the ISO environmental management systems certification, it has been a compulsory obligation for the Organisation to implement and to comply with various types of environmental management standards required by the ISO. Most of the respondents pointed out that ISOs are very important for the implementation of sustainability practices, and, on the other hand, requirements from ISOs are mostly compulsory that Organisation has to comply with. The Executive 2 noted that in some situations ISO provides very useful guidelines that support the implementation of other sustainability practices as well. The Organisation is signatory to the UNGC since 2003 and, in turn, the Organisation has been continuously submitting the COP annually by adhering to the UNGC reporting requirements under the headings of human rights, labour, environment, and anti-corruption. Importantly, the Senior Manager 1 highlighted that while the UNGC influences the way how the Organisation practices sustainability, it does not determine what the organisation does. [The Organisation] has always strived to achieve the ten principles of the Global Compact through not only our day to day operational practices but also through specific target projects and programmes. The Global Compact gives us the ability to be exposed to the wider global sustainability objectives and to align ourselves to these in a more meaningful manner. As signatories we will continue to strive for greater excellence as a corporate citizen (COP, 2010, p.31). Board of directors directions towards the sustainability Interestingly, all the interview respondents revealed that it is the board of directors commitment, interest and leadership that primarily drive the sustainability practices in the Organisation. Respondents underlined that board s directions to implement sustainability practices are very strong and influential. Further, respondents also emphasized that appointing a board member who is responsible for sustainability at the top apparel board itself shows the board s influence for sustainability practices. There is a board member; our managing director is a part of [the Organisation s] board. He is the person who is driving sustainability for the entire group. That s a big representation which he takes the sound. (Executive 4) The board takes strategic decisions to practice sustainability with a robust policy implementation system of Hoshin Kanri 3. With Hoshin Kanri, the board directs a strong monitoring mechanism to ensure that sustainability strategic plans are properly implemented 3 Hoshin Kanri is a form of corporate-wide management that combines strategic management and operational management by linking the achievement of top management goals with daily management at an operation level (Witcher and Butterworth, 2001, p. 651). 18

19 and targets are achieved. Most of the participants (Executive 7 & 4, Manager 1) emphasised that board s directions to implement sustainability practices are compulsory and everyone has to comply with Hosin Kanri directions which are derived from the top apparel board. Primarily the board sets sustainability objectives through Hoshin Kanri and forwards to the next levels for the design of strategies to achieve objectives. It is apparent that the board pressure to achieve sustainability targets are very strong and the management teams who are responsible for implementing sustainability practices have been advocated with well-structured sustainability strategic plans. Respondents also commented that strong board leadership towards the sustainability is crucial without which it is impossible to implement bottom-up practices due to Asian cultural constraints. Accordingly, the board s directions to implement sustainability practices seem to have a very strong and positive impression among managers as they are properly designed and implemented through clear sustainability policies. Respondents commented on that: Our approach to the sustainability quite come from the board what we get from them is the intent. Intent is that how serious they want us to look into long term vision and where we need to go, in terms of articulation. And then what we do is we develop that into specific plans and strategies and convert them into actions. If you look at the amount of money that we actual spend annually, we can t do that without a proper board support. (Senior manager 1) In addition to the above major coercive pressures that influence the Organisation to implement sustainability practices, respondents also highlight the increasing influence coming from the community and suppliers as well Strategic responses to mimetic sustainability pressures The Organisation mimics sustainability pressures generated by various means, such as (i) exampling customers 4 sustainability best practices, (ii) following sustainability best practices implemented by leading companies in the apparel manufacturing industry and multinational corporations, (iii) benchmarking group level best practices, and (iv) learning sustainability best practices from sustainability forums and experts. Exampling customers sustainability best practices Modelling and imitating sustainability best practices implemented and required by customers has been one of the key influential factors that enhances the Organisational sustainability initiatives. Respondents informed that adopting what customers are doing is a mutual relationship where both parties benefit. On the other hand, it has also been the practice of customers to share whatever the new systems and sustainability practices they implement in their global manufacturing networks. Benchmarking may be from our customers, [Customer A] is leading. We constantly partner with them [customers] and we learn a lot from them. For example they have comprehensive chemical management procedures. We have observed how they do it and 4 Customers are referred to big retailors as the case Organisation is a manufacturing Organisation that does not sell products to end users. 19

20 now we are having our own system We are adapting how they are evaluating eco factories. So we have similar models here (Manager 3) Interestingly respondents (Manager 4) informed that what the Organisation is doing currently is mostly reflected by what customers are doing and what they need from the Organisation. In certain situations customers sustainability demands are more likely to be compulsory requirements. Further, customers also expect to enhance their corporate image towards sustainability by motivating manufactures to adhere with sustainability practices. It is interesting to note that how significant was the influence of the Eco-Factory, which was built as a response to customer s demand, to the future of the Organisation s sustainability agenda. According to the Senior Manger 1, it was the Eco-Factory that made an inspirational turning point for the Organisation to develop a group level sustainability framework. The Organisation has also been proactively bargaining with customers to enhance the sustainability practices by proposing better sustainable solutions in situations such as destroying excess garments as a way of protecting brand and market. The following example clarifies how the Organisation responded to customer demands with the aim of enhancing the sustainability practices. There was a customer requirement that you need to destroy extra garments to protect the brand and market. Destroying for them is burning; so we had to go and say that no we are not going to burn but we will cut them into small pieces so that you can t use them for the intended purpose. So there was a negotiation there and then implemented it. It was actually how we who implemented the more sustainability practices. (Executive 3) In another situation where customers asked the Organisation to certify that garments manufactured by them are free from hazardous chemicals, the Organisation has avoided to certify as they only contribute almost 20 per cent of the value chain. This fact was revealed by several respondents, and the Organisation explained their capacity within the value chain and inability to provide such an assurance for the entire product for which they are not accountable. The Senior Manager 1 explained the situation; one of the new things that s going on is the brands [customers] want their garments to be free of hazards chemical. They want us to certify that garments are made free of hazards chemicals. The problem is that hazards chemicals don t come from here. So, we don t have as much as leverage to look what [suppliers] are doing and giving. So this was a real issue to be sorted out. Because for the brands, they say that we buy from you, so, you tell us the story of hazards chemicals, but [suppliers] are the people who provide things with chemicals. That s a contradictory situation. We said no, but we can assure that we don t use hazards chemicals, but we can t give you an assurance of another supplier that they supply hazards chemicals free things. Exampling sustainability best practices implemented by leading companies Participants also revealed that the Organisation considers sustainability practices implemented by leading organisations in the industry, particularly, industry competitors. They informed that it has been a crucial task even for competitors to implement sustainability practices due to the increasing demand for green products. A respondent (Manager 1) also pointed out that those leading organisations in the industry also perform well in sustainability and there is a big competition among those organisations for sustainability awards awarded by the government and international bodies. 20