The question is as follows:

NOKIA seeks to extend its sustainability strategy into its supply chain. Thus Chinese suppliers have to fit with criteria established by NOKIA.

  • Is this an effective way of diffusing sustainability criteria?
  • How would another governance mechanism improve on this?

NOKIA is a Finnish multinational telecommunications corporation and so it must be following the ISO 14000 series, which means being in compliance with the environmental legislation of each country in which the company has activities.  So NOKIA is a private market based organization, a self organized system with its own environmental management program.

  • It appears to me that when NOKIA is asking from the Chinese suppliers to follow a certain EMS, it is forcing a coersive pressure to them to behave according to the standards they set.  But on the other hand NOKIA is dependent on the suppliers, since the Chinese suppliers have the know-how  to produce NOKIA’s products and could sell them to another company if NOKIA will push them too much.  So NOKIA cannot demand from them to apply sustainability criteria.  Both systems are dependent to each other.   Probably the Chinese suppliers are in compliance with the minimum environmental restrictions in order to be eligible for  an ISO certificate.  But since the legislation is not strict, this has no real positive effects in improving the quality of the environment.  So, in this case having NOKIA asking them to adopt policies beyond-compliance it is an effective way of diffusing sustainable criteria.  Of course it is not expected that the industry’s policy will change overnight, but still one step at a time is significant in order to achieve the final goal.  So, I believe that for develiping countries with loose legislation it is effective to have e.g. a corporation asking for more strict policies.
  • Although it is effective, it is only effective to some extent.  It could be more effective if the government was mainly regulating and so legislation was more stringent and the  fear of a fine existed.  So legislation should be redrafted, but to a level that will be feasable to be applied by the industry.  Also, even without a government regulating system dominating, it would be practical for the industry to follow the regulations of an international organization that would have rules that were applied globally.  This international organization should be more specific than ISO 14000 and taking more into account developing countries.  So then we would have the trend of  isomorphism, i.e. the industry would comply, because it would know that it is a model that has succeeded to other industries and it is globally accepted and enabling trade.  Nevertheless, I am in favor of compulsory standards rather than voluntary, since everybody would have to comply.