1. Institutional Theory
It describes how external influence from the government, media and public associations impact organizational behaviour and decision-making and how such pressure gradually creates institutional rules. Organisations seek survival and legitimacy by conforming to critical institutional rules which stem from coercive, mimetic and normative isomorphic drivers. Coercive isomorphism explains how government regulators with who the organization is connected to influences the organisation‘s response to pressure exerted. Mimetic isomorphism occurs in when organisations imitate other successful and legitimate organisations in the industry
to reduce cognitive uncertainty.
In normative isomorphism, organisations that comply with standards, legislation and societal norms are secured against the possible consequences of environmental and social misconduct, including penalties, protests, campaigns and sanctions. Institutional pressures can influence businesses and supply chains to adopt more socially and environmentally responsible practices. These stem from state regulations, industrial selfregulation, monitoring organisations for example NGOs, institutional investors and the media, business publications and education, trade or employer associations and formal processes of stakeholder engagement.
2. Stakeholder Theory
Stakeholders can be classified as primary or secondary. This presents a classification based on the dimensions of power, urgency and legitimacy to help unpack stakeholder saliency. With regard to these three attributes, the spectrum of stakeholders starts with definitive stakeholders on one side and ends with non-stakeholders on the other side. Stakeholders can influence organisations to follow specific actions, including sustainability initiatives and voluntary integration of sustainability into business operations. Organisations are compelled to satisfy the interests of their primary stakeholders to ensure the viability of their business operations. Central to the stakeholder theory interpretation is that these demands and expectations of stakeholders should be considered as an input for implementing and managing sustainable supply chains. This explains how the sustainability commitment of stakeholders can be the primary driver for the adoption of sustainability practices at the supply chain level.
Poor environmental performance leads to poor company‘s relationship with its stakeholders. This will affect the firm‘s reputation and shareholders will suffer financial losses on their investments if a firm is found liable to environmental damage and this is due to stakeholders such as customers shunning the concerned firm.
3. Resource Based Theory (RBT)
The RBT suggests how valuable, rare and inimitable resources can become as the basis for competitive advantage of firms. The natural resource-based view of organisations, highlights the sustainability risks and opportunities, and discusses how environmentally and socially sustainable economic activities can build competitiveness for organisations. Sustainability initiatives such as environmentally friendly production lines can lead to long-term sustained competitive advantage for firms.
From an organisational perspective, the resources including assets, capabilities, competencies, processes and know-how are necessary to implement strategies and improve competitiveness both at the firm and the supply chain levels. The effective utilisation and sharing of resources and capabilities between the supply chain entities, as posited by more recent RBT thought can be seen as a competitive advantage that enhances the implementation of sustainable practices across the supply chain
