Why Buy the Cow when You Can Get the Milk for Free? The Transparency Paradox of Private Governance

One of the many heralded attributes of private governance initiatives is their capacity to increase transparency, which overall has proven to be a driver of increased socially and environmentally sustainable business practices in supply chains. At the same time, transparency runs counter to traditional business logics about competitive advantage and also poses reputational risks to companies. This presents the transparency paradox of private governance: how do actors manage the paradox between the value proposition offered by private governance initiatives to further sustainability with their demands for transparency about companies (un)sustainability? This paper unpacks this dilemma empirically through the private governance of the Bangladesh apparel industry. It finds that firms which embraced the paradox through proactive management via a private governance initiative benefited from organizational learning and made fewer changes to their sourcing footprint. Companies which evaded the paradox through a reactive approach experienced greater changes to their sourcing yet had little to no organizational learning. The findings advance our understanding of the drivers, impediments and implications of private governance on supply chain sustainability