Achieving sustainability is not only a source of competitive advantage for businesses but
also projects a positive image among customer, investors and media. Hence, it has become a
primary goal of corporations to become sustainable. However, sustainability is only possible if
the entire supply chain is sustainable and not just the focal firm. Ensuring the entire supply chain
to act in a responsible manner requires tremendous effort, coordination and time. Audits have
become a source of verification and improvement in this quest. Organizations rely on audits and
compliance related activities to prove their competency, credibility, firm performance and
sustainability practice. Sustainability audits encompass entire supply chains and are very complex
due to, firstly, the global nature of supply chains and, secondly, the expansive scope of
sustainability, which may include financial, manufacturing, social, and environmental aspects.
Adding to this dilemma is the absence of a consensus on standards related to sustainability,
resulting in duplication, variations, and multiple interpretations. Owing to these reasons the
frequency, complexity, and scope of audits has increased, thus giving rise to the emergent
phenomenon called ‘audit fatigue’ in the industry. Unfortunately, the incidents of audit fraud have
also risen. This has been getting increasing media coverage in recent times, often implicating major
multinationals and their supply chains. This is an exploratory research based on a collective case
study methodology, with a focus on the large textile exporters in Pakistan. The aim is to find the
determinants and consequences of audit fatigue and further elaborate the concept. The study has
shown that contrary to popular belief, audit frequency is not the only precursor to audit fatigue.
Firm size, management support, sustainability standards’ complexity and variety, clients’ size and
brand, transaction costs economics (TCE) also play an important role in driving audit fatigue. The
depth of buyer-supplier collaboration also influences audit fatigue. An unexpected consequence of
audit fatigue has been an increase in the systemic risk in the form of reduction in supplier base due
to preference given to a few certified suppliers, and a gravitation of the textile suppliers to limited
customers markets based on similarity of sustainability standards. TCE theory also served as a lens
to explain why managers treat audits as a burden and hesitate to go the extra mile to achieve
sustainability.
Achieving sustainability is not only a source of competitive advantage for businesses but
also projects a positive image among customer, investors and media. Hence, it has become a
primary goal of corporations to become sustainable. However, sustainability is only possible if
the entire supply chain is sustainable and not just the focal firm. Ensuring the entire supply chain
to act in a responsible manner requires tremendous effort, coordination and time. Audits have
become a source of verification and improvement in this quest. Organizations rely on audits and
compliance related activities to prove their competency, credibility, firm performance and
sustainability practice. Sustainability audits encompass entire supply chains and are very complex
due to, firstly, the global nature of supply chains and, secondly, the expansive scope of
sustainability, which may include financial, manufacturing, social, and environmental aspects.
Adding to this dilemma is the absence of a consensus on standards related to sustainability,
resulting in duplication, variations, and multiple interpretations. Owing to these reasons the
frequency, complexity, and scope of audits has increased, thus giving rise to the emergent
phenomenon called ‘audit fatigue’ in the industry. Unfortunately, the incidents of audit fraud have
also risen. This has been getting increasing media coverage in recent times, often implicating major
multinationals and their supply chains. This is an exploratory research based on a collective case
study methodology, with a focus on the large textile exporters in Pakistan. The aim is to find the
determinants and consequences of audit fatigue and further elaborate the concept. The study has
shown that contrary to popular belief, audit frequency is not the only precursor to audit fatigue.
Firm size, management support, sustainability standards’ complexity and variety, clients’ size and
brand, transaction costs economics (TCE) also play an important role in driving audit fatigue. The
depth of buyer-supplier collaboration also influences audit fatigue. An unexpected consequence of
audit fatigue has been an increase in the systemic risk in the form of reduction in supplier base due
to preference given to a few certified suppliers, and a gravitation of the textile suppliers to limited
customers markets based on similarity of sustainability standards. TCE theory also served as a lens
to explain why managers treat audits as a burden and hesitate to go the extra mile to achieve
sustainability.
