Why engage in certification labelling? : a cost-benefit analysis of chocolate producers on the Dutch market

(1)

Why engage in certification labelling?

A cost-benefit analysis of chocolate producers on the Dutch

market

Author: Joris van den Berg // Student Number: 10092080 (6353355) // Specialisation: Business, International Strategy // Date of Final Version: 30 - July – 2014 // Supervised by: Erik Dirksen

(2)

(3)

Abstract

In the past decade ethical consumption has experienced rapid growth, which is not expected to slow down anytime soon. This growing interest in sustainable products has led to the rise of certification labels. Here, certification labels provide otherwise unobservable information on the practices of an organisation to consumers. Great in theory, but in practice complications arise as it is noted that due to a proliferation in the use of labels credibility issues arise. Furthermore, it remains a contested terrain if consumers are sufficiently aware of certification labels and if they are willing to pay a premium. This in turn has its complications for organisations. This raises the question whether certification labels are in fact beneficial to an organisation and why organisations adopt certification labels. To gain insight in this from the organisation’s perspective a qualitative research is carried out by conducting semi-structured interviews at seven chocolate producers that serve the Dutch market.

It is found that differing perspectives and reasons emerge between small-scale producers, supermarket brands and private label organisations. More generally it is found that from the organisation’s perspective certification labels are a means to increase the sustainability of the supply chain and are a first step in overcoming complications in the demand and supply side of the cocoa chain. However, it is noted that certification labels do not have a positive influence on profits or the organisation’s strategic position. Furthermore, this study shows that the incentive to adopt a certification label is positively related with stakeholder culture and size. Finally, the presence of a certification labels seems of little influence on the buyer’s decision, as it is noted that taste and price are considerably more important than the sustainability of a product. Altogether there is reason to doubt the benefits and effectiveness of certification labels in their contemporary form for organisations.

(4)

Foreword

I am an Economics & Business student at the UvA and I have not only done courses relating to economics but I have also enjoyed several other courses and disciplines on social, cultural or ecological perspectives. During this period, I have gained interest in the phenomenon called certification labels. The reason for this is that certification labels relate to all the above-mentioned disciplines and not just economics. And as I like to think across disciplines, this subject suited me from the start.

It has been a challenging and a long journey writing this thesis. Especially the empirical part, conducting interviews, has not been without its complications. It has proven difficult to gain access into organisations, as many are too busy or do not want to cooperate in university projects. It took several weeks, loads of emails and even more telephone calls but in the end it worked out. Altogether, I am very pleased with the end product. It has to be noted though that I could not have done it alone. Therefore I would like to use this paragraph to show my gratitude to those without whom I could not have delivered this thesis.

At first, I want to thank Erik, my supervisor, for giving me all the time and freedom I needed, for the help and advice he gave me and for all the discussion sessions at the Amsterdam Business School with free coffee. Secondly, I want to thank Olivier, Toussaint, Henk, Jochem, Arjen,

Jean-Marie and Jos who were prepared to give up time for me cooperating in the interviews. Thirdly, I

want to thank Ronald for helping me to improve the readability of this thesis and for his exceptional critical feedback. Finally, I want to thank Annelies, for her very critical grammar check and useful feedback on my writing.

Now, the only thing that remains for me to say is that I hope you will read this thesis with the same amount of joy as I had writing it.

Sincerely,

(5)

1. Introduction

Underlying changes in demographics and lifestyles and numerous scandals involving for instance child labour or the food industry have increased consumer awareness and launched ethical consuming (Padilla et al., 2006). During the past decades, increased consumer awareness and willingness to pay a premium for products that meet certain fair or sustainable objectives have led to the popularity of socially and environmentally friendly products and their rapid rise (Basu & Hicks, 2008). Accompanying this, due to globalisation and increased international coordination an organisation’s actions influence more stakeholders than ever before. Hereby, organisations are more than ever confronted with differing expectations and interests. Mainly because of the influence that stakeholders can exert on a company’s reputation, it is in a company’s best interest to engage with its stakeholders (Tulder & van der Zwart, 2003).

As Nadvi & Waltring (2002) point out, a response to these increasing pressures is a heightened interest in certification labels. These labels may address a wide variety of social and ecological issues, such as labour conditions (e.g. Fair Trade, Manufactured without Child Labour), health and safety norms (e.g, ISO 9000) or environmental concerns (e.g. FSC) (Nadvi & Waltering, 2002; Basu & Hicks, 2008). A prime function of certification labels is to transfer information concerning a product’s content and quality as well as the company’s social commitment to its stakeholders. This in turn should satisfy its stakeholders and increase the company’s reputation, which in turn may translate to more purchases or higher profits (Tulder & van der Zwart, 2003). In addition to this, since consumers seem willing to pay a price premium for ethical consumption, certification labelling can be a means to achieve a competitive advantage. More explicitly, a certification label can be a means to gain market access, differentiate an existing product or increase current market entry barriers (Vertinsky & Zhou, 2000).

All together, certification labelling seems a perfect solution. However, some complications arise. Arguably due to its perceived advantages, the use of certification labelling has proliferated since the turn of the century. With this rapid increase of certified products the integrity of certification labelling is at stake. Tulder & van der Zwart (2003) argue that many certification labels overlap in practice. This in turn results in confusing and incomplete information that ultimately lowers the effectiveness of certification labels (Tulder & van der Zwart, 2003). Another problem that is

(8)

identified here in the Netherlands is that although certification labels need to be accredited by the government, it is unknown how consumers perceive the label. It has already been observed in 2011 that 75 per cent of the Dutch consumers do not know the difference between certification labels on their food products. Furthermore, it is observed that in comparison to the previous year (2010) consumers remain willing to buy certified products but seem far less trusting of the integrity of certification labels (43 per cent in 2010, against 30 per cent in 2011). Arguments for this are that consumers find that certification labels are too similar, too high in frequency and do not provide clear information (MarketResponse, 2011).

Academic research is growing on the topic of certification labels but it is still an upcoming field of interest, many aspects remain under-researched. Up until now academic literature primarily has focussed on the perception of consumers towards the use of certification labels or on the effects of certification labels towards primary producers. What is missing in this strain of research though, is an insight from the company perspective. At present, it is observed that certification labels are a growing concern on the Dutch food market. Especially concerning chocolate products as nearly all chocolate producers have adopted a certification label. It is apparent that from the organisation’s perspective certification labels have two sides of the same coin. Certification labels seem a means to a competitive advantage. However, arguably consumer confusion and possible misperception diminish its effectiveness in this. Is this leaving an organisation with more benefits than costs? Or to put it differently, is it beneficial for an organisation to pursue a certification label strategy? This has yet to be thoroughly addressed, therefore the main research question of this study is the following:

Why does a chocolate producer on the Dutch market engage in certification labelling?

To gain an understanding in this phenomenon, at first prior academic literature is addressed to indicate possible relationships and outcomes. From the preliminary findings four sub questions are derived. Here, the first sub questions addresses the question whether a certification label can increase profits or impact an organisation’s strategic position. The second sub question addresses the impact of organisational characteristics on the incentive to adopt a certification label. The third sub question addresses how the proliferation of certification labels effect an organisation. Finally, the fourth sub question addresses the effectiveness of a certification label as a signalling device

(9)

towards consumers. For every sub question several propositions arise for which evidence will be gained by constituting semi-structured interviews with Dutch chocolate producers. By answering the sub questions and analysing possible additional findings a summary of reasons pro and con certification labels can be established. This summary should constitute an answer to the main research question. Afterwards, in the discussion section, a note will be given to theoretical and practical implications, future research and limitations. At the very end of this study all major contributions and findings will be shown in an overall conclusion.

(10)

2. Theoretical framework

The key managerial problem that this thesis will shed light upon is why a company should engage in certification labelling in the context of chocolate producers. To gain insight in this it is necessary to look at previous research first. Here, by conducting previous research, the sphere in which certification labels operate is described. The determinants why an organisation should or should not adopt a certification label are discussed in six sub paragraphs. Finally, a note is given to the Dutch cocoa market and its corresponding certification labels. Overall, this section results in four key drivers that form the base of the conceptual model.

2.1 Corporate Social Responsibility

Over the past decade, markets for green products, green services and firms have experienced rapid growth. As a matter of fact, research has pointed out that the consumer market for green products will reach about $845 billion in 2015, while in 2009 this was just $230 billion (Social Investment Forum Foundation, 2010). To profit from this growth ever more organisations exemplify that their products and practices are green. The effect of this is that green advertising has almost tripled between 2006 and 2011 (TerraChoice, 2009). Today, companies interact with ever more stakeholders that demand companies to be accountable for the social and environmental impacts of its products and processes (Porter & Kramer, 2006). Here, stakeholders can be identified as any party that has a legitimate interest in the organisation’s outcomes; examples of any such parties are customers, suppliers, community groups, governments and NGO’s (McWilliams & Siegel, 2001). The current legal system puts some environmental and social obligations upon organisations but arguably not as much as needed. Because of lacking formal regulation, NGOs, activists and the media act as informal monitors of a firm’s social and environmental performance. Especially because of an increase in consumer interest and awareness of environmental and social issues, these external pressure groups and the media have gotten more powerful. However, because it is not punishable by law, they can only attack an organisation by damaging its reputation (Delmas & Burbano, 2011).

The increase of social and environmental concerns along with an increase in demand for green(er) products have led organisations to adopt CSR policies. The concept of CSR is heavily researched and multiple definitions have shown up in academic literature. Therefore, to remain clear, the most

(11)

common and overall accepted definition of CSR will be provided. Thus for this manner CSR will be understood as “a concept whereby organisations integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (Dahlsrud, 2008, p. 7). Engaging in CSR activities can positively influence the perception of the organisation. This in turn may result in a higher market share, higher profits and overall better stakeholder relations (Rasmus & Montiel, 2005). It has already been observed that of the S&P 500 companies more than 75 per cent have a dedicated section on their websites that addresses CSR initiatives (Alves, 2009). However, because it is difficult to verify CSR claims, abuse and false claims of a company’s greenness are becoming more apparent (Rasmus & Montiel, 2005).

2.2 Greenwashing

With the rapid increase in demand for green products, a new phenomenon known as greenwashing has entered the stage. Greenwashing is the misleading of consumers, by arguing environmental benefits of the company’s products and processes that are in practice not as green as promised. Prior research has identified seven sins regarding greenwashing, which are shown in figure 1.

TerraChoice (2009) investigated the frequency of these sins in US products in 2008-2009 and concluded that over 95 per cent of the products it researched portrayed at least one of the above-mentioned sins. Furlow (2009) argues that these high greenwashing numbers can have considerable negative consequences. It is expected to decrease the consumer’s confidence in green products. Also greenwashing can pose risks for an organisation when consumers or NGOs questions it for its proposed greenness. It may be so that due to increased consumer scepticism consumers will disregard all green claims with the result that organisations can no longer pull off legitimate green claims. Furlow (2009) argues that this will ultimately lead to a decreased motivation for firms to be green. In conclusion, greenwashing can pose a considerable threat on the effectiveness of a certification label as consumers may lose trust in certification labels.

(12)

Figure 1: Sins of greenwashing

Source: Greenwashing, 2014

2.3 Signalling theory

Research on search behaviour in information economics has been longstanding. Prior research has shown that buyers and sellers are generally not equally informed. However, the degree of information asymmetry depends on the type and attributes of goods.

(13)

2.3.1 Research on signalling

Nelson (1970) makes a distinction between two sorts of goods, search versus experience goods. Here, search goods are defined as products of which the quality can be verified before purchase (e.g. clothing). Experience goods are defined as products of which the quality can only be assessed after purchase (e.g. food). Darby & Karni (1973) further developed this theory by arguing the existence of credence attributes. Here, credence attributes are defined as product characteristics that cannot be evaluated before or after purchase by the consumer. This mainly applies to characteristics such as safety norms, health consequences and other ethical and environmental concerns that can be assessed by analysing the end product in a laboratory setting (Moussa & Touzani, 2008; Jahn et al., 2005). In such cases, the seller possesses more information about the product than the buyer. Eliminating this information asymmetry requires extensive research, which is too costly for an individual consumer. Therefore, the only way for a consumer to assess a credence attribute is by relying on third party judgements (Jahn et al., 2005). Finally, Tietzel & Weber (1991) argue the existence of potemkin attributes. Potemkin attributes cannot be checked in analysing the end product in a laboratory setting and therefore consider mainly all process-oriented attributes, such as organic production, fair trade or dolphin-safe tuna.

Greenwashing attempts that consider credence attributes can be revealed by inspections of external organisations, public authorities or competitors (Emons, 1997; Vetter & Karantininis, 2002). In turn these results can be communicated to the customer with the use of mass media. Thus although the information asymmetry between buyer and seller gives organisations an incentive for greenwashing, the risk of exposure and reputation damage alters organisations to actually pursue illegitimate claims on credence attributes (Ippolito, 1990; Kirchhoff, 2000). In fact, Jahn et al. (2005) argue that the incentive to greenwash credence attributes is moderated by the amount of monitoring present in the particular product category, and by whether the organisation is famous enough to be written about in mass media. For potemkin attributes the story is different. Because potemkin attributes are closely connected to the production process, they are difficult to assess for an outside observer. The only way to assess the legitimacy of such attributes is by direct monitoring. The problem here however, is that for most organisations this is not feasible, besides high auditing costs there is no legal basis for controlling an organisation's production process unless there are serious issues to be suspected. Therefore, in contrast to credence attributes, greenwashing attempts can poorly be identified for potemkin attributes. Thus, potemkin attributes have a

(14)

considerable less risk of exposure and reputation loss. A summary of the discussed attributes is shown in figure 2.

Figure 2: Types of good attributes

Source: Jahn et al., 2005

When a product contains credence or potemkin attributes, the information asymmetry that arises between buyer and seller cannot be overcome by sole buyer action (Moussa & Touzani, 2008). When buyers cannot verify the seller’s quality, they are not willing to pay a premium for higher quality due to the fear of being deceived. This generates a problem for sellers of higher quality products (Akerlof, 1970). A way for the seller to overcome this dilemma is to transfer some of its information to the buyer in order to assure the product’s quality. In academic literature this is perceived as signalling, and was originally proposed by Spence (1973). In essence, a signal is considered as “a marketer-controlled, easy to acquire informational cue, extrinsic to the product itself that consumers use to form inferences about the quality or the value of the product” (Bloom & Reve, 1990, p. 59).

2.3.2 Certification labels use in signalling

To overcome the seller’s dilemma in goods with credence and potemkin attributes one should use signalling. One method to do this is through the use of certification labelling. Phelps (1949) defines certification labels as “marks used upon or in connection with the products and services of one or more persons to certify regional or other origin, material, mode of manufacture, quality, accuracy,

(15)

or other characteristics of such goods or services”. The main reason for the existence of certification labels is to overcome, at least part of the information asymmetry between buyer and seller by providing the buyer with product quality information (Fotopoulos & Krystallis, 2003). Certification labels are especially useful for assessing potemkin attributes. By conducting regular control through neutral inspection institutions an organisation can be awarded a certification label serving as a signal on the potemkin attribute (Jahn et al., 2005).

In general, a certification system operates as shown in figure 3 below. In order to signal its quality the supplier provides the products it sells to the customer with a certification label. The certification label is based upon the standards that are laid down by the standards owner and is awarded by a neutral certification body. In turn the certifier has to be accredited by an accreditation body to prove its ability to effectively monitor and control (Jahn et al., 2005). The certification body carries out the inspections. At these audits it is assessed if an organisation achieves the standards that have been constructed by external organisations (Luning et al., 2002).

Figure 3: Basic structure of certification in signalling

(16)

Nowadays, certification systems are primarily privately organised and significantly differ in the focus on the part of the supply chain. It is also observed that ever more certification labels are addressed directly to the consumer, as its use in consumer marketing is of growing importance (Jahn et al., 2005).

Although in theory labels seem a well-suited signal, in practice certification labels are loosely defined which may lead to overall confusion. At first, labels can be awarded by various entities such as manufacturers, retailers, governments or NGO’s. Secondly, the criteria that need to be met can differ substantially. Thirdly, labels can vary in their specificity, so some focus on only one problem while others imply overall decent quality. Finally, some labels demand full compliance and advocate strict criteria while other labels demand merely a positive attitude of the organisation and have almost no criteria (Gruner, 2005). Therefore, there are several factors that complicate the communication of certification labels towards buyers. Besides this, it is argued by Kirmani & Roa (2000) that it is in fact the credibility of the certification label that acts as the signal in convincing the buyer of the product’s quality and eventually overcome the information asymmetry.

2.4 Consumer perspective on certification labels

A returning issue revolving certification labelling is its perceived credibility and interpretation. Certification labels, in theory, can be an effective mechanism to signal a product’s quality to consumers. However, in practice, it is observed that consumers are unsure of what a certification label represents. If the standard of a certification label is unclear, consumers are faced with a so-called joint estimation problem. This means that a consumer tries to estimate what a label indicates, if it implies whether a product is of high quality or that nearly every product could achieve the standard of the label (Harbaugh & Maxwell, 2011). On the other hand though, the proliferation of certification labels can have indirect positive effects for consumers. Most certification labels push up the standard of quality. Thus, if the bigger part of a product category is certified, the overall quality for the consumer is higher. It also happens that some supermarkets, governments or firms demand their suppliers to adopt a certain certification label, which should also push up the overall quality (Keurmerk, 2014).

(17)

In conclusion, consumer confusion is an obstacle to the adoption, efficient and effective use of certification labels. As it becomes clear from Harbaugh & Maxwell (2011), there are not only direct but also indirect information losses. However, although it is nearly invisible to the consumer some positive indirect effects are established as well.

2.5 Organisational attitude towards labels

The interaction between the external pressure from NGOs, media and others, the customer base and the industry structure and industrial trends create the environment that influences the organisation in its choice of adopting a certification label. However, how an organisation responds and interprets these pressures depends on the organisational characteristics (Delmas & Burbano, 2011). As is stated by Delmas & Burbano (2011), organisational characteristics such as size, profitability, lifecycle stage, available resources and competencies influence the optimal strategy of the organisation. For instance, it is observed that larger and better-known organisations are more likely to be targeted by NGOs or media attention for their social and environmental externalities than smaller firms. Moreover, more profitable organisations may refrain from using certification labels or other mechanisms that legitimate their CSR claims because their higher margins better dampen bottom line shocks from reputational damage than less profitable firms (Meznar & Nigh, 1995).

Another construction that may influence the decision to adopt a certification label is that of stakeholder culture. As argued by Jones et al. (2007), there exist critical qualitative differences between organisations. Jones et al. (2007) mentions five positions along a continuum from self-interest concerning others in three divisions, amoral, limited morality and broadly moral. The five positions are briefly exemplified below and summarized in figure 4.

At first, there is the agency culture. Here, managers who pursue self-interest and show no concern for others characterise the organisation. Shareholders and stakeholders may benefit but only as by-products of self-interest. Secondly, there is corporate egoism. Here, the organisation stresses short-term profit maximization. Stakeholders are only seen as a means to short short-term economic success. Egoistic firms exhibit amoral behaviour towards stakeholders but do posses some moral virtues such as loyalty and reliability. Thirdly, there is instrumentalist culture. Here, the organisation voluntarily extends to stakeholders that can enhance the organisation’s well being. It is recognized

(18)

that moral behaviour is often beneficial to the firm, but only if it has economic advantages. The fourth position is the moralist culture. Here, the organisation shows a concern for all stakeholders regardless of economic benefits. Honouring their commitments is valued and its stakeholders are treated fairly and with respect. At last, there is the altruist culture. Here, the organisation’s choices are dominated by the concern for others, even if the firm’s survival is at stake. The organisation can be characterized by benevolence, altruism and selflessness (Jones et al., 2007).

In conclusion, it can be argued that as an organisation becomes more moral, stakeholders become more important. As certification labels are a means to increase or create value for stakeholders it can be expected that as organisations become more moral the incentive to adopt certification labels increases.

Figure 4: Stakeholder culture typology

Source: Jones et al., 2007 2.6 Strategic implications

Vertinsky & Zhou (2000) mention several strategic goals that an organisation can pursue by adopting a certification label. Certification labels can be used as a means to differentiate a product. Just like certification labels can play a role in overcoming or creating barriers of entry. Another strategy is to use certification labels as a defensive mechanism reducing external pressures, and advocating the organisation’s legitimacy. Finally, Vertinsky & Zhou (2000) argue that certification labels can help in coordinating competition on environmental performance.

(19)

The adoption of a certification label comes with added costs for admission, monitoring and usage (Tulder & van der Zwart, 2008). It is noted that besides certification fees, inputs may also be more expensive (Rousseau, 2013). But as the reputation of the organisation improves, frequently this is translated into higher profit margins. Just as the bigger share of research concludes that sustainable and ethical processes within companies are positively related with profits. However, negative consequences are also possible. By being more transparent, external pressures, such as analyst, NGOs and the media, get more insight into the weak points of the organisations and may lead them to further criticize the organisation. The same goes for the fact that too strict certification labels can alter an organisation’s strategic position (Tulder & van der Zwart, 2008).

2.7 Certification labels in the Netherlands

Certification labels are numerous and can target a wide variety of resources and products. In order to keep this study insightful, this paragraph relates to which product and certification labels this study will focus on. At first, it is argued why this study will focus on chocolate. Here, the Dutch chocolate industry will also be shortly addressed. Finally, the origin and context of the certification labels used on agricultural products (such as chocolate) in the Netherlands are discussed.

2.7.1 Dutch Chocolate Market

The main products that are targeted by certification labels are coffee, tea and chocolate (Solidaridad, 2014). Unfortunately, it is not feasible to address all three products, therefore to keep this study feasible it is chosen to only relate to chocolate. There are several reasons for this. At first, the demand for chocolate products grows with 3 per cent per year, in order to keep up with the growing demand it is necessary that the sustainability of chocolate increases (Solidardidad, 2014). Certification labels can arguably play an influential role in this. Secondly, certification labels on chocolate products are a relatively recent phenomenon. In the past decade many chocolate producers have adopted a certification label or are currently considering its adoption. Thirdly, the chocolate production chain has received many criticisms and media attention, especially upon perceived child slavery in Western Africa. Fairly recent examples of this are the “groene sint” (an initiative of Oxfam Novib to address fair chocolate during “Sinterklaas” festivities) and Tony’s Chocoloney’s (an initiative of the Dutch public television program “Keuringsdienst van Waarde” to address child slavery in the chocolate industry). These initiatives have put the sustainability of

(20)

chocolate in the spotlight. Altogether, the need of sustainable chocolate is becoming ever more apparent.

Therefore, as this study focuses on chocolate producers it is useful to gain some insight in the chocolate industry. When considering chocolate, cocoa is the main ingredient on which most certification labels focus. It has been estimated that in 2010 the total production of cocoa was approximately 4.3 million tons of which only 6 per cent was certified (KPMG, 2012). When considering the Netherlands, the Dutch domestic market had an annual turnover of 760 million euros in 2012. Of this 70 per cent can be attributed to supermarket sales and 7 per cent to sales in small-scale shops (HBD, 2014).

The production of cocoa is mainly based in Africa as Africa delivers 70 per cent of the total cocoa volume. A typical African cocoa farmer has a low productivity and a low income. As there is little money to hire employees, child labour is frequently necessary. Although this is not always forced labour, it does limit the future possibilities of these children, as they cannot attend school. Furthermore, issues such as the discrimination of women, slavery, weak trade unions, biodiversity loss and soil erosion due to poor agricultural practices are noted (MVO, 2014). The processing of cocoa mainly takes place in Western countries, where six brand organisations and three grinders dominate the chocolate chain. Here, grinders produce semi-finished products that the brand organisations use to produce chocolate. Interestingly, only 70 per cent of the total cocoa production ends up as consumable chocolate; the remaining 30 per cent is used by pharmaceutical and cosmetic industry (MVO, 2014).

2.7.2 Certification labels present on Dutch chocolate market

In order to address the issues at the production level, certification bodies have emerged. For agricultural products in the Netherlands there are three main certification labels (Fair Trade, UTZ Certified and Rainforest Alliance). In order to understand these certification labels more thoroughly it is useful to gain some insight in their origin and context.

The origin of these certification labels can be found in the 1960s when the fair trade movement began to take shape (Renard, 2003). Here, the fair trade movement is united by the view that

(21)

conventional trade relations between the North and South are unfair and unsustainable (CBWCE, 2005). During the 1960s and 1970s, the fair trade movement initiated several important first steps. In 1969, the first world shops were opened, not only did they sell fairly traded products they also increased consumer awareness. Moreover, European NGOs started to perceive the need of fair trading organisations that help in setting up Southern fair trade and provide social services to disadvantages producers in underdeveloped countries. This gave rise to the foundation of multiple fair trade organisations. At the beginning, these fair trade organisations primarily traded handcrafts that in turn were sold to consumers in the North through world shops. In 1973, the fair trade organisation in the Netherland imported the first coffee that complied with fair trade standards. Later on other products such as tea, cocoa, sugar, nuts and spices followed (Kocken, 2004).

Certification labels, as we know them today, began to take its current form in the 1980s. In order to reach the broad public with fair trade products a new method had to be adopted. It was at this time that a Dutch priest brought up the idea of a fair trade label. Here, products that complied with the fair trade conditions could qualify for a label that would make them stand out among other products. This opened up the window for organisations to become involved with fair trade (Kocken, 2004). In 1988, the first fair trade label, Max Havelaar, was set up in the Netherlands. In the following years, Max Havelaar extended to other countries such as Belgium, Norway and France and similar fair trade labelling organisations were founded such as Transfair in Germany, Italy and the United States and Fairtrade Mark in Ireland and the United Kingdom (Fair Trade, 2014). In 1997, a worldwide umbrella organisation was set up, known as FLO (Fair Trade Label Organisations International). FLO was set up to coordinate international fair trade standards and audit the fair trade label organisations (Kocken, 2004). Together, all fair trade label organisations (Max Havelaar, Transfair etc.) that are acknowledged by FLO constitute the certification label Fair Trade. Altogether, the introduction of the Fair Trade label has been an important step in the history of fair trade as it is exemplified by Kocken (2004) that fair trade labelling has significantly helped fair trade to go mainstream.

Besides the foundation of the Fair Trade certification label, several other certification labels have emerged that focus on increasing the sustainability of agricultural products. The two largest alternative labelling organisations, Rainforest Alliance (SAN) and UTZ Certified, will be addressed below.

(22)

At first, is SAN (Sustainable Agriculture Network). In the 1970s and 1980s, SAN emerged from concerns of environmentalists on the destruction of tropical forests. SAN members believed that farm certification was an effective tool for protecting the environment and increasing the livelihoods of disadvantaged producers. In 1987, SAN-member Rainforest Alliance was founded that started to develop a system to certify farms and award labels. In 1992, it awarded its first certification label to a banana farm. Later on Rainforest Alliance started to engage in partnerships with other SAN members to certify other products such as, coffee and cocoa farms. In 1997, SAN officially formed a network and in 2001, they introduced their international logo the Rainforest Alliance Certified label, which shows a green frog. In the subsequent years, other products were added and various smaller and larger organisations started to sell products that obtained the Rainforest Alliance certification label (SAN, 2014).

Secondly, is UTZ Certified. In 2002, the Ahold Coffee Company and several coffee producers in Guatemala founded UTZ Kapeh (meaning good coffee in a Mayan language), as an alternative to the Fair Trade label (UTZ, 2014). In 2007, UTZ Kapeh started to grow and engage in partnerships with organisations to extend their certification system to other products, mainly cocoa and tea. Because of this UTZ Kapeh chose to change its name to UTZ Certified (Solidaridad, 2014)).

In conclusion, there are three large labels present for agricultural resources, which primarily target coffee, cocoa and tea (Solidaridad, 2014). All the above mentioned certification labels strive for a more sustainable sourcing of resources by conserving the environment and by increasing social and economic conditions for farmers, farmer corporations and communities (KPMG, 2012). Here, all three labelling organisations base its social and economic criteria on international standards of the ILO (International Labour Organisation) and base its environmental criteria on the ISO 65 standard, which prohibits the use of the most toxic pesticides. In this aspect these certification labels are very similar (UCC, 2014). However, two main differences between the certification organisations are identifiable. At first, the focus of the certification labels differs. The focus of Fair Trade is on trade relations and on the social conditions of farmers, such as transparency and democracy in farmer corporations. The focus of Rainforest Alliance is on nature conservation, water management and safe living conditions. On the other hand, the focus of UTZ Certified is on increasing productivity and traceability in the entire supply chain. Secondly, there are differences in trade conditions. Fair Trade applies a fixed minimum price that farmers need to produce sustainable. On the other hand,

(23)

UTZ Certified and Rain Forest Alliance do not use a minimum price. Here, the price is determined by negotiations between buyer and seller (UCC, 2014; KPMG, 2012).

In summary, the corresponding logo and main focus of all the discussed certification labels is shown in figure 5. Besides this, figure 5 shows the volume and market share of all the discussed certification labels in the cocoa sector (worldwide).

Figure 5: Certification labels overview

Source: KPMG, 2012

It may prove a long and difficult journey to obtain 100 per cent sustainable produced cocoa. Although it is noted that larger as well as smaller organisations are trying to increase their sustainability, many changes in the cocoa supply chain are necessary. This is exemplified by the fact that in order to achieve 100 per cent certified cocoa, 3 million farmers need to change their production practices (MVO, 2014). However, commitments have already been made as the Dutch government together with private sector players and NGO’s agreed that in the Netherlands all cocoa consumption needs to be a 100 per cent sustainable by 2025 (KPMG, 2012).

(24)

3. Conceptual framework

The theoretical framework has provided a clear insight into what previous research has concluded on the use of certification labels. Drawing on the information of the theoretical framework four distinct aspects can be identified that together determine whether an organisation should use a certification label. The conceptual model is shown in figure 6 and can be divided into two subsequent parts. The framework of the first part is based upon the greenwashing framework of Delmas & Burbano (2011). From this framework four key drivers have been identified that constitute costs and benefits from the organisation’s perspective. The specific costs and benefits that belong to these key drivers are extracted from the prior literature review. Altogether it is questioned if the benefits weigh out the costs and a certification label is adopted. Subsequently, the second part of the framework discusses if the adoption will lead to a better reputation for the company and if this translates directly and indirectly to a better strategic position or better financial performance.

(25)

3.1 How does a label increase profits or impact the strategic position?

As it has been argued in the theoretical framework and shown in the conceptual model, the adoption of certification labels can be beneficial to an organisation in two distinct ways. It has been argued that it can benefit to the organisation’s financial position or contribute to a better strategic position.

Adopting a certification label can be seen as a voluntary act in decreasing a company's social and environmental externalities. Thus, adopting a certification label is a CSR initiative. As Rasmus & Montiel (2005) point out, engaging in CSR activities can be of a positive influence on the reputation of the organisation. In turn, Rasmus & Montiel (2005) argue that an increase in reputation may translate to higher profits or a better strategic position. Also it has been argued by several scholars that consumers are willing to pay a premium for certified products and that with increasing consumer awareness the eco-friendliness of a product can constitute a competitive advantage (Basu & Hicks, 2008; Houe & Grabot, 2009). Therefore, the establishment of strategic advantages due to product differentiation or the establishment of higher profitability due to higher profit margins seems feasible. This leads to the formulation of the first set of propositions.

Proposition 1A: The adoption of a certification label has a positive effect on profitability as higher margins are possible or turnover increases.

Proposition 1B: The adoption of a certification labels has a positive effect on the organisation’s strategic position.

Proposition 1C: These effects are mediated by reputation.

3.2 How do organisational differences impact the incentive to certificate?

From the discussed key drivers in the conceptual model, two different environments can be derived. Here, the drivers, external pressure, industry/ market trends and the customer base together construct the external environment of the organisation. While the remaining driver, organisation characteristics, forms the internal environment. As it has been outlined by Delmas & Burbano (2011) how an organisation interprets and translates the external environment depends on the internal environment. Jahn et al. (2005) notes that the risk of exposure and the amount of external

(26)

pressure increases as an organisation grows. Amacher et al. (2004) adds to this that if an organisation wants to obtain a certification label, certain standards need to be met. In order to achieve these standards, an organisation needs to invest in a combination of new technologies and efforts. However, due to capital outlays or auditing and licensing fees, these investments are typically costly, especially for smaller firms. Therefore, it is assumed that there exists a relationship between an organisation’s size and its incentive to certificate. This leads to the following proposition.

Proposition 2A: The organisation’s size is positively related to the incentive to adopt a certification label.

As organisations move along the stakeholder culture continuum coined by Jones et al. (2007) the concern for others increases. It can be argued that companies that have a more moral stakeholder culture will have more incentive to adopt a certification label, as this is a means to treat stakeholders more fairly. This leads to the following proposition.

Proposition 2B: The organisation’s stakeholder culture is positively related to the incentive to use certification labels.

3.3 Are incentives altered by the adoption of labels by other companies?

The proliferation of certification labels alters its effective use, confuses the consumer and ultimately creates uncertainty about the meaning of certification labels (Tulder & van der Zwart, 2003). Although, hypothetically, an organisation can achieve a competitive advantage by adopting a certification label, this advantage loses ground when other organisations follow. But arguably, and of greater influence are the three complications that Harbaugh & Maxwell (2011) identify, which decrease the incentive for voluntary labelling. At first, certification labels would add the most value when a product is perceived as bad, but in fact is not, and therefore meets the standard of the certification label. However, it is observed that when consumers are uncertain of a label’s standard a so-called Groucho effect occurs. Here, consumers conclude that a certification label is probably of poor quality as a product that they perceive as bad can meet the label’s minimum standards. Secondly, multiple labels with different standards for one issue should allow firms to more

(27)

explicitly differentiate itself concerning quality. However, the opposite effect is observed. This occurs because consumers do not know if the standard of the certification label is high or low, and therefore the only information that a certification label transfers to the consumer is that the product has met at least the lowest possible standard for the addressed issue. Thirdly, there are information externalities between firms that in turn influence strategic behaviour. Firms with a bad reputation have an incentive to adopt the same label as a firm with a good reputation, while firms with a good reputation try to avoid the labels that firms with a bad reputation use. This confuses and complicates consumers in estimating the standards of labels (Harbaugh & Maxwell, 2011).

Moreover, it is observed by Harbaugh & Maxwell (2011) that as certification labels proliferate, its formativeness reduces to zero. The arguments presented by Harbaugh & Maxwell (2011) make the possible establishment of a competitive advantage by adopting certification labels doubtful, especially in the long-term. It seems that proliferation and uncertainty are key obstacles to this. Therefore the following proposition is established.

Proposition 3: The incentive for a company to use certification labels diminishes as certification labels proliferate and more companies adopt certification labels.

3.4 Are certification labels an effective signalling device?

As has been shown in the theoretical framework, the main reason of existence and function of certification labels is to overcome information asymmetry between the buyer and seller. This is especially applicable for so-called credence and potemkin attributes. It has been argued by Jahn et al. (2005) that especially for potemkin attributes refelcting on the quality of the production, certification labels are the only possible and feasible signal available. On the other hand, incidents of greenwashing and the proliferation of certification labels have led to consumer confusion and to credibility issues (Grunert, 2005; Harbaugh & Maxwell, 2011). However, if an organisation wants to signal credence and potemkin attributes it is suggested that certification label are effective since there is no other manner for third party assessment. This leads to the final proposition.

(28)

4. Method

In this paragraph it will be reviewed what kind of research methods are used in this thesis. At first, it will be discussed if the research will be of a qualitative or quantitative nature, which research method will be applied and how data will be collected. Secondly, the procedure will be discussed. Thirdly, it will describe how the collected data will be analysed. Finally this paragraph will conclude with a note on which limitations arise with this research design.

4.1 Research method

The objective of this thesis is to gain an insight in the reasons why a Dutch organisation should engage in certification labelling. To identify and understand which factors are taken into account, empirical research will be carried out. Considering that the main research question seeks to explain why organisations adopt certification labels and seeks to explore what interactions and attitudes arise, the research is of an explanatory and exploratory nature. As is argued by Devine (2002), when the research goal is to explore for instance people’s experiences, practices or attitudes towards certain phenomena, a qualitative research design is best suited. Therefore, in order to reach for a comprehensive outcome to the identified problem, a qualitative research approach has been adopted.

Multiple methods or approaches can be considered as qualitative research. In this case a multiple case study was chosen. The choice for a case study approach has several reasons. At first, when a holistic, in-depth investigation is needed a case study is an ideal method (Feagin, Orum & Sjoberg, 1991). Also, case studies try to answer how and why question in research areas that have been unexplored, so case studies should provide a clear insight in the perception of organisations towards certification labelling (Edmondson & McManus, 2007). Secondly, it is argued by Saunders & Lewis (2012) that case studies address a phenomenon within its context. As this research tries to identify why with all pressures that exist within an organisation should engage in certification labelling, it is necessary to pursue a research method that incorporates all these pressures. For instance, it can be expected that in a hypothetical setting or a lab experiment certain external pressures are less prevalent than in real life. Thus, a case study allows an in-depth analysis on certification labels from the company perspective in a real setting. Thirdly, because case studies assess the situation in practice they are able to generate relevant managerial knowledge besides

(29)

mere theoretical implications (Leonard-Barton, 1990). Therefore, the end product of this study has practical relevance and will give realistic insight into why organisations act as they do in the context of certification labels.

4.2 Description of the sample

To give a comprehensive insight, a multiple case study will be conducted. Because this thesis aims to gain a holistic insight into the organisation’s perspective and it observes the fact that label strategies differ widely, as not all organisations adopt a certification label and those organisations that have adopted a label do not necessarily adopt the same label. Therefore, seven different organisations will be studied which are present on the Dutch market. As this study is conducted in the Netherlands, the Dutch market is the most convenient to gain access into.

Also, to keep the research focussed, it has been decided to only select cases that belong to the same product category. In this case, chocolate bars. This category has been chosen for several reasons. At first, there are many chocolate bar producers of which most have obtained a certification label, though not all. Secondly, there is a variety of certification labels present (UTZ, Rainforest Alliance and Fair Trade). Therefore a case study on seven of these chocolate producers will be performed. Of these seven cases, five have adopted some sort of label, while the remaining two have not adopted a certification label. By researching both categories, certified and non-certified, hopefully a more comprehensive insight can be obtained.

4.3 Data collection

Yin (1994) has identified six sources that can deliver evidence in a case study research, documentation, archival records, interviews, direct observation, participant observation and physical artefacts. Because interviews are targeted, focus on the thesis topic, and gain insight information, it is determined that interviewing is the most suitable data collection method. In order to generate in-depth information, but at the same time maintain some sort of control and directions, the interviews are semi-structured and will be conducted face to face (Yin, 2003). It is chosen to execute the interviews face-to-face. Besides the fact that face-to-face interviews are synchronous, the primary advantage is that there are possibilities of influencing and creating a good interview ambience. Since some of the information that will be discussed may be confidential, a good

(30)

ambience can reduce barriers and create confidence in the interviewer (Opdenakker, 2006). However, as it was difficult to arrange the interviews, resulting in the fact that two interviews were conducted by telephone.

The interview is designed to gain insight into the reasons for a company to adopt a certification label. The interviews will take approximately 40 to 60 minutes and are tape-recorded for analytical purposes. To allow for improvisation but at the same time keep some control, the interviews will consist of five themes. At first, there is room for an introduction by the interviewer and the interviewee. Here, it is discussed what the reason for the interview is and what is expected of the interviewee. To put the interviewee at ease, at first some global job questions are asked. Subsequently, the five themes will be discussed, company characteristics, label decision, customer base, competitors and finally external pressure. The aim is to obtain detailed and insightful information on how the organisations relate to the adoption of certification labels. Finally, the question is asked whether the interviewee has anything to add and finally, of course, the interviewee is thanked for his cooperation and time. The interview set-up slightly depends on whether an organisation has adopted a certification label or not. These interview set-ups can be found in appendix 2 and 3. In this study seven chocolate producers that are present on the Dutch market will be interviewed, at every chocolate producer one interview is taken off. Thus overall, this study will conduct seven interviews.

4.4 Data Analysis

After conducting the interviews, the interviews are transcribed so that the entire interview is available in writing. In order to critically analyse and give meaning to the data, text passages are coded (Lee, 1999). Together these coded passages can form categories such as “benefits of certification” or “costs of certification labels”. Relating to the grounded theory method, the relevant codes are found by an inductive and deductive approach (Strauss & Corbin, 1998). As a starting point, the theoretical framework is considered to make a preliminary code list. Emerging codes that are found during the data analysis are added to this list. The final code list can be found in appendix 4. After coding all the interviews, a case description of all organisations is composed. Here, it is discussed what the organisation looks like, how in general it interprets the external environment and what its main reasons for the adoption of a certification label are. Afterwards, relationships and

(31)

patterns are sought between the cases to find answers on the propositions argued in the conceptual framework.

4.5 Limitations

Every research approach has its limitations, interviews as well. The main limitations are identified and shortly discussed. At first, a biascan occur due to poor questioning. Secondly, a reflexivity bias may develop, where the interviewee expresses what the interviewer wants to hear (Yin, 1994). Therefore it is important that the interview questions are well structured and the researcher’s opinion remains neutral. Finally, by focussing on a specific niche, the findings of this study are arguably more comprehensive. However, as this study is focused, its external validity is limited.

(32)

5. Analysis

This paragraph discusses the interviews. At first , there is a short description of every case, stating overall information on the organisation’s size, stakeholder culture and attitude to certification. Subsequently, a summative table of these descriptions has been composed, figure 7, which divides the cases into small/ large organisations and certified/ non-certified organisations, also the organisations are divided in three categories, using colours. Secondly, the propositions coinedin the conceptual framework will be discussed along with the findings of the interview. Altogether, these findings should answer the main research question, why do chocolate producers certificate?

5.1 Case descriptions

In this section a short description of each case will be given. By consulting the information of the interview the set up of the organisation is given. The stakeholder culture is determined by looking at the best fit between interview data and the description shown in figure 4. The size of the organisation is based on the organisation’s annual turnover; this gives a clear distinction between smaller en larger organisations. The organisations actual names are undisclosed as the interviewees preferred to remain anonymous.

5.1.1 Organisation A

Organisation A is one of the biggest confectionery manufacturers worldwide, it is a corporate organisation that entails multiple brands and products of which some but not all use cocoa in their production process. It reaches its customers mainly through selling its items in supermarkets. Organisation A is a fully family-owned company that has approximately 30,000 employees, twenty factories all over the globe and an annual turnover of 8 billion euros. The Netherlands is only a small market for organisation A. Because organisation A has always been owned by a family which has integrated its own values within the company, organisation A has pursued CSR activities from the beginning and taken care of its employees and society. Currently, organisation A buys approximately 40 per cent of its cocoa through certified organisations. It is expected that by 2020 all cocoa will be certified. Furthermore, organisation A works together with NGOs to increase the living standards of cocoa farmers. Although it could already mention several certification labels on its products, showing off is not in the company’s nature and in the organisation’s perspective. Moreover, the organisation is unsure of the effect of stating a certification label on its packaging.

(33)

Besides that, the organisation does not feel comfortable in communicating a label for cocoa but leaving out a communication signal for other critical resources.

In conclusion, it can be stated that organisation A is large and can be characterized as a moralist. It is currently adopting certification labels but is not communicating this on the product’s package. However, organisation A is moving beyond certification labels by partnering up with NGOs.

5.1.2 Organisation B

Organisation B is a smaller chocolate producer, which has a variety of chocolate products under its own label. Besides this, organisation B sometimes produces a private label. The chocolate products under organisation B’s label are only available through its own stores or through smaller more high-end chocolate stores, but not through regular supermarkets. Organisation B has approximately 35 employees, one factory, one official store and several franchise stores and an annual turnover of 3.5 million euros. Organisation B has little focus on lowering ethical externalities. The prime reasons for this is that the organisation sees itself as too small to leverage the extra costs needed to generate value for its stakeholders. Moreover, as the organisation is serving the upper end of the market it is already paying higher prices for its cocoa and buys via suppliers that are taking some sort of care of its farmers. In general, organisation B is not communicating any information about its production to its stakeholders. Organisation B is currently not pursuing a certification label. Besides the extra costs, organisation B sees no value in adopting a label as even low-cost private labels in the supermarket adopt them and further doubts the impact and amount of money that actually reaches farmers. Also, organisation B argues that because of a higher quality and price, customers can interpret that some care is given to production externalities.

In conclusion, organisation B is a small chocolate producer with a instrumentalist stakeholder culture that is not pursuing a certification label, mainly due to accompanying costs, reliability issues and perceived customer ignorance.

5.1.3 Organisation C

Organisation C is also a smaller chocolate enterprise that mainly produces commissioned chocolate related products for Dutch retailers (mainly supermarkets and wholesalers). Organisation C is mainly a private label company that does have an own label that the organisation uses for clients

(34)

who cannot realise their own private label. Of its business, about 80 per cent is domestic and 20 per cent is international trade. Organisation C has approximately 20 to 35 employees (depending on the season), one factory and an annual turnover of 4 million euros. Organisation C is a commercial organisation that strives to maximize its revenue. Although organisation C would like to be more ethical it argues that it has not enough funds, and considers itself too small to perform better or make a significant impact as an ethical and socially responsible organisation. Nonetheless, the chocolate of organisation C is 100 per cent UTZ certified. The main reason for this is that the clients, in practice Dutch retailers, demand that their cocoa is UTZ certified. It is noted that if organisation C would not deliver 100 per cent UTZ its means of existence would disappear. Another factor that plays a role is that according to organisation C, a cocoa shortage is approaching, due to more consumption in emerging economies and lowering supply. Therefore, the chocolate industry as a whole benefits if cocoa is more sustainable.

In conclusion, organisation C has an instrumentalist stakeholder culture and sees itself as too little to make a significant impact in the cocoa industry. Nevertheless, it has adopted a certification label due to pressures from its customers.

5.1.4 Organisation D

Organisation D is a small organisation that is still in its start-up phase, it has only opened its doors for two months now, but is experiencing rapid growth. Organisation D has 6 employees, one store and one factory where it designs and produces all sorts of cocoa products. Using high quality resources and craftsmanship, organisation D serves the upper end of the market. Organisation D tries to create value and build relationships with its cocoa farmers. In general, most of the resources that organisation D acquires have some sort of certification label. However, if a resource is certified or not is not of main importance. Organisation D wants to get the best possible resources for a fair price. It determines for itself if it perceives the resource as good enough or not, and if this product is certified or not comes second and is considered less important than quality. Also, organisation D argues that for higher quality and biological cocoa a farmer gets more money per kilo. Furthermore, organisation D does not want to communicate certification labels on its packaging or via any other channel. Instead, organisation D wants to show directly to the customer where its cocoa comes from (e.g. by using video material in store). In fact, organisation D wants to communicate complete transparency by telling story to its customers. By doing this it aims for its customers to learn that its

(35)

brand name guarantees that care is taken in the production process. Thus, organisation D is telling its own story and is not dependent on the perception of certification labels by customers. As organisation D argues, less money will evaporate in the supply chain, and if a certification label loses reliability organisation D is not affected.

In conclusion, organisation D has a moralist stakeholder culture. Although most of its cocoa is certified, it tries to move beyond certification labels by telling its own story and being completely transparent towards its stakeholders. However, currently organisation D only communicates through its packaging that it tries to take care of its production externalities.

5.1.5 Organisation E

Organisation E is a smaller producer that fully focuses on chocolate and which is only active on the Dutch market. It reaches its consumers primarily through supermarkets but also via other smaller (more fair trade oriented) stores. Organisation E has 19 employees, and 1 factory line at a large chocolate manufacturer where its chocolate is produced and has an annual turnover of 7.5 million euros. Organisation G is a young company that started with the intent of changing the chocolate industry, by making it more transparent and fair. It is the organisation’s mission to show larger competitors that it is possible to produce fair chocolate and still be profitable. Instead of having a CSR department, organisation E argues that its business is completely focussed on being sustainable and responsible. It wants to create impact and does this in multiple manners. Besides certification it develops partnerships in order to realise projects at the cocoa farmers level. Moreover, 1 per cent of its turnover is dedicated to a foundation that tries to make the cocoa supply chain more fair and equal. Organisation E is 100 per cent Fair Trade certified. The main reason for this is that in organisation E’s start-up phase organisation E wanted to make a statement and chose Fair Trade certification as many ideas converged between organisation E and Fair Trade. But as organisation E argues, a certification label is not enough to change the cocoa supply chain and therefore it will be trying to lower the focus on fair trade over the years.

In conclusion, organisation E is a smaller chocolate producer. Because changing the cocoa supply chain is so integrated in this organisation, it cannot be in the same category as the other organisation defined as moralist, therefore organisation E can be identified as an altruist stakeholder culture.

(36)

5.1.6 Organisation F

Organisation F is a larger chocolate producer that is mainly active in mass retailing in Europa. The organisation has its own labels but also produces private labels for other brands. In the Netherlands, it predominantly produces private labels. Organisation F has 1850 employees, nine factories and an annual turnover of 550 million. Organisation F works together with UTZ and other NGOs to support and increase the livelihoods of cocoa farmers mainly by raising its productivity. The organisation sees it as its main responsibility to communicate to its customers that a sustainable cocoa chain is essential. Moreover, organisation F argues that every organisation should be permanently involved in increasing the sustainability of the supply chain. Besides having an UTZ certification label, organisation F pursues an extra programme in which it helps 3,500 farmers in gaining a better income. The main reason organisation F works together with certification bodies and NGOs is that it believes independent auditing is necessary for credible claims towards customers. Besides programs with cocoa famers, organisation F is also active in other smaller projects that serve the sustainability of resources.

In conclusion, organisation F is a large chocolate manufacturer that mainly produces private labels in the Netherlands of which all demand a certification label, mainly to act as a defensive mechanism in the retailers strategy. The clients of organisation F are therefore mainly instrumentalist, while organisation F is more identified with a moralist stakeholder culture.

5.1.7 Organisation G

Organisation G is one of the largest food producers in the world, it is a corporate organisation that has multiple brand and products of with about 10 per cent uses cocoa in its production process. It reaches its consumers primarily through selling its products in supermarkets. Organisation G is a matrix organisation and has approximately 340,000 employees, 468 factories and an annual turnover of 70 billion euros. For its chocolate products the Dutch market is however only a very small portion. Organisation G was already involved in taking care of its cocoa supply since the end of the past century. Because it needs enormous amounts of cocoa, it cannot be fully certified yet. Instead it has set up its own program to increase the livelihoods of cocoa farmers. In this programme organisation G cooperates with UTZ. Besides this, organisation G has multiple CSR initiatives in which it tries to create stakeholder value, the achievements in this have been published in reports for already more than 10 years. Creating value is at the heart of the company’s strategic

(37)

roadmap. As organisation G serves the entire society it believes that the organisation needs to be sustainable in order to survive. Organisation G cannot communicate a certification label on its packaging, instead it communicates its own programme with a note that it cooperates with UTZ.

In conclusion, organisation G can be characterized by a moralist stakeholder culture, which is currently adopting a certification label. Although communication was insufficient, partly because organisation G does not want to exaggerate, nowadays organisation G tries to communicate its sustainability.

Figure 7: Certified-Size Grid

In this figure, small-scale organisations are blue, supermarket brands are orange and private label organisations are purple, extracted from interview transcriptions.

Why engage in certification labelling? : a cost-benefit analysis of chocolate producers on the Dutch market