Transparency in the food sector: stakeholders pressures and sustainability disclosure strategies

Transparency in the food sector: stakeholders pressures and

sustainability disclosure strategies

3

Abstract

Sustainability issues in the food industry increase stakeholder pressure on food organizations.

Stakeholders legitimize organizations to continue their operations so firms will try to satisfy

their stakeholders. Regulative voids lead to possibilities for organizations to create disclosure

strategies. This research explores the relation between stakeholder pressure and disclosure

strategies. A content analysis of sustainability reports is done to study disclosure strategies of

food organizations. Therefore, a transparency measurement tool is created to measure both

depth and scope of transparency. Results indicate that higher stakeholder pressure on particular

sustainability aspects leads to higher disclosure on these aspects. Organizations compensate

non-disclosure or less disclosure sustainability aspects by being highly transparent about a few

sustainability aspects that are considered important by their stakeholders. Firms use

sustainability reports to respond to stakeholder pressure instead of disclosing their real

sustainability performance, which raises questions about the quality of information in these

reports.

4

Table of contents

List of abbreviations ... 5

1. Introduction ... 6

2. Literature ... 9

2.1 Food supply chain transparency ... 9

2.2 Food safety ... 11

2.3 The role of stakeholders in influencing disclosure strategies ... 13

3. Research design ... 17

3.1 Sample and data collection ... 17

3.2 Research method... 19

4. Results ... 26

4.1 Background information stakeholder pressure in the food sector ... 26

4.2 Tropical food product group ... 26

4.3 Unhealthy food product group ... 29

4.4 Agricultural food product group ... 32

5

List of abbreviations

C.A.F.E.

coffee and farmer equity

CONI

consolidated narrative interrogation

Corp.

corporate

CSR

corporate social responsibility

FY

fiscal year

GHG

greenhouse gases

GRI

Global Reporting Initiative

GMO

genetically modified organism

ILO

international labour organization

MNC

multinational corporation

NGO

non-governmental organization

OECD

organization for economic co-operation and development

SCC

supply chain communication

SCM

supply chain management

SCT

supply chain transparency

SEAR

social and environmental assessment report

WHO

World Health Organization

6

1. Introduction

Several sustainability related problems continue to plague the food industry: the spread of

non-communicable disease epidemics is partly maintained by multinationals in the food and

beverage industry (Moodie et al., 2013). So the health of people is being affected by ingredients

and additives of food and drinks. Not only does the food industry affect people’s health, it also

impacts the environment. During the food processing, pesticides may be used to protect the

food from insects and certain food packages may extend the food’s shelf life but both operations

negatively impact the environment (Marsh & Bugusu, 2007). Also, suppliers may deceive

organizations and consumers about the ingredients like the Chinese supplier did when it passed

off rat meat as lamb (Patience, 2013). Hence, there is an increase in demand for transparency

of ingredients in food and beverage products because it impacts the wellbeing of consumers

(Consumers Union, 2016) and the environment. Furthermore, Nestlé and McDonalds are found

in the top 10 brand scandals of 2015 due to their violation of human and labour rights (James,

2015). So the food industry has to deal with social and environmental issues. Consumers

contribute to the trend of CSR in the sense that they are increasingly aware of environmental

and social issues. As a consequence, the demand for environmentally and ethically responsible

products also increased (Chen & Chang, 2013). CSR is referred to as ‘actions that appear to

further some social good, beyond the interests of the firm and that which is required by law’

(McWilliams & Siegel, 2001:117).

7

Due to the pressure of consumers and other stakeholders to behave socially responsible,

organizations inform them about their CSR through reports. Sustainable organizations have a

lot to lose when information about their environmentally damaging actions is revealed (Lyon

& Maxwell, 2011). Activists tend to punish organizations that claim to be socially responsible

while they are not, while they do not react as angrily to organizations that do not claim to be

socially responsible (Lyon & Maxwell, 2011). Hence, a CSR report may not reflect all

information about a company’s environmental or social performance because only positive

information is mentioned while negative information might be withheld (Ernst & Young, 2008).

This study builds on existing literature about stakeholder theory and disclosure strategy; the

aim is to contribute to theory by exploring the relationship between prioritized sustainability

aspects by stakeholders and disclosure strategies of organizations in the food sector.

Organizations are asked to disclose more information about all processes in the supply chain.

Previous studies have shown that certain factors, like visibility, industry and sustainability of

the firm, increase the transparency of the firm about sustainability (Burgwal & Vieira, 2014;

Campbell, 2003; Hackston & Milne, 1996; Hooghiemstra, 2000; Patten, 2002). The quality of

sustainability and CSR reports plays an important role in the maintenance of the consumer’s

trust in organizations and their products. In turn, the transparency of sustainability topics

contributes to the quality of sustainability reports, which shows the practical relevance of this

study. The basic assumption of transparency is the degree to which is reported about the goals,

performance and impacts regarding economic, environmental and social sustainability (GRI,

2013a; Transparantiebenchmark, 2014). In this study, a transparency tool will be developed to

measure the transparency in sustainability reports. Transparency is identified by the scope of

subjects in the supply chain disclosure radar (Marshall et al., 2016) and the depth of this

disclosure (Beck et al., 2010). This study concentrates on the food industry because it is ‘the

largest manufacturing sector accounting for 15% of overall manufacturing industry’ (Lyons &

Ma’aram, 2014:1911) and food is a very labour intensive product. Secondly, the food sector

contains multiple product groups which all have different stakeholders. These different

stakeholders account for the possibility of differences and similarities in transparency of

different product group. So the wide range of product groups and different stakeholders makes

the product sector suitable to study the relationship between disclosure strategies and

stakeholders of the organization. This leads to the following research question:

8

In the next chapter I will explain my theoretical framework. This framework is based on existing

9

2. Literature

In this chapter a theoretical framework will be built around the subject of sustainability

disclosure strategies in the food sector. The lack of social reporting regulations leaves the social

and environmental disclosure of the organization voluntary. Motivations for firms to disclose

certain social and environmental information will be provided and the underlying theories will

be explained. First, theories about food supply chain transparency and sustainability issues

related to the global supply chain will be discussed. Then, literature about food safety will be

discussed, which currently is a major sustainability issue in the food industry. In the last section,

theories about stakeholder pressure are discussed. The aim of this chapter is to apply existing

theories to the transparency measurement tool.

1

2.1 Food supply chain transparency

In the global value chain one firm produces (a part of) a product for another firm or provides it

with a service which does not belong to the core competencies of the buying firm (Gereffi et

al., 2005). The supply chain of a multi-national may be partially located in developing countries

because of the presence of raw materials there (Keesing & Lall, 1992). Developing countries

are characterized by low-income, human resources weaknesses and high economic

vulnerability (Cuervo-Cazurra & Genc, 2008). Based on one of the three pillars of Ruggie’s

framework

2

, which serve as a global standard for addressing human rights, companies must

respect human rights. Since there is a lack of global regulations regarding human rights and

international laws differ from each other the corporate responsibility to respect human rights

becomes more important (Ruggie, 2013). This research focuses on social and environmental

sustainability which means that organizations are ‘meeting the needs of the present without

compromising the ability of future generations to meet their own needs’ (Brundtland

Commissie, 1987). Christopher (1992) (according to Lauras, 2013) defines the supply chain as

‘the network of organizations that are involved, through upstream and downstream linkages, in

the different processes and activities that produce value in the form of products and services

delivered to the ultimate consumer’.

1 _{See table 2.}

2 _{According to the first pillar of this framework it is the state’s duty to protect against human rights abuses by third}

10

The relationship between the buyer and supplier shows some interdependency since the buyer’s

competitive advantage also depends on its supply chain management (SCM). In an appropriate

supply chain strategy customer needs are taken into account (Lyons & Ma’aram, 2014). Figure

1 presents an example of a supply chain in the food sector.

Fig. 1. Example of a supply chain in the food sector (Diabat, Govindan, & Panicker, 2012:3043)

The increased demand for socially responsible products and food safety asks for increased

transparency in the supply chain to ensure that the products are safe and sustainable. Supply

chain transparency (SCT) is ‘the degree to which a supply chain player has access to relevant

information about products, processes and flows of capital without loss, noise, delay and

distortion’ (Bastian & Zentes, 2013:554). The European Commission (2015) created laws and

standards regarding food safety. According to Bastian & Zentes (2013) these standards in the

food industry will reduce the complexity of food quality issues and also increase the SCT due

to disclosure pressure. With increased supply chain transparency food quality and safety are

easier to assess (Bastian & Zentes, 2013). In turn, organizations tend to disclose this information

to satisfy their stakeholders in order to continue their operations (Deegan, 2002).

11

by the involvement of all management levels in the supply chain (Rábade & Alfaro, 2006).

Communication is used to make the supply chain more transparent. In turn, if the supply chain

is transparent, agency problems and complexity of ethical and quality issues will be mitigated.

So, the greater the SCT, the higher the social, ecological and operational performance of the

chain (Bastian & Zentes, 2013). If SCT and sustainable performance of the organization are

related to each other the organization is likely to disclose information about supply chain

communication.

Traceability is one way to increase the supply chain transparency. According to Rábade and

Alfaro (2006) traceability concerns registering and tracking parts, processes, and materials used

in production. Traceability can be used as a tool to manage food quality by tracking information

to improve and control processes in the supply chain. In the examination of food safety the

extension of food supply beyond a single firm’s boundaries should be taken into account. Food

supply chains often consist of multiple firms, like farms, processors, packers, distributors,

transporters, and retail stores. Most of these market transactions are anonymous which makes

it difficult to assess the food safety (Resendo-Filho & Hurley, 2012). Traceability systems

might be used to decrease the asymmetry of information along the supply chain. These systems

can also solve information problems related to food quality and food safety (Rábade & Alfaro,

2006). Other incentives, that are more at the firm’s own advantage, to adopt traceability systems

are the identification of better sources of raw materials and the compliance with international

trade standards. The more incentives a firm has to improve food safety the more effort it will

put in increasing the traceability system’s precision. Precision means the linkage between the

identities of raw material producers and the final food products (Resendo-Filho & Hurley,

2012). So a traceability system is necessary when suppliers are anonymous. In order to deliver

sustainable products or services an organization must know if its suppliers comply with its

sustainability standards and therefore the organization should know who its suppliers are. In

that case the organization has a transparent supply chain. If the supply chain of an organization

is transparent, possibly due to traceability, it is likely that this organization discloses the name

and location of its suppliers in order to show that suppliers are identified and in turn the

sustainability of their operations can be monitored.

2.2 Food safety

12

governmental institutions, such as the World Health Organization (WHO), create more laws

and regulations regarding food quality and safety. Besides pressures on organizations to behave

sustainably, NGOs and governmental institutions exert pressure on food organizations to

safeguard the quality of their food. Both sustainability and food safety pressures are salient in

the food industry. The influence of this stakeholders’ pressure on the organization will be

elaborated in the next section.

The increased food safety, particularly regarding pesticide residues, E-numbers and sweeteners,

forced companies in the food sector to increase explicit coordination in the value chain. Food

safety regulations are developed by the state to protect consumers (Bloom, 2015). Due to the

increased food safety an organization will reduce the amount of suppliers but increase the

responsibility of the remaining suppliers (Gereffi et al., 2005). Food processing and food

packaging play an important role in food safety and the quality of food. Related to both issues,

proper waste management is required in order to protect human health and the environment and

to preserve natural resources. Waste prevention is established “by changing the design,

manufacture, purchase or use of the original materials and products” (Marsh & Bugusu,

2007:44). Besides waste prevention, recycling and reusing materials of food packages have

environmental benefits, like the conservation of resources, prevention of greenhouse-gas

formation and protection of the environment (Marsh & Bugusu, 2007). So, in light of consumer

health and environment protection, these issues are considered important.

13

a more sophisticated market, the buyer generally has a better understanding of the customer

demand than the supplier. Then the buyer will inform the supplier of what is required

(Humphrey & Schmitz, 2001). This means that the increased demand for fair and green products

(Chen & Chang, 2013) would also reach the suppliers through the buyers from developed

countries. In this way organizations that do not directly find themselves in a sustainable

environment will also be expected to conform to the norms regarding sustainability.

2.3 The role of stakeholders in influencing disclosure strategies

Stakeholders are groups or individuals who are influenced by the decisions of the organization’s

management (Freeman & Reed, 1983). The stakeholder model of Donaldson and Preston

(1995) is presented in figure 2. Due to pressure from stakeholders, organizations disclose social

information to show that their products are manufactured under acceptable social and

environmental standards (Lauras, 2013). For example, statutory laws and legislations against

discrimination in business operations are developed. Such legal developments show that

‘stakeholders are defined by their legitimate interest in the corporation, rather than simply by

the corporation’s interest in them’ (Donaldson & Preston, 1995:76). Due to the interdependency

between the organization and its stakeholders, it is a strategic decision in the long-run to take

into account these ethical considerations, as this is desired by stakeholders (Donaldson &

Preston, 1995). Standards for food safety also form a pressure from NGOs, governmental

institutions or the society. Stakeholders are influenced by the organization, so their right to

social and environmental information about the organization is comparable to the right of

shareholders to financial information about the organization (Emeseh & Songi, 2014). In turn

the organization is dependent on its stakeholders since they provide the organization with the

resources with which it needs to operate (Ullman, 1985). This is why the arrows in the

stakeholder model run in both directions (Donaldson & Preston, 1995). So, corporations acting

in socially responsible ways will avoid any activities that could harm their stakeholders. When

harm to stakeholders is already done by the corporations they will rectify it once they are aware

of this harm (Campbell, 2007).

14

responsible by providing the organizations with rewards (Campbell, 2007). Therefore,

organizations are likely to be more transparent about aspects of sustainability that are

considered as important by the organization’s stakeholders. Since there are institutional

pressures, e.g. from the European Committee, to disclose more about food safety issues,

multinationals in the food industry are expected to disclose more about the aspects of food

safety (including food packaging and ingredients) than other CSR categories in their

sustainability reports.

Fig. 2. The stakeholder model (Donaldson & Preston, 1995)

3

The fact that organizations imitate other ‘more legitimate or successful’ (DiMaggio & Powell,

1983:152) organizations can be explained by mimetic processes. Similarity among

organizations within the same field often leads to many advantages, like legitimacy and easier

transactions with other organizations (DiMaggio & Powell, 1983). ‘Legitimacy is a generalized

perception or assumption that the actions of an entity are desirable, proper, or appropriate within

some socially constructed system of norms, values, beliefs, and definitions’ (Suchman, 1995,

p. 574). As long as the society is satisfied with the organization operating in an acceptable, or

legitimate, way, then the organization can continue its operations. This is referred to as the

social contract between society and organizations. Firms are aiming for good reputations, which

are related to multiple competitive advantages, including charging premium prices and easier

15

access to capital markets. Van Riel (1995:23) (following Hooghiemstra, 2000) defines

corporate image as ‘a set of meanings by which an object is known and through which people

describe, remember and relate to it’. Maintaining legitimacy is more difficult since the

organization may continue with the same operations but the norms of society change (Tilling,

n.d.). If the stakeholders are unsatisfied with the operations of the organization this might lead

to a reduction in customer demand for the products or services from the organization. In this

case, the organization needs to defend its corporate image (Tilling, n.d.). Corporate social

reporting may be used restore a firm’s corporate image. This means that corporate social

reporting may not serve solely as a disclosure of social and environmental information but this

disclosure may be used to alter the stakeholder’s perceptions of legitimacy (Deegan, 2002;

Hooghiemstra, 2000).

16

‘worse environmental performance is associated with greater environmental disclosure’. In

17

3. Research design

In the first section of this chapter the sampling strategy and criteria are discussed. The second

section contains an elaboration of the research method. In this research a qualitative content

analysis will be conducted to study the influence of stakeholders on the transparency of

particular sustainability aspects. To conduct the content analysis a transparency measurement

tool is needed and will be provided in the appendix. The transparency measurement tool is

explained in the second section of this chapter.

3.1 Sample and data collection

18

group in the first place. To study similarities and differences amongst product groups with

stakeholders that emphasize different sustainability issues, data will be selected based on the

following issues that are emphasized by the organization’s stakeholders: health, social and

environmental sustainability issues

4

. These important sustainability topics for stakeholders are

called ‘material aspects’ which ‘are those that reflect the organization’s significant economic,

environmental and social impacts; or that substantively influence the assessments and decisions

of stakeholders’ (GRI, 2013b:244). Material aspects are derived from dialogues that

organizations have with their stakeholders and may be included in a materiality index in the

organization’s report. An overview of the data selection is presented in table 1.

To study the influence of stakeholders on the transparency of particular sustainability aspects,

other factors, that possibly influence this transparency, such as firm size, should be similar

amongst samples. The size of the organizations in the sample are relatively big since they

account for multinational organizations with a global supply chain. Also, the position in the

global supply chain must be similar amongst the organizations in the sample. Global food

brands have multiple suppliers and consumers form one of their stakeholder groups. Therefore,

food brands are selected in the sample. The context of regulations should be similar amongst

organizations since this also exerts pressure on organizations to disclose social and

environmental information. Therefore, MNCs with their headquarter (HQ) located in the United

States are included in the sample.

Table 1. Overview of data selection

#

Food brand

Product group

Type of product

(Case)

Material aspects

*

1

Chiquita

Fruit and vegetables Tropical

Social, environment

2

Fresh del

Monte

Fruit

Tropical

Social, environment



3

Kellogg’s

Cornflakes

Unhealthy

Health, environment

*

4

Coca Cola

Beverages

Unhealthy

Environment, social

*

5

Mars Inc.

Candy

Unhealthy

Social, environment

*

4 _{In some sustainability reports a materiality index or analysis is included. If a materiality index is lacking, these}

sustainability topics are elaborated in the reports.

 _{Prioritized sustainability categories marked with an asterisk are disclosed in the report of the organization. If not,}

19

6

Heinz

Sauces

Unhealthy

Environment, health

*

7

Ben & Jerry’s

Fairtrade ice-cream

Agriculture

Social, environment

8

Starbucks

Fairtrade coffee

Agriculture

Social, environment

*

9

Stonyfield

Farm

Organic dairy

Agriculture

Environment, health

10 Tyson Foods

Meat

Agriculture

Health, environment,

animal welfare

*

3.2 Research method

A content analysis will be employed to investigate whether differences exist between social

reports of multinationals in the food sector. Content analysis is ‘a research technique for making

replicable and valid inferences from texts (or other meaningful matter) to the contexts of their

use’ (Krippendorff, 2014:18) (following Beck, Campbell & Shrives, 2010).

Transparency is composed of two components. The first is the scope of sustainability subjects

from the supply chain disclosure radar (Marshall et al., 2016). The second relates to the depth

of disclosure (Beck et al., 2010). The supply chain disclosure radar is presented in figure 3. It

identifies eleven categories of supply chain disclosure information and three levels of disclosure

and the option of non-disclosure. Nine of these categories can be found in the original supply

chain disclosure radar of Marshall et al. (2016).

5

The category ‘raw material supplier’

substitutes the original ‘first tier’ and ‘lower tier’ categories.

6

_{Since stakeholders put much}

pressure on customer health, which is affected by ingredients and additives in food, the category

‘ingredients and additives’ is added to the supply chain disclosure radar. The categories of

supply chain disclosure information are further specified into several items. These items are

derived from the GRI reporting principles and the GRI research about topics that stakeholders

want the organizations to disclose. The items can be found in table 2. So, all categories from

the supply chain disclosure radar comply with one or more of the GRI reporting guidelines.

This shows that there is conformity between the scientific literature used and sustainability

benchmarks used in practice. I extended this conformity in the creation of a measurement tool

for transparency. Besides the part of this tool that measures the transparency of the content of

sustainability reports, criteria related to the date of the report are also added to the measurement

5 _{The two categories that were not a part of the original supply chain disclosure radar are highlighted in figure 3.} 6 _{This modification is made after the analysis from which it became apparent that organizations in the food industry}

Table 2. Transparency measurement tool

Category Item GRI guideline7_{/ GRI}

stakeholder suggestions8

Labour rights Employment information (type, numbers of employees by region/country, employment creation and average turnover)

G4-LA 1, 2, 3

Labour/management relations (the presence of independent trade unions and companies’ policies and procedures)

G4-LA 4

Health and safety (policies on occupational accidents and diseases, standard injury, lost day, and absentee rates and number of work-related fatalities)

G4-LA 5,6,7,8

Training and education (Average hours per year per employee by category of employee) G4-LA 9,10,11 Diversity and opportunity (description of equal opportunity policies, monitoring systems) G4-LA 12

Equal Remuneration for Women and Men G4-LA 13

Human rights Strategy and management (description of firms policies related to the universal declaration and the fundamental human rights conventions of ILO)

G4-HR 1,2

Non-discrimination (policies/program/procedures preventing all forms of discriminations in firms’ operations)

G4-HR 3

Freedom of association and collective bargaining (firms’ policies on acknowledging freedom of association and collective bargaining)

G4-HR 4

Child labour (policies to exclude the use of child labour directly from firms’ internal operations and indirectly from firms’ suppliers)

G4-HR 5

7 _{This refers to the G4 Sustainability Reporting Guidelines constituted by the Global Reporting Initiative (GRI, 2013c).}

8 _{The GRI exercised a project with the aim of identifying sustainability topics that are considered relevant by different stakeholder groups. The results represented sustainability}

21

Forced and compulsory labour (policies addressing forced and compulsory labour) G4-HR 6

Society Community (policies to manage impacts on community in areas affected by firms’ operations) G4-SO 1,2 Bribery and corruption (policies and mechanism for organisation and employees in addressing bribery

and corruptions)

G4-SO 3,4,5

Political contributions (policies, management system and compliance mechanism for managing political lobbying and contributions)

G4-SO 6,7,8

Indirect economic impacts 23

Local employment 23

Supplier location Changes in the location of suppliers, the structure of the supply chain, or in relationships with suppliers, including selection and termination

G4-13

Supplier production of raw materials in environmentally sensitive and/or conflict-affected areas 23

Raw material supplier Name, location, workforce composition and sub-contracting status of lower-tier direct suppliers

Description of the organization’s supply chain G4-12

Supplier Human Rights Assessment (percentage of new lower tier suppliers that were screened using human rights criteria, significant actual and potential negative human rights impacts in the supply chain and actions taken)

G4-HR10,11

Supplier Assessment for Impacts on Society (percentage of new suppliers that were screened using criteria for impacts on society, significant actual and potential negative impacts on society in the supply chain and actions taken)

G4-SO9,10

Animal Welfare (animal health and welfare management) 23,24,25

Material used Sourcing standards for chemical fertilizer, herbicide and pesticide use in agricultural production

22

22

Packaging (plastics use and management, product packaging materials, environmental impacts of

packaging across life cycle)

22, 23

Sourcing strategy and policies (raw materials, ingredients and feedstock) 24,25

Materials used by weight or volume (renewable/non-renewable), percentage of materials used that are recycled input materials

G4-EN 1,2

Material location Products from responsibly managed land to avoid deforestation and forest degradation 22

Wood-based products from responsibly managed forests 22

Biodiversity (operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas; description of significant impacts of activities, products, and services on biodiversity in protected areas)

G4-EN 11,12

Ingredients and additives Customer health and safety (policy protecting customer health and safety during the use of firms’ product and services)

G4-PR 1,2/

23,24,25

Product information and labelling (required or voluntary, regarding the sourcing of components of the product or service; content, particularly with regard to substances that might produce an environmental or social impact; safe use of the product or service; disposal of the product and environmental/social impacts)

G4-PR 3/

23,24,25

Energy Energy consumption within and outside the organization G4-EN 3,4

Energy intensity G4-EN 5

Reduction of energy consumption, and in energy requirements of products and services G4-EN 6,7

Water Total water withdrawal by source G4-EN 8

Water sources significantly affected by withdrawal of water G4-EN 9 Percentage and total volume of water recycled and reused G4-EN 10

23

Total number and volume of significant spills G4-EN 24

Advertisement and marketing

Policies and strategies about responsible advertising and marketing

Stakeholder suggestions GRI stakeholder

suggestions (GRI, 2013c)

Criteria Description

tool. The more recent the information is about the organization’s sustainability practices, the

more transparent the organization is. Recent sustainability reports reflect more transparency,

thus the date of these reports is part of the transparency measurement tool.

Fig. 3. Supply chain disclosure radar.

9

To make replicable and valid inferences about the companies’ transparency their reports will

be coded. This coding will be done by using the CONI (consolidated narrative interrogation)

method (Beck et al., 2010). The CONI method is used to identify the depth of the disclosure.

Table 3 provides explanations and examples of the types of disclosures 0, low, medium, and

high. Typically the number of the organization is compared to a trend, a target or an industry

average (Beck et al., 2010). The CONI method is combined with the eleven categories of the

supply chain radar. With this transparency tool conclusions can be made about the transparency

of sustainability reports in the food industry.

9 _{The values in the supply chain disclosure radar have the following meaning: 0 = no-disclosure, 1 = low}

25

Table 3. Transparency measurement scale

Disclosure type Definition Examples 0 No-mentioning of the category n/a Low Disclosure addresses

issues related to category definition, and may provide details (purely narrative).

‘In addition, we are building coalitions to galvanize global action across the Golden Triangle of business, government and civil society to help address the public health challenges we face worldwide.’

Coca Cola 2014/2015 Sustainability report (p.9) Medium Disclosure addresses

issues related to category in a numerical way, and may include qualitative explanations (narrative and quantitative).

‘In 2014, the U.S. Caring Dairy™ program included 85 farms, including five new farms outside of Vermont that supply our western US production line.’

Ben & Jerry’s 2014 SEAR – Values Led Sourcing

High Any numerical disclosure to the category including qualitative statements demonstrating year comparisons; narrative, quantitative and comparable.

‘We introduced Froot Loops® Bloopers, which are made with whole grains and provide a good source of fiber and 10 grams of sugar per serving. We also lowered the sugar content of Frosted Flakes® to 10 grams per serving. We have reduced the sugar content of this popular cereal by 17 percent since 2007.’

26

4. Results

In this chapter general information about stakeholder pressures in the different product groups,

and the results of the content analysis will be discussed. The results will be analyzed and

interpreted per product group. First general information about stakeholder pressure in the food

sector will be discussed. In the second section of this chapter, stakeholder pressure on tropical

food organizations and results of the content analysis of this product group will be discussed.

The same structure is applied to the unhealthy product group in the third section, and the

agricultural product group in the fourth section. An overview of the results is provided in table

7. The elaboration on these results is given for each organization. These elaborated results are

included in Appendix A.

4.1 Background information stakeholder pressure in the food sector

There has been much pressure on genetically modified organisms (GMOs) in the food sector.

The world health organization (WHO) defines GMOs as ‘organisms whose genetic material

(DNA) has been modified in a way that does not occur naturally’ (WHO, n.d.). DNA from

genetically modified crops may enter human blood which is dangerous since GMOs are related

to cancer and gluten illnesses (RT, 2013; Spisák et al., 2013). Other health issues, such as

immune system disorders, accelerated aging, and infertility, also increased after the

introduction of GMOs in the food industry (Smith, 2011). NGOs exerted pressure on mandatory

GMO labeling but the American state Vermont also forced big companies, such as General

Mills, Mars and Kellogg’s, to label their products since the state now requires mandatory

labeling (Charles & Aubrey, 2016). Food organizations also receive pressure from formal

regulations by governments and negative publicity by NGOs on typical unhealthy ingredients,

such as E-numbers. These E-numbers are used to enhance flavour, texture, colour or increase

the shelf-life of food. A negative effect of E-numbers is the increase in hyperactivity (mainly

in children), and there are concerns some of them are related to cancer (Coughlan & Snelson,

2015).

4.2 Tropical food product group

4.2.1 Stakeholder pressure on tropical food organizations

27

to disclose information on these topics. The U.S. Department of Agriculture (USDA) checks

farms on food safety and their compliance with regulations. To safeguard food quality,

organizations have to be able to trace their whole supply chain. Multiple fruit companies,

including Chiquita, were accused of bribery, bad labour conditions and violation against

employees. With support from NGOs, such as Oxfam Novib, the World Trade Organization

(WTO) created regulations to increase development of societies involved in trade of bananas

(Shah, 2010). The materiality index in the report of Fresh del Monte together with the findings

of GRI (2013c) about what stakeholders want to know, show that stakeholders in the tropical

product group concern most about social sustainability issues, followed by environmental

issues. So organizations in this product group received pressure on human – and labour rights,

as well as GMO use and food safety.

4.2.2 Analysis of tropical product group

The product group ‘tropical products’ consisted of the food brands Chiquita and Fresh del

Monte. Both food brands are transparent about material sourcing, meaning that both the scope

of related sustainability issues was high as well as the depth of the information. In general, the

scope of disclosed environmental issues was high but detailed information about energy

consumption, water use and waste was lacking. For example, energy reduction is elaborated but

information about energy consumption is lacking. The scope of social sustainability items that

are disclosed, is high. The tropical food companies are most transparent about employee health

and safety since they provide most detailed information on this social sustainability item.

Especially the project developed by Chiquita to increase female farm worker’s equality is

elaborated but relatively little attention is paid to other social sustainability issues, such as

policies regarding human rights, child labour and forced labour. In general, the scope of

customer health items that are disclosed, is higher than the depth of this information. Within

the sustainability category of health, this group is most transparent about customer health and

safety since most detailed information is provided about this item. So, organizations in this

product group are most transparent about material sourcing, energy reduction, employee health

and safety, and customer health and safety. Overall, the reports of the companies showed most

transparency about environmental performance.

28

Examples of these disclosures are given in table 4. It is striking that, with regard to the

development of society, healthy food companies focus on the disclosure of projects. They

deliberately highlight certain projects that positively impact society while other societal aspects

are not or narratively disclosed. Sourcing standards that may influence consumers’ health are

not disclosed while sourcing strategies and policies that influence society and the environment

are discussed more in detail. Examples of this disclosure are presented in table 4. Organizations

in this product group received pressure on human – and labour rights, as well as GMO use and

food safety. Disclosure strategies of organizations in the tropical product group include

highlighting certain sustainability aspects of categories that receive pressure from stakeholders

while other aspects are not or narratively mentioned. So, organizations in this product group

seem to compensate the non-disclosure of sustainability aspects, by disclosing other

sustainability aspects in detail. Sustainability items that are mostly highlighted are those that

receive pressure from stakeholders whereas lacking or less elaborated sustainability aspects can

be both considered important by stakeholders or not important to stakeholder.

Table 4. Examples of highlighted disclosure items in healthy food organizations

Sustainability item Organization Example sustainability disclosure

Employee health and safety

Chiquita ‘The Helpline claim categories are bribery/corruption, conflicts of interest, financial misconduct/fraud, human resources/employment relations, privacy and confidentiality, retaliation, and safety/security.

Helpline Reports (By Year) 2008 2009 2010 2011 2012 Total Reports Received 135 111 156 172 141’ Chiquita CSR report 2009-2012 p.15/16 Fresh del Monte

‘In Costa Rica, we have received numerous recognitions for our efforts to reduce the number of accidents at the workplace. Our standards in social responsibility are audited by third-party auditors using well-reputed norms such as the Ethical Trading Initiative (ETI) or our customers’ own standards.’

Fresh del Monte corp. sustainability report p.20 Material sourcing Chiquita ‘From a cautious test on two farms has grown a network of over 40,000 hectares (98,840 acres) of Rainforest Alliance Certified™ banana farms that includes not only Chiquita’s owned farms in Latin America, but also over 200 local growers who supply Chiquita. All of these certified farms implement the Sustainable Agriculture Network (SAN) Standard pioneered by the Rainforest Alliance, which includes comprehensive social and environmental requirements.’

29

Fresh del

Monte

‘SUSTAINABLE PALLET PRODUCTION IN COSTA RICA - We sustainably produce wooden pallets by growing more than 1,750 hectares (ha) of Gmelina trees on marginal land not suitable for agricultural production. The lumber in our “sustainably managed” forest is harvested every 6 years producing 1,500 pallets/ha. The harvest process does not disturb the soil because the stumps of harvested trees are left to produce new saplings which are pruned to develop into new trees.’

Fresh del Monte corp. sustainability report p.16

4.3 Unhealthy food product group

4.3.1 Stakeholder pressure on unhealthy food organizations

NGOs and governmental groups exerted pressure on fast-food organizations to show more

responsibly to customer health (Gianatasio, 2014). For example, children should not be the

target of fast-food advertisements. Organizations in the unhealthy product group also received

pressure on the low nutrition quality of their food. Results of studies about fast food driving

diet-related diseases are being published. The unhealthy product organizations receive negative

media attention: movies are published on YouTube in which negative effects of fast-food are

shown, and publications can be found on the decomposition of unhealthy food due to unnatural

ingredients (Mercola, 2010). Due to the high level of sugars consumed by Americans, several

governmental institutions, such as the WHO, recently recommended sugar intake limits (Bailin,

Goldman & Phartiyal, 2014). This creates pressure on food organizations to disclose the amount

of sugar in their products in order to contribute to the guidelines regarding sugar intake.

According to Bailin, Goldman & Phartiyal (2014) organizations deliberately focus on the

disclosure of the natural sourcing of sugar and added fruit to the product (while the actual

amount of fruit is low) to disguise the high amount of sugar content. Specific responsibility

topics that are considered important by stakeholders are derived from the materiality index:

health and environmental sustainability. So, most pressure in this product group is exerted on

advertising- and marketing strategies, customer health and nutrition of the products.

4.3.2 Analysis of unhealthy food product group

30

used’ sustainability category. The scope of social sustainability items is relatively high; most

detailed disclosure is provided for employee health and safety. Coca Cola’s transparency about

opportunities for women and other groups of society is out of balance with other social issues

since the project to empower women in business gets relatively much attention. Heinz does not

take responsibility for child labour and minimum labour wage as it did not create any policies

regarding these aspects but Heinz complies with local regulations which may be lacking. So,

Heinz is transparent about its use of child labour in case it is permitted by local regulations.

This transparency, and at the same time lack of the organization’s own human rights policy, is

striking. The disclosure of the other social sustainability issues is limited to narrative

information which in turn limits the transparency about social sustainability of this product

group. The scope of sustainability items related to health is high, which can be explained by the

high pressure on this aspect. In general, the information regarding health contains details and

numerical information. Health and wellbeing strategies are elaborated so organizations show

their initiatives to improve customer’s health. In this product group, the sustainability items

material used, energy – and water use, human rights strategies, and employee health and safety,

were disclosed in an elaborate way. Organization in this product group are most transparent

about environmental performance and health issues.

31

Table 5. Examples of highlighted disclosure items in unhealthy food organizations

Sustainability item Organization Example sustainability disclosure

Customer health Kellogg’s ‘We introduced Froot Loops® Bloopers, which are made with whole grains and provide a good source of fiber and 10 grams of sugar per serving. We also lowered the sugar content of Frosted Flakes® to 10 grams per serving. We have reduced the sugar content of this popular cereal by 17 percent since 2007.’

Kellogg’s 2014 Corporate Responsibility Report p.43 Coca Cola ‘In 2014, we introduced more than 400 new beverage options, more than 100 of which are reduced-, low- or no-calorie, and we continued to increase the number of smaller package-size offerings.’

Coca cola 2014/2015 sustainability report p.9 Mars Inc. ‘Calories: In 2014, 99.8% of Mars Chocolate or confectionery products were no more than 250 calories per portion. The next step is to increase the number of chocolate confectionery products that are 200 calories or less per pack. In the UK and Germany, our Drinks business introduced a reduced calorie hot chocolate option for our KLIX® vending machines, with 52% fewer calories than the regular version.’

Mars Principles In Action Summary 2014 p.19 Heinz ‘Heinz has been at the forefront of the U.S. National Salt Reduction Initiative, a public-private partnership aimed at reducing people’s salt intake by 20% by 2014 to help reduce the risk of hypertension and heart disease.’

2014 Heinz CSR Report p.41 Advertisement and

marketing

Kellogg’s ‘In the European Union, we follow a pledge that targets advertising to children under 12 toward those products that meet specific nutrition criteria based on scientific evidence and both national and international dietary guidelines.’

Kellogg’s 2014 Corporate Responsibility Report p.46 Coca Cola ‘Based on our responsible marketing policy, we do not buy advertising placements that target children, defined as audiences with 35 percent or more of viewers under the age of 12.’

Coca cola 2014/2015 sustainability report p.10 Mars Inc. ‘We were 97.4% compliant against our goal of not advertising on television if more than a quarter of the audience is likely to be under 12.’

Mars Principles In Action Summary 2014 p.40 Diversity and

opportunity

Kellogg’s ‘It’s also notable that we now have one of the more gender-balanced boards of directors in corporate America, with seven men and five women as members. According to Catalyst, a nonprofit that seeks to expand opportunities for women in business, just 17 percent of Fortune 500 board positions were held by women in 2013.’

32

we enabled approximately 313,000 women, making a total

of nearly 865,000 since 2010.’

Coca cola 2014/2015 sustainability report p.17 Mars Inc. ‘To help female growers in Côte d’Ivoire improve their crop quality, yields and incomes, Mars Chocolate initiated the second phase of our Gender Action Plan. For example, we’re supporting 25 women’s groups in cocoa communities to improve their household income and business practices.’

Mars Principles In Action Summary 2014 p.29 Heinz ‘Our objectives in pursuing diversity and inclusion

initiatives have been to:

• Achieve a skilled, high-performing workforce that is reflective of the diverse global marketplace;

• Cultivate external relationships with professional and civic groups to support business priorities; and

• Foster an inclusive culture that embraces differences and drives innovation to accelerate growth.’

2014 Heinz CSR Report p.38

4.4 Agricultural food product group

4.4.1 Stakeholder pressure on agricultural food organizations

33

of water will increase, hence the demand for sustainable water use in agriculture also increased

(global agriculture, n.d.). Especially agriculture is under pressure of GMO labelling since this

part of the food industry uses GMOs on a large-scale, from genetically modified seeds to

genetically modified animals (Wolfe, 2013). NGOs and governmental institutions, including

the Vermont State, fought for GMO labels on genetically modified food (Charles & Aubrey,

2016). So agricultural food organizations receive most pressure from its stakeholders on labour

rights, environmental and use of GMOs. Besides, animal well-being is one of the sustainability

topics that is considered most important by Tyson’s stakeholders. The organizations Ben &

Jerry’s and Starbucks receive less pressure from stakeholders on their social performance.

4.4.2 Analysis of agricultural food product group

The product group ‘agricultural products’ is constituted by Ben & Jerry’s, Starbucks, Stonyfield

and Tyson. In this product group most environmental sustainability items are discussed. In

general, the environmental sustainability items that are disclosed by organizations in this

product group contain detailed information increasing the depth dimension of transparency.

The reports about agricultural products show most transparency about sustainability items

‘packaging’ and ‘energy reduction’. The scope of social sustainability performance is high as

almost all social sustainability items are discussed. But in general, disclosure about social

performance is limited to narrative information. It should be noted that organizations are least

transparent about human rights. The organizations are most transparent about labour rights,

specifically about the social sustainability items regarding communities in which the

organizations operate. Depth of disclosure is lacking regarding the other social sustainability

items, such as local employment, child labour and forced labour. Starbucks mostly elaborates

on its own fair trade certification Coffee and Farmer Equity (C.A.F.E.) Practices. The company

discloses the percentages of Fairtrade, C.A.F.E., and organic sourced coffee. The agricultural

product brands are not transparent about customer health related sustainability issues. The scope

of disclosed health issues is small. If customer health is discussed, it is done narratively so there

is no depth of health disclosure. For example, the information that Ben & Jerry’s discusses

about product safety is limited to GMO policies. Tyson Foods was also highly transparent about

animal welfare.

34

it sells unhealthy products but the company does not seem to receive much pressure on the

aspect of customer health. Ben & Jerry’s focuses on the disclosure of fair trade sugar sourcing

instead of disclosing the sugar content in its products. It may be that Ben & Jerry’s has

something to hide regarding the latter, which the company tries to disguise by its high

transparency on fair trade sugar sourcing. It is striking that several environmental aspects, such

as packaging, are highlighted in the reports while other environmental aspects are not or

narratively disclosed. The high transparency of Starbucks about energy reduction is striking

since other environmental aspects are discussed in a more narrative way. So Starbucks

highlights a few environmental aspects. Another striking result is Starbucks’ disclosure on their

own fair trade certification C.A.F.E. They created these standards because, according to

Starbucks, ‘the C.A.F.E. Practices model actually was superior to the fair trade standards’

(Ramaika, 2013). 96% of their sourced coffee meets C.A.F.E. standards while only 8.6% meets

Fairtrade standards. This rather shows that C.A.F.E. standards are weaker and easier for

Starbucks to comply with (Paul & Cummins, 2014). The creation of their own fair trade

certification explains why Starbucks can label their coffee as ethically sourced, since most of

their sourced coffee fails the Fairtrade certification test. Examples of striking results are given

in table 6. The organizations in this product group respond to stakeholder pressure by their high

transparency on certain environmental aspects. It is especially striking that Starbucks highlights

energy reduction in its report as the organization received pressure from its stakeholders on

energy use in its buildings and restaurants. Organizations that label raw materials of their

products as ethically sourced disclose less social information whereas their stakeholders have

said to trust the social responsibility of fair trade organizations. Tyson’s stakeholders also

considered animal well-being as one of the most important sustainability topics. The

organization responds to this pressure by the transparency of its animal well-being policies and

programs.

Table 6. Examples of highlighted disclosure items in social food organizations

Sustain-ability item

Organi-zation

Example sustainability disclosure

Ingre-dients & addatives

Ben & Jerry’s

‘Over the course of 2014, 94.96% of our ingredients, by volume, were non-GMO by the original seed source for that ingredient. … In 2014, we got to work in our home state to support mandatory GMO labeling. After a hard fought battle, Vermont became the first and only state to require a “no strings attached” GMO labeling law.’

Ben & Jerry’s SEAR 2014 section ‘Going non-GMO’ Tyson

Foods

35

(minimally processed with no artificial ingredients). Our Open Prairie

Natural Angus® brand products are created from animals that are raised without added hormones or antibiotics.’

Tyson Foods 2015 Sustainability Report on Marketplace: Promoting Health and Nutrition and Providing Specialty Products Stonyfield

Farm

Stonyfield website – About us: Why we’re organic Energy Starbucks ‘Green building strategies have been incorporated into both new and existing stores, including international stores. We continue to experience challenges in some of our high growth markets where LEED® is still gaining traction and are working to address this issue. … We purchased renewable energy equivalent to more than 59% of the electricity used in our global company-operated stores -- and 74% of that used in the US and Canada.’

Starbucks Global Responsibility Report 2014 p.16,17

Packag-ing

Ben & Jerry’s

‘In 2014, all of the paperboard used in our pint-sized cartons, mini-cup containers and novelty boxes (pretty much most of our packaged goods) is Forest Stewardship Council (FSC) certified, globally.’

Ben & Jerry’s SEAR 2014 section ‘Climate and Environment’ Starbucks ‘It is our goal to serve 5% of the beverages made in stores in tumblers and mugs brought in by our customers, and in 2014 our customers did that 47.6 million times, up from 46.9 million in 2013.’

Starbucks Global Responsibility Report 2014 p.8 Stonyfield

Farm

36

Tyson

Foods

‘Our approach to improving the sustainability of our packaging is to leverage the 5 Rs (Remove, Reduce, Reuse, Recycle and Renew) during design without sacrificing quality or product protection. … More than eight million pounds of fiber was reduced from corrugated boxes and paperboard cartons.’

Tyson Foods 2015 Sustainability Report on Environment: packaging Human

Rights10

Ben & Jerry’s

‘All of the suppliers for Ben & Jerry’s ice cream are expected to follow practices consistent with the Code of Business Principles of our parent company, Unilever. This code includes: … a firm commitment to human rights, among other things.’

Ben & Jerry’s SEAR 2014 section ‘Values Led-Sourcing’ Starbucks ‘Starbucks launched Coffee and Farmer Equity (C.A.F.E.) Practices in 2004 – one of the coffee industry’s first sets of comprehensive sustainability standards, verified by third-party experts. … In 2014, 96% (400+million pounds) of our coffee met this standard, with 95.5% C.A.F.E. Practices, 8.6% Fairtrade, and 1% organic (some coffees receive multiple verifications or certifications).’

Starbucks Global Responsibility Report 2014 p.3 Labour

Rights

Tyson Foods

‘If a team member gets hurt on the job, we require them to report it, regardless of how minor they believe it to be. We do this because we believe in early intervention to prevent further injury and start the healing process sooner. During fiscal 2015, we reduced our Total Recordable Incident Rate by 12% and our Days Away, Restricted, and Transfer Rate by 13%, when compared to fiscal 2013.’

Tyson Foods 2015 Sustainability Report on Workforce and Culture: Workplace health and safety Heinz ‘The Heinz Safety Process is based on four key principles:

• Nothing we do is worth getting hurt for; • Occupational Health & Safety can be managed;

• Every injury/illness could and should have been prevented; and • Occupational Health & Safety is everyone’s responsibility.

In 2012, the Company lowered its Total Recordable Incident Rate (TRIR) to 1.35 from 1.64 in the prior year.’

2014 Heinz CSR Report p.30,32

10 _{The human rights aspect is not highlighted in the reports of the social product group but, on the opposite,}

Table 7. Results content analysis sustainability reports

Sustainability category Item C hi qui ta Fre sh D el Mo nt e K el log g’ s C oca C ol a Ma rs I n c. H ei nz B en & Je rr y’ s Sta rb ucks Stony fi el d Far m Tyson Foods

Labour rights Employment information

Medium Medium High High Medium Medium 0 High 0 High

Health and safety High High High High High medium Low Low 0 High

Training and education

High. Medium Medium Medium High Low Low High Medium Medium Diversity and

opportunity

Low Low Medium Medium Low Low Low Low 0 Medium

Equal

Remuneration for Women and Men, and equality policies regarding men and women in business.

Low 0 Medium 0 Medium 0 Low 0 0 0

Labour relations committees or associations

Medium Low 0 Low 0 Low Medium Low 0 Medium

Human rights Strategy and management

Low Low Low High Low Low Medium Low 0 Medium

Non-discrimination

Low Low Low Medium 0 Low Low Low 0 Medium

Child labour 0 Low Low Medium Medium Low Low Low 0 Low

Forced and compulsory labour

0 Low Low Low 0 Low Low Low 0 Low

Society Community Low Low High Low Medium Low Low High Medium Medium

Bribery and corruption

38

Indirect economic

impacts

Low Low Low Low Medium Low Medium Medium High Medium

Local employment

Medium Low 0 0 0 0 Low Low 0 0

Supplier location Changes in the location of suppliers, the structure of the supply chain

0 0 Low Low Medium 0 0 Medium 0 0

Supplier production of raw materials in environmentally sensitive and/or conflict-affected areas

Low 0 Medium Low Low 0 Low 0 Low 0

Raw material supplier Name, location, workforce composition of raw material suppliers Low Low/ Medium

Low Low Low Low Medium 0 High Medium

Description of the organization’s supply chain

0 0 Medium Low 0 Low Low 0 0 Low

Supplier Human Rights

Assessment

Low Low Medium Medium Medium Low High Medium 0 Medium

Supplier Assessment for Impacts on Society

Low Low Medium Low Low Low High Medium 0 Medium

Animal Welfare 0 0 0 0 0 Low Medium 0 Low High

Material used Sourcing standards

0 0 High 0 Low Low High Low High 0

39

Sourcing strategy

and policies

High Low Medium Low High Medium Medium Medium Low Low

Materials used by weight or volume (renewable/non-renewable), percentage of materials used that are recycled input materials

High High Low High Medium Low Medium 0 0 Low

Material location Products from responsibly managed land to avoid deforestation, forest degradation and land grabbing

Medium High High Low High Medium High 0 0 0

Biodiversity Low High Low High Low Low Low 0 Medium 0

Ingredients and additives Customer health and safety Low/ Medium

Medium High Medium High High 0 0 Low low

Product

information and labelling

Low Low High Low Medium Low Low 0 High Low

Energy Energy consumption within and outside the organization (joules)

High 0 High High High High Medium Medium 0 High

Energy intensity (ratio)

0 0 High High 0 0 0 0 0 High

Reduction of energy

consumption, and of energy

40

requirements of

products and services Water Total water

withdrawal by source

High Low High High High High Medium Medium 0 High

Water sources significantly affected by withdrawal of water

0 0 Low High Medium Medium 0 0 0 0

Percentage and total volume of water recycled and reused

0 0 High Low High Low Low 0 0 0

Waste Total weight of waste by type and waste

management

Medium Medium High Medium High High Medium Low High Low

Total number and volume of

significant spills

0 0 Medium 0 0 0 0 0 0 Low

Advertisement and marketing

0 0 Medium Medium Medium 0 0 0 0 Low

Stakeholder suggestions

0 High Low High Low Medium 0 Medium 0 High