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AMBIGUOUS PRESSURES: STAKEHOLDER INFLUENCE ON SUSTAINABILITY IN FOOD SUPPLY CHAINS

Master’s Thesis

Supply Chain Management

University of Groningen, Faculty of Economics and Business

22 June 2018

MARLENE BUCHNER Studentnumber: 3064212

Email: M.I.W.Buchner@student.rug.nl

Supervisor / university Dr. K. Peters

Co-assessor / university Dr. ir. P. Buijs

Word count: 12 284

Acknowledgement

I thank my supervisor Dr. Kristian Peters for his support during this project. Dr. Peters‟

door was always open and he provided me with very valuable help and comments. Further

I thank Dr. Paul Buijs for this feedback on my work. I would also like to thank the

interview respondents for their willingness to participate and interesting insights. My

thanks go to Suzanne Dijkgraaf for the excellent cooperation during the data collection

process. Finally I thank my family and partner for their support during my studies and this

project. Without them, I could not have realized this project.

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2 ABSTRACT

_________________________________________________________________________

Purpose

This thesis serves the purpose to identify how stakeholders can influence the process of environmental decision-making in food supply chains. It identifies different types of stakeholder pressures and how these pressures affect actions for sustainability.

Methodology / Research Design

A multiple case study approach was employed to investigate stakeholder influence. Three food supply chains were investigated in the Netherlands.

Findings

Multiple types of stakeholder pressures have been identified that confirm current knowledge. It was also found that pressures act against sustainable decision-making.

Furthermore it was found that obstacles are present that make the decision process more difficult for actors. Also the concept of sustainability itself is not equally interpreted throughout the chain.

Practical Contributions

This thesis provides contributions for practitioners. Clear insights on the types of pressure that affect organizational decision-making enable practitioners to analyse and manage these pressures more effectively. Members of stakeholder groups can utilize this research to focus or re-direct their pressures on true sustainability.

Theoretical Contributions

The food sector is a relevant actor in the area of sustainability due to its considerable ecological impact. This thesis contributes to literature because stakeholder influence is highlighted in this sector and this can help to bridge the gap between the obvious need for sustainable behaviour and the current lack of companies to act sustainable.

_________________________________________________________________________

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Table of contents

1. Introduction ... 4

2. Theoretical Framework ... 7

2.1 Sustainability in Food Supply Chains ... 7

2.1.1 Sustainability in supply chains ... 7

2.1.2 Sustainability in food supply chains ... 9

2.2 Stakeholder Pressure and Sustainability ... 10

2.2.1 Stakeholder theory ... 10

2.2.2 Stakeholder pressure for sustainability ... 10

3. Methodology ... 13

3.1 Research Design ... 13

3.2 Case Selection... 13

3.2.1 The potato starch, pork and milk supply chain ... 14

3.3 Data Collection ... 15

3.4 Data Analysis ... 18

4. Results ... 19

4.1 The Meaning of Environmental Sustainability ... 19

4.2 Ambiguous Pressures: In Favour and Against Sustainability ... 21

4.2.1 Pressures in favour of sustainability ... 21

4.2.2 Pressures against sustainability ... 24

4.3 Environmental Sustainability as a Means to Reach Economic Sustainability ... 27

4.4 Obstacles to Reach Environmental Sustainability ... 29

4.5 Summary of Main Differences between Chains ... 35

5. Discussion and Conclusion ... 36

5.1 Theoretical and Practical Implications ... 39

5.2 Limitations and Future Research ... 40

6. Bibliography ... 42

7. Appendices ... 48

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4

1. INTRODUCTION

Food production systems tend to humanity‟s basic requirements and have existed in some form since the beginning of human evolution (Diamond, 2002). However, many people worldwide suffer from food insecurity and insufficient food provision (Kick, Tiezzi, &

Pena, 2017). This issue is likely to become aggravated by climate change in the coming decades and will lead to even more food insecurity (Worldbank, 2018). In order to confine these negative developments, many countries have joined forces to reduce greenhouse emissions drastically in order to keep global warming below 2°C (Paris Agreement, 2015).

It is believed that staying below this threshold can reduce the negative impacts of a climate change. The impact of the food production sector is especially high, this sector emits around 20% of global greenhouse gases (McMichael, Powles, Butler, & Uauy, 2007). It was argued that companies have a responsibility to join the effort and seek to reduce their impact on the climate (Reid & Toffel, 2009). However companies differ vastly in their environmental efforts and it is yet not entirely clear what motivates them to either act or not act sustainable (Bansal & Roth, 2000).

Stakeholders are identified by literature to have a major influence on the sustainability- related behaviour of companies (Wolf, 2014). Stakeholders are groups that can impact the performance of an organization or supply chain or be afflicted by the actions of it. The end-customer is identified to be an especially powerful stakeholder in this context (Brammer, Hoejmose, & Millington, 2017; Seuring & Müller, 2008). However many organizations do not operate sustainable today (Shevchenko, Lévesque, & Pagell, 2016) although the urgency has grown considerably over the course of the past decades.

With regard to improving sustainability in food supply chains it is of the essence not only to consider organizations in isolation but entire supply chains. This is because the environmental impact of a product is made at all stages of a chain, to varying extents (Roy et al., 2009). Prior research has assessed the environmental impact distribution among agri- food supply chains and found that the major share of emissions is made at the farming level and at the feed producing stage (Godard, Boissy, Suret, & Gabrielle, 2012;

Reckmann, Traulsen, & Krieter, 2012; Thoma et al., 2013). Those two stages are the

furthest upstream. Considering the statement above that the customer is supposed to be one

of the most powerful stakeholders, the distribution of environmental impacts in the supply

chain seems to present a hurdle. The customer could not be further away from the stages

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where the critical environmental impact is made. Apart from the end-customer, other stakeholder groups can exert influence: these are for example governmental agencies, non- governmental organizations (NGOs), supply chain customers or financial shareholders (Buysse & Verbeke, 2003; Freeman, 1984). But again, it is also questionable whether these stakeholders are able to influence the right parties in the food supply chain given the skewed distribution of environmental impacts. In order to investigate the inconsistency between pressure and action for sustainability, this thesis addresses the question:

How do stakeholders influence environmental decision-making in the food supply chain?

Stakeholder theory is well grounded in literature (Parmar et al., 2010). The interplay of environmental concerns and stakeholder pressure has also been elaborated on in past research (Buysse & Verbeke, 2003; Sarkis, Gonzalez-Torre, & Adenso-Diaz, 2010). It was found that stakeholder pressure can indeed encourage organizations to engage in sustainable measures. The concept of sustainability and its triple-bottom-line in relation to shareholder theory also is well-established (Hubbard, 2009). It assumes that firms need to face the pressure of economic performance criteria as well as environmental and social expectations. Organizational decision-making has been evaluated with respect to environmental pressures (Wu & Pagell, 2011). It was found that firms often face a trade- off between economic and environmental pressures. However other researchers found that these environmental pressures can be rather vague in the view of firms or not experienced at all (Alblas, Peters, & Wortmann, 2014).

Researchers in sustainable supply chain management have called for insights as to which

extent sustainability is present in management praxis and how different forces influence

decisions for sustainability in organizations (Matthews, Power, Touboulic, & Marques,

2016). Furthermore it was called for more sustainability research that covers an entire

supply chain and its stakeholders rather than merely a focal organization (Montabon,

Pagell, & Wu, 2016). The skewed distribution of environmental impact within the chain

calls for a supply chain view in order to understand all the pressures in it and to understand

why becoming sustainable is deferred. Considering the substantial impact of food supply

chains on climate change, they are an important research setting.

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This thesis investigates stakeholder influence by means of an inductive multiple case study approach. Investigating multiple actors in different food supply chains contributes to existing knowledge, because it provides a comprehensive view on how stakeholders affect different supply chain actors and how this influences the environmental performance of the chain as a whole.

There are several theoretical contributions offered by this thesis. First, the literature on stakeholder pressure is expanded into food supply chains. Insights from this sector can confirm or challenge existing findings, hereby improving the generalisability of current findings. Additionally the aforementioned gap between the general and widely present pressure to become sustainable and the low levels of sustainability improvements observed in practice is addressed. Also a clearer picture will be provided on which types of pressure are actually experienced in the supply chain. Another contribution will be that possible contradictions or trade-offs can become apparent that appear between different types of pressure groups. The investigation of organizational environmental decision-making under these pressures can shed light on problems that supply chains face in decreasing their environmental impacts. This research can further be relevant to managers. Clear insights about the different pressure groups and their influence on organizational decision-making can provide managers with a clearer picture of the pressures within their chain. It shows that they cannot rely on an external party to lead the way to truly sustainable production.

The remainder of this thesis is organized as follows: First the theoretical background is

established by defining and elaborating on existing concepts. The section is followed by

the method part explaining the case study approach. The subsequent sections cover the

results and discussion. Whenever „sustainability‟ is mentioned by itself, it refers to

environmental sustainability.

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2. THEORETICAL FRAMEWORK

The following part describes the theoretical framework that is employed to assess the research objective. Food supply chains and sustainability within these chains is described.

Stakeholder theory is outlined and a focus on stakeholder pressure for sustainability is provided.

2.1 Sustainability in Food Supply Chains

2.1.1 Sustainability in supply chains

This section outlines the concept of sustainability and its application in supply chains.

Supply chains traditionally consist of five stages: “[...] raw material, industry, distribution, consumer, and waste” (Matani, Tripathi, Doifode, & Gowardhan, 2015: 261). In contrast to traditional supply chains, sustainable supply chains aim at the reduction of environmental impact while keeping an eye on economic profits (Matani et al., 2015). Sustainable supply chain management can be defined as the management and cooperation between companies in a supply chain where the three dimensions of sustainability are taken into consideration (Seuring & Müller, 2008).

The concept of sustainability has first been introduced to a broad public by the Brundtland Report in 1987. This report proposed a basic definition of sustainability, namely behaviour or actions which tend to the needs of the present generation while maintaining the ability of coming generations to tend to their own requirements (WCED, 1987).

Three dimensions of sustainability have been identified by literature. This „Triple Bottom Line‟ includes an environmental, a social and an economic dimension. In order to act sustainable, each of these dimensions should be met at least to a minimum. The environmental dimension relates to consideration for the natural environment. The social dimension corresponds to ethical requirements. The third dimension, economic, bears on to the financial health of a company or supply chain (Lozano, 2008; Seuring & Müller, 2008).

This definition is provided for the sake of completeness. This thesis focuses on the environmental component of sustainability and disregards the social dimension.

Many supply chain management researchers use the Triple Bottom Line as the definition

of sustainability in their work (Montabon et al., 2016). However, the three dimensions are

often not given equal weight. The economic dimension is frequently given priority

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(Matthews et al., 2016). Research then focuses on the financial gains that can be achieved from implementing sustainability (Golicic & Smith, 2013). This concept is called instrumental logic. The logic emphasizes economic sustainability over environmental and social sustainability and assesses how the first can be improved by augmenting the others.

It has been argued that this behaviour will never lead to true sustainability (Pagell &

Shevchenko, 2014).

Based on criticism on the instrumental logic, Montabon et al. (2016) developed the Ecologically Dominant logic. This approach proposes that in order for supply chains to become truly sustainable, the environmental dimension must be given priority in each transaction or business activity. This thought is based on the fact that human activities deplete planetary resources faster than they grow back. Second priority is assigned to the social dimension. The authors argue that the condition of the environment will always influence the social wellbeing. The economic dimension can only be addressed if the former dimensions have been met. This approach defines economic profits as a means to an end, not an end in itself.

In a similar vein, Pagell and Wu (2009) define sustainable supply chain management as follows: “To be truly sustainable a supply chain would at worst do no net harm to natural or societal systems while still producing a profit over an extended period of time [...] [and]

could, customers willing, continue to do business forever.” (Pagell & Wu, 2009: 38).

Researchers have proposed to turn to natural sciences to unveil a more inclusive and scientifically accurate approach to sustainability (Whiteman, Walker, & Perego, 2013).

The so-called planetary boundary framework identifies several dimensions which are

decisive for a healthy Earth system. Examples are climate change, ocean acidification,

freshwater use, land-system change or biosphere integrity. All these dimensions are

influenced by human behaviour and thresholds have been estimated for all these

dimensions. A transgression of one or more of these boundaries may lead to the Earth

system not being able to support current human lifestyle anymore. Three dimensions have

already exceeded a safe operating space (nitrogen levels, phosphorus levels and genetic

diversity). Multiple dimensions are approaching a high risk space (e.g. land-system change

or climate change) (Steffen et al., 2015). This shows that the natural sciences are far more

elaborate in the way they define the need for sustainability.

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Clearly, sustainability is subject to different definitions. A guiding question of this thesis is to identify how supply chain parties define sustainability and how this definition is influenced by their stakeholders. Furthermore it aims to gain insights if the stakeholder pressures are even directed at true sustainability or if they are merely directed at isolated fragments of sustainability.

2.1.2 Sustainability in food supply chains

This section describes why food supply chains are a relevant sector to implement sustainability. Food supply chains can be defined as a network of companies that cooperate to oversee the flow of services and goods in a chain of food and agricultural products with the goal to achieve minimum costs while increasing value for customers (Folkerts &

Koehorst, 1997). The food sector is highly relevant to consumers and public institutions because of issues like food safety and quality. This is an issue that is likely to concern everyone in a society. Consumers are concerned with methods of production, the quality and additives in their daily food (Beske, Land, & Seuring, 2014). It has further been mentioned that consumers are becoming more conscious about the environmental impact of the products they consume (Validi, Bhattacharya, & Byrne, 2014).

The food sector faces criticism on its sustainability-behaviour. An example is the deforestation that occurs in many regions to clear space for agricultural land use which can lead to changes in world climate (Luyssaert et al., 2014). Another issue is the carbon emission issued by global distribution systems. The food sector has been identified to emit over 20% of global greenhouse gases (McMichael et al., 2007).

Adopting sustainability practices in global food supply chains can mitigate risks that are faced by food supply chains. These risks include changes in the political landscape, climate factors (e.g. drought, crop failure) and the risk of illegal or unethical behaviour of distant suppliers which are difficult to monitor. These risks can be reduced through self-regulation of supply chains in order not to provide incentives to governments to alter regulations and secure accountability (Rueda, Garrett, & Lambin, 2017).

Referring to the planetary boundaries it is striking that all three dimensions that exceed the

tolerable level can be connected to agricultural activities. Nitrogen is applied to

agriculturally used farmland as a crop fertilizer (Robertson & Vitousek, 2009) as is

phosphorus (Sharpley, Foy, & Withers, 2000). The third dimension, genetic diversity, can

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also at least partly be accounted to land use and its alteration through agricultural activity (WWF, 2016).

2.2 Stakeholder Pressure and Sustainability

2.2.1 Stakeholder theory

This section provides a brief overview of the antecedents of stakeholder theory and highlights its key features. Stakeholder theory has been reviewed extensively (Laplume, Sonpar, & Litz, 2008; Parmar et al., 2010). There has been previous focus on stakeholder theory in relation to sustainability (Buysse & Verbeke, 2003; Roome & Wijen, 2005;

Sarkis et al., 2010; Wolf, 2014). The work of Freeman (1984) was especially influential in combining stakeholder theory with business ethics. It was argued that stakeholder theory could link ethical concerns and capitalism. The premise was that management should not only work to increase value of shareholders (Parmar et al., 2010). Stakeholders are groups that can impact the performance of an organization or be afflicted by the actions of it (Freeman, 1984). These stakeholders can be customers, employees, the community, competitors, suppliers, managers or financial shareholders. The aim of management should be to maximize the value of shareholders, but also of other stakeholders (Parmar et al., 2010). Stakeholders can be grouped into external and internal. External stakeholders are for example customers or governmental institutions. Internal stakeholders can for instance be employees (Sarkis et al., 2010).

Studies found that in order for management to attend to a stakeholders‟ need (salience), three attributes need to be present in a stakeholder: power, urgency, legitimacy. A powerful stakeholder has the ability to influence the organization. A stakeholder is seen as legitimate, when the needs are viewed as appropriate. Urgency refers to the criticalness and timeliness of claims (Mitchell, Agle, & Wood, 1997; Parent & Deephouse, 2007).

2.2.2 Stakeholder pressure for sustainability

Stakeholder pressure can be categorized as a circumstance where an organization is made

accountable for its practices concerning products, supply, production and transportation

(Parmigiani, Klassen, & Russo, 2011). Supply chains have been subject to increasing

demands for accountability for their chains, especially those parts that are not under their

direct control, notably second or third tier (Parmigiani et al., 2011). Companies can be held

responsible for environmental misconduct of a supplier (Seuring & Müller, 2008).

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Internal stakeholders can be limited in their power to influence the adoption of environmental practices. They often rely on top management to support initiatives.

External stakeholders have the capability to mobilize the public to support or oppose environmental initiatives or behaviour. Government institutions can exert pressure through regulations and law-making. Non-compliance of organizations can lead to lawsuits, resulting financial losses and degradation of reputation. Other groups of external stakeholders are community groups, non-governmental organizations and the media. These groups can apply pressure to organizations by mobilizing the public to resist or favour environmental practices. Downstream stakeholders in the supply chain, customers and consumers, but also competitors can also influence an organization‟s environmental practice. Customer organizations in the supply chain often use codes of conduct or other forms of requirements to ensure and monitor a suppliers‟ environmental performance. A final, and fundamental, group of stakeholders are shareholders who have a financial interest in the firm, for example through stocks (Sarkis et al., 2010).

It was found that governmental institutions, customers, shareholders and local communities have the most influence on environmental practices of organizations, compared to other stakeholder groups (Henriques & Sadorsky, 1999). Sarkis et al. (2010) found that sustainable supply chain management and stakeholder pressures are significantly and positively related.

Organizations have recognized that the consideration of environmental issues in their management practices can positively influence competitive advantage (Sarkis et al., 2010).

Competitive pressures can increase the efforts for sustainability (Seuring & Müller, 2008).

It has also been argued that companies can improve their financial performance when they incorporate environmental practices (Ameer & Othman, 2012) and that the advertisement of sustainability can increase the appeal of products and of the company as a whole (Newman, Gorlin, & Dhar, 2014; Peloza, Loock, Cerruti, & Muyot, 2012).

Researchers however have also argued that organizations avoid becoming truly sustainable although the need for sustainability is widely expressed in popular and academic literature (Shevchenko et al., 2016). Further they argue that organizations with extensive resources have the capability to compensate stakeholders and therefore offset their pressure.

Although organizations with many resources are the most visible to stakeholders, these

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organizations are able to withhold actions to become sustainable. Compensating actions are actions that satisfy stakeholder demands, but do not reflect a truly sustainable organization (Shevchenko et al., 2016). However, it should be mentioned that the paper relies on mathematical modelling and lacks empirical research.

Considering the discussion under 2.1 about definitions of sustainability the question arises how stakeholders define sustainability. It can be expected that different stakeholder groups apply different definitions and therefore demand different types of actions. On the one hand this can create tensions for supply chains. On the other hand it can direct the process of becoming sustainable in a direction that is not conform to becoming truly sustainable. A critical question is if stakeholders are aware of the „right‟ kind of demands they should be making or if powerful organizations disperse the pressure through compensating actions as proposed by Shevchenko et al. (2016).

Organizations want to make sure that critical resources are at the organizations‟ disposal

and make decisions accordingly. If these resources are controlled by stakeholders, the

access can be limited if stakeholders want to change firm behaviour (Frooman, 1999). It

has been argued that a truly sustainable organization does not face stakeholder pressures. It

would therefore be in the interest of an organization to reduce the uncertainty that is

created by the control of resources through stakeholders and become truly sustainable

(Shevchenko et al., 2016).

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3. METHODOLOGY

3.1 Research Design

The aim of this research is to identify stakeholder influence on environmental decision- making in food supply chains. In order to find answers, an inductive multiple case study was conducted. Inductive case studies can be conducted to build theory from empirical evidence. This is useful when the context is not yet well explored. It is not clear today how effective stakeholder pressure really is in influencing sustainable activities. The case study approach permits to research which pressures exist and how strong they are.

The basis is rich data that originates from multiple data sources. A downside of the accumulated data is that it might be subject to individual bias which is caused by the retrospective nature of the research method. It was tried to alleviate this issue by being transparent with the gathered raw data and achieving researcher triangulation. Appendix C displays quotes supporting the findings. Case studies enable the researcher to tab into the real-world context of the contemporary phenomenon under study (Eisenhardt & Graebner, 2007). The central method of case studies is the interview which can be useful to display individual views of respondents and provide a rich array of data.

3.2 Case Selection

A multiple case study was conducted for this research. The unit of analysis is a supply chain. Three supply chains have been chosen. Investigating multiple or all stages of a supply chain increases the reliability of research. Many previous studies only considered few organizations within a chain and translate these findings on the entire chain (Seuring, 2008). Therefore, this case study considers multiple stages of three different supply chains.

The end-customer has not been researched as an actor, because he/she acts differently from upstream supply chain parties. The supply chain delivers products for the end-customer and is therefore driven by other motivations than the customer who asks for the product.

The chains have to fulfil certain criteria in order to be eligible for this research. The first

criterion is that they have to be agri-food supply chains. The second criterion is that all

stages of the supply chain need to be located in the Netherlands or in geographic proximity

to the Netherlands. This is a critical criterion due to time and resource constraints of the

researchers. One supply chain was investigated by collecting primary data, namely

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interviews from seven supply chain actors. The two other chains, the dairy chain and the pork chain, were investigated by analysing secondary data. The secondary data has been made available by other researchers (Caputi, 2018; van Rijn, 2018). The secondary data was compatible because a similar case study protocol was used.

Literal replication logic was applied, because all cases are food supply chains. This means that the selected cases are expected to produce similar results (Karlsson, 2009). Literal replication increases the external validity of research. The researcher expects to reach data saturation after investigating three cases. This means that adding more cases will not add to the understanding.

In the potato starch supply chain, seven actors have been chosen for data collection. Four starch potato farmers, one potato starch processor, one bakery with multiple stores and one retailer group. The retailer group is the parent group of two Dutch supermarket chains. The bakery was chosen as a producer that uses potato starch and sells directly to the customer.

One organic dairy farmer was interviewed to add to the secondary data of the dairy chain.

3.2.1 The potato starch, pork and milk supply chain

Three agri-food supply chains are part of this research: the potato starch chain, the pork and the dairy chain.

Potato starch is an agricultural product which is used in many products, also non-food products (Godard et al., 2012). The figure below displays a schematic overview of the potato starch chain.

Figure 3.1: Schematic overview of the potato starch supply chain

The figure below shows an overview of pork and dairy chains. Pork and dairy are two important food supply chains in Europe (Roy et al., 2009). Two separate overviews have been provided because the potato starch supply chain differs slightly from the other chains:

food processors can also sell directly to the end-customer (e.g. a bakery).

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15 Figure 3.2: Schematic overview of the pork and dairy supply chain

3.3 Data Collection

The main method of data collection is to conduct interviews with suitable respondents, based on the case selection. Suitable respondents have been identified for the different stages. These were either the business owners (e.g. farmer) or respondents in a management position. These respondents have been chosen as an appropriate data source because they are knowledgeable about the stakeholder influences that can affect the organization and have a position which is high enough in the organizational hierarchy to be informed about or participate in organizational decision processes. Potential respondents were identified using the internet and contacted by phone. Face-to-face interviews were arranged. The researchers visited the companies and farms in person and conducted the interviews at the respective locations. It was not possible to gather data from feeders, therefore data from this stage is missing.

The interviews were semi-structured and followed a predefined interview guide (see Appendix B). Each respondent was asked a similar set of questions but when the researchers identified an interesting component or needed to clarify a certain aspect, they explicitly probed for it. The interviews lasted between 30 and 60 minutes, were audio taped and transcribed afterwards. Table 3.1 provides an overview of all interviews and respondents. Figure 3.3 summarizes how many interviews were conducted per stage and chain.

The interview questions were formulated based on theories and constructs that have been established in the theoretical framework. They have however been formulated in an open manner, in order not to impose the cognitive structures of the theoretical constructs of the researchers on the respondents. This open formulation enables the researchers to discover new constructs that are employed by the respondents (Gioia, Corley, & Hamilton, 2013).

To increase the reliability of the research, a case study protocol has been established to

guide the research process (Appendix B). All data has been gathered in one database. This

enables other researchers to access, verify and replicate the process.

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In order to increase the validity of the research, triangulation was employed. This means that two or more research methods have been used to reinforce results (Karlsson, 2009).

For this research data source triangulation, method triangulation and researcher triangulation were realized. This increases the construct validity of the research. Data source triangulation was accomplished, because multiple respondents have been asked to respond to a similar set of questions. Method triangulation was realized because next to the primary interview data, secondary interview data was used. Researcher triangulation was achieved because two researchers were part of the data collection process. Interviews were conducted with two researchers in order to exert control for the quality of the interviews.

One researcher was leading the interview process while the other paid attention to the interview guide and the time.

Figure 3.3: Summary of interviews per stage and chain Feeder

Starch: n.a.

Pork: - Milk: - Total: 0

Farmer Starch: 4 Pork: 2 Milk: 3 Total: 9

Processor Starch: 1 Pork: 1 Milk: 2

Total: 4 Food processor Starch: 1 Pork: - Milk: - Total: 1 Retailer All chains Total: 3

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17 Supply

Chain

Data source

Position in

Chain Respondent

Existence of Company (in years)

Firm size

Experience (in years) A Potato

starch Primary Farmer Owner 89 - Entire life

B Potato

starch Primary Farmer Owner 100 60ha Entire life

C Potato

starch Primary Farmer Owner - 25 ha Entire life

D Potato

starch Primary Farmer Owner >400 150 ha Entire life

E Potato

starch Primary Starch

processor Supply Chain Manager Confidential information

1350

employ. 4 months F Potato

starch Primary Bakery

(Processor) Manager 32 7 stores 11

G Pork

Secondary Farmer Owner - 120 ha -

H Pork Secondary Farmer Owner - - -

I Pork Secondary Processor Quality Manager - - -

J Milk Secondary Farmer Owner - 90 cows

80 ha -

K Milk Primary Farmer Owner >350 130

cows ~20

L Milk Secondary Farmer Owner - - -

M Milk Secondary Processor

Manager Corporate Environmental Affairs and Sustainability

18 19000

employ. - N Milk Secondary Processor

CSR and

Communications Manager

10 22000

employ.

O All Secondary Retailer Quality Manager Meat

& Dairy - - -

P All Secondary Retailer Quality Manager - - -

Q All Primary Retailer Manager Distribution

Centre 10 19000

employ. - Table 3.1: Overview of interviews and respondents (Case G-J, L-P: Caputi, 2018; van Rijn, 2018)

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3.4 Data Analysis

The interviews were recorded and transcribed literally. Four interviews were conducted in English and four in Dutch. Interviews conducted in Dutch were translated to English by one of the researchers. First the researcher familiarized with the interview data by reading the transcripts multiple times. The data was coded using the computer programme atlas.ti.

The coding process was completed following an approach proposed by Gioia (2013). First descriptive codes were attached to the literal quotes summarizing the essence of the quote.

Then the data was grouped in increasingly aggregate dimensions, thereby creating categories of similar codes. The complete coding tree can be found in Appendix A.

The coding process was inductive. This means that the codes are not necessarily grouped in concepts which exist in literature. Rather, the categories emerged from the interviews.

However the aggregate dimensions are compared to and, when possible, merged with

existing concepts. The identification of patterns from existing literature in the data

increases the internal validity of the research (Karlsson, 2009). A cross-case and within-

case analysis was conducted. The results have been merged in the next chapter.

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4. RESULTS

This research analyses which types of pressure affect the decision of supply chain actors to invest in sustainable activities. The data was structured into aggregate dimensions which represent the general findings of this research. These aggregate dimensions are presented and explained in the following. First of all, the meaning of the term sustainability itself will be reviewed. It was found that pressures exist in favour of environmental sustainability as well as against it. Another finding is that obstacles to reach sustainability exist and that environmental sustainability is often pursued as a means to reach economic sustainability.

At the end of this chapter figure 4.1 and table 4.2 display a summary of the results. The results focus on findings that are similar among the chains. When findings are generalisable across all chains and actors, no specific indication is given. When differences among chains and actors exist, they are specifically mentioned. At the end of this chapter, a summary of the differences between the chains is provided.

4.1 The Meaning of Environmental Sustainability

When discussing sustainable activities it is important to know what actors consider sustainability. Sustainability has a different meaning to supply chain actors. Many farmers point to the relevance of a healthy soil and biodiversity. Nitrogen and phosphorus levels are also concerns of these actors. But table 4.1 shows that far less than half of all actors in the starch and pork chain are aware of biodiversity loss and the impact of fertilizers.

Across all chains and stages respondents mention the concern to save energy and fossil materials, often through the reduction of driven kilometres, transport innovations or the generation of renewable energy. Many focus on climate change and the reduction of greenhouse gas (GHG) emissions. Many interviewees report that the weather is changing and farmers in particular mention that more extreme weather has affected their way of working.

Respondents were also asked to provide a definition of what they consider sustainability.

Most often they mentioned the preservation of the Earth for future generations and to keep

the harm to the environment to a minimum. This is in the same vein as in the Brundtland

Report (WCED, 1987) which defines sustainability as the effort to maintain the Earth for

future generations. This first official definition of sustainability seems to be well known.

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The planetary boundaries were presented here as the most inclusive approach to define sustainability. They comprise all dimensions in which humans are doing harm to the environment and identify the degree to which the Earth suffers under this harm. Such comprehensive understanding of sustainability is lacking in food supply chains. The definition of what sustainability contains and which actions can or should be taken is restricted to the environment in which the actor works. Farmers focus on soil health, gas emissions or selling locally. Downstream supply chain actors focus on the reduction of driven kilometres, respective gas use and energy usage. Sustainability is for supply chain actors what is directly in their line of work. The results go even further, even in chains that impact for example nitrogen pollution or biodiversity loss the awareness for this issue is low (pork and starch). Table 4.1 displays a comparison between the definitions of sustainability that were derived from literature and the definitions that were found in this research. Economic sustainability will be discussed below.

Definition of

sustainability Description

Chains

Starch Pork Milk

Brundtland Report

(WCED, 1987)

Preserve Earth for future

generations 56% 83% 38%

Triple Bottom Line (Seuring

& Müller, 2008)

Environmental sustainability All All All

Economic sustainability All All All

Social sustainability1 Not relevant Not relevant Not relevant Planetary

Boundaries (Whiteman et al., 2013)

Climate change 89% 100% 88%

Rate of biodiversity loss 33% 33% 75%

Nitrogen / Phosphorus cycle 44% 33% 75%

Stratospheric ozone depletion - - -

Ocean acidification - - -

Global freshwater use - - -

Change in land use - - -

Atmospheric aerosol loading - - -

Chemical pollution - - -

Table 4.1: Comparison of definitions of sustainability from literature and as mentioned by respondents

1 Social responsibility is not relevant in this research; respondents knew that the research focuses on environmental sustainability.

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4.2 Ambiguous Pressures: In Favour and Against Sustainability

4.2.1 Pressures in favour of sustainability

Different types of stakeholder pressures were identified which lead supply chain actors to increase their sustainability efforts. Five types could be determined: public pressure, supply chain pressure, governmental regulation, internal and end-customer pressure. Below the types are described in more detail. Table 4.2 at the end of this chapter provides a detailed overview of all types of pressures per chain and actor.

Public pressure is exerted by parties who operate in the public and share information on

publicly accessible platforms. This entails media of all types, for example newspapers, television and social media. Especially upstream actors feel an increased pressure from the society in general towards their way of working. One farmer (interview A) complains that

“Everyone is watching and everyone thinks that we should do something.” „Everyone‟

means that the farmer has a general feeling of being judged. The pork chain struggles with the public image of red meat in particular and meat consumption in general as being harmful.

NGOs are organizations that operate in the public and apply pressure to food supply chains. Milk and pork processors, potato farmers and retailers report about NGOs pressuring their organizations to increase sustainability efforts. Concerns of NGOs are for example deforestation or chemical substances on the fields. Some organizations establish partnerships with NGOs to secure their approval.

Interestingly potato farmers are the only farmers experiencing public pressure whereas the starch processor is the only processor not experiencing this type of pressure. In the pork and milk chain public pressure seems to be directed towards the visible, big companies (the processors). In the starch chain, the farmers seem to be more visible than the processor.

Supply chain pressure is a pressure which is exerted by actors in the supply chain onto

other supply chain actors. The retailer is a party that can direct its pressure at upstream

partners. Retailers say about themselves that they apply pressure for more sustainability to

their upstream suppliers. This pressure is only felt at the level of the pork and milk

processor. The potato starch chain is not affected by this at all. This could be because the

chain is highly ramified. Potato starch itself is a marginal product in supermarkets. Starch

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as an ingredient is far more common, so that retailers are likely to turn to food processors to apply pressure.

Another type of supply chain pressure is the pressure exerted by processors towards their farmers. Processors recognize that farmers have the most impact on the ecological footprint of their food chain. They either demand more sustainable initiatives or incentivise farmers through monetary rewards or subsidies. Demands are for example a reduction of energy consumption, shrinkage of the environmental footprint or declining use of fossil materials. These pressures are strong in the milk and starch chain; here the farmers report that they feel the pressure. In the pork chain it is only mentioned by the processors that they try to incentivise farmers. Apparently the farmers do not feel pressured by their processor. This shows that the pressure is not strong enough.

A third type of supply chain pressure is the decision of organizations to choose supply chain partners based on their sustainability practices. Potato farmers report that they chose less harmful substances from their suppliers if they are given the choice. However this type of pressure is rather faint. The pork chain does not report on this at all. No organization reported that they chose supply chain partners exclusively based on their sustainability practices. The price of products always plays a superior role. This shows that sustainability of suppliers is not a dominant concern in the pork chain and a marginal concern in the other chains.

Governmental regulation is a third type of pressure which influences supply chain actors to

opt for sustainable activities. The government in this case includes besides the Dutch government also the legislative bodies of the European Union, by respondents referred to as „Brussels‟. These governments control the application of chemicals on the field. Strict rules have been set to ensure that maximum levels of ammonia, phosphates, fertilizers, manure and water contamination are not exceeded. Severe monetary punishment can be the consequence of misconduct. This is mainly relevant for farmers, because they apply substances on their fields.

A second pillar of governmental regulation is the establishment of targets to reduce GHG

emissions. This is felt at the processor level of all chains. Targets are distributed among

industries and force actors to reduce their GHG emissions. A special target for the

Groningen region (Netherlands) is the reduction of gas usage. The exploitation of natural

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gas causes earthquakes in the region. Apparently the government is interested in distributing these targets among bigger organizations and not farmers.

Finally the government provides incentives to food supply chain actors to act more sustainable. Those are subsidies for solar panels or other investments for more sustainable applications. The government supports the achievement of national climate goals with monetary aid. These subsidies are reported by farmers (all chains) and milk processors.

Retailers do not report on governmental pressures at all. The government directs its pressures towards upstream players, which is where the main impact is made.

Apart from some monetary incentives the government seems to focus on controlling the status quo. The only areas of improvement are the GHG emission targets. But as established above sustainability should have a far larger focus in order to effectively protect the environment. Also the emission reduction aims only at processors, whereas far more severe impact is made at the farmer level.

Internal pressure is a fourth power that influences organizations towards sustainable

actions. Some organizations feel a responsibility to act sustainable. The impact of the respective supply chain stage is recognized and a responsibility is expressed to act more sustainable.

Secondly, processors from all chains report on demands from their employees or boards who try to advance sustainability efforts internally. Pressure is often exerted by employees who make sustainability a personal matter of interest. Some also report that the motivation to act sustainable at all originates in personal values. As opposed to farmers processors have a large pool of employees who can share their opinion. The employee pool of farmers is likely to be very narrow.

Sustainability and costs appear as a trade-off to respondents. Some explain that this trade- off must be accepted in order to work sustainable and additional costs must be condoned.

Often the costs are weighed against the impact that can be achieved with the measure. If the achievable environmental impact justifies additional costs in the eyes of the actor, the costs must be accepted.

Members of all chains and stages have reported internal pressure, except retailers. This

shows that sustainability is on the agenda of the organizations, at least internally. It is

unknown why retailers do not experience internal pressure.

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24 Customer pressure is the final pressure towards environmental sustainability. Interviewees

are convinced that the end-customer has in principle the power to influence if sustainable actions are taken in the supply chain. Customers can decide which type of production they want to support by buying the respective products. One farmer (interview L) explained:

“[...] I try to make [the consumer] conscious of that point: Which farm will you support? In the supermarket you buy the cheapest meat, OK, you support the big stables with many many many many animals and low wellbeing. So, yeah, what, which farm will you support? Yeah, then you see people think, ohh, yeah, my consumer behaviour is very important for the systems of food.”

While this example focuses mostly on animal wellbeing, it is also applicable to sustainable ways of production. Retailers mention that they face different customer segments asking for varying levels of sustainability in the products they purchase. In general interviewees share the opinion that end-customer demand can be influential in determining ways of production.

In addition to the conviction that the end-customer possesses the power to influence supply chains with their demands, customers are actually asking for more sustainable products.

This pressure however is rather faint and only reported by few interviewees. The pork industry is mainly affected by changing eating behaviour and increasing consciousness with respect to food. This however touches sustainability only marginally.

4.2.2 Pressures against sustainability

While this research initially investigated pressures that act in favour of environmental sustainability, pressures that act in the opposite direction have been identified, too. Two principal sources of these pressures will be presented. The first one is the conviction that economic sustainability has priority over environmental sustainability, the second one is governmental disincentive.

Economic sustainability has priority over environmental sustainability is a belief shared by

most interviewees. They are convinced that sustainable actions must be economically

attractive in order to consider them. This means that actions are not taken if they cause

additional costs which are not balanced with short-term gains. Common concerns are also

risks and labour intensity. One farmer (interview B) highlighted the financial risk he

perceived from applying natural chemicals:

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“And so [producer of fertilizer] [is] producing a lot of chemicals that is from natural basics. So we have also test field on our farm where we try these nature chemicals [sic]. [...] So we see a changing [sic] but also with the new chemicals, they know that if you have the normal chemicals it is working 80-100% [sic: read

we know that the normal chemicals are working up to 80-100%]. And these

[natural chemicals] are doing 50-60%. So the rest is risk for the farmer. Nobody is paying that risk. So people say, we don‟t want the chemicals, we are putting other stuff [sic: read natural chemicals] on the field but the risk if for us.”

The financial risk from using less efficient chemicals induces such high uncertainty for the farmer that he is reluctant to use them. Many make explicitly clear that environmental investments will not be considered if they do not generate returns. Some also report that investments are only attractive if they are subsidised.

Another pressure against environmental sustainability is the fact that supply chain actors perceive strong pressure for price from retailers. Retailers compete for the lowest price amongst each other and transfer this pressure to their supply chains. Interviewees think that they would have to increase their prices in order to be able to invest in sustainable measures. This price increase however would not be accepted by retailers so that actors would lose their distribution channel. This is perceived by retailers themselves, potato starch and milk farmers. Processors do not report that they feel price pressures. This is a counterintuitive finding, because one would assume that especially the processors are concerned with the sales price of their product. Also it was found above that retailers apply pressure for more sustainable production while at the same time they pressure for low prices. This is a contradictory behaviour which increases insecurity among upstream parties.

A final issue is that end-customers are not willing to pay increased prices for sustainable

products. Two different approaches have been reported: the customer appreciates the

sustainable production of a product but is not willing to pay more. Or the customer is

satisfied with the conventional product and does not appreciate a price increase for

(undesired) sustainability. The interviewees feel incapable to change their production if

this is not supported by the end-customer. This is experienced by the potato and pork

farmers as well as retailers. Interestingly the processors do not report on this. So there

seems to be a gap within the supply chain in terms of this issue. In the milk chain actors

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seem to experience a willingness of customers to pay more for sustainable products while the retailer who actually sells the product, does not.

Governmental disincentive is another source of counter-sustainable pressure. All types of

farmers report that governmental demands or actions incentivise them to produce in a conventional way rather than in a sustainable way. They believe that the attempt to generate high export quotas keeps the price down. They also believe that the government and banks which give out loans are more interested in efficiency than in sustainability.

They report on regulations which do not allow windmills in the respective province to have a height which would be required to produce energy. Also regular energy seems to become very cheap when bought in great quantities. Farmers also complain about the fact that they perceive the government to punish (e.g. overuse of substances on field) rather than to provide incentive. They feel that incentives would have much larger impact on their behaviour. They also see a contradiction between animal welfare and sustainability. When the government promotes animal welfare (e.g. bigger stables or fields) this is diametrically opposed to biodiversity or renaturation. This pressure is only felt at the farm level. This shows how torn especially farmers are between conventional and sustainable farming.

Almost all supply chain actors do not feel any or very little governmental pressure towards sustainability. Members of all chains report that they do not feel direct pressure by the government to invest in sustainability measures or even put sustainability on their agenda.

One processor reports that the only pressure is to reduce the consumption of natural gas in the province of Groningen.

In summary, the milk processor is the only actor that does not experience any pressures against sustainability. Many pressures apply to the farm level of all chains and the retailer.

This shows how split particularly farmers are between pressures in favour of sustainability

and against it and that the pressures are quite different per stage.

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4.3 Environmental Sustainability as a Means to Reach Economic Sustainability

This section reports on behaviour in a supply chain where actions for sustainability are taken to save resources and to secure customer demand in the future. Actors reported that they realize those measures first which are most easy to realize and to avoid waste.

Furthermore they take sustainable actions to avoid a bad public reputation, stay ahead of competition and in anticipation of future demand. These five types of motivation are described below in more detail.

Measures which are most easy to realize have priority over actions which require more

effort and money. Processors report that they improved in areas where measures were easily realized. An example for this is the reduction of internally driven kilometres.

Organizations investigate their environmental footprint to identify areas of improvement.

Once easy improvements have been accomplished, the improvement process stagnates.

This is because further investments are often seen as too costly compared to their expected environmental impact. One could argue that these measures are taken to compensate stakeholders and not because actors are actually interested in becoming more sustainable.

The avoidance of waste is also considered a sustainability measure. The motivation behind this is to improve efficiency and can therefore be considered a measure for economic sustainability. Examples are precision farming with elaborate machinery to avoid wasting chemicals or water, processing all parts of a slaughtered animal or to gather waste from store locations.

Avoiding a bad public reputation is a third motivation to invest in sustainability measures.

This is felt particularly by the pork and the starch chain. Farmers feel criticized in their way of working and attempt to improve the farming image. A farmer reported:

“[...] to have a little bit a positive way of thinking about the farmers we started also

with these kinds of things [author’s comment: establish flower patches around the

fields]. Not only we thought that it is good for the environment but also to have a

license to produce. That the neighbours could see that we want to improve and to

have a little bit nicer people around [sic].”

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The pork industry feels that it should avoid scandals evolving around meat and therefore invest in certain sustainability measures. The understanding of sustainability focuses here on animal welfare and food safety and is less directed towards an environmental understanding. Apparently the milk chain did not experience reputational problems in the past and does not feel endangered by this.

Sustainability as a means to be ahead of competition is mentioned by actors as a

motivation. They are interested in either not lacking behind their competition or keeping the position as front runner in sustainability. Another motivation is to be attractive to supply chain customers and end-customers through these actions. It is important to be seen as a trustworthy partner. This is expressed by retailers, pork and milk processors. The starch chain does not seem to experience this competitive pressure. This could again be attributed to the ramified nature of the chain. This type of pressure is in contrast to the low level of end-customer pressure that was found above. Even though little end-customer pressure is experienced, sustainability still seems to serve as a competitive advantage.

Milk and starch processors invest in sustainability in anticipation of future demand. For

one, actors expect that stricter regulations will be released in the nearer future because

climate change becomes an increasingly pressing issue. Moreover, they anticipate

sustainable products soon to be in rising demand. Improving their sustainability efforts

now is expected to mitigate risk in the future. The pork industry does not seem to expect

rising sustainability demand. Also this pressure is not experienced on the farm level. This

could be because farmers do not have the capacity to conduct market analyses.

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4.4 Obstacles to Reach Environmental Sustainability

This final sub-chapter presents obstacles that have been identified to impede the path to sustainable production. The first issue is the fact that many actors think that environmental

sustainability is not a priority topic. Retailers perceive very low end-customer pressure for

sustainability. The average end-customer is satisfied with current methods of production and does not ask for more sustainability. The retailer is close to the end-customer, therefore they would experience their pressure first.

When asked about their sustainability efforts, actors often report on issues and demands on animal wellbeing. This topic has priority over environmental sustainability in the dairy and pork chain. End-customers are asking for improved livestock breeding and better animal health. Farmers feel that this can be contradictory to environmental sustainability. Due to the fact that end-customer pressure for animal wellbeing is high, supply chain actors focus their resources on this instead of on environmental sustainability. Similarly many NGOs focus their efforts on animal wellbeing. In the face of these combined pressures, animal wellbeing is a priority. Animal wellbeing is naturally not a concern in the starch chain.

The public and NGOs are diffusing their efforts. Especially the pork and the dairy chain experience more pressure for animal welfare than for sustainability. This affects how actors prioritize their resources. It also leads to confusion whether sustainability or animal welfare is more important.

Some farmers (all chains) are convinced that nothing more can be done for sustainability on their farms. They either think that they do not have the power to make a contribution to mitigate climate change or they are convinced that they exhausted all possibilities to become more sustainable. This may be attributed to lacking knowledge about the environmental impact of the farming stage.

Finally there are those actors who do not invest in sustainability measures at all or to a very small extent. This has been reported by the food processor but also a few farmers.

Sustainability is not something they think they should invest in. Furthermore almost all

actors disclose that environmental sustainability does not play any role or only a small role

in their supply chain. They report that they do not choose suppliers based on their

sustainability practices, so do not exert pressure upstream. They also do not experience

much pressure from their customers. They are also unaware of sustainability efforts within

the chain. There are neither means of communication about this topic nor information

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sharing. This finding is partly contradictory to above findings on supply chain pressure.

This shows that even parties within one stage of a chain do not experience pressures the same way. This shows how conflicting and inconsistent the allocation of pressure is within the chains. The retailer may perceive itself as applying pressure on their upstream supply chain but this is evidently not experienced by farmers.

Lastly many respondents are convinced that actors lack the right knowledge that would qualify them to make decisions on sustainability. Farmers (all chains) report that they do not have the knowledge themselves to decide which actions should be taken or if their way of working is harmful to the environment or not. One actor explained that sustainability is not covered in agricultural education and that therefore farmers are only knowledgeable if they educate themselves. Many also think that the end-customers do not possess the appropriate knowledge to judge on supply chains‟ sustainability. This leads to resistance towards such demands because they are viewed as erroneous. It also increases the insecurity of farmers, combined with their own incomplete knowledge on sustainability.

Another issue is a certain distrust towards the expertise of national decision-takers. Potato farmers think that substances that have been banned had not been researched sufficiently to judge on their harmfulness. This fosters reluctance among these parties towards such decisions. Members of political parties which promote environmental sustainability initiatives are not trusted to be informed sufficiently.

Farmers from all chains think that the general public information about sustainability is unreliable or even wrong. Information made available through social media or television generates a certain public opinion. Farmers think that this opinion is one-sided or biased.

Therefore they trust these sources of information less and think that the pressure stemming from these sources is inappropriate. This shows that on the farm level there is a lot of resistance, distrust and lacking knowledge towards sustainability. Also the ambiguity of pressure is largest at this stage.

Obstacles are by far strongest at the farm stage. This makes decision-making on this stage

even more difficult. Sustainability is diffused, the knowledge is lacking and so is the sense

of urgency. Combined with the conflicting pressures discussed above, effective

environmental decision-making seems to become highly difficult for farmers.

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Figure 4.1: Overview of results: Unbalanced pressures

Pressure to act sustainable Pressure to not

act sustainable

Obstacles

Economic sustainability

Stakeholder

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