What determines firms’ decisions to manage sustainability in their supply chains?

What determines firms’ decisions to manage

sustainability in their supply chains?

A cross-case analysis between two industries

Master Thesis Léa Kaiser

University of Groningen: S2552388

Supervisor: Dr. Miriam Wilhelm Co-assessor: Dr. Dirk H. M. Akkermans

27.06.2014

University of Groningen

Abstract

Nowadays buying firms have to be increasingly aware of the sustainability activities at their supplier premises because the irresponsible behavior of the suppliers is often projected onto them and affect negatively their reputation. Only in recent years scholars started to consider sustainability risks and stakeholder demand in the strategic purchase decisions of firms. Conducting 6 interviews with NGOs and Social Businesses within two industries this study aims at getting a better understanding of sustainability risks and firms’ sustainable management practices regarding social and environmental issues. The findings add new insights about the use of sustainable management practices to the scarce research conducted in that research field and present some implications for firms’ decision- making.

Keywords: Sustainability; Supply Chain Management; Case Studies; Food industry; Textile

Acknowledgement

DIRECTORY

FIGURES ...

TABLES ...

1 INTRODUCTION ... 7

2 THEORETICAL BACKGROUND ... 9

2.1 SUSTAINABILITY IN SUPPLY CHAINS ... 9

2.2 MANAGING SUSTAINABLE SUPPLY CHAINS ... 9

2.2.1 WHEN TO MANAGE? ... 9 2.2.2 HOW TO MANAGE? ... 15 3 METHODOLOGY ... 18 3.1 DATA COLLECTION ... 18 3.2 DATA ANALYSIS ... 20 4 CASE STUDY ... 21 4.1 FOOD INDUSTRY ... 21 4.1.1 WHEN TO MANAGE? ... 24 4.1.2 HOW TO MANAGE? ... 27

4.2 TEXTILE AND CLOTHING INDUSTRY ... 30

4.2.1 WHEN TO MANAGE? ... 33 4.2.2 HOW TO MANAGE? ... 35 4.3 CROSS-CASE ANALYSIS ... 37 5 DISCUSSION ... 40 6 CONCLUSION ... 44 7 REFERENCES ... 46

APPENDIX 1 – DESCRIPTION OF ORGANIZATIONS ... 52

FIGURES

Figure 1 Kraljic's Purchasing Portfolio Model ... 11

Figure 2 The Purchasing Portfolio Cube ... 13

Figure 4 Model of a Food Supply Chain (One ingredient) ... 21

TABLES

Table 1 Overview of Interview partners ... 19

Table 2 Commodities of the food industry ... 22

1 INTRODUCTION

Making profit is no longer the only right thing to do in business, but the ethics of business activities are gaining more and more importance as companies are evaluated on their ability to meet the needs of different groups like customers, employees and NGOs (Andersen and Pedersen 2006). MNCs are nowadays often held responsible for all non-sustainable actions occurring in their supply chain, as customers often do not distinguish between a single company and its partners in the supply chain (Rao and Holt 2005). Supply chains of especially large globally active MNCs consist of a large number of companies; hence its sustainability depends on the sustainability of each individual company (Hutchinson and Sutherland 2008). A company’s most significant environmental and social impacts (Corporate Responsibility) are often not to be found in its own operations but in its value chain – upstream in the operations of their suppliers (KPMG 2013). Buying firms must consequently verify that sustainable operations exist at their supplier premises, since irresponsible supplier behavior of any kind may be extended to the buying firm, causing negative publicity, damage the firm’s reputation and create costly legal obligations (Carsten et al. 2010).

Economic performance has traditionally been the focus of businesses in order to create wealth for their shareholders (Carroll 1999) and little or no concern was given to sustainability for many years, until in recent decades it started to gain importance. In the beginning especially environmental issues have been the concern of firms (Golicic and Smith 2013) but gradually economic and social concerns gained importance in management (Ahi and Searcy 2013). The KPMG report of 2013 for instance shows that from the 250 largest companies worldwide (G250) 93% report about their Corporate Responsibility performance, whereas in 2005 it were only 64% (KPMG 2013).

(Carsten et al.2010). Recognizing the impact that suppliers have on competitive success, managers started to implement more advanced sourcing strategies that required closer interaction between purchaser and seller (Trent and Monczka 1999). In principal the literature about sustainable supply chain management defines two practices that are used and that are described as supplier assessment (e.g. audits) and collaboration (e.g. training) in accordance with Gimenez and Tachizawa (2012). Many authors agree that assessment alone is not enough, as to make a supply chain sustainable collaborative activities are needed as well (Carsten et al. 2010; Lim and Philips 2008). Conversely, firms with limited financial resources and a large supply base cannot have a collaborative partnership with every single supplier (Vachon and Klassen 2006). Further, theory suggests that not all type of purchases make a partnership necessary (Pagell et al. 2010). Hence, it can be deduced that firms have to choose when they will engage into sustainability enhancing activities and which practices they would choose. Consequently, my research question reads: What determines firms’

decisions to manage sustainability in their supply chains?

This study was conducted in the scope of two different industries that are hit by frequent sustainability scandals and hence received significant media attention. The repeated scandals like the burning of the textile factory complex in Pakistan in 2012 (New York Times 2012) or the factory collapse of the Rana Plaza in 2013 (New York Times 2013) show the disastrous working conditions in the textile industry and how little firms do in order to improve them. The high complexity of the textile industry and the repeating sustainability scandals led to the decision to conduct this study in that context. Next to that I chose the food industry as a second context for my study, which is characterized by low transparency and traceability (Roth et al. 2008) and is known for problems related to e.g. the excessive use of pesticides.

2 THEORETICAL BACKGROUND

2.1 SUSTAINABILITY IN SUPPLY CHAINS

A widely accepted definition of the term sustainability is from the World Commission on Environment and Development (1987) that describes it as development meeting the present needs in a way that it does not compromise the ability of future generations to meet their own needs. For a supply chain to be sustainable it requires that it does not harm natural and social systems while producing a profit over an extended period of time, thus creating the possibility for business to go on forever (Pagell and Wu 2009). This definition includes the three dimensions of sustainability (economic, environmental and social) that are known as the triple bottom line (Carter and Rogers 2008) and which firms need to consider when doing sustainable business. If scholars are referring to the economic performance of a firm they include indicators such as costs, return on investment, earnings per share (Paulray 2011), operational efficiency and sales (Gimenez and Tachizawa 2012). Definitions of environmental sustainability are generally related to energy efficiency and the reduction of waste, pollution, carbon emissions, environmental accidents or consumption of hazardous materials (Zhu and Sarkis 2004; Paulray 2011; Gimenez and Tachizawa 2012). Social sustainability is related to labor conditions, diversity, connectedness within and outside the community, quality of life (Gimenez and Tachizawa 2012), social welfare and betterment, risks to the general public, community health and safety, and occupational health and safety of employees (Paulray 2011). Social performance thus captures both the individual-level human safety and welfare and the societal-level community development.

Economic performance has traditionally been the focus of businesses in order to create wealth for their shareholders (Carroll 1999). Consequently enhancing economic performance is a natural goal for a firm to pursue. Early sustainability initiatives tended to have an environmental focus, but nowadays firms take the triple bottom line of sustainability into account, therefore also the social dimension (Ahi and Searcy 2013).

2.2 MANAGING SUSTAINABLE SUPPLY CHAINS

2.2.1 WHEN TO MANAGE?

decide to implement activities to ensure sustainability in their supply chain. The study of Foerstl et al. (2010) shows that firms base these decisions on the stakeholder demands they face. Suppliers who do not comply with the Corporate Social Responsibility (CSR) policies established by the buying firms create sustainability-related risks for the latter. These incidents, may they be related to the use of environmentally dangerous products or inadequate working conditions, would cause negative media exposure and lead to reputational damages, or firms may held liable for damages caused through them. What kind of sustainability-related risks a firm identifies in its supply chain depends mostly on the external stakeholder pressure exerted on the firm. Stakeholders can include NGO’s and customers and their concerns may be focused either on the social or environmental dimension. In order to mitigate these risks a firm can engage in supplier assessment and monitoring practices that require time and financial resources, e.g. by conducting supplier audits. Thus a firm cannot engage in practices with each single firm. Consequently, they suggest that the sustainability engagement should be prioritized and concentrated on those suppliers which are perceived to create most likely adverse events in terms of sustainability and those perceived to cause the most significant damage if the risk is realized (Foerstl et al. 2010).

The importance of the purchasing and supply management function has been increasingly acknowledged as a critical function in companies' sustainability work, since it plays a decisive role in approaching environmental and social aspects upstream in the supply chain and in ensuring supplier’s compliance with sustainability criteria (Kogg and Mont 2012). Thus, in recent years several scholars aimed at creating models including sustainability into the purchasing strategies of firms (Handfield et al. 2005; Pagell et al. 2010; Arnold and Schmidt 2010) with the aim of providing guidelines for firms how to adjust their supply chain practices when they are faced with sustainability risks. Those models are an extension of the Purchasing Portfolio Matrix of Kraljic (1983) that is widely recognized among researchers and supply chain practitioners as a tool for managing business relations with suppliers (Kogg and Mont 2012; Pagell et al. 2010).

The model of Kraljic starts with the basic premise that firms’ purchasing functions have

opportunities). For both of these dimensions two classifications exist: “high” and “low”. This classification results in four categories: non-critical items (low supply risk, low profit impact), bottleneck items (high supply risk, low profit impact), leverage items (high profit impact, low supply risk) and strategic items (high profit impact and high supply risk). This model suggests in any case that firms should minimize supply risk and make the most of buying power. If firms allocate their limited resources properly, their purchasing performance will increase (Kraljic 1983). It should be noted that the framework of Kraljic focuses more on dyadic relations between buyer and seller than on the whole supply chain (Kogg and Mont 2012). Figure 1 shows an illustration of Kralijc’s Purchasing Portfolio Model by Arnold and Schmidt (2010).

Figure 1 Kraljic's Purchasing Portfolio Model Source: Arnold and Schmidt (2010)

Based on that model recommendations have been drawn how to handle these items. For

non-critical items supply is abundant and consider mainly commodities. They should be

sourced from multiple local suppliers and simple market analyses should be sufficient to manage these items. Bottleneck items are mainly specified materials and require a more specific market analysis. Strategies should aim at establishing a reliable supply source in order to limit transaction costs and mitigate risk, for instance via volume insurance, control of vendors and security of inventories. For leveraged items there are generally multiple potential suppliers providing the same quality and performance. Consequently firms should exploit their full purchasing power and purchasing strategies should be based on price. Strategic

whom the firm should engage in a collaborative long-term supply relationship. A large number of analytic techniques such as risk analysis and price forecasting are required (Kraljic 1983).

As this model has been tested and refined in various studies and widely accepted as an effective practitioner tool (Pagell et al. 2010) it provided the basis for various scholars aiming at creating Purchasing Models including the sustainability aspect. Many models include however either only the environmental dimension (Handfield 2005) or all three dimensions into one single axis (Pagell et al. 2010), which has been criticized as the economic aspect represents more the shareholder- than the stakeholder demand (Arnold and Schmidt 2010). Hence, one model is of predominant importance for this study as it includes both the social and ecological dimension of sustainability in a separate axis next to the economic one: The Purchasing Portfolio Cube of Arnold and Schmidt (2010). The underlying ideas of this model are in line with the aforementioned findings of Foerstel et al. (2010) that firms decisions are based on the stakeholder demands and the risk suppliers create for the buying firm.

The Purchasing Portfolio Cube

Arnold and Schmidt (2010) created an extension of Kraljic’s model that included the economic and social dimension of sustainability as an own axis under the term of “stakeholder impact”. Answering the criticism of the Purchasing Model of Pagell et al. (2010) they separated the ecological and social demands of stakeholder from the economic efficiency demanded by shareholders, which is already included in the axis “profit impact”. Basically this model includes the idea that firms have different stakeholders within their socio-economic environment as they are acting in different branches, countries and situations. Consequently, stakeholder place different claims to firms and their different purchasing categories, as for instance low-environmental risk commodities do not require the same attention as high-environmental-risk commodities (Handfield et al. 2005).

hand, be assessed what consequences could arise from noncompliance with the stakeholder demands. On the other hand it should be considered how important it is for a firm to avoid these consequences (Arnold and Schmidt 2010).

Figure 2 The Purchasing Portfolio Cube Source: Arnold and Schmidt (2010)

Here, they recommend to extend price competition to ecological and social aspects, e.g. within reverse auctions. Further, eco-efficiency, cost reduction through recycling and material savings would be an important criteria. The fourth cell shows items that are high in supply risk and profit and stakeholder impact. Similar to the strategic items in Kraljic’s model, the authors recommend collaboration with the supplier to minimize ecological and social impacts and investing resources into eco-innovations (Arnold and Schmidt 2010).

Although this model seems the most appropriate one regarding the inclusion of sustainability in purchasing decisions, it is not without critique. First, it is a theoretical model that lacks underlying evidence (Arnold and Schmidt 2010). Second, a major critique of that model is the evaluation of social and environmental risk together in one axis, which is problematic and even named as a limitation by the authors themselves. To defend themselves they state that this is the only way to create a model that is still simple enough to be useful (Arnold and Schmidt 2010). Nonetheless this is a weakness, as social and ecological matters comprise different aspects and might need to be addressed differently. Consequently, it is questionable to draw recommendations about which practices a firm should use if no differentiation is made. Another limitation is the difficulty of measuring the stakeholder dimension. As previously mentioned, the measurement of risk depends on three different steps: On the ecological and social impact of each item, the stakeholder demands and the consequences that arise from non-compliance and how important their avoidance is to the firm (Arnold and Schmidt 2010). The first step requires that firms know the exact situation at their suppliers’ premises in order to estimate the risk, which could be difficult due to the large number of suppliers firms often have. As long as they do not know about the situation of their suppliers they would probably not engage in any activity with them regarding sustainability management. As a next step, firms may estimate the consequence of non-compliance by considering the competitive environment of the industry it is operating in. For instance, the risk that customers switch to competitors could affect the willingness of firms to manage their suppliers regarding sustainability. Further, the severity of non-compliance could be an important factor. Hence, the context of the industry with varying levels of competition and of power on the supplier’s and buyer’s side could indeed alter the strategic choices of firms.

2.2.2 HOW TO MANAGE?

When in the last decades executive managers external to procurement and sourcing started to increasingly recognize the impact of suppliers on the buying firm’s competitive success they also began to implement more advanced sourcing strategies that required closer interaction between purchaser and seller (Trent and Monczka 1999). As limited financial resources impede having collaborative partnerships with all suppliers (Vachon and Klassen 2006) and as purchases are of diverse structure, firms manage their suppliers with different sustainable supply management practices (Pagell et al. 2010). In the literature about SSCM various authors aimed at describing and classifying these practices using a broad range of different terms, such as Green Supply Chain Management (GSCM), Green Purchasing, Green supply, CSR and socially responsible purchasing.

supply base (Carsten et al. 2010). Hence, another widely adopted sustainable supply management practice is the use of certification that suppliers can obtain if they comply with public standards like ISO 14000 (Pagell and Wu 2009) which addresses various aspects of environmental management and provides a practical tool for companies and organizations to identify and control their environmental impact and improve their environmental performance (ISO 2014). Parallel to the ISO 14000 standard for environmental management the SA 8000, setting basic requirements for workforce practices, is increasingly adopted by firms with an international supply chain (Awaysheh and Klassen 2009) and described to be one of “the world’s first auditable social certification standard for decent workplaces across all industrial sectors […] [that] create a common language to measure social compliance” (SAI 2014). The compliance of a supplier with these standards is verified by a third party in the form of an audit. The certification is usually provided in cooperation with a third party such as an NGO. For instance a firm could decide to certify their suppliers according to the standards of the NGOs Rainforest Alliance (Pagell and Wu 2009).

As managers started to increasingly recognize the impact suppliers have on the competitive success of their operations, they began to implement more advanced sourcing strategies requiring closer interaction between purchaser and seller (Trent and Monczka 1999). One common practice that requires this close interaction and that gained attention in studies of several scholars is supplier collaboration (Vachon and Klassen 2003; Paulray 2011; Gimenez and Tachizawa 2012; Pagell and Wu 2009). Collaborative activities comprise actions such as site visits, exchange of personnel, technical assistance and training provided at the suppliers base (Vachon and Klassen 2003). This definition is similar to that of Gimenez and Tachizawa (2012 p.533) who describe collaboration as “working directly with suppliers providing them with training, support or other activities.” There is common agreement in the literature that assessment alone is not sufficient, but that collaboration is also needed (Carsten et al. 2010; Lim and Philips 2008).

In line with Vachon and Klassen (2003) and Gimenez and Tachizawa (2012) in the scope of this study certification is not seen as a practice in itself but rather as a tool used to assess the performance of the supplier, as certification is often the outcome of audits where an external auditor evaluates whether suppliers meet the certification criteria or not. It can be seen similar in the case of codes of conduct that buying firms pass to their suppliers, as they have to assess or audit the compliance with the Code. Hence I do not see codes of conduct as an own mechanism for sustainability implementation. For the following part of this study the same classification of governance mechanisms into collaboration with and assessment of suppliers from Gimenez and Tachizawa (2012) will be used.

3 METHODOLOGY

An inductive Case study approach was selected in order to explore the sustainability-related risks firms face and their subsequent decisions for a practice to manage suppliers regarding sustainability. This approach was chosen as research in this field is still in an exploratory stage and a case study provides the potential to investigate a contemporary phenomenon within its real-life context (Yin 1981). In addition an embedded multiple case study design was chosen allowing drawing information from multiple sources. The case studies were conducted in the context of two different industries: The food and textile industry. The main units of analysis were NGOs and Social businesses and information was gained via interviews conducted with representatives from those organizations.

3.1 DATA COLLECTION

In the context of the food industry interviews were conducted with two certifying NGOs, Rainforest Alliance and UTZ certified, and with the non-profit organization Bonsucro. One further interview was conducted with the Solidaridad network in order to gain an insight from another side about sustainability-related problems and implementation practices in the food industry. In the context of the textile industry an interview was conducted with the certifying NGO Cotton made in Africa (CmiA) in order to cover the cotton producer base and another interview with the ‘Kampagne für saubere Kleidung’, hereinafter referred to as KFSK, in order to cover the successive supply chain for the apparel industry. Table 1 provides an overview of the organizations, their aim and a description of the interviewee’s responsibility. Table 1 Overview of Interview partners

Organization Industry Location Aim of the organization Interviewee’s responsibility

UTZ certified Food Amsterdam

Enabling farmers to use sustainable farming methods, improving the

working conditions and taking better care of their children and the

environment

Standards & Certification Officer

for the coffee commodity

Rainforest

Alliance Food Delft

Conserve biodiversity and ensure sustainable livelihood by transforming land-use practices, business practices and consumer

behavior

Manager Sustainable Agriculture Relations

Bonsucro Food London

Reducing the environmental and social impacts of sugarcane production while recognizing the importance of economic viability

Research & Policy Analyst

Solidaridad

Network Food Utrecht

Bringing together supply chain actors and engaging them in innovative solutions to improve production, ensuring the transition

to a sustainable and inclusive economy

Project Manager for the Fruits & Vegetables commodity

Cotton made in Africa

Textile and

Clothing Hamburg

Improving the general living conditions of African small-scale

farmers

Project Manager for the Verification

Management by the Aid by Trade

Kampagne für saubere Kleidung

Textile and

Clothing Wuppertal

Improving working conditions in the global clothing industry

Interview procedure

In order to build the case information was mainly drawn from interviews with the organizations, but also additional information from their webpages and from material provided by the interviewees was included. The interviews were semi-structured, meaning that a guide was composed with open or less structured questions leaving the freedom of altering the order and exact wording of questions (Merriam 2009). The aim was to extract the richest information as possible. The interview guides were developed including information about practices drawn from the literature and the information found on the webpages of the respective organization. Two guides were designed according to the NGO’s work: One guide was designed for the certifying organizations and another for the network organization Solidaridad and KFSK, an alliance of organizations. The questions in both guides began with general questions about the corresponding industry and the organization’s work moving towards more specific questions regarding the sustainability practices they adopted. Mostly open question were used in order to encourage the interviewees to describe situations and their impressions in detail and to provide examples.

The interviewees were representatives from a special commodity the organization focuses on (e.g. Project managers from specific commodities, certification officers and Research & Policy Agents). Their responsibilities mostly consisted in coordinating sustainability projects in producing countries mainly on the farmer level but also including suppliers on other value creating levels within the chain, but others worked in stakeholder relations or included the license reviewing of a commodity. These representatives were contacted via mail explaining the purpose of the research and asked for an interview. These were either carried out via telephone or in person and lasted 24 to 70 minutes. The language of the interviews was either English or German. The interviews were audiotaped, transcribed and then send to the interviewee for validation in order to avoid misunderstandings of questions or answers.

3.2 DATA ANALYSIS

4 CASE STUDY

4.1 FOOD INDUSTRY

Van der Vorst et al. (2002) distinguishes within the food industry between supply chains for fresh agricultural products and those for processed food products. The market for fresh agricultural products includes a broad range of commodities: cereals, roots and tubers, sugar crops, sugars and sweeteners, oilseeds, fruit, vegetables, vegetable oil, tree nuts, beans and pulses, spices, coffee, tea and cocoa. Distinctive for this supply chain is that in all stages the product remains in its natural characteristic untouched, hence processes consist in the handling, storing, packing, transporting and trading of the good. Processed food include e.g. bakery, canned or frozen food (Global Food Products 2014) and are made up of raw agricultural products that are processed in order to produce consumer products with higher added value, e.g. via conservation or conditioning (Van der Vorst et al. 2002). For this case study the fresh agricultural products are important as those were (with one exception) the only focus of the organizations interviewed in the context of this case study.

Figure 3 shows a model of a food supply chain, apt to describe that of fresh agricultural products. Despite being based on one ingredient, supply chains for agricultural products typically comprise a large variety of different supply chain partners such as retailers, wholesalers/distributors, various traders, processors, marketers/storage, farmers or farm suppliers that increase complexity and decrease transparency.

Three major forces were found to affect the food supply chains: Globalization (e.g. importing to reduce costs), consolidation (domination by few large businesses) and commoditization (e.g. commodity foods are traded as undifferentiated goods in large quantities based on price only). The transaction over long distances and the standardization of products reducing the need for communication largely resulted in reduced traceability and transparency (Rothet al. 2008).

Specific characteristics of processes and products of those supply chains are “shelf life constraints, variability of quality and quantity of supply of farm-based inputs, variable process yield in quantity and quality due to biological variations, seasonality, random factors connected with weather and pests and other biological hazards (Van der Vorst et al. 2002 p.124)”. This mainly poses a risk to having a continuous supply of qualitative products. Given that food safety is a concern of almost every consumer, sustainability has been under close scrutiny of the public (e.g. government) for some time, for instance environmental (e.g. deforestation) and social issues (e.g., in the form of fair wages for farmers) are reported frequently by governmental agencies or NGOs (Beske et al. 2014). Being aware of the difficulty to ensure continued quality of the products, partnership approaches already gained attention for firms over the years (Van der Vorst et al. 2002).

As the food industry includes a large variety of products a large number of organizations was chosen to describe the situation on the producer level in various commodities: fruits and vegetables; sugar cane; coffee and cocoa. These commodities are shown in table 2. It further shows for each commodity the respective data source, meaning the NGOs or Social Businesses that provided information for that commodity and the countries where it is sourced from. Mainly the food is sourced from Latin America and Africa, but also in parts from Asia and Australia. For a more detailed description of the organizations see Appendix 1.

Table 2 Commodities of the food industry

Commodity Countries Data source

Coffee Brazil, Vietnam, Uganda, Ethiopia,

Colombia, UTZ, Rainforest Alliance

Cocoa Ivory Coast, India UTZ, Rainforest Alliance

Fruits and vegetables

India, Ghana, Ethiopia, Brazil, Costa Rica, Peru, Ecuador, Mexico

In the following I will provide a description of the sustainability problems that the NGOs and Social businesses encountered in their commodities and in the different countries.

Coffee for instance is sourced from Brazil, Vietnam, Ethiopia, Uganda and Colombia. Brazil is a quite advanced place for the coffee production, whereas in other African countries the development is at a much lower stage. Thus, the problems within the coffee commodity depend on the level of development of the country where the coffee is sourced from (Interview UTZ).

“So in Brazil it is more about technical assistance, the difficulties are on a higher level. They have their beamers and good facilities. But in Uganda for instance you might sit in the middle of the coffee plantation and have a blackboard.”

--- UTZ certified, Certification Officer

In the case of cocoa that is mainly sourced from African countries child labor is always an issue. But here again you can find environmental issues such as poor soil fertility management, aging tree stocks, improper use of chemicals and uncontrolled deforestation (UTZ 2014). For coffee and cocoa the sustainability issues depend largely on the region where these products are sourced from. For instance in India child labor is an issue, whereas in other countries it is not but the use of pesticides, wages or soil erosion (Interview RA).

Fruit and vegetables are sourced from a number of countries, such as India, Ghana, Ethiopia, Brazil, Peru, Ecuador and Mexico, countries where large parts of the global production of fruits and vegetables is located. One of the main problems in that commodity is the lack of knowledge and skills on the small-scale producer’s level. Farmers have received little training regarding production methods and lack knowledge on labor rights. For instance, farmers often have migrant workers on their fields coming from a distance of thousands of kilometers and that settle there only for the harvest season of 2 or 3 months. In that case it is a huge challenge to have formal contracts, records of working hours and social benefits (Interview Solidaridad).

“A normal practice in some countries is that intermediaries organize migrant labor through contract workers. Companies thereby do not consider it their responsibility to keep track on proper working conditions and compliance with labor rights.”

--- Solidaridad, Project Manager for Fruits & Vegetables

Consequently, including the intermediary agencies in sustainability discussions is necessary in order to see together how to improve that issue (Interview Solidaridad).

“But of course you can have your doubts or anything about this [the labor conditions] - You need transparency. That`s where specifically for food is a huge challenge.”

--- Solidaridad, Project Manager for Fruits & Vegetables

The lack of financial means for investment is a problem as well as the lack of knowledge. The consequence is that through incorrect drainage of the fields and use of pesticides plants become more susceptible to diseases causing even more difficulties for the farmers. The fruit and vegetables sector is both characterized by social and environmental issues, but the issues depend on the commodity and the region. For South Africa which has a semi-arid climate water use is a big problem, whereas in Brazil problems would not be related to the availability of water, as it is a rain-fed region. In the case of bananas the social part is a big problem, as the health and safety of the plantation workers and adjacent communities is endangered by the excessive use of pesticides for growing bananas (Interview Solidaridad).

“The banana export production is really just based on one cultivar that is very susceptible to diseases. So it needs to be sprayed a lot what is done by aerial fumigation. If you spray from an airplane the wind takes it to nearby communities and to the people of course who work directly with it. It is a huge problem, it is a dirty business.”

--- Solidaridad, Project Manager for Fruits & Vegetables Sugar cane constitutes around 80% of the global sugar production. Countries of production are for instance Brazil, Australia, India and Colombia. Sustainability challenges in sugar cane have various forms, such as constraints on natural biodiversity, conversion of primary forest habitats, soil erosion and degradation, increased greenhouse gas emissions, uncontrolled agrochemical use and impacts on water usage on the environmental side. On the social side the issues are child and forced labor, poor working conditions, lack of compliance with local laws, land right issues, working rights and gender issues. The issues vary from country to country (Bonsucro 2013).

4.1.1 WHEN TO MANAGE?

frontrunner companies who see putting money in their supply chain not as a cost but really as an investment (Interview Solidaridad).

“It is often so that for instance Mars comes to us and says: We want to do something with our supply chain in Cocoa in Cote d’Ivoire, the major cocoa producing country. Let us start up a program to train our farmers to be more sustainable, get better income, better products etc.“

--- Rainforest Alliance, Manager Sustainable Agriculture Relations

Reasons can be business oriented and aim at risk mitigation. For instance, for cocoa supply is decreasing, so firms want the plantations to be more productive (Interview RA). In the case of sugar cane Bonsucro aims at making firms understand that if they want to have a sustainable supply in the future they need to engage in relationship with a mill that is certified and not only buy the cheapest sugar available for everyone. This relationship with the supplier of certified sugar would assure them to have an enduring supply. However there might be people in the companies caring about sustainability, the reasons are more business-oriented with the final aim to guard their own reputation (Interview Bonsucro).

“It is more about market risks and supply risks than the actual sustainability at the mill level. […] Of course they care and that is why they have their own codes requiring suppliers to follow specific rules and practices, but in the business sense they aim at guarding their reputation.”

--- Bonsucro, Research & Policy Analyst

As mentioned in the introductory section the sustainability issues depend largely on the region and on the commodity. Firms’ reasons to get active thus are depending on the region and the crop and the issues detected there. Then they would contact NGOs such as RA or UTZ in order to certify their suppliers.

“There are a lot of issues they are concerned with. One is deforestation - if you think of palm oil. One can be bad labor circumstances or child labor - if you think of cocoa.”

--- Rainforest Alliance, Manager Sustainable Agriculture Relations

producers want to meet. The same accounts for sugar cane, where the initiative to get certified mainly comes from the mill, but not unilaterally, as there are many actors behind that initiative that want to make a change. Global players as e.g. Unilever, Bacardi, Ferrero or Coca Cola are members of Bonsucro and interested in buying certified sugar. If there is a demand for certified sugar, producers are also more committed to get certified in order to meet that need. For sugar cane the situation varies from that for coffee or cocoa. Bonsucro arose from a movement in the sugar cane industry when a roundtable including NGOs, producers, buyers, traders and all other supply chain members was created. All actors got together, created a standard and an organization to maintain this standard. The activity first came from the industry side, differently to the case of UTZ and RA.

“[…] the other organizations like Fair Trade or UTZ at the beginning were no multi stake holders. They were rather a NGO that created a standard and afterwards started asking the private players to use it. So it was created first and afterwards there was the involvement of the private sector. But in our case the private sector was at the beginning and in the heart of the organization.”

--- Bonsucro, Research & Policy Analyst

Deciding when they should engage in sustainable practices is difficult for firms. They have to make choices and these depend on the expertise they have. First they need to identify the issues in their supply chain and based on that how they are best equipped to make changes. Some aspects can easily be improved, so the firms should spend a little bit of time and money to improve those issues. Then it depends on the leverage the firm has, because it is challenging to improve a supply chain as all the suppliers have to be put together to work with the firm. And the suppliers are also not only supplying only for one firm, but for many firms (Interview Solidaridad).

“Companies need to be realistic and know where they have the leverage to actually do something, because they are of course not the only ones who wants something. It is always necessary to take all the partners in the chain together and then see how to change it. It is really a complex issue.”

--- Solidaridad, Project Manager for Fruits & Vegetables

“I think [firms] are really willing to do something, but the question of who will finance it is always challenging. In general in many commodities there is always a loud voice on retail and how retailers have power in the market and decide what kind of prices is given to products.”

--- Solidaridad, Project Manager for Fruits & Vegetables

But mainly the financing is spread between retailers, traders, brands, farmer associations and donor funding, so that the costs are not all carried by the brand. So there are solutions to that problem.

4.1.2 HOW TO MANAGE?

When firms decide to actively improve the sustainability performance of their suppliers they often engage external auditors to conduct the audits according to specific standards. Third party audits can be done with the help of the NGOs. In that case an external audit body accredited by RA would audit according to the SAN-Standard which is the standard RA uses. The same accounts for other certifying organizations like UTZ and Bonsucro, which have their own standards including criteria for social, environmental and economic aspects (Interview RA; Interview UTZ; Interview Bonsucro). The Bonsucro certification however differs from the certification of RA and UTZ in the sense that many producers start the certification process on their own initiative, so that they can also define the scope of it. Particularly in the sugar cane industry the prices influence a lot the production balance. In one year they have to produce a lot of sugar in the other a lot of ethanol. So producers can increase the level of certification if the demand for certified products is higher and they need more. Next to third part audits, firms also have their own codes and conduct their own audits. For instance, if suppliers are Bonsucro certified, firms like Coca Cola or Unilever may say that those mills do not need to pass their own Coca Cola or Unilever audit (Interview Bonsucro). Firms can also benefit from contacting NGOs, because those have expertise in sustainability issues and in the case of Solidaridad they give firms access to their network of farmer associations, local input suppliers, donors and governments.

“It is about expertise, because it is hard to know as a company about the exact issues in your supply chain and to have all the expertise yourself. It is about the identification and analysis of the issues. We have representation in a number of countries and are independent and critical in our agenda and ambitions.”

There are some criteria that affect the sustainable performance that are more difficult to assess than others. As an example, in the audit processes Bonsucro uses a calculator for self-assessment of farmers, including economic, social and environmental criteria. The environmental criteria are assessed by the metric, for instance in kilo per hectare. Criteria are for instance water quality, soil quality and the use of fertilizers (application of nitrogen and phosphors). The social part is not as metric as the environmental one. Some criteria can be measured, such as child labor that is measured by the minimum age of workers. There is a definition of the minimum age of workers depending on the work, but other definitions exists for what is considered hazardous work and what not, when there is discrimination, harassment and compulsory labor. As these criteria cannot really be measured, they are answered by ‘yes’ or ‘no’. Hence, for firms it can be hard to identify some social issues that are prevalent at the suppliers’ premise. So even if they send an auditor to assess the situation there some problems may escape them. These issues are of growing concern; for instance at one ILO conference the question was addressed how to identify sexual harassment at a company (Interview Bonsucro):

“[…] if you go [to the supplier] with an auditor one day in a year nobody will trust the auditor to tell them. If a woman has never seen the auditor in her life it is hard to imagine that she would go to him and tell him that she has been sexually harassed. So what they do is that the auditor goes to a group of women and asks them: Let us assume you have a friend – not you - that has been sexually harassed. What are the next steps you take? Whom would you talk to? If they do not know that then it is a clear indication that the company is not prepared to deal with it.”

--- Bonsucro, Research & Policy Analyst

The problem however does not lie in the difficulty to improve these issues, but in the assessment. Once assessed, they should not cause more difficulties than other issues in the improvement (Interview Bonsucro). Those detected issues need sometimes trainings in order to be improved, because sometimes the farmers do not know how to solve these problems or do not see the necessity. There are some aspects that once detected however require more training than others, for instance due to cultural differences (Interview RA).

“For European countries for instance child labor is not acceptable but in Cote d’Ivoire (or India) people would ask: ‘Why should the children not work? They live here they work here. What is the point?’ So it requires a bit of training to say that it is important that kids go to school and learn.”

Training, either in cooperation with NGOs or on the firm’s own initiative, is the other main practice firms use to manage their suppliers regarding sustainability. They vary according to the social and environmental issues detected in the audit and are then adapted to the regional problems and farmers’ needs (Interview RA; Interview UTZ; Interview Solidaridad). Trainings can have different shapes, e.g. participant trainings, field visits or lectures (Interview UTZ).

“The main focus of the training depends on the assessment done before, but definitely agricultural practices, management practices are more frequently used.”

--- UTZ certified, Certification Officer

Training must be adapted to the level of the farmer in terms of management and structure. If good agricultural practices and correct management skills are already in place they would have a much more positive impact on the rest of the requirements than it would be vice versa. If there is no structure in place or no responsible person can be identified some basic elements are missing, so starting the training at the baseline with monitoring the water quality the training will not create a big effect, therefore these structures first need to established (Interview UTZ).

“When taking Brazil as an example it is a quite advanced place for the coffee production, so that there normally technical issues are discussed or you go into technical details. You do not have to go into general issues and start at the baseline like what a contract is. You might discuss for instance the production volume or how to estimate it or large scale implementations to improve the farming performance. […] But if you go to Sierra Leone there is no structure like this, so you discuss in a different way and have more baseline issues, where you need to figure out with whom to discuss it.”

---UTZ certified, Certification Officer

Trainings of NGOs do not always aim at certification, but really at improvement, so they can be done according to different criteria. Although training aiming at certification is more common for companies when engaging in trainings, because it is a good way to get an external validation of the sustainability situation at their supplier’s base. It makes the training more credible.

“For instance if Trader or Retailer A wants to have Rainforest alliance certified pineapples then he says that he wants to train these farmers to become compliant with Rainforest Alliance. Then he could source Rainforest alliance certified pineapples. But Trader A could also say that he wants a group of farmers to comply at least with its own list of pesticides, respect working conditions, living wages etc. They can set their own criteria and train on this. […] As a company it is much easier to say that they source Rainforest Alliance certified pineapples instead of telling a story that they train but do not have a certification on it; Because in that case it is not verified by a third partner.”

--- Solidaridad, Project Manager for Fruits & Vegetables

Still there are some companies who probably do not only provide trainings in collaboration with other organizations, but also involve in additional sustainability enhancing activities with their suppliers.

“I think they also do other practices. There are so many companies and system so I don’t really know, but I am sure they have and work closely with their suppliers.”

--- Bonsucro, Research & Policy Analyst

4.2 TEXTILE AND CLOTHING INDUSTRY

The textile and clothing industry is a very diverse and heterogeneous industry and its products are used by private households and businesses alike. “Its activities range from the production of raw materials (i.e. natural as well as man-made fibers) to the manufacture of a wide variety of semi-finished and finished products” (Stengg 2001 p. 1). It is one of the most complicated industrial chains in the manufacturing industry. It starts with cotton planting, sheep growing or synthetic fibers manufacturing, continues with weaving and knitting in order to produce textile surfaces or fabrics, then undergoes pretreatment activities, such as dyeing and printing, before finally reaching the ready-made clothing section, where fabrics are cut and sewed (Lacasse and Baumann 2004).

in this case the supply chain from the raw cotton to the end consumer, that includes the following actors: Cotton farmers, cotton ginners, cotton spinners to produce yarn (Kogg 2003) that is then processed in the knitting and woven mills and dye houses, and passed to the garment factory before it finally ends up at the retail outlet (Cao et al. 2008). This is only the basic supply chain, as further traders could be the intermediates between two actors (Kogg 2003) and similarly one actor could take the responsibility for more than one task (Cao et al. 2008).

Figure 4 Textile Production Source: Lacasse & Baumann (2004)

In our case we investigated sustainability issues and the management of firms in the case of cotton production and ginning and the cutting and sewing section of the supply chain. These steps are divided into two commodities as shows table 3: The raw material for the clothing production in this case is cotton. Finished products are clothes that passed the last step of cutting and sewing. Again this table shows for each commodity the respective data source, meaning the NGOs that provided information for that commodity and the countries where the product is sourced from. For more information regarding the organizations see Appendix 1. The raw cotton that this study considers is sourced only from African countries. The last step of cutting and sewing to create the finished product is done in Central America, Asia and some eastern European countries. More detailed information provides the table below.

Table 3 Commodities of the textile and clothing industry

Commodity Countries Data source

Raw material African countries Cotton made in Africa

Finished products

Asia (China, Pakistan, Bangladesh), Central America (Honduras, Salvador), Eastern Europe (Romania, Bulgaria)

Kampagne für saubere Kleidung

In the following I will provide a description of the sustainability issues detected in these commodities and the countries they are sourced from.

The sustainability-related problems in the cotton industry differ between the farmer and gin level. On the farmer level an important ecological issue is the use of pesticides, as the cotton plants are very susceptible for pest infestation. This leads to problems with soil fertility and health of the workers. The excessive use of pesticides is mainly related to the low education and lack of financial means. Often the farmers are so poor that they cannot afford protective clothing, or in case that they do have it they often a lack awareness considering the toxicity of pesticides (Interview CmiA).

“The poverty and low educational level [on the farmers level] is among other one major problem of the cotton companies. That is why they train the farmers in specific techniques. But if they encounter illiterates the contents will often be forgotten. That is in this respect one of the difficulties that these techniques need time to reach them.”

--- CmiA, Project Manager by the Aid by Trade Foundation

cotton companies on time. Being so poor that they could not achieve a decent living, they were evidently unable to invest in better production techniques or less harmful pesticides (Interview CmiA).

“For a long time it was a problem that the small-scale farmers were not paid on time and that they did not received any inputs, because the relationships were rather informal, so that the cotton companies did not necessarily felt responsible to pay on time.”

--- CmiA, Project Manager by the Aid by Trade Foundation

On the level of the cotton gins social aspects are especially important, such as occupational health and safety, minimum wages, working hours, freedom of association etc. Child labor may also happen in the cotton industry, but mainly because many farms are family businesses and that is why the children sometimes help out. Organized child labor however is not an issue (Interview CmiA).

Typical problems of the clothing industry encountered on the subsequent cutting and sewing section of the supply chain are extremely low wages and long working hours and poor working safety. The safety of working places and buildings is absolutely insufficient (Interview KFSK).

4.2.1 WHEN TO MANAGE?

On the cotton production level firms nowadays actively contact NGOs like CmiA in order to improve the sustainability of their suppliers (Interview CmiA).

“The first cotton companies we collaborated with were contacted by us. By now it is running by itself, so that it is rather the cotton companies that contact us in order to get verified.”

--- CmiA, Project Manager by the Aid by Trade Foundation

CmiA is a quite young initiative, founded in 2005, but they established the demand alliance that created a demand for cotton produced under sustainable conditions. The cotton companies decide do engage in activities because they are private enterprise companies and their aim is to operate on a long-term basis. They have a great interest in having farmers that are able to read and write, but the reasons are economically based. They know that they cannot get a good quality and a secured supply base if they do not have a good relation with the small-scale farmers (Interview CmiA).

Some companies set specific stimulus, so that one company offered the best cotton farmer a trip to Mecca. […] Of course it is not a charity project from the side of the companies; they do it for their own interest. But nonetheless I think that they are interested in improving the situation of their farmers.”

--- CmiA, Project Manager by the Aid by Trade Foundation

There is a general willingness of firms to actively improve the sustainability performance of their supply chain from the side of the cotton companies (Interview CmiA). This differs largely from the firms buying the clothes from the cutting and sewing fabrics. There the firms are aware of the poor working conditions in the clothing industry, but as improving the situation of the suppliers involves higher costs, they are reluctant to react fearing a reduction of their profits (Interview KFSK).

“Since decades firms know how the conditions are [at the supplier’s premise]. A breakdown like the one of the Rana Plaza with more than thousand dead workers is only the very very severe catastrophe, but every day the catastrophes happen and the firms know that.“

--- Kampagne für saubere Kleidung, Coordinator

In many countries there are no unions that stand up for the workers’ rights. Often workers are not aware of their rights, because in the textile fabrics are often women who start working at the age of 14. And they are chosen, because they are so young and inexperienced. There are however labor disputes in many countries who are often violently clubbed down, for instance in Bangladesh or Cambodia. The lack of unions is one problem, but again in countries where there are unions that achieved to raise the standards firms often relocate to a place with lower standards leaving the people without work (Interview KFSK).

“It [the production] just changes from China to Vietnam. If the labor standards are lower there, what they do is to ‘cut-and-run’, so they cut the supply relationship to one country and just move to another. It is a huge problem.”

--- Kampagne für saubere Kleidung, Coordinator

accomplishment, but still more firms should be members. That firms actually engage in activities to enhance the sustainability in their supply chain is due to the pressure NGOs or customers exert on them. If the pressure is that high that they would have to fear sales collapses, they would start to get active (Interview KFSK).

“If in the media the pressure on the firms is high enough, I assume that they would feel impelled to improve the situation at his supplier’s base – but really only then.”

--- Kampagne für saubere Kleidung, Coordinator 4.2.2 HOW TO MANAGE?

On the cotton production level the use of trainings is a common practice. Companies can conduct these in cooperation with CmiA. The cotton companies receive a training that they thereafter pass to their cotton farmers. As they have a network of staff members allowing having a direct contact to each of the small farmers they should be able to pass the training to all their contracted farmers. Companies should therefore engage in activities to improve sustainability with every single farmer, irrespective of its size (Interview CmiA).

“Accordingly we assume that there is a possibility to influence many things that are centrally operated, like e.g. the trainings or the education of the trainers in the specific regions. It is governed by the companies until it reaches all of the small farmers.”

--- CmiA, Project Manager by the Aid by Trade Foundation

Trainings are always adapted to the individual needs of the companies and are elaborated in cooperation with them. They are more conducted at the farmer level then at the fabric level, because those are much more numerous (Interview CmiA). Mainly they aim at ecological aspects like agricultural farming techniques, e.g. crop rotation. Concerning pesticides farmers are intensively trained in the ‘threshold of damage’ principle, so that they do not spray preventatively but only when it poses a risk of economic loss (Cotton made in Africa 2014). Trainings can also include some social aspects, such as safety at work with the use of protective clothing, but they are seen as more efficient when aiming at environmental issues than at social ones. Some trainings on the fabric level sporadically mention operational safety and health, but not as a regular method (Interview CmiA).

“We try to do that more with the use of audits. The fabrics are also verified, we have certain criteria and we also give recommendations to the companies how they can improve certain aspects and expect that they do it until the next verification.”

CmiA contacts the management of the fabrics expecting them to feel obligated to implement measures that will have an impact on the workers. Sometimes there can be difficulties in the assessment of some aspects. For instance, whether all farmers received a contract at the beginning of the season, which is one of the criteria required from CmiA, can be difficult to assess as there is a huge number of farmers and checking whether they all have papers can be complicated. If the farmers do not find them it must not mean that they don’t have a contract with the company, as in Africa it can be difficult that the papers remain always at the same place. However it is easy for CmiA to identify which pesticides are used, because they are provided from the companies to the farmers. Those often do not have the possibility to buy the pesticides on the free market. The companies provide the farmers credits in the form of pesticides, seeds, fertilizers in order to give them the necessary inputs to be able to produce cotton. In that sense the companies have the leverage to influence the use of pesticides as they have a collaborative relationship with their suppliers (Interview CmiA).

On the cutting and sewing level the use of social audits is a practice that goes beyond the common purchasing tasks. In some cases these audits aim at certification and are conducted from a third party. But those audits are only inspecting the situation and that often only very superficially (Interview KFSK).

“Currently we have a situation in which the companies audit themselves or hire an external auditor and the problem is that the outcomes of these audits are not published because they do not involve unions. The problem of these audits is that they are only capturing the moment: They go there and look around the factory, but we know exactly that they put everything in order before that. It is not enough. There must be in any case another stakeholder such as a union involved.”

--- Kampagne für saubere Kleidung, Coordinator

A study from INKOTA, one of the responsible organizations of KFSK, interviewed fabric workers, managers and auditors and found that worker are often told by the managers what to tell the auditors, that new workers are send on vacation when an audit is pending and that they have falsified books containing information about working hours, wages etc. (see more INKOTA 2006). An audit can therefore only be efficient when other stakeholders such as unions or other NGOs are involved, which is so far often not the case.

“The purchasing practice of firms is still: Receive everything very cheap and very fast”

Hence, there are in fact simple methods for companies to improve the labor conditions of their suppliers without engaging in any practice that goes beyond common purchasing tasks. Raising the purchasing prices only a little bit would already significantly influence the working conditions and a longer delivery time would render overtime unnecessary. Moreover there is a huge overproduction of clothing, that when reduced would also make overtimes unnecessary. But most firms so far do not consider doing that (Interview KFSK).

“There are no reliable numbers but there is the guess that 50% of the produced clothes we find in the stores is dead stock and ends up in the shredder. […] A colossal waste of resources and labor.”

--- Kampagne für saubere Kleidung, Coordinator

4.3 CROSS-CASE ANALYSIS

After having described the characteristics of each case, I will compare the characteristics of the supply chain in the food industry with those of the supply chain in the clothing industry and analyze their differences and similarities and how they affect the choice of firms for sustainable practices.

Sustainability issues

The social matters within the textile industry were more found on the fabric level, for instance in the case of cotton they are more found on the level of the cotton gin than on the cotton farm and refer to the health and safety of workers, wages, working hours and freedom of association. On the cutting and sewing section the problems were similar, including extremely long working hours, low wages and poor working safety. Here also the fact that there are often young women which are not aware of their rights and that there are no unions to enforce their rights makes it very critical in terms of social sustainability. Consequently the analysis shows that there is a similarity on the agricultural level across both industries assuming the shape of mainly environmental matters, but it shows also that the social issues are more prevalent in the textile industry than in the food industry.

When to manage?

products could not be found within the scope of this study, leading to the assumption that the demand for certified products is higher in the food industry than in the textile industry.

Firms acting within the food industry cooperate with NGOs or Social businesses in order to benefit from their expertise and their network of certified suppliers. Due to the lack of transparency (e.g. migrant workers) they often do not know about the problems in their supply chain. All the interviewed NGOs in the food sector agreed that there is a general willingness of improvement from the firms’ side. This makes a major difference to the textile sector where the retailing firms are under high pressure of NGOs and are well aware of the problems in the textile fabrics but few of them are becoming active in managing sustainability in their supply chain. Firms are focusing on buying cheap products and receiving them within a short period of time and have little concern for the working conditions in the factories as long as it does not shed negative light on them. On the contrary, this study even shows that if it comes to an improvement of the working conditions and a raise in the wages at the supplier’s premise the buying firms would face higher prices and relocate their production to another country with lower wages. Only in the case that incidents become public and could harm their reputation and affect their sales they would get active. A general willingness of firms to improve sustainability is therefore not to be found in the textile industry, which makes a major difference to the food industry.

How to manage?

them. But this study shows that those audits are deemed to be superficial and inefficient. The use of trainings is not mentioned on that level, which is not surprising due to the fact that firms are found to have little or no concern for the situation at their supplier’s premise. Thus there is an observable difference in the use of practices depending on the level of the stages within the supply chain and the dimension of sustainability that is affected. Trainings are mainly conducted on the agricultural level and primarily aim at environmental matters, whereas on the fabric level the use of audits is more common and aims at social topics. Trainings were found to be a common practice in the food industry, which is line with the findings from Van der Vorst et al (2002) stating that partnership approaches in the food industry already gained attention for firms over the years.

5 DISCUSSION

This study was conducted in the textile and food industry where the purchased items from firms can be classified as non-critical items with high stakeholder impact, according to the Purchasing Portfolio Cube of Arnold and Schmidt (2010). In both cases the supply risk is low, because there are numerous suppliers and the production requires no scarce materials, so that firms encounter no difficulties to switch from one supplier to another. Moreover the profit impact is low as firms do not face high purchase prices for those items. But the stakeholder impact in both industries is high as NGOs and consumers put pressure on firms to start sustainable activities. One item mentioned in this study is an exception: In the case of cocoa supply risk is high, as supply of that product is decreasing pushing firms more to take actions. According to the Purchasing Portfolio Cube this would be a bottleneck item with high stakeholder impact.