The supplier’s adoption of buyer’s sustainability
practices and standards: decouple or implement?
04-07-2016
University of Groningen
Faculty of Economics and Business
MSc International Business and Management
Author: Mira Hamraoui Slichtland 12
9302 GH Roden, the Netherlands Student number: S2795558
E-mail: m.hamraoui@student.rug.nl
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Abstract
This study explores to which extent a supplier is implementing or decoupling on these buyer’s sustainability practices and standards and will address additional factors for either decoupling or implementation of sustainability. Due to different institutional pressures a supplier might face competing pressures on these buyer’s sustainability practices and standards. In this research the main source of institutional pressures derives from the different international buying firms. The extent to which these sustainability practices and standards are adopted are expressed in terms of evasive decoupling, emergent decoupling, strategic implementation and routine implementation. Through qualitative research, five firms were interviewed to determine to which degree sustainability is integrated in: performance targets, performance appraisals, strategic decision making and operational processes. The main findings and conclusions show that a lack of audits, firm’s own interest in sustainability, and a trade-off between perceived benefits, costs, time and human resource most likely result in decoupling. Factors which are likely to contribute to the implementation of sustainability are sustainability as a marketing tool, high sustainability interest and frequent audits of the buying firm.
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Preface
The past months I have been working on this master thesis, to complete the Master of Science degree in International Business and Management. It was definitely an interesting and sometimes difficult road to complete this thesis. As some might say there is no straight way to success, but it allowed me to learn from a theoretical and research perspective.
In this preface I would like to thank several people who guided, supported and contributed to the completion of my thesis. First, I would like to thank my supervisor Dr. M.M. Wilhelm. She helped me out along the process with feedback and support to find the right direction. Thank you for your time, support and feedback that highly contributed to the completion of my thesis. Second, I would like to thank all five supplying firm for their flexibility, openness and hospitality to conduct interviews. Without their contribution I was not able to develop real-life cases. Last but not least, I am very grateful for the support of my family and friends.
4 Table of Content Abstract ... 2 Preface ... 3 Introduction ... 5 2. Literature review ... 8
2.1 Decoupling on sustainability practices and standards ... 8
2.1.1 Institutional pressures ... 8
2.1.2 Pressures of different stakeholders: decoupling ... 9
2.1.3 Four levels of sustainability adoption ... 12
2.2 Decoupling sustainability at the supplier level ... 13
3. Methodology ... 15
3.1 Case selection ... 16
3.2 Data collection: interviews ... 17
3.3 Data analysis... 19 4. Results ... 22 4.1 Firm ALPHA ... 22 4.2 Firm BETA ... 24 4.3 Firm GAMMA ... 26 4.4 firm DELTA ... 27 4.5 firm SIGMA ... 29
4.6 Cross-case analysis: levels of sustainability adoption ... 31
Discussion ... 37
Main findings in light of the literature ... 37
Future research ... 41
Managerial implications ... 42
Limitations ... 42
Conclusion ... 44
Reference list ... 46
APPENDIX I: Question list interview ... 52
APPENDIX II transcript interview ALPHA ... 55
APPENDIX III transcript interview BETA ... 63
APPENDIX IV transcript interview GAMMA ... 73
APPENDIX V transcript interview DELTA ... 80
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Introduction
Firms are held more responsible by its stakeholders for environmental and social problems caused by the firm directly, but also caused by the suppliers of the firm (Caniato, Caridi, Crippa and Moretto, 2012; Hsueh, 2014). Consumers and governmental organizations are increasingly focusing their attention on sustainability practices (Maloni and Brown, 2006), and firms are asked continuously to take the environment and social problems into account in the entire supply chain (Müller and Seuring, 2008; Maloni and Brown, 2006; Grosvold, Hoejmose and Roehrich, 2014). The aim of firms to create a more sustainable supply chain can be defined as green supply chain management (Walker, Di Sito and McBain, 2008; Diabat and Govindan, 2011). In order to obtain a green supply chain, sustainability issues must be integrated and it has to be taken into account in all flows within the supply chain. An example of creating a more green sustainable supply chain is reduced carbon emissions during transport (Walker et. al, 2011), but it also includes social sustainability practices like the health and safety of workers, human rights, and benefits to stakeholders and community (Marshall, McCarthy, MCGrath and Claudy, 2015). By involving both environmental and social sustainability in the supply chain (Marshall et. al, 2015), firms are moving beyond the traditional core of supply chain management (Linton, Klassen and Jayaraman, 2007).
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According to the Foerstl et. al (2015) there is a lack of research explaining the supplier sustainability commitments, and this research is necessary because suppliers can face different levels of pressure towards sustainability practices. Zhu and Sarkis (2007) argue that these pressures can arise from regulators, activist groups or customers. For example regulators can force a supplier to improve the environmental performance, like reducing carbon emissions (Zhu and Sarkis, 2007). Another example is that the buying firm demands to take care of the health and safety of workers (Baden, Harwoord and Woodward, 2009). This pressure towards sustainability can arise from different institutional environments (Marano and Kostova, 2016), where different actors can force pressures on firms to incorporate new practices or policies (Meyer and Rowan, 1977). Zucker (1987) argues that it is important for firms to fit in the institutional environment to achieve legitimacy. However, firms might face conflicting demands to which they cannot comply and jeopardize the legitimacy of the firm (Egels-Zandén, 2014). Therefore firms decouple on sustainability practices and standards, meaning that a firm is overstating the level of sustainability activities only to impress stakeholders (Kotler and Maon, 2016).
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A firm’s response to pressures towards sustainability can be decoupled from the regular business activities, meaning that not every sustainability practice or standard will be integrated into day-today operations (Weaver, Trevino and Cochran, 1999). This view is called symbolic (Christmann and Taylor, 2006). The opposite of symbolic is substantive, where a firm continuously implements and integrates sustainability practices into the daily operations (Iatridis and Kesidou, 2015; Christmann and Taylor, 2006). This will be the starting point to elaborate on the supplier’s level of sustainability adoption.
The main contribution of this paper is to extend recent literature on the theory of decoupling and implementation of buyer´s sustainability by suppliers (Crilly et. Al, 2012). A second contribution is to address additional factors explaining the decoupling or implementation of sustainability. This is done by investigating five real-life examples.
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2. Literature review
Many firms show their commitment and contribution to sustainability, but at the same time firms still struggle with this concept (Lindgreen and Swaen, 2010). Building on the Brundtland Report (1987) definition of sustainability, Johnston, Everard, Santillo and Robèrt (2007) state that sustainability is about initiatives in making decisions based on reducing the negative impact on the environment, increasing the social well-being of the society and an efficient use of resources with a long term perspective. Throughout this paper this last definition will be used as a definition of sustainability. The Brundtland Report (1987) is a widely accepted starting point for conducting research on sustainability (Sneddon, Howarth and Norgaard, 2006). Examples of sustainability issues are origins of materials, supplier’s production process, recycling and labor force conditions (Hsuan, Skjott-Larsen, Kinra and Kotzab, 2015). The remaining of this literature review will discuss the theoretical concepts of the institutional pressures and decoupling. Then, four levels of adoption of sustainability are explained. Lastly decoupling on sustainability at the supplier level is shortly discussed.
2.1 Decoupling on sustainability practices and standards
Organizational practices are embedded in the institutional environments in which the organization operates (Marano and Kostova, 2016). Institutions are the “rules of the game” (North, 1990), and not knowing the “rules of the game” can be devastating for a firm (Beyer and Fening, 2012). Different stakeholders can be indentified in the institutional environment, resulting in different institutional pressures.
2.1.1 Institutional pressures
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themselves along guidelines prescribed in the institutional environment (Meyer and Rowan, 1977). Therefore, the institutional environment can be seen as setting acceptable actions, decisions and behavior for firms (DiMaggio and Powell, 1983). Based on the institutional environment in which a firm operates, it will make business decisions in order to achieve legitimacy (Meyer and Rowan, 1977). According to Zucker (1987) firms need to adjust to its institutional environment to achieve legitimacy, which eventually leads to isomorphism. In turn this should increase the probability of survival in the institutional environment (Zucker, 1987; Meyer and Rowan, 1977).
From this institutional environment a firm can face different institutional pressures. There is a variety of institutional pressures which are embodied in rules and regulations, norms and values, and social expectations (Meyer and Rowan, 1977). DiMaggio and Powell (1983) note that states, governmental and regulatory agencies, professions and interest groups are sources of institutional pressures. Besides regulative and competitive forces, a non-governmental organization (NGO) can also exert pressure on firms (Delmas and Toffel, 2004) as well as customers (Scott, 1987). If these sources of institutional pressures can contribute to achieve legitimacy in the institutional environment, a firm will be motivated to comply with these pressures because resistance will be difficult (Oliver, 1991 in: Goodstein, 1994). As described in the next section, a firm can face different institutional pressures due to different stakeholders with varying expectations. Then the firm has to decide with which practices and standards it can or cannot comply: decoupling.
2.1.2 Pressures of different stakeholders: decoupling
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one response to a sustainability requirement from one stakeholder might result in complaints by another stakeholder (Dare, 2016). When a firm is pressured to adopt sustainability practices and standards by different stakeholders to increase its legitimacy, it is often overstating the level of sustainability activities only to impress stakeholders (Kotler and Maon, 2016). This is called decoupling. As explained by Meyer and Rowan (1977 in: Crilly et. al, 2012), “decoupling is a function of inconsistent stakeholder expectations”. Decoupling is further explained as organizations that are carrying on routines which are in contrast with the practices they adopt due to institutional pressures (Meyer and Rowan, 1977). The conflicting demands can lead to a partial implementation of sustainability to achieve legitimacy, while the firm is trying to distract the attention from business (core) activities that might be unacceptable to some stakeholders (Dare, 2016). Therefore, firms decouple their behavior from stated sustainability commitments as a respond to the diverse and conflicting demands from different stakeholders (Crilly et. al, 2012). A firm can thus present an instrumental response to achieve the approval of stakeholders in the institutional environment to gain legitimacy, and gain the freedom to continue with internal operations which are necessary for the business (Jamali, Lund-Thomsen and Khara, 2015). As stated by Jamali et. al (2015), decoupling can provide a safeguarding mechanism when a firm has to deal with conflicting institutional pressures.
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The previous example shows the extent to which a firm actually is implementing sustainability into its core business. This decision on what to implement or not can be expressed terms of a symbolic or substantive response (Giuliani, 2016). Symbolic refers to a firm’s responsiveness, where it fails to use the sustainability practices in daily operations (Christmann and Taylor, 2006; Iatridis and Kesidou, 2015). According to Delmas and Monte-Sancho (2010), a firm can use a symbolic response to achieve legitimacy in its institutional environment. On the other hand, supplier that apply a substantive response, are continuously implementing and integrating sustainability practices into the daily operations (Iatridis and Kesidou, 2015; Christmann and Taylor, 2006). The distinction between symbolic and substantive is important because previous research shows that firms could pass for periodic audits, whereas in reality they were not complying with the sustainability practices and standards on an ongoing basis (Christmann and Taylor, 2006). But according to Crilly et. al (2012) the responses symbolic and substantive does not have to be binary. These authors identified four configurations on the level of adoption of sustainability practices: routine implementation, strategic implementation, emerging decoupling and evasive decoupling. The reasons behind one of these type of responses are first further explained. After that, a detailed explanation of the four different levels of adoption will be examined.
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2.1.3 Four levels of sustainability adoption
Two levels correspond to the decoupling of sustainability practices and standards: evasive and emergent decoupling (Crilly et. al, 2012). The other two levels of adoptions are routine implementation and strategic implementation, which are associated with a more consistent implementation of sustainability (Crilly et. al, 2012).
Evasive decoupling
Some firms decouple on the implementation of sustainability more for intentional reasons (Crilly et. al, 2012). Evasive decoupling implies that when a firm can hide their lack of implementation, they will not implement sustainability policy consistently (Crilly et. al, 2012). According to Crilly et. al (2012) this is often the case when there is low consensus within the firm. Also Oliver (1991; in Goodstein 1994) explained that a firm can intentionally avoid institutional pressures by responding symbolically and non-conformity. Evasive decoupling is therefore closely related to a symbolic response. As found by Crilly et. al (2012) firms within this category often intentionally trying to conceal the non implementation of sustainability.
Emergent decoupling
This category of decoupling is related to a firm’s response to diverse and conflicting sustainability demands, without the intention to conceal non implementation, but they have to decouple because they cannot comply with all demands (Crilly et. al, 2012). This type of decoupling can even be present when a firm is unable to hide their non implementation of sustainability practices and standards (Crilly et. al, 2012). In emergent decoupling their might be disagreement within the firm regarding the decisions on the adoption of buyer’s sustainability practices and standards. This disagreement and the disability to comply with all demands result in emergent decoupling, which means that a firm might search for another (local) solution (Crilly et. al, 2012), or choose not to comply with all demands.
Strategic implementation
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tool, where the firm might not implement sustainability into the day-to-day business fully or consistently.
Routine implementation
A last category on the level of adoption of sustainability practices and standards is routine implementation. The focus on sustainability derives mostly from inside the firm (Crilly et. al, 2012). The decisions to implement sustainability does not necessarily has to be from external stakeholders, but the adoption of sustainability is internal driven (Crilly et. al, 2012). However, external pressures could have been the trigger to develop sustainability within the firm (Crilly et. al, 2012). Either the external pressures for sustainability implementation are weak due to its presence within the firm, or the firm will implement (most) sustainability demands because it is in line with the firm’s corporate beliefs on sustainability (Crilly et. al, 2012). This routine implementation is therefore closely related to a substantive response.
2.2 Decoupling sustainability at the supplier level
In this section decoupling on sustainability at the supplier level is briefly discussed. This is considered necessary because the focus of this research emphasizes the adoption of sustainability practices by suppliers. The pressure towards sustainability at the supplier level often derives from the buying firm (Foerstl, Reuter, Hartmann and Blome, 2010; Andersen and Skjoett-Larsen, 2009). Although a supplier might have to deal with other types of stakeholders like governments, their suppliers and local community for example, however this research mainly focus on sustainability pressures deriving from the buying firm (the customer of the supplier). This pressure can occur in different forms. According to Andersen and Skjoett-Larsen (2009) MNEs developed, defined and implemented various procedures to make sure that their suppliers are complying with the MNEs sustainability practices, for example a code of conduct (Gimenez and Sierra, 2013; Egels-Zandén and Lindholm, 2015).
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3. Methodology
This research will use a qualitative research approach to answer the research question to which extent suppliers adopt buyer´s sustainability practices and standards. The overall purpose of a qualitative research is to get a deeper understanding of how people make decisions and how they interpret their experiences (Merriam and Tisdell, 2015). Therefore this research uses a phenomenology approach, because it is based on understanding the meaning and structure of experiences (Knaack, 1984). As stated by Knaack (1984): “The goal of phenomenological research is to understand human experiences from the individual perspective”. Interviews are used to let the individuals explain their experiences and allows the researcher to describe this lived experience and the meaning it holds (Drew, 1989). Therefore this approach will be useful in investigating the level of sustainability adoption by suppliers.
According to Yin (2009) a “how” research question should be investigated by using a single case study or multiple case studies. A case study is a research strategy where the researcher focuses on the understanding of the dynamics that are present within a single setting (Eisenhardt, 1989). As Yin (2009) stated, a case study method helps to investigate and understand complex social phenomena. According to Ghauri (2004) a research can focus on what to learn from each case. In this research multiple case studies are considered as the best suitable strategy. A first reason to use multiple case studies is that the same questions are asked to different firms, which allows the researcher to compare each case to draw conclusions (Ghauri, 2004). A second reason is that different levels of the research of interest can be examined (Ghauri, 2004). By using multiple case studies each of the earlier mentioned four levels of adoption could be represented in a case and provides an in-depth analysis on the factors explaining the level of sustainability adoption.
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According to Eisenhardt (1989) a first step after defining the research question is the case-selection. In the first section of this chapter the criteria for this case selection and the final cases are presented. After the cases are selected, the method of data collection has to be presented (Eisenhardt, 1989). In this research, interviews are used as a method of data collection. This data collection method is explained in the second section. The last section will express how the collected data will be presented and analyzed.
3.1 Case selection
A case study is based on theoretical sampling which means that cases are chosen for theoretical reasons instead of statistical reasons (Eisenhardt, 1989). According to Eisenhardt (1989), a case might be chosen to “replicate previous cases or extend emergent theory, or they may be chosen to fill theoretical categories and provide examples of polar types”. This research follows the reasoning behind the case studies of Crilly et. al (2012), to find out to what extent a firm is adopting buyer’s sustainability practices and standards. However, this research wants to extend this theory by investigating the additional factors explaining either decoupling or implementation of buyer’s sustainability demands.
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The cases are purposefully selected from a population of supplying firms in the Northern part of the Netherlands (derived from example Harris and Sutton, 1986 in Eisenhardt, 1989). Firms were approached and selected that were (quite) similar in terms of the case selection criteria. This is a necessary requirement because only then an explanation can be given on why some suppliers might differ in terms of their responsiveness regarding buyer’s sustainability practices and standards. Ishak and Bakar (2014) refer it as purposive sampling and explain that this is an acceptable sampling procedure in qualitative research.
Firms are contacted through telephone and/or by email. A small interview took place to make sure the supplier meet the required criteria. Eventually, five organizations are selected and participated in the research. In table 1 these firms are anonymously presented with their main characteristics. Because some firms preferred to remain anonymous, firms are labeled as ALPHA, BETA, GAMMA, DELTA and SIGMA. The selected firms differ in terms of their industry they operate in, which will be addressed in the discussion section. This research did not focus on a specific industry, but on the adoption of sustainability by suppliers in general.
Table 1: overview of main characteristics of the five selected firms
3.2 Data collection: interviews
The researcher is the primary instrument in collecting the right data through interviews, observations or documents (Merriam and Tisdell, 2015). In this research interviews will be used to collect the necessary data. For this research semi-structured interviews will be used.
Firm Buyers as largest
stakeholder
Location main international buyers
Number of employees
Industry Function participant
ALPHA Yes, additionally
(local) governments of selling area
Product sold through distributors, mainly in Europe but extending to Asia and Australia
Approximately 40 The main industries the firm is selling its product to are dental care, medical care, industry (manufacturing plants), laboratory, education and offices/retail
Sales and Marketing Manager and member of the corporate Management Team
BETA Yes, no additional stakeholders regarding sustainability
Europe, Singapore, China and USA
Approximately 100 The main industries the firm is selling its products to are military, telecom, automotive and business to business electronics
Operations Manager
GAMMA Yes, no additional stakeholders regarding sustainability
Scandinavia, Duitsland, China and the Middle-East
Approximately 50 Transportation of products Quality Manager and Sales
DELTA Yes, additionally
the Dutch national and local government
Export to many countries, mainly Germany, Belgium, Russia, China, Ecuador and Honduras
Approximately 20 Rubber production for indsutries like shipping, transport by road,furniture, computers, railways, air freight, construction building
Director
SIGMA Yes, additionally a
NGO
Export mainly to England, but also to Spain, Italy, Germany and France
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The advantage of this instrument is that there are some guidelines for both the researcher and participants, but it also allows for flexibility (Merriam and Tisdell, 2015). The researcher still has the possibility to investigate the line of inquiry when given answers are not directly related to that specific question. With semi-structured interviews, insights on the degree to which sustainability is integrated into the daily business are gained. The interview question list is based on the four core business areas identified by Crilly et. al (2012), which is explained in the literature review. This research follows the reasoning of Crilly et. al (2012) in explaining that these four areas are the core of a firm, because it allows to assess the influence of sustainability of the firm’s priorities, structure of authority, decision making and its operations. In order to get a better understanding of the supplying firm, the firm’s representative is also asked what their own sustainability program is and how it is integrated in the core dimensions of the firm. This list can be found in Appendix I.
According to Eisenhardt (1989), case studies often combine more than one data collection method. This could be combinations of archives, interviews, questionnaires and observation present in a qualitative and/or quantitative result (Eisenhardt, 1989). Some additional documents which were provided by the participated suppliers and their websites are used as additional firm information to present the results. In preparation for the interviews a firm's website is used to find background information and if possible read the information on sustainability (which was the case for DELTA, ALPHA and SIGMA). Additional documents on paper were provided by some of the participated firms. These documents include a sustainability performance target (GAMMA), information book on the different norms that are used and the option to use recycled material (ALPHA), and a questionnaire to give an example of buyer's sustainability request (BETA).
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not require major changes in the question list, but the skills in conducting interviews, were definitely improved.
3.3 Data analysis
The data analysis is an important step in case studies, but might also be very difficult and “the least codified part of the process” (Eisenhardt, 1989). This section will explain how the collected data through interviews will be presented and analyzed. The main characteristic of qualitative research is that the results will be very descriptive (Merriam and Tisdell, 2015). The findings will be textual presented to the readers and contain everything what the researcher has learned about the studied phenomenon (Merriam and Tisdell, 2015). This could be referred as what Eisenhardt (1989) calls within-case analysis. A within-case analysis requires a detailed description for each firm and is the basis for the generation of results (Eisenhardt, 1989). Since no standard format exists for this type of analysis (Eisenhardt, 1989), each firm is first worked out individually in a descriptive manner following the same structure as the interview question list in the chapter Results.
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Table 2: Example of how the different degrees of sustainability integration will be presented in the chapter Results (Crilly et. al, 2012).
The third step builds on the second step. It analyses the level of adoption in terms of routine implementation, strategic implementation, emergent decoupling and evasive decoupling. The allocation of the firm to one of these four configurations is based on the high, medium and low degrees arising from step two. When a firm shows only or mostly high degrees to the four core business areas, the firm will be classified in routine implementation. It means that the firm is responding in a substantive way and really implements the buyer’s sustainability practices and standards. A firm that shows only or mostly a low degree is classified as evasive decoupling. The firm is not truly implementing buyer’s sustainability practices and standards. A firm with more medium degrees is either classified as strategic implementation or emergent decoupling. The reasoning of the supply firm is important here. If they have to decouple, but not intentionally want to “mislead” the buying firms, then the firm is classified as emergent decoupling. When a firm is highlighting its sustainability interest, but only consistently implements it when they can link it to potential business opportunities it is classified as strategic implementation. In this part of the analysis an etic approach is used again. The analysis based on the gathered data through interviews will be executed by the researcher. This means that interview participants are not asked directly for a substantive or symbolic response. Based on the allocation of the different degrees, the researcher will analyze and classify the firms into one of the four configurations. The provided documents during interviews and the information on their website are used to check the story of the participant. This additional information complied with the statements made by the participant. This check has been executed to increase the validity of the interviews.
The last step will be the cross-case analysis, where every single analysis of each firm is brought together (Yin, 2009). A cross-case analysis can contribute to the finding of patterns (Eisenhardt, 1989). The contribution of this research is identifying the level of sustainability
Firms Sustainability related Performance Targets Sustainability related Performance Appraisals Sustainability related Strategic Decision Making Sustainability related Operational Processes 1 Medium: some sustainability criteria are translated to performance targets but not all or less progress is tracked.
Low: no sustainability requirements are integrated
High: developed strategies are in line with the sustainability criteria
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4. Results
In this chapter the results gained through the interviews are presented. The results are expressed in the same structure as the interview list. Each paragraph is an analysis of a firm and the results are described in a descriptive and uncensored manner without interpretations of the researcher. The full transcripts of the interviews can be found in appendix II – VI. Next, the analysis is presented on the different degrees of sustainability integration, which in turn resulted in defining the level of adoption for each firm. As explained in the methodology chapter, this critical analysis is based on an etic approach (the interpretations and observations of the researcher).
4.1 Firm ALPHA
At this moment the firm does not have an own formalized sustainability program. However, there is a high desirability to create one and get this information on their website. Due to the business growth it has not been a priority. ALPHA does pay small attention to sustainability. For example the CEO’s implementation of the use of sustainable energy (solar panels), or the use of materials with a high recycle value. This recycling of materials is developed by their own product development department.
The main stakeholder of this firm is the different international customers. Other stakeholders are some national governments of their customers and ALHA’s suppliers. Depending on the size of the buying firm they receive varying requests. A larger firm will often use a tender procedure, where they ask for specific certificates, standards or norms (like ISO) to comply with their sustainability requirements. Smaller buyers also have demands regarding the certificates and norms, but it is often less explicit. For example these smaller buyers ask for general accepted norms or certificates, where as large buyers might ask for more specific ones. ALPHA is sometimes getting the request to sign a sustainability compliance contract. It states that ALPHA has to be a compliant firm, although none specific definitions are provided by the buyer. The participant believes this compliance contract is used by buyers to show their stakeholders they took care of sustainability at their supplier.
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value chain. Therefore ALPHA also has to be sure that their suppliers are not taking the advantage of child labor for example. Some buyers asked for specific requests. For example buyers from France are demanding more transparency on sustainable production. The industry and regulators require French firms to be more open on their production process, materials used and the impact on the environment. And they pressure their suppliers to do the same.
Performance targets
All performance targets are related to making revenue and profits. In the Management Team they discuss certifications and ISO norms demands, which are mostly focused on the environmental sustainability aspects of the product (e.g. materials used), but not all are directly translated into specific targets or goals when it should be achieved. Some buyers do require ALPHA to invest in certificates or norms to contribute to sustainability. According to the participant the firm is straightforward to their customers by stating they will look at it in the near future to decide whether it is implemented. When ALPHA is implementing it, then goals are set that has to be met to achieve a certificate or norm. It will depend on time, effort and money whether the firm can adapt them, but it is not always reported in terms of performance targets.
Performance appraisals
Once a year every employee will have a meeting with the manager for a job evaluation or performance interview. Employees can ask for training and education as long as it is related to their specific tasks. But none of employees is rewarded based on sustainability objectives.
Strategic Decision Making
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Operational processes
Sustainability development mostly takes place in Marketing and Production development (R&D). Marketing has direct contact with distributors and buyers, and their sustainability demands. Marketing and production are working together in the adoption of a certificate for example. At the R&D department employees are investigating, testing and developing new products and try to implement specific (sustainability) demands from buyers. For example they developed chairs of which a high amount of the materials can be recycled or re-used.
4.2 Firm BETA
At this moment the firm does not have its own explicit sustainability program. BETA does not have the intrinsic motivation to develop a sustainability program of its own. However, due to an upcoming trend on sustainability in their market and due to new sustainability regulations for some of the raw materials, BETA has to adjust their business now and then. For example BETA uses loaded and unloaded tin in the components of the final product. Some customers prefer components without the lead due to their own environment sustainability program. The final product cannot be recycled and the danger of using lead in components is that it can harm the water in the ground and land. Therefore they have buying firms who only want to buy the product if the tin is without lead. At the other hand customers, especially in the military industry, they need lead because it increases the stability and functioning of the product. Another example is that of conflict minerals. Minerals are used in the components of the final product. More and more buying firms require BETA to purchase minerals sustainably (avoid conflict minerals). BETA initiated an investigation into their value chain to check where their minerals where coming from. In their sample none of the suppliers sourced from conflict mineral areas. However, there are many firms active in the value chain. The firm’s representative is never completely sure where the mineral actually come from. It is not the priority of BETA to investigate this fully.
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anything with”. BETA did receive a questionnaire of 30 pages all related to sustainability from a Chinese buying firm. These questions are related to the materials used, impact on environment or policy of employees. These questions are much more detailed so they think it is not always reasonable to integrate all demands, as noted: “sometimes you have to be creative in your response”.
Performance targets
At this moment BETA does not have the intrinsic motivation to develop sustainability performance targets. If BETA states they do not have the sustainability demands in place, some buyers want to know when they will have it and how they will do it. But these questions will definitely not be included in the performance targets. Why? It is not the priority of the business and as long as the buying firms does not actual check for it why invest in it.
Performance appraisals
Some buying firms require to develop a policy on the absence, health and sickness of employees. The HR manager of BETA developed a policy around the health of employees, but this was already in place and was not developed due to customer demands. If an employee makes an effort to implement sustainability within the firm it is really appreciated. However, no employee is rewarded because of that.
Strategic decision making
When sustainability demands from the buying firm are send to BETA it will always be discussed in the management team. However, it is not standard on the agenda of meetings. It is always communicated to the customer that BETA will do something with their sustainability demands, but they let it remain vague on what they will do. And as long as the buying will not ask further questions BETA will leave it. It is not a goal to put much effort and time in sustainability demands and it is only discussed what to do about the demands rather than taking it into account in the decision making process within the firm.
Operational processes
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really checking for it. BETA just wants to show the buying firm they took action on their demand. Thus, purchasing is not taking sustainability demands into account.
4.3 Firm GAMMA
At this moment GAMMA has not a formalized sustainability program. However they made a small start by adopting an ISO norm. This is not obligated in their industry, but GAMMA thinks it is important to start to look at sustainability (intrinsic motivation). It contains guidelines and approval that GAMMA is taking care of safety, and minimizes any risk that could bring humans, environment or the product in danger. This norm is sometimes required by buying firms in larger tender projects which is another motivation of GAMMA (market trends). The contribution within the firm is really small, but they started with an environmental policy that explains that during transport certain type of trucks cannot be used due to high levels of pollution.
The buying firms are the main stakeholder. Due to buying firms, GAMMA has to keep track of calculations on their carbon footprint. The hardest thing nowadays is that different tools and systems exist for this measurement. Some buying firms developed their own and some are made available by for example universities. GAMMA tries to be as honest as possible to the buying firm on what to implement and what not. They not intentionally want to mislead their customers “because as a supplier you will get caught at some point and that eventually will harm your business”. Thus, GAMMA is afraid of getting caught and that it will harm its business. GAMMA cannot comply to all sustainability requirements due to money, time or feasibility. If this is the case, GAMME will try to negotiate with buying firms to see whether they can meet each other halfway. Sometimes that is not possible due to the stakeholders of the buying firm, but sometimes it is possible. Mostly because at the end, a lot of buying firms find the total costs more important than the sustainability practices and standards.
Performance targets
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Performance appraisals
Sustainability is raising attention within the firm, but nothing is related yet to any kind of performance appraisals. It is quite a flat organization which not uses any kind of bonuses and employees are not rewarded based on sustainability requests, initiatives or targets.
Strategic decision making
The first decision made due to the increasing customer demands is to develop an own sustainability program in the short run. If the buying firm is requiring sustainability related implementations, it is always discussed at the management level. During these meetings they try to discuss whether it is reasonable and feasible to implement it or not. The main goal is to implement it, also from a marketing perspective. “Sustainability can be used as a selling point”. But important to the firm is making choices and decision that are based on the truth and honesty, so if the sustainability requirement is not feasible they will tell the buying firm.
Operational processes
Sustainability is very important for marketing and sales. Mainly because of the increasing customer demands regarding sustainability it is good to let buyers know upfront you take it into account. But real internal sustainability practices have to be developed and are not in place yet. This is the reasons it is not spread out throughout the internal organization, and if the sustainability requirement does not involve task or responsibilities from a specific function, these employees will be left out.
4.4 firm DELTA
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these social activities are published online, but the main reason for that publication is that it is required by the ISO 26000 norm. All other efforts taken by DELTA itself are not published and only used for internal purposes or for audits by buying firms. As the director mentioned: “you have to believe in sustainability yourself and do not simply use it as a marketing tool”.
Sustainability demands mainly derive from the buying firms. Sometimes these demands are already in place, for example certification and spreadsheets on the sourcing and quality of the products. It then happens that the buying performs an audit to check whether their demands are actually in place. The buying firm will visit DELTA to check all available documents, numbers and information on sustainability. DELTA is very open on its sustainability program when asked by the buying firm, but as said it will not be used to publish on the website. Examples of buyer’s sustainability demands are related to the scouring of rubber, industry-specific certificates, employee registration at the beginning and the end of the day and working permits. An example that was (directly) implemented by DELTA were the working permits. The director thought it would be nice for the employees to have it. It resulted in a higher rating of the firm within its industry and discounts on insurances with a minimum effort. If it is relevant and reasonable in terms of time and money it will be implemented. An example that is not implemented but required by some buying firms is the registration of personnel at the beginning and end of the day. Since DELTA is not a large company the director did not found this necessary. It is directly communicated to the buying firms and in turn DELTA let them know what they are contributing to sustainability in other areas, like safety and healthy in the production plant.
Performance targets
DETLA is not focused and lead by performance targets or key performance indicators. However, each initiative regarding sustainability will be documented and each year it is evaluated. The progress of these initiatives is tracked in these documents and new plans or changes are recorded as well. These documents are used by buying firms sometimes to audit the firm.
Performance appraisals
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account the sustainability practices of the firm, for example when an employee is not complying strictly with the safety rules other employees and especially the director will tell them too. But none of the buying firms is demanding sustainability requirements to be implemented in performance appraisals.
Strategic decision making
Every sustainability demand of a buying firm is taken into account in the decision making process. Several times per year all employees are brought together to brainstorm, share opinions and think of these sustainability demands and how it can or should be implemented into the business of DELTA. Specifics on raw materials or equipment use during production might be discussed. Together they brainstorm not only on the possibility of the implementation but also on the effects and consequences for the whole firm.
Operational processes
Since DELTA is not a large firm, it does not have specific departments or units like marketing, finance and human resource management. The director is focusing himself on these activities, with sometimes the help from partners. In marketing and sales DELTA does not want to use its sustainability program as a selling point, but buying firms are free to ask and audit by checking the facility or documents. In production the safety of workers are very important. Sustainable implementations at the production facility are mainly due to buyer’s sustainability demands. Lastly, from a HRM perspective the firm is focusing on training and educating its employees and provide less educated or people with a handicap with a job to participate in the community.
4.5 firm SIGMA
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like SIGMA is interrelated with these firms, smaller buying firms will not impose sustainability demands anymore. The larger buying firms set high standards as a baseline, and often a smaller firm will not be that detailed on sustainability. The high standards include sustainability issues like the wealth of animals, hygiene and worker’s rights and conditions for example. Besides checking documents, reports and data on sustainability, some buying firms come visit the production plant to interview randomly selected employees.
The main stakeholder of SIGMA is thus the buying firms. Although some NGOs like “WakkerDier”, which is a Dutch NGO protesting and fighting for the well-being of animals, pressures the industry to take better care of animals. However, SIGMA is not directly affected by them. SIGMA grew with the increasing attention for sustainability within the market, which have lead to the integration of sustainability. SIGMA’s representative thinks sustainability does not necessarily bring more business opportunities or revenues. “An own sustainability program and its implementation should derive first from an intrinsic motivation of the management and other organizational members and second it has to comply with demands from the market”.
Performance targets
The continuous implementation and integration of buyer’s sustainability practices and standards are not translated in specific organizational goals or objectives for the long term. But based on audits and new requests, SIGMA will set up a project plan and meetings on how the implementation will take place and when it should be ready. Therefore in the short run it could be seen as setting some performance targets.
Performance appraisals
None of the employees is directly rewarded on sustainability issues in terms of salaries or bonuses. High attention is paid to hygiene, worker’s health and education and creating the awareness of the sustainability integration, but none of these sustainability practices or standards are taken into account in job evaluations and rewarding structures.
Strategic decision making
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audited for it and they can lose market share. Another consequence is that other buying firms see the reports on the available databases, which will then look for alternative suppliers.
Operational processes
In Marketing sustainability is not used as a unique selling point. The higher levels of integration are at the HRM department and operations. At the HRM department sustainability integration lead to education and training of employees, safety and hygiene policies and create an employee friendly work environment (health, provide materials and zero tolerance of discrimination). Buyer’s sustainability demands also resulted in sustainability integration at the production department. For example no wooden pallets are used because they cannot be reused. Another example is the minimized usage of plastic during production and find innovative solutions to that in their own lab. For example with a customer in the United Kingdom SIGMA developed a special type of packaging that will dissolve itself when it is put with the product in the oven.
4.6 Cross-case analysis: levels of sustainability adoption
In this section the firms are brought together to analyze the results and present their level of adoption in one overview. The first step is presenting the results on the four core business areas and to which extent the analyzed firms integrated buyer’s sustainability practices and standards into those four. The degree to which sustainability demands are implemented are expressed with high, medium and low. In table 3 (next page) these results per firm are presented. The second step is to present an overview on the level of adoption.
32 F ir m s S u st ai n ab il it y r e lat e d P e rf or m an ce T ar ge ts S u st ai n ab il it y r e lat e d P e rf or m an ce A p p rai sal s S u st ai n ab il it y r e lat e d S tr at e gi c D e ci si on M ak in g S u st ai n ab il it y r e lat e d O p e rat ion al P roc e ss e s T yp e of f ir m 's r e sp on se A L P H A M e d iu m : m os tly n ot , on ly in a ch ie vi ng a c er tif ic at e or nor m "W e ar e pr im ar il y foc us ed on t he gr ow th of our r ev enue , bu t w e di d m ak e t he pl an t o ge t t he ISO and G er m an ce rt if ic at e w it hi n t hi s ye ar " L ow : n on e a t pr es en t "W e do pay at te nt ion t o the de v el opm ent and he al th of our e m pl oy ee s, but s us tai nab il it y i s not us ed f or pe rf or m anc e app rai sal s " H igh : ex te ns iv el y di sc us se d a nd m os tly t ake n in to a cc ou nt "D o w e w ant ac ti v el y be inv ol v ed i n s us tai nab il it y ini ti at iv es ? D ef ini te ly ye s. W e al w ay s di sc us s the pos si bi li ty of im pl em ent at ion " M e d iu m : h ea vi ly in m ar ke tin g a nd R & D , ot he rs n ot "R & D has t o t ak e i nt o ac coun t t he r ec yc le v al ue of t he di ff er ent com pon ent s "; "M ar k et ing i s r es pon si bl e for t he c om m uni cat ion of c er ti fi cat es and nor m s to c us tom er s" E m e rge n t d e cou p li n g: c on tin uou s t ra de -of f be tw ee n pot en tia l be ne fit s a nd r equ ir ed i nv es tm en t. D ec ou pl in g ta ke s pl ac e bu t n ot in te nt ion al ly . "I f w e c an w in or be ne fi t f rom i t, w e w oul d m ak e the i nv es tm ent "; " W he n bu si ne ss be com es har de r it i s m or e di ff ic ul t t o c om pl y w it h s us tai nab il it y de m and s, an d as a r es ul t i t w il l t he n no t be t he fi rs t pr ior it y "; " W e do look at al te rnat iv es w he n w e k now our s upp li er e x pl oi t e m pl oy ee s i n l ow labo r c os t c oun tr ie s, bu t s om et im es w e hav e t o do bus ine ss w it h t he m be caus e i t i s c he ap a nd n o r eal al te rnat iv e i s av ai labl e " B E T A L ow : n on e, i t i s n ot a pr ior ity "W e do not do any thi ng w it h s us tai nab il it y obj ec ti v es or t ar ge ts . Som e c us tom er s as k w he n an i m pl em ent at ion w il l be don e, bu t w e ei the r s ay w e do not or w e ar e m or e c re at iv e i n our r es pon se , i t i s not our c or e bus ine ss " L ow : not r ew ar de d or ta ke n i nt o a cc ou nt "E ff or ts on sus tai nab il it y is app re ci at ed as l ong as it c ont ri but es t o cus tom er s at is fac ti on, but non e w il l be re w ar de d or ge t pe nal ti es f or i t " L ow : n ot a n i te m on t he ag en da "I n m ee ti ngs at t he m ana ge m ent l ev el sus tai nab il it y i s not an it em on the age nda . I f i t cont ri but es t o c us tom er sat is fac ti on w e do di sc us s how w e c an re spon d t o i t w it h l im it ed ti m e and m one y " M e d iu m : on ly H R M t ri es m or e t o i m pl em en t su st ai na bi lit y "O ur H R M m ana ge r i s m os tl y dr iv en on sus tai nab il it y im pl em ent at ions , f or ex am pl e t he he al th of em pl oy ee s. B ut ot he r de par tm ent s ar e not inc or por at ing o r dr iv en by s us tai nab il it y obj ec ti v es or de m and s " E vas ive d e cou p li n g: in te nt ion al ly n o c on si st en t im pl em en tion of s us ta in abi lit y de m an ds . "Y ou h av e t o be e thi cal c re at iv e i n r es pon di ng t o que st ions , i t as a g re y ar ea an d w e c an m ak e thi ngs up to s how t he c us tom er w e t hou ght abo ut it "; "A s l ong as w e do not ac tual ly l os e c us tom er s w e do not do any thi ng w it h s us tai nab il it y "; "s us tai nab il it y i s not our i nt ri ns ic m ot iv at ion a nd cor e bus ine ss "
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Evasive decoupling
One firm can be categorized as an evasive decoupling firm. BETA is a firm that does not give any priority to sustainability demands of buying firms. This firm is rated with a low degree of sustainability integration in three of the four core business areas. Only operational processes got a medium degree, because sustainability is implemented at the HRM department. The primary reason for BETA as an evasive decoupling firm is that they intentionally not implement sustainability demands consistently. As long as buying firms do not perform any audits or other checks, they feel not the urge to put money, time and effort in it. Another reason is that sustainability is not a priority internally, because they want to focus on doing business and not on the development of sustainability within the firm. As the participant stated, you have to develop a “creative ethical response”.
Emergent decoupling
ALPHA is a firm that adopts buyer’s sustainability practices and standards through emergent decoupling. With no integration in performance appraisals (low), minimal integration into performance targets (medium) and in operational processes (medium), the firm is not consistently implementing sustainability. However, the difference with BETA is that ALPHA is not intentionally not implementing it. As expressed, they give high attention to sustainability in their strategic decision making process (high). Unfortunately due to the required (financial) investment, ALPHA is not always able to implement it straightaway. The firm continuously makes a trade-off between the potential benefits and required investment. If ALPHA cannot comply with buyer’s sustainability practices and standards they have to decouple. ALPHA is trying to explore its options to implement the sustainability demands. Although their well intended initiatives, ALPHA has to decouple on some demands because it can create uncertainties to the firm in terms of profit-making.
Strategic implementation
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Sustainability gained more attention internally, but the integration has to be further developed within the firm. Due to the focus on the sustainability demands from the market, the potential use of sustainability as a selling point and its plan to develop an own sustainability program, GAMMA can be classified as a strategic implementer of buyer’s sustainability practices and standards.
Routine implementation
DELTA scored a high degree of sustainability integration in performance targets, strategic decision making and operational processes. This firm puts a high priority on sustainability development and implementation within its business. If a buyer’s sustainability practice or standard is not present at the firm, employees will come together and think of how they can implement it rather than why would we do it. On a rarely basis the firm has to decouple because it requires a high amount of financial investment which cannot be paid, but that kind of demands mostly derives from the government (e.g. solar panels). But due to their openness and willingness to let buying firms check the production facility and documents on sustainability, DELTA never experienced a cancellation on an order. Because of its continuous implementation of sustainability, DELTA is classified as a routine implementer. The firm responds quite substantive to buyer’s sustainability practices and standards due their internal importance on sustainability.
SIGMA: between strategic and routine implementation
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Discussion
This research aimed to identify the extent to which buyer’s sustainability practices and standards are adopted by suppliers. The different degrees of integration into the day-to-day business lead to either a decoupling or implementation of sustainability practices. As a result, during interviews factors behind decoupling or implementation could be addressed to extent current literature. For this study firms were not specifically selected for each of the four adoption levels. Firms were selected based on predetermined selection criteria, therefore the case selection was not completely random. The firms were representative and similar in terms of the selection criteria. Firms could also have been selected based on the four different levels of adoption. For each level of adoption one or more firms could have been selected to assure all levels are covered. According to Eisenhardt (1989), firms could be selected based on their fit into the theory and specific case.
This research studied firms from different industries and only took into account small and medium-sized enterprises. When firms from the same industry or different sizes were taken into account, the results of this research might have been different. For example, larger supplying firms might have more resources and capabilities to implement sustainability. The attention given to sustainability and buyer’s sustainability demands can also highly differ per industry. A last remark can be made on the definition of sustainability used during the interviews. The questions focused on sustainability in general, including both social and environmental sustainability. This broad definition of sustainability was explained prior to the interview, but no further distinction between social and environmental sustainability were made, neither during the interview nor the analysis.
The remainder of this chapter will discuss the main findings of this study in light of the literature discussed in the literature review. Lastly some limitation, directions for further research and managerial implications are discussed.
Main findings in light of the literature
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degrees were identified for firms at different core business areas. However, all firms had a low degree on performance appraisals. This could indicate that this might not be seen as a core business to implement buyer’s sustainability practices and standards. A broader perspective on employees could have been used instead. For example HRM policies, which covers performance appraisals, but also other employee related sustainability issue like worker’s conditions (e.g. in SIGMA).
The descriptive analysis of BETA showed that firms can intentionally decouple on sustainability practices. Following Crilly et. al (2012), a firm can intentionally conceal lack of implementation. The case of BETA exactly showed a real-life example that a firm can actually intentionally not implement buyer’s sustainability demands. As argued by the BETA’s responsiveness, as soon as a buying firm will start to audit BETA, the buying firm will notice that nothing is documented or actually implemented in the daily business. This relates to the theoretical definition of a symbolic response explained by (Iatridis and Kesidou, 2015) that a firm can act or pretend to implement sustainability, but in reality none is included in the daily routines. The findings of this study showed that each firm had matching characteristics with at least one of the four levels of adoption identified by Crilly et. al (2012). For example, ALPHA cannot always comply with all buyer’s sustainability practices and standards. It is not because ALPHA does not want to, but because they do not have the resources available to implement all. Therefore they have to make a choice between the different demands. Another result showed that firms can use the implementation of sustainability for strategic reasons. GAMMA approaches sustainability from a strategic and marketing perspective. For example they examine how the implementation of sustainability can be used as a selling point. The results also provided an example of a firm trying to implement nearly everything. DELTA’s corporate vision includes continuous implementations of sustainability. The firm makes efforts to implement as much as possible. This is in line with the theoretical expectation based on Crilly et. al (2012), that some firms might find it easier to implement sustainability because they pay high attention to it internally. From a theoretical perspective DELTA confirms that firms can continuously implement and integrate sustainability practices substantively into its day-to-day operations (Iatridis and Kesidou, 2015; Christmann and Taylor, 2006).
