A tale of happy cows and flowered fields: why advancements towards true environmental sustainability are hindered in the Dutch dairy industry

A tale of happy cows and flowered fields:

why advancements towards true environmental sustainability

are hindered in the Dutch dairy industry

Master Thesis, Supply Chain Management

University of Groningen, Faculty of Economics and Business

ABSTRACT

The purpose of this study is to improve the understanding about the factors that influence decisions regarding environmental sustainability in food supply chains. A case study was performed in a Dutch dairy supply chain. Data was gathered through conducting semi-structured interviews with multiple chain members and an inductive approach was used when analysing this data. The findings show that advancements regarding environmental sustainability are hindered by the instrumental logic that is

used

throughout the chain. This leads to a short-term focus that prioritizes financially beneficial practices over practices that are most beneficial for the environment. The intrinsic motivation and sense of urgency to improve practices seems to be lacking in the dairy chain. These findings lead to the

TABLE OF CONTENT

1. INTRODUCTION... 4

2. THEORETHICAL BACKGROUND...6

2.1 Sustainability in Supply Chain Management... 6

2.1.1 Sustainable decision making...7

2.2 Temporal orientation... 8

2.3 A supply chain view...10

3. METHODOLOGY... 11 3.1 Research design...11 3.2 Case selection... 11 3.3 Data collection...13 3.4 Data analysis... 15 4. FINDINGS...16 4.1 Cherry picking... 16

4.1.1 Profitability of sustainable measures...16

4.1.2 Uncertainty...17

4.1.3 Financial incentives...18

4.2 Focus on suboptimal solutions...20

4.2.1 Lack of knowledge... 20

4.2.2 Lack of knowledge downstream... 21

4.2.3 Greenwashing... 22

4.3 Missing sense of urgency...24

4.3.1 Satisfaction about efforts...24

4.3.2 Responsibility... 24

4.4 Government role...25

4.5 Synthesis... 26

4.5.1 Dynamic model... 26

5. DISCUSSION...28

5.1 Limitations and future research...30

6. CONCLUSION... 30

7. BIBLIOGRAPHY...32

8. APPENDICES...36

Appendix A: Questionnaire...36

Appendix B: Coding tree...37

1. INTRODUCTION

“If no fast and far-reaching measures are taken the earth will heat up by 1.5 degrees before 2040, causing catastrophic consequences for both the environment and the economy”. (Shepherd et al., 2018) With this The IPCC, United Nation’s climate commission has formulated their most powerful warning so far. The loss of ice on Antarctica tripled in the past decennium causing sea levels to rise even faster than researchers expected (Shepherd et al.,2018). “The reporting about the poles is alarming” according to associate professor Arctic Ecology Maarten van Loonen, “what is happening on the poles already causes problems. The ice surface is not only decreasing but the ice is getting thinner, this is all due to climate change” (Nog nooit zo weinig zee-ijs bij Spitsbergen gemeten, 2018). This climate change is proven to be accelerated by the hands of humankind. The emission of greenhouse gasses contributes to the heating of our planet. Researchers around the world acknowledge that action is required now to prevent irreversible damage to our systems that would cause harm to our standards of living.

A significant share of GHG emission is caused through our consumption of food. This is a necessity of life so eliminating all emissions caused by food consumption might be wishful thinking. Nonetheless, critical assessment of our food production systems and moving towards more environmentally sustainable practices can significantly contribute to turning the tide on climate change.

The importance of environmental sustainability is acknowledged by both consumers and professionals. Both consumers (Consument omarmt duurzaamheid, 2018) and professionals (Bouma & Marijnissen, 2018) also show willingness to act in an environmentally sustainable way, yet in many cases people seem to make decisions that are detrimental to the environment (Landrigan and Fuller, 2018) and therefore cannot be considered sustainable. This discrepancy between intentions and actions (Frederiks, Stenner & Hobman, 2015) is a potential impediment for sustainability efforts as people don’t engage in sustainable behaviour as much as they want or could. Finding the causes for this gap between intentions and actions could lead to a better understanding of the mechanisms influencing environmentally sustainable behaviour and thereby help to narrow this gap.

in psychological distance being social distance, hypothetical distance, spatial distance and temporal distance (Trope, Liberman, Wakslak, 2007).

The benefits of environmentally sustainable decisions are often experienced in the long term while people in general prefer more certain short-term benefits (Frederiks et al., 2015). The experienced temporal distance gives people an abstract idea of the benefits that can be attained while short term benefits are concrete and deemed more save. While food supply chains and its actors primarily aim for making a profit, any risk that might threaten this is logically being avoided. Furthermore, following this theory negative future consequences that might be connected to climate change are also underestimated.

An organizations time orientation can be broadly defined as the way in which firms perceive time (Ancona, Okhuysen & Perlow, 2001). Slawinski and Bansal (2009) add that a firm’s temporal orientation impacts its members perception of issues, constraints and guides their ideologies and believes about threats and opportunities. Thereby stressing the importance of the role this orientation plays within organizations. Differences in temporal orientation can influence corporate approaches to sustainability and thus their sustainable decision making. Although, a significant body of literature on the perception of time has developed at the individual level of analysis the knowledge about the influence of temporal orientation on corporate decision making is more scarce while adapting a supply chain view in this line of research is lacking overall. Multiple studies (Jennings and Zandbergen, 1995; Matthews, Power, Touboulic & Marques, 2016; Sala, Ciuffo & Nijkamp, 2015; Cellura, Longo & Mistretta, 2012) point out that sustainability is an issue that should be addressed on a level that transcends the organizational level. Nevertheless, the majority of extant literature focusses on firm and industry effects and does not take a system perspective as a starting point (Whiteman, Walker, Perego, 2013).

This study aims to contribute to existing knowledge by conducting research about the factors that influence environmental decision making in a dairy supply, with a focus for what hinders the advancement of sustainability throughout this chain. Furthermore the corporate temporal orientation will be addressed to create an insight in if and how it influences sustainable decision making in the dairy supply chain. Do players within the dairy supply chain use different time perspectives and do these differences influence the sustainability performance of the chain? Is a farmer with a long-term view hindered in his intentions by processors that attain a short term view? Or do other factors overshadow the influence of corporate temporal orientation making it less relevant than literature suggests?

the perspective of single actors within the chain and a cross-chain-perspective as it is important to acquire insights in different perspectives and the differences that might occur.

The objective of this study is to improve the understanding about sustainability efforts in food supply chains and to align sustainable intentions and actions throughout the chain by answering the following research questions:

1. How are sustainable advancements hindered in a dairy supply chain?

2. How does corporate temporal orientation influence sustainable decision making in a dairy supply chain?

3. How can impediments for sustainability be approached to move towards truly sustainable practices?

2. THEORETHICAL BACKGROUND

2.1 Sustainability in Supply Chain Management

A truly sustainable supply chain is defined by Wu & Pagell (2009) as a supply chain that would at worst do no harm to natural and societal systems and possibly benefit them, while at the same time produce a profit over an extended time period. This definition addresses all three aspect of the Corporate Social Responsibility (CSR) triple bottom line (TBL) (Hahn, Pinkse, Preuss, Figge, 2015). Therefore, for attaining a truly sustainable supply chain, the economic, environmental as well as the social aspect should be taken care of sufficiently. This definition however gives no answer to the question which aspect of the triple bottom line should be prioritized and why.

Markman and Krause (2016, p. 7) state that “Society’s survival is dependent on fully functioning environmental ecologies, where economic systems are only part of the overall social system.” Implying that the environmental aspect, of which the societal and economical are only a part, has the most importance. Based on the analyses of the most cited studies in corporate sustainability, Markman and Krause (2016, p. 9) conclude that sustainable practices are based on two main principles, first they should benefit ecological health, be ethical, advance social justice and improve the economic situation. Second, the environmental aspect must be prioritized over the social, which should be prioritized over the economical aspect.

the ‘Planetary Boundaries’. This concept entails a framework that defines a ‘safe operating space’ in which the human race can keep on thriving and developing. The framework sets nine planetary boundaries of which exceedance will lead to perturbation of critical processes in the system of Earth (Steffen et al., 2015). The Earth-system processes for which these boundaries are set are the following: Climate change, rate of biodiversity loss, interference with the nitrogen and phosphorus cycles, stratospheric ozone depletion, ocean acidification, change in land use, freshwater use, atmospheric aerosol loading and chemical pollution (Rockström et al., 2009; Whiteman et al., 2013). Figure 1 depicts the planetary boundary framework with the current status of each Earth-system process. This shows us that for climate change, the nitrogen cycle and biodiversity loss the boundaries are already exceeded. In the light of the planetary boundaries framework corporate sustainability can be defined as corporate behaviour that reduces the impact on one of the nine boundary processes. In this study the main focus will be on climate change and the emission of greenhouse gasses (GHGs).

Figure 1: The Earth's planetary boundaries (Rockström et al., 2009)

2.1.1 Sustainable decision making

being the main incentive for firms to act in a sustainable way. Implying that all sustainable practices that are potentially profitable will be adopted, while it also implies that practices that are not recognized as being profitable will not be implemented or adopted (Montabon, Pagel, Wu, 2016). Firms following this logic can neglect important sustainability issues or efforts because the efforts simply do not provide immediate profit or other economic benefits.

In contrast, the ecologically dominant logic prioritizes the environmental aspect of the triple bottom line over the economic (Montabon et al., 2016). The fact that trade-offs between the three aspects of the TBL are inevitable is acknowledged by this approach, it argues that benefits cannot be gained simultaneously for all three aspects. In these trade-offs the instrumental logic would always prefer the solution that yields most profit while the ecologically dominant logic would prefer the solution that yields the most benefit for the environment.

The paradoxical thinking frame on corporate sustainability entails believing in the possibility to pursue the three aspects of the triple bottom line simultaneously, even if they seem to contradict each other (Hahn et al., 2015). This view goes even further by encouraging managers to embrace the tensions between the sustainability aspects and consider them as interrelated. Followers of this approach argue that the ecologically dominant and instrumental logic both acknowledge that there are trade-off decisions to be made regarding sustainability. In trade-off situations, The paradoxical view argues that a choice does not necessarily have to be made because it is possible to pursue economic, environmental and social benefits simultaneously.

Porter and van der Linde (1995) state that the trade-off between competitiveness and the environment should be relaxed instead of accepted as a given fact. They say the traditional view on environmental sustainability was about balancing social desires for environmental improvement with the industries financial burden. Porter and van der Linde however argue that properly designed environmental standards can stimulate sustainable innovations which can ‘earn back’ the costs attached to complying with these standards or regulations. These so called ‘innovation offsets’ can not only lower the costs of meeting regulations but can also provide firms or industries with competitive advantage over firms or industries in other countries. Porter and van der Linde do admit that innovations cannot always offset the costs of compliance. They identified six purposes which can be served by environmental regulations, provided that they are carefully crafted: 1. Signal firms about inefficiency; 2. Raise awareness by regulating information gathering; 3. Reduce uncertainty about the value of investments; 4. Create pressure to stimulate innovation; 5. Level the playing field by forcing every player to move in the same direction at the same time; 6. Account for incomplete offsets.

The most cited definition of sustainable development entails a temporal concern by arguing that sustainable development should meet the needs of the present without compromising the needs of future generations (Brundtland, 1987). This temporal aspect is key in sustainable development for it highlights the intergenerational character of environmental issues (Held, 2001) This focus on the long-term however, does create tension with the short-long-term focus that is dominant in corporate decision making (Slawinski and Bansal, 2012), because sustainable development often requires a longer temporal orientation than the time horizon that is typically used by firms (Held, 2001). The temporal tension in sustainable decision making refers to the question whether firm strategies undervalue long-term sustainability outcomes (Hahn et al. 2015).

Long term decisions are typically more idealistic while short term decisions are usually pragmatic and aimed at satisfying needs in a fast and easy manner (Trope et al., 2007). This could cause short term decisions to frustrate long term environmentally sustainable intentions. A concept supporting this is ‘the consideration of future consequences’, which says that those who consider future consequences are mostly willing to accept costs on the short-term or sacrifice short-term benefits for the sake of more desirable long-term consequences (Strathman, Gleicher, Boninger and Edwards, 1994).

What prevents managers to take sustainable decisions is the gap between the information they need for making such decisions and the information that is available (Marginson & McAulay, 2008). Furthermore, uncertainty about the outcomes of environmentally sustainable efforts is known to be an impediment for such efforts. Focussing on short term sustainability aspects minimizes uncertainty because more information is available about the consequences of such actions. This avoidance of uncertainty due to lack of information can cause decision-makers to make decisions that yield maximum short-term results but are suboptimal in the long run. In support of this claim Joireman, van Lange and van Vught (2006) point to the tendency of individuals to focus on the short-term while neglecting the long-term. They suggest a relationship between the short-term focus and a lack of attention to sustainability issues. Furthermore, multiple studies in psychology have found that individual time perspectives affects decision making in general (Fraisse, 1963; Klineberg, 1968; Strathman et al., 1994; Zimbardo & Boyd, 2006).

Milfont, Wilson and Diniz (2012) conducted a meta-analysis including literature that assessed the associations between time perspective and pro-environmental attitudes and behaviours. This analysis distinguishes three time-perspectives, being: past, present and future orientated perspectives. Past time perspective yields warm and sentimental attitudes to the past. Individuals with a past time perspective will usually prefer to take decisions that were previously made as they are already familiar with the outcome. Hereby minimizing uncertainty, but hindering development.

take a long-lasting environmental impact into consideration than people with a future perspective. This is assigned to the fact that benefits of sustainable actions are often temporally distant, which makes present-focused managers assign less urgency to them. Individuals that are more present focused and thus focus on the short-term oftentimes underestimate future benefits while overestimating present costs. Business issues that matter in the short-term are therefore more likely to get their attention. This phenomenon is called economic short-termism and causes decision makers to pursue actions that are optimal for the short-term but suboptimal for the long-term (Laverty, 1996). Present-orientated sustainability decision makers are more likely to take actions that yield immediate results and entail minimal uncertainty. The consequences of climate-change for example can be considered long-term and sustainable actions to mitigate climate-change require upfront investments from which the return on investment is distant and therefore uncertain. (Slawinski et al., 2017).

The future perspective focuses on the long-term. Future focused managers have a higher tolerance for uncertainty, which makes it easier for them to take decisions that don’t yield guaranteed outcomes in the short term. This makes future-focused manager more likely to take environmentally sustainable decisions that yield uncertain long-term benefits, while they require substantial short-term investments. (Slawinski et al., 2017)

2.3 A supply chain view

The majority of literature on the influence of temporal orientation on sustainable decision-making focuses on the individuals temporal orientation (Slawinski et al., 2017; Slawinski & Bansal, 2012; Joireman et al., 2006; Milfont et al., 2012). Organizations however exist of individuals, that each have their own temporal orientation. Together these individuals form an organizations temporal orientation, which is also influenced by the goals, vision and strategies of the organization. As individuals form a part of an organization, an organization forms a part of a larger system itself.

Extant literature on corporate sustainability is based on a firm or industry perspective, mostly neglecting the need for the integration of system thinking towards solutions on a planetary level (Levy and Lichtenstein, 2012). The fact that environmental challenges and the Earth’s environmental problems are all connected and related to each other in complex systems (Rockström et al. 2009) makes it unlikely that these issues can be properly addressed when an individual or a firm perspective is maintained (Whiteman et al., 2013).

understand the decision making process. Since systemic environmental problems must be resolved through interaction between supply chain partners (Sala et al., 2015). Addressing sustainable development issues from a Supply Chain perspective leads to better insights as environmental impacts are made throughout the Supply chain. The ‘where’ and ‘how’ of these impacts can be identified when a supply chain view is adopted (Cellura et al., 2012).

3. METHODOLOGY

3.1 Research design

The aim of this study is to improve the understanding of how sustainable decision making in food supply chains is influenced within a dairy supply chain with a focus on temporal orientation. Sustainability in food supply chains is a relatively young field of research in which theories are not fully crystalized yet. Although temporal orientation has been subject of multiple studies regarding climate change and organizational inaction (Slawinski, Pinkse & Busch, 2017), the link between temporal orientation and sustainable decision making has not been the main focus (Hahn, et al., 2015) of studies yet. But more important is the fact that a supply chain perspective has not been used yet in theory regarding temporal orientation in environmental decision making. This means that there is a need for theory building in order to describe constructs, identify linkages and identify why these linkages exist. The research method that is best suited for theory building is case research.

This method uses case studies as its basis and has the ability to generate relevant theory. The strength of this type of research is in the fact that case research allows phenomena to be studied in their natural context, which contributes to a full understanding of this phenomenon (Voss, Johnson, Godsell, 2015). From the dairy supply chain perspective this is interesting because each actor operates within its own environment with contextual differences such as stakeholders, legislation and cultural differences. This study aims to contribute to existing theory on environmental decision making and temporal orientation by using an inductive approach. This should lead to answers on the question why certain relationships and constructs exist, what the key constructs are and what patterns and linkages exist between variables (Voss et al., 2015)

3.2 Case selection

which consists of multiple actors with strongly differing characteristics operating in different contexts. The definition of food supply chain or food system is as follows: “Food systems entail the overall supply chain from agriculture to production, trade, distribution, consumption and the waste production (Sala et al., 2015 p. 388). Actors within these systems differ from feed traders, to multiple farmers, processing and trade cooperations, retail and wholesalers and consumers who all differ in size, strategy and culture. Figure 2 shows a typical dairy supply chain. Analyzing the differences between these actors could lead to better insights in the alignment of sustainability efforts throughout food supply chains.

Figure 2: Overview of a dairy supply chain Feed producer Dairy farmer Consumer Organic processor Retailer Organic dairy farmer Processor Organic processor

The dairy supply chain is an economically important aspect of agriculture both in the Netherlands and worldwide. Furthermore the dairy supply chain has a significant impact on the environment, which gets a lot of attention for its role in climate change. With questions being raised about the emissions of GHG’s and freshwater use (Thoma, Popp, Nutter, Shonnard, Ulrich, Matlock, East, 2012). Organizations within the dairy chain differ in size within segments and across the supply chain making it an interesting topic of research (Glover et al., 2014). Furthermore access to the dairy chain was relatively easy as dairy farmers are omnipresent in the Netherlands.

studies had to be available for the selected chains as well and the chains should be accessible, taking available time and resources into account. Furthermore, the available LCA’s should have ‘cradle-to-grave’ boundaries, which means that the LCA scope reaches to the consumption of the product and no further (Thoma et al., 2012). The considered cases and selection criteria as set by Kaputi and van Rijn are depicted in table 1.

Table 1: Case selection criteria (Kaputi & van Rijn, 2018)

3.3 Data collection

The data was collected using qualitative methods. Through conducting semi-structured in-depth interviews with different representatives from organizations within the dairy supply chain in the Netherlands. Interviews have the potential to provide rich data from a range of different perspectives, thereby developing a holistic point of view (Cassel and Symon, 1994). Successful induction requires that the knowledge of the researcher acquired from theory is not reflected on or of influence to the interviewee’s experience or opinion. This was ensured by posing questions that were not constructed around concepts from existing theory but around the sense-making of the interviewees that was expected as a result of the prior literature study (Gioia, Corley, Hamilton, 2013). Therefore, leading-the-witness questions were avoided throughout the interview. The interview was built up in such a way that the start is very open and general as not to guide interviewees in a certain direction. Towards the end of the questionnaire the questions will focus more towards specific constructs. The interview protocol can be found in appendix A.

within the scope of this study. The gathered data elaborates and complements the existing secondary data from Kaputi and van Rijn (2018). This data consists of interviews with two dairy processors and two dairy farmers. This study has broadened the scope compared to that of Kaputi and van Rijn (2018) by adding an interview with a feeding company. Adding the feeders to data set is relevant, while this part of the chain has a significant contribution of 21% to the overall environmental impact of the chain (Thoma et al., 2012).

63% of the feed market is served by only three feeding companies (Bron, 2016), there are 17.500 dairy farmers in the Netherlands and the processing industry exists of only 25 companies (Zuivel in cijfers, 2018). To reflect the numeric representation of the different players in the dairy chain we chose to add 6 dairy farmers to the dataset. The interviewed farmers were selected based on size and proximity. The sizes ranged from 60 to 275 milk cows, where the average among dairy farmers in the Netherlands is 99 milk cows (CBS, 2017), and 0 to 170 young cattle. The feeding companies are represented by one company. Three different feeding companies were contacted and the one with the biggest market share was willing to cooperate. Unfortunately this interview was conducted by phone, As mentioned two interviews with representatives from dairy processors were available from Kaputi and van Rijn (2018), one mainly focusing on regular dairy products and the other mainly focusing on organic products. Both processors are in the top ten of largest dairy processing companies worldwide. We aimed to add another processor to the dataset of which we knew they had a strong focus on sustainability, this processor however did not want to cooperate. Nevertheless we deemed two processors as a sufficient amount. As interviews are available with feeders, farmers and processors the influences on sustainable decision making could be studied in a supply chain perspective for this part of the dairy chain. Table 1 gives an overview of all interviews. Interviews depicted in bold are derived from van Rijn and Kaputi (2018).

Table 2: Overview of the interviews, interviews conducted by Kaputi and van Rijn (2018) are depicted in bold

3.4 Data analysis

In the first step of coding the transcript was divided in free quotations, mostly using the exact sentences as used by the interviewees. In the next step these quotations were assigned to codes that reflected the content of the identified quotation. The codes were than bundled into second order concepts after which these concepts were assigned to aggregate level themes. The following is an example of how the coding was executed: “The idea of doing something for the environment appeals to me, I think we should take care of this world, but it should at least break even and on the long run be profitable. That is definitely a condition” (farmer 3). This quote was first identified as a possibly important quote after which it was located into two different code groups being ‘Environmental motive’ and ‘financial condition’. The ‘financial condition’ code group, existing of a bundle of quotes regarding this topic, was eventually assigned to the second order code ‘profitability of investments’ which was assigned to the aggregate level concept ‘Cherry picking’. The coding tree that resulted from the data analysis can be found in the appendix B.

4. FINDINGS

In this section the results of the data analysis will be discussed. The structure will follow the coding tree that can be found in appendix B. The aggregate level concepts will serve as main topics in which the 2nd _{and 1}st _{order concepts will be discussed. In the last part of this section a dynamic model is}

depicted to visualize all described factors and their relationships.

4.1 Cherry picking

Considering the fact that all interviewees are either entrepreneurs or employees working at for-profit organizations it is not surprising that financial conditions are prioritized when considering sustainable investments. However, the importance of this fact and the influence it has on sustainable decision making cannot be neglected.

4.1.1 Profitability of sustainable measures

environmental sustainability if it does not entail any financial benefit. Even if the idea appeals to them, oftentimes it is not wise from an entrepreneurial point of view. Farmer 3 stresses why it is so important to focus on the financial aspect: “The financial margins are under pressure so you do not have a lot of room for gambling. You have to be careful with what you do”.

Although the feeding company and the processor have more financial means to engage in more uncertain long term investments they do have to consider the financial wellbeing of the farmers. Both the feeding company and the processors in this study are cooperation’s that are technically owned by farmers. This type of ownership entails that these companies exist to serve the needs of their members, which is primarily to earn money and provide consistency in their revenue. “For us the most important thing is to have attention for the farmers revenue model” (Feed company). This means that when considering more sustainable practices, the feeding company will always look at the financial implications for its members first and this is where tensions occur: “Sustainability often has a price and you have to compete with unsustainable competition” (Feed company). All investments in sustainability that increase production costs have an effect on the position of the Dutch dairy industry compared to their global competitors. A certain amount of care is therefore required when considering investments to prevent market mechanisms to drive dairy consumers away from Dutch dairy products towards cheaper foreign supplies.

Producing in a truly sustainable way is more expensive than regular production. The extra costs of more sustainable practices thus has to be accounted for. The question is who will carry these costs and why. Most players in the chain are inclined to point at each other. The price eventually has to be paid by the end customer but consumers are inclined to select the products they buy based on price. Creating a new standard and thereby raising the price of milk all together seems to be a relatively obvious solution. The dairy industry however operates in a global market, which means Dutch dairy producers have to compete with milk produced in other countries. If producers in other countries do not attain that new standard, as the laws of the market entail, most of the clientele will start buying the cheaper foreign milk. A striking example of how this mechanism works occurred in the egg industry recently: “When battery cages were forbidden in the Netherlands a few years ago they were all sold to countries like Romania. The Dutch eggs got a few cents more expensive while the production in Romania is very cheap. So now these cheaper Romanian eggs are imported and sold in the Netherlands and they are selling better than the eggs produced in the Netherlands. That is an example of how things can go wrong.” (Farmer 3).

4.1.2 Uncertainty

like solar power. If that period is longer than 5 or 6 years I will not do it” (Farmer 1). Being more focused on the present instead of the future provides decision makers with more certainty, while it might also hinder investments in innovations that could provide more financial and environmental benefits on the long run. This farmer explains his rather short term focus as follows : “Other farmers are promised to earn back their investment in 10 years. In that calculation however the costs of possible intermediate maintenance is not accounted for and I think that there is little chance these panels will work for ten years without any problems.” (Farmer 1).

Another factor that contributes to the level of uncertainty is the frequently changing legislation regarding sustainability. Recently such changes provided some farmers with problems. In 2015, when the quota that determined how much milk each farmer could produce was lifted, many farmers decided to increase their cattle stock. This required investments in both cattle and facilities. On the first day of 2018 a new quota on phosphorus became effective which forced many farmers to bring back their stock of cattle to the level of 2015. “A farmer that has built stables for 140 cows now has to go back to 79 cows. If you have a mortgage on that stable you suddenly have a big problem. The margins in dairy farming are low compared to other sectors so it will be hard to bear those costs.” (Organic farmer 1) Changes like these make farmers careful when deciding about investments. If it is unknown what the future will bring and which demands are going to be enforced by the government and powerful supply chain partners, farmers are less likely to engage in long-term investments such as solar power. “It is still uncertain if you can receive money for the energy you provide to the grid after 2020, this makes it difficult to decide about investing in solar panel” (Farmer 4).These factors make it hard for involved companies to attain a long-term view and engage in long-term investments. This urges companies to cherry pick the sustainability efforts with relatively low uncertainty, thereby preventing them to engage in long-term investments.

4.1.3 Financial incentives

Global competition and their entrepreneurial mind-set leads companies throughout the entire chain to only invest in measures that provide them with clear financial benefits. Either because costs are being saved, subsidies are being rewarded, or the value of their products increase. This causes involved players to only pick the lowest hanging fruits and do what is most convenient for their own business instead of prioritizing the environmental benefits. The investments that are most beneficial financially are oftentimes not the most beneficial for the environment. To focus solely on the economical aspect therefore makes important issues to be overlooked and not taken care of.

(Table 3). The main focus seems to be on saving energy and working as efficient as possible in terms of fossil fuel use and food conversion. Furthermore consumers, retail and processors have a strong focus on pasture grazing and sowing the pasture with field flowers and certain herbs, which is promoted as being green. These measures mainly provide economic benefits in the form of subsidies, cost savings or premiums on the end product. The environmental benefit that is gained with these ‘green’ measures is minimal, especially when it comes to reduction of GHG emissions. Furthermore many of these measures benefit the dairy industry’s image, which also serves to increase the value of the end product.

Table 3: Summary of results

Respondent Definition of sustainability Triple bottom line aspects

Main sustainability focus

Feed company

“Act in such a way that no harm is done to our environment and arrange our systems in such a way that we can continue with that for eternity.”

Environmental, Social

Resource efficiency, local resources, healthy plants, soil and animals.

Farmer 1 “Producing as much milk as possible with minimal use of resources.”

Economic Resource efficiency.

Farmer 2 “Working with animals and land in a way that you can work longer with the same amount of resources. So the animals will last longer.”

Economic, Environmental

Longer living animals.

Farmer 3 Sustainability has to do with the future, doing things in a way that is good for nature and humankind.”

Environmental, Social

Reduce energy use.

Farmer 4 “Being good for people, animals and your wallet. Making sure that the animal is faring well while minimizing the environmental burden.”

Economic, Environmental, Social

Crossbreeding for longer living cow. Pasture grazing. Reduce use of pesticides. Farmer 5 “Produce in such a way that future

generations also have a change to enjoy the earth. Treating the environment wisely.”

Environmental, Social

Reduce energy use.

Farmer 6 “I think sustainability is a complicated concept. We generate a lot of our

energy ourselves. Next to that, we try to be as economic as possible with our cows. We try to make our cows older.

reduced medicine use.

Organic Farmer 1

“What is maintainable, what can go on for a longer time. And a fair price.”

Economic Cut energy use and produce solar power. Organic

Farmer 2

Not available - Local resources, pasture

grazing. Processor

(From website)

“Better Nutrition. A good living for the farmers. Now and in the future.”

Economic, Social

Pasture grazing / energy use reduction

Organic processor

“For us sustainability is very much related to our environmental impact and sustainable dairy farming. So the impact on the farm, environmental impact of the factory and a third pillar is health.”

Environmental, Social

Pasture grazing

4.2 Focus on suboptimal solutions

Both the representatives from the feeding company and the processor said to know these figures as they worked with LCAs on a regular basis. It is interesting to see that the information is available and known by certain players in the chain yet is not shared throughout the chain. It seems important to at least inform farmers about these results as the biggest contribution is made in their activities. Knowing that both the feeding and processing companies are owned by these farmers, and meetings are scheduled regularly sharing this information should not be difficult, yet it does not happen.

Table 4: Perceived greenhouse gas emission per supply chain stage in percentage of the total co2 equivalent

Table 5: Perceived greenhouse gas emission in percentage of total co2 emission equivalent in farming stage

4.2.2 Lack of knowledge downstream

is not the case at all. Consumers have a totally different view on sustainability, there is a very big gap between the consumers ideas and reality, of which I don’t hope that it will get larger.” (Farmer 3). The processor acknowledges that these problems exist. The lack of knowledge among consumers allows them to be misled by parties that prioritize financial benefit over ethics and the environment. Many consumers perceive organic and ‘green’ products as being sustainable, while this is often not the case. As long as consumers will buy these products retailers nor processors will be triggered to demand truly sustainable products from upstream partners in the dairy supply chain.: “You see that retailers are interested in sustainability and then consumer expect that the retail solves their problem on sustainability. Of course you have consumers who buy organic products, because they believe that organic products are better on sustainability than non-organic products. But we calculated that the environmental footprint for organic and regular dairy is the same. But organic is a brand so, pay 10 cents more, it is fine for me, but it is not contributing to sustainability on dairy.” (Processor 1).

4.2.3 Greenwashing

It is typical that the processor states that “it if is fine for him” that the consumer pays 10 cent extra per liter for a product that is not more sustainable than regular milk. This shows that companies are willing to trick consumers into believing they are contributing to a greener world by their consumption behavior while they are not. The parties responsible for selling dairy products seem willing to exploit the lack of knowledge among consumers.

The respondents that did graze their cows in the meadow however, stated that it is more sustainable to do so because the cows collect their own food and spread their own manure. This should save fuel of the machinery that is normally used to collect grass and corn and spread the manure over the land. From the LCA studies we know however that the GHG emission due to fossil fuel use is minimal compared to methane emissions. The processors nevertheless stimulate farmers through their sustainability programs to graze their cows in the meadow. This measure seems to be driven by retailers who use pasture grazing as a marketing tool which consumers seem to appreciate: “The market has not been very demanding on sustainability topics in the past. Our own company tried to formulate goals and the consumers are not asking us to make steps on sustainability. So, the only program we had in the last years was the meadow grazing program. As a retailer, we don't want to lack behind so we started this project with the 300 farmers to try to implement more sustainability programs than in the past” (Retailer). Processors acknowledge that pasture grazing is not environmentally sustainable but nevertheless choose to focus on this type of production: “In the Netherlands it is generally more about efficiency, so cows are mainly in stables[Sic], which is beneficial for the environmental impact, but in the Netherlands there is also the tendency to graze cows outside because it is better for their natural behavior. So we only produce pasture milk, it is a label concept” (Organic processor).

Processors are being involved by the government in setting new boundaries regarding GHG emission in the dairy industry. Although the aim of these boundaries is to reduce emissions counterproductive measures are being taken, setting boundaries regarding pasture grazing ensuring to maintain high levels. This illustrates that the focus is on image building and increasing product value rather than truly sustainable practices: “We have agreements with the government. By 2020 we will have new boundaries based on the Paris agreement but also for meadow grazing. For us it is important that consumers see the cow in the meadow, so we set our own boundaries so that we would have the same level of cows outside as in 2012” (Processor 1)

From the above can be concluded that the dairy sector is working hard on stimulating all kinds of practices that improve the perceived greenness of their produce but until now fails to tackle the problems regarding the largest contributors to GHG emissions enteric methane and methane from manure.

4.3 Missing sense of urgency

Respondents stress that something has to be done about climate change and point out that we as a species have the responsibility to take care of our planet. In general however the interviewed farmers seem satisfied about the environmental sustainability efforts in the supply chain and on the farm level. “I personally think that the agricultural sector is quite sustainable [..] I think we’re doing pretty well here in the Netherlands” (Farmer 2). And: “If I compare with for example aviation, I think we are doing well.” (Farmer 1). Other responding farmers also point out that through the constantly changing legislation the sector is getting more and more sustainable.

Although most farmers acknowledge that “something needs to happen” a sense of urgency is lacking. “I want to contribute to a sustainable world but I’m definitely not a forerunner” (Farmer 1). There seems to be a wait and see mentality that stems from farmers not being very keen on engaging in practices with uncertain outcomes that lie beyond their core competences: “ I have not really looked into it [Solar panels] yet and I’m not a power producer so I would not like to do it for someone else. We have to keep our heads there where it’s needed.” (Farmer 5). Another factor that might be contributing to the lacking sense of urgency is the fact that negative consequences of climate change are not being experienced in the Netherlands. Farmers do point out that heavier rains and more fluctuations in the weather requires better planning than before, but the felt consequences are mostly positive: “We had some very good years. The grass is growing very good because the temperatures are higher and there is more rain in summer. So it is an advantage so far, but in the long term I think it will not be good.” (Organic farmer 2)

4.3.2 Responsibility

The processors point out that they are not the problem owner, but the farmer is. With this they seem to stress that they are doing what they can and it is time for the farmers to act, because that is where the biggest emissions take place: “We take a lot of time to discuss with them [Farmers] what they can do and to make them feel the owner of the problem. We are not the problem owner, but we do have discussion about it with our customers because they want to reduce their carbon footprint as well.” (Processor).

farmers have the feeling they are doing quite well. The processor pointing there finger to the farmer seems quite odd while the processor is owned by and consists of farmers and has power over the farmers through buyer-supplier dependencies. The farmers produce what is demanded by downstream partners and are depending on them for ensuring their income. “They just feel the pressure from us. So when we say to our farmers "you have to discuss this with your feed supplier", the issue is that individual farmers have no power and we have the power of course.” (Processor 1). The further downstream, the more power there seems to be. Farmer 1 attributes this to the fact that the dairy market is a supply market: “This means that the power lies with the ‘demanders’, which are in our case the consumers and retailers. They decide which standards our products should meet and the rest of the chain just has to follow if they want their product to be bought.”

The feeding company feels a responsibility to take care of the planet and provide food for future generations and acknowledges that this can’t be sustained with the current practices. That is the reason why they embedded sustainability in their strategy and focus on more sustainable production together with supply chain partners. “I think all chain members are working on sustainability very seriously” (Feeder). As being the most upstream party in the chain the feeding company will however always be depending on the downstream demand and as long as these demands are aimed at practices that are not the true root of the problem they will not be able to change the tide either.

4.4 Government role

According to multiple respondents the success of sustainability efforts largely depends on politics. “That all depends on the national politics and international politics. You can argue that if we are doing well here and the Americans are not, it’s just a drop in the ocean. But we should keep on doing it to give an example as the Netherlands and Western Europe.” (Farmer 2). Most respondents acknowledge the fact that the government plays an important role in sustainability. They have the power to both facilitate and accelerate sustainability efforts: “The government can facilitate sustainability in the form of legislation and laws. [..] Oftentimes the pace in which sustainable practices are implemented depends on governmental stimuli, mostly financial stimuli” (Feeding company).

cannot do that.” (Farmer 5). Moving all in the same direction at the same time, guided by the government would prevent these inequalities to occur. The reduced use of antibiotics is a good example of successful governmental guidance: “I am totally in favor of the government pushing us to do sustainable things. It is very good that the legislation on antibiotics use got more strict, you can see that the use of antibiotics has reduced by 60% in the last two or three years.” (Farmer 5).

4.5 Synthesis

It seems as if all parties in the chain are being greenwashed by their own ‘green’ practices and blinded by their urge to sell as much dairy as possible for the best price possible. This seems to distract the industry from the biggest problems that need to be addressed, causing a lack of urgency and a lacking sense of responsibility throughout the chain. The negative consequences of climate change are not felt yet and so nobody seems hurried to act upon this issue. Moreover until now the interviewed farmers have only benefited from the changing circumstances. The consequences of climate change such as rising water levels and biodiversity loss are not felt or experienced yet and seem far away both spatially and temporally. This makes the consequences abstract and distant which seems to influence the sense of urgency in addressing this problem. Furthermore all financial incentives to reduce methane emissions are missing. Because the cost of the harm that is done to the planet is not accounted for by any party in the chain no one financially benefits from reducing these emissions. Subsidies or premiums for production with minimized methane emissions are also absent, which makes it almost impossible for farmers to invest in measures aimed at minimizing methane emissions. All these factors lead to a strange situation in which there is movement, but not in the right direction. 4.5.1 Dynamic model

5. DISCUSSION

From the analyses of the interviews it became clear that for all companies within the case, to engage in sustainable efforts there should at least be a financial stimulus. Saving fuel, electricity, more efficient feed conversion and minimizing fresh water use are all examples of measures that lead to both environmental and financial benefits and are therefore oftentimes considered and applied. This prioritizing of financial benefits over environmental and social benefits confirms that the dominant decision logic in the dairy supply chain is the instrumental logic. Which means that the most common stance towards sustainability is:“If it’s not profitable, you don’t do it” (Montabon et al., 2016, p. 16). The appliance of this logic makes decision makers throughout the chain avoid financial risks. This means investments with long payback periods are being avoided. This is influenced by uncertainty about the costs and returns of such investments, decision makers cannot predict what circumstances will occur beyond the near future. An example of such circumstances contributing to uncertainty is the frequently changing legislation. Marginson and McAulay (2008) confirm that the gap between available and needed information for taking such decisions prevents decision makers to take sustainable decisions. In order to minimize the uncertainty decision makers focus their efforts on the near future, adopting a present-time focus. The concept ‘the consideration of future consequences’ by Strathman et al. (1994) says that those who consider future consequences are mostly willing to accept costs on the short-term or sacrifice short-term benefits for the sake of more desirable long-term consequences. Because of low margins and financial uncertainty however, farmers that would apply this concept might not even survive long enough to enjoy these benefits. Slawinski et al. (2017) Argue that people with a present-time perspective are less likely to take a long-lasting environmental impact into consideration than people with a future perspective. This phenomenon is called economic short-termism and causes decision makers to pursue actions that are optimal for the short-term but suboptimal for the long-term (Laverty, 1996).

sense of urgency might be due to the psychological distance to the negative consequences of climate change. In comparison to for example Spitsbergen, these consequences are not experienced in the Netherlands yet and it could take 20 years until they do, this makes these consequences feel both spatially and temporally distant. This psychological distance causes people to underestimate future consequences (Frederiks et al., 2015)

One could argue if the lack of knowledge among consumers is a big problem because the real differences will eventually have to be made in the production stage. Multiple respondents however mention that the dairy market is a supply market, which means that the consumer has the power to demand for certain product characteristics and for the lowest possible price. This entails that the dairy industry, to sell their produce, follows the consumers wishes. If these consumers are not properly informed they allow processors and retailers to greenwash them with measures that create the appearance of being sustainable, while they are not. The industry is facilitated in these practices by the fact that, due to a lack of information or concern, consumers do not apply much pressure on the industry to become truly sustainable. Furthermore the financial incentive to reduce methane emissions is missing. While no one in the dairy chain is currently paying a price for these emissions, no one is urged to implement policies or practices towards reducing them. Instead mainly the parties with power to enforce sustainability measures on upstream players pick the lowest hanging fruits. Choosing to stimulate practices that provide them with direct financial benefits through cost savings or increased product value.

All the above contributes to the ascertainment that for becoming truly sustainable the dairy industry cannot rely on the market nor on its own intrinsic motivation. This is mainly caused by the financial focus, the tendency to avoid uncertainty and a lack of knowledge in critical stages of the supply chain. From the findings suggestions towards a solution can be derived: Mainly governmental legislation and (financial) incentives emerge as influencers that have proven to be successful in the past.

5.1 Limitations and future research

This study mainly focussed on climate change and the emission of greenhouse gasses. As described by Rockström et al. (2009) environmental sustainability entails nine different planetary boundaries. Future research could be directed towards one or more of these other boundaries. For future research it is also recommended to add interviews with experts in the field of sustainability legislation and policy. As this seems to play an important role in the stimulation of sustainable practices it is a limitation for this study that this data was not available. Another limitation of this study is the fact that it was conducted solely in the Netherlands. Although the dairy industry significantly contributes to GHG emissions in the Netherlands the industry is operating globally. A vast share of Dutch dairy is being exported to other countries. Furthermore dairy producers from other countries compete with Dutch dairy producers as well, which drives the need for global solutions. Future research should therefore transcend national borders and attain a European or global scope.

6. CONCLUSION

The objective of this study was to contribute to the existing knowledge about environmental decision making in food supply chain. More specifically with a focus on finding factors that might hinder sustainability advancements in a dairy supply chain in the Netherlands. and the influence of corporate temporal orientation on these advancements. Furthermore the aim was to look forward towards possible solutions that might emerge from the gathered data. This led to the formulation of the following research questions:

1. How are sustainable advancements hindered in a dairy supply chain?

2. How does corporate temporal orientation influence sustainable decision making in a dairy supply chain?

3. How can impediments for sustainability be approached to move towards truly sustainable practices?

feeling that the responsibility to pursue true sustainability should be taken. Players in the chain expect other players to move first and no one truly feels as if they are the problem owner. Furthermore, in important stages of the supply chain, the farmer and consumer stage, the information about contributions to climate change is lacking. This also hinders the sense of urgency to develop towards true environmental sustainability.

Throughout the chain a present time perspective is being used. The lack of clear long term guidelines, frequently changing legislation and the avoidance of financial uncertainty hinder the application of a future perspective. This short-term focus leads to the overestimation of present costs for investments and the underestimation of future consequences. Driving decision makers to choose for suboptimal measures. This underestimation also contributes to the lacking sense of urgency to address the strongest contributors.

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8. APPENDICES

Appendix A: Questionnaire

* Start with the introduction about the research.

* Ask whether it is okay to record the interview and if it is fine to use this for the research.

* Mention that the gathered information will be processed anonymously and that we are willing to share the results of the research.

A. Introducing questions (± 5 minutes) 1. How long does you firm exist?

2. For how long are you in this job function?

3. How large is you firm/how many cows do you have?

B. Sustainability activities: at the interviewees firm (± 25 minutes)

4. What actions did you take in terms of sustainability in the last 5 years? 5. What was you motivation to take these actions?

5.1 What were the considerations in the decision process? 5.2 What considerations were decisive?

5.3 How far do you look ahead when taking such decisions? 6. Are the results of these sustainability actions being measured?

6.1 Are you familiar with eco-innovations? (manure digesters, solar panels)

7. According to you, what are innovations that could make a difference in terms of sustainability?

8. According to you, what are restrictions when investing in such innovations or other sustainability practices?

C. Sustainability activities within the supply chain (± 15 minutes)

In this section we will ask about sustainability within the dairy chain and its related supply chain actors. The chain consist of the feeders, the dairy farmers, the dairy processors, the retail and the consumers. The chain partners are firms you deal with in terms of demanding and supplying products.

10. Do you think that your partners in the chain operate in a sustainable way? 10.1 What do you think about their effort in terms of sustainability?

11. Do you have an idea about what the actors in the dairy supply chain do about sustainability?

11.1 And what about other firms within your supply chain stage? 12. Are there differences in sustainability policy within the supply chain?

12.1 What causes these differences?

12.2 How do these differences influence the performance of the supply chain as a whole in terms of sustainability?

13. Do you have influence on the sustainability performance of other actors in the supply chain?

14. Do you cooperate on sustainability initiatives with partners in the supply chain? 14.1 According to you, what is the importance of cooperation?

14.2 Do you communicate with your supply chain partners about sustainability? D. Influence on the environment (± 5 minutes)

15. What is your main focus in terms of sustainability? 15.1 Why is that so?

16. According to you, what is sustainability? ( if not revealed in previous answers) 17. Does climate change have influence on your firm?

18. Are there any other relevant themes we did not considered and discussed yet, and which could important to mention?

E. LCA exercises (± 10 minutes)

* Show the documents that need to be filled in and ask the interviewee to fill in.

* Show the LCA results and explain how these results have been established in that study. 19. What do you think about this?

20. Where do you think the differences in your perception and the LCA results come from?

Appendix C: Supporting data from LCA study (Thoma et al., 2012)

Table 6: Greenhouse gas emissions by supply chain stage.