Environmental sustainability decision-making
in agri-food supply chains
Exploring the milk and pork supply chains in the
Netherlands
Combined Master’s Thesis,
Supply Chain Management & Technology and Operations Management,
University of Groningen, Faculty of Economics and Business
January 29, 2018
Jordi van Rijn
Student number: S2353873
Email: j.van.rijn.2@student.rug.nl
Supervisor
prof. dr. ir. J.C. Wortmann
Co-assessor:
prof. dr. K.J. Roodbergen
1
ABSTRACT
Purpose: The purpose of this paper is to investigate the decision-making process of organizations
within the food supply chains, to shed light on the possible misalignment between corporate sustainability practices and the desired impactful environmental initiatives.
Design/Methodology/Approach: This study uses an inductive study approach. Multiple
semi-structured interviews will be conducted. In addition to this primary data, secondary data from both sustainability reports and life cycle assessments will be used.
Findings: The instrumental logic remains the dominant logic found in practice when considering
environmental practices. This seems to limit the scope of companies in what is considered and hence pursued. Institutional pressures can help to alter this logic and get companies to adopt sustainability practices. Nevertheless, the pressure for environmental sustainability was found to be low.
Practical Implications: Understanding what influences sustainability decisions can aid in
identifying the causes of a misalignment between the desired and actual practices. This knowledge can aid firms, supply chains and policy makers to better tackle environmental impacts.
Originality/contributions: This study adopts a supply chain perspective to assess the
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TABLE OF CONTENT
1. Introduction ... 4
2. Theoretical background ... 7
2.1 Sustainability in Supply Chain Management ... 7
2.1.1. Measurement of Sustainability ... 7
2.2 Sustainable decision-making ... 8
2.2.1 Instrumental logic vs. Ecologically Dominant logic... 8
2.2.2. Institutional theory ... 10
3. Methodology ... 12
3.1. Research design ... 12
3.2. Data collection ... 12
3.3. Case selection... 13
3.3.1. The pork and milk chains ... 14
3.4. Data gathering ... 15
3.5. Data analysis ... 17
4. Results ... 18
4.1. LCA studies ... 18
4.2. Corporate sustainability strategy... 19
4.2.1. Sustainability philosophy ... 19
4.2.2. Sustainability knowledge ... 20
4.2.3. Sustainability measurement ... 20
4.2.4. Sustainability focus ... 21
4.2.5. Trade-off thinking ... 23
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4.3.1. Macro-environmental pressures ... 24
4.3.2. External supply chain pressures ... 25
4.3.3. Internal supply chain pressures ... 25
5. Analysis... 28
5.1 The dominant logic towards sustainability: the instrumental logic ... 28
5.2 Institutional theory ... 30
6. Discussion ... 35
6.1. Limitations and further research ... 36
6.2. Theoretical implications... 37
6.3. Managerial implications... 37
7. Conclusions ... 38
8. Bibliography ... 40
9. Appendices ... 44
Appendix A: LCA methodology ... 44
Appendix B: Interview protocol ... 45
Appendix C: Coding tree ... 49
PREFACE
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1. INTRODUCTION
The current activities of food production have been heavily contributing towards environmental impacts and therefore to crossing several of the planetary boundaries, leading to climate change, the biodiversity loss, freshwater shortages, change in land use, and chemical pollution (Notarnicola et al., 2016; Rockström et al., 2009; Roy et al., 2009). When considering the social aspect of the need to increase food production by approximately 60% by 2050, the environmental impacts of production will become even more severe (Notarnicola et al., 2016). This clearly illustrates the fact that improving food systems is of the upmost importance from both an environmental as well as a socio-economic perspective.
Sustainability in the food supply chains is a well-developed topic, with multiple practices and opportunities being sought by the companies involved, and management studies being performed by researchers. Nevertheless, the latest environmental analyses keep on indicating a worsening state of affairs (Whiteman et al., 2013). This is a paradox, given the fact that one would expect that the environmental burden would have decreased and certainly not increased, since sustainability has become widely adopted by firms. Therefore, it seems that corporate sustainability efforts are possibly not aligned with the environmental burdens created by the organizations involved.
5 environmental perspective of sustainability (Montabon, Pagell, & Wu, 2016). This normative logic favours the environmental dimension of sustainability over the economic dimension.
Certain sustainability practices are however adopted without an obvious economic return (Glover, Champion, Daniels, & Dainty, 2014), although this is not conforming to the instrumental logic found earlier. A perspective that explains this behaviour is the institutional theory. This theory examines the factors that lead to organizations adopting similar strategies and processes, which is called isomorphism (Kauppi, 2013). Here the motivation for decision-making is not dependent on the decision outcomes, as with the instrumental logic, but rather it is focussed on legitimacy (Gopal & Gao, 2009). This means that companies base their decisions on what they perceive to be desirable or proper within the social context (Suchman, 1995). An example of this is that external pressures from stakeholders can influence companies to adopt certain sustainability practices (DiMaggio & Powell, 1983).
Previous research on sustainability decision-making is found to be lacking on two aspects. Firstly, a focal firm focus instead of a supply chain focus is taken in current literature (Montabon et al., 2016). Secondly, sustainability performance has been measured at the means of financial performance (Golicic & Smith, 2013), instead of actual reduction of the environmental burden created by firms. Research that focuses on corporate decision-making without taking into account the ecological impact is at risk of creating an unbalanced angle to this topic (Whiteman & Cooper, 2011).
Therefore, this paper will contribute to current literature in two ways. First, this study will adopt a supply chain focus, instead of a focal firm focus, to assess the decision-making process within and between firms in a supply chain. This will be done by interviewing all players involved in the production of a single product from farmer until the retailer. Second, this study will not rely on financial outcomes to assess the sustainability performance, but focus on the supply chain from the perspective of other stakeholders and the natural systems (Pagell & Shevchenko, 2014). Therefore, to analyse and determine the environmental impacts per activity in the chain, Life Cycle Assessments (LCAs) will be used to acquire quantitative data of the burden on the earth’s system placed by the companies involved. In order to do this, we will build upon the previously identified logic and theory that provide a scope for the decision-making process:
6 Given what is explained above, the following research questions are developed:
1. How does the instrumental logic influence the decision-making regarding environmental sustainability for companies in the food supply chain?
2. How does the institutional theory influence the decision-making in the food supply chain regarding environmental sustainability?
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2. THEORETICAL BACKGROUND
This section will be explaining supply chain and (economic) decision-making theories that we expect to explain environmental sustainability decision-making in practice. The starting point of the literature research were the recent papers of Matthews, Power, Touboulic, & Marques (2016), Golicic & Smith (2013), and Whiteman et al. (2013), provided by one of the academia at the university. In the three beforementioned papers, the authors outed their concern with the way environmental sustainability has been researched in the last decades in Sustainable Supply Chain Management (SSCM) literature. With these papers as a starting point, a broader theoretical frame was build.
This chapter is hence structured as follows: firstly, an introduction to sustainability in supply chain management is provided. Additionally, the way environmental sustainability is commonly measured in literature will be explored. The section will end with sustainable supply chain decision-making literature.
2.1 Sustainability in Supply Chain Management
Sustainable Supply Chain Management (SSCM) has been an extensive research topic in recent years, and its definition and composition has varied greatly (Roehrich, Grosvold, & Hoejmose, 2014). The introduction of the triple bottom line is seen as a paradigm shift within the field of SSCM (Matthews et al., 2016). This triple bottom line allows decision-makers to address organisational performance across the range of economic, environmental, and social issues (Hahn et al., 2015). Yet, the majority of SSCM literature has focused on the question whether it ‘pays to be green’, which contains the assumption that profits are the absolute assessment of sustainable supply chain management (Pagell & Shevchenko, 2014). This way of reasoning is challenged in the next paragraph.
2.1.1. Measurement of Sustainability
8 this approach cannot lead to truly sustainable outcomes, as the financial benefits will be prioritized over truly sustainable supply chain practices (Montabon et al., 2016; Pagell & Shevchenko, 2014). A second drawback of this approach is that the perspective of a certain focal firm is taken. This entails that not the supply chain performance but the focal firm performance is measured (Montabon et al., 2016). Given the fact that environmental impacts are made throughout the whole supply chain, adopting a supply chain view allows to identify the ‘where’ and ‘how’ of environmental impacts (Cellura, Longo, & Mistretta, 2012). An additional reason for this research to adopt a supply chain perspective is to prevent burden shifting. This burden shifting means that the environmental burden can, by certain measures, be shifted towards other categories of impact or stages in the supply chain (Sala et al., 2017).
In the meta-analysis of Matthews et al. (2016), the SSCM literature between 1993 and 2013 was reviewed. It came forward that of 181-reviewed paper, only 15 empirical studies used environmental performance as their focus. These 15 papers did however measure their environmental performance based on subjective data from a survey based research. This example clearly shows that SSCM literature has limited understanding of the environmental effectiveness of SSCM strategies. This gives several researchers reason to conclude that SSCM literature is facing a methodological problem. Therefore, in this research the Life Cycle Assessment (LCA) methodology is used to determine the environmental impact in the chains. The details regarding the LCA methodology can be found in Appendix A. How exactly the LCA will be used in this research will discussed in the methodology section.
2.2 Sustainable decision-making
Research acknowledges the challenges of balancing the environmental issues and sound business practices (Wu & Pagell, 2011). Therefore, decision-making regarding this topic is complicated and needs to be understood to shed light on how organizations balance their priorities.
2.2.1 Instrumental logic vs. Ecologically Dominant logic
9 this logic, this would imply that sustainable practices that can be financially beneficial for organizations will be adopted anyway (low-hanging fruits), since there is a clear incentive. On the other hand, this also entails that the leading cognition in practice towards sustainability has been that “If it’s not profitable, you don’t do it” (Montabon et al., 2016, p. 16). Yet this logic will limit the scope of companies, as only sustainability issues that offer an immediate business benefit will be addressed and considered (Hahn, Figge, Pinkse, & Preuss, 2017).
However, since sustainability is multi-faceted of nature with an economic, social and environmental dimension, situations will exist were dimensions, and the associated benefits, are in conflict (Hahn, Figge, Pinkse, & Preuss, 2010). This means that trade-off decisions are inherent to sustainable decision-making, and benefits for two dimensions can’t always be achieved simultaneously. However, compromising between two dimensions does not necessarily result into inferior sustainable development compared to the win-win situations. For instance, accepting a small loss on the economic dimension may result into a substantial social or environmental benefit, which can have in total a larger contribution to sustainable development than the win-win scenario (Hahn et al., 2010).
Various researchers in the last years have challenged the instrumental thinking, and called for a paradigm shift towards more true sustainable thinking (Montabon, Pagell, & Wu, 2016; Wu & Pagell, 2011). Pagell & Shevchenko (2014) even go as far as to claim that: “the majority of
ongoing research overlooks the environmental and social consequences of supply chain actions and at worst is research on nonsustainable or irresponsible supply chain management” (p. 45).
10 the three dimensions of sustainability shifts. The Ecologically Dominant logic prioritizes the environment, then the society, and lastly the economic aspects. This is based on the believe that: “Society’s survival is dependent on fully functioning environmental ecologies and where economic
systems are only part of the overall social system” (Markman & Krause, 2016, p. 7).
2.2.2. Institutional theory
In the previous part regarding the instrumental logic, an explanation was provided why certain sustainability practices are adopted and why certain practices are not. The economic incentive played the dominant role and was the decisive factor for adoption. Nevertheless, certain sustainable practices are adopted without an obvious economic return (Glover et al., 2014). The institutional theory offers explanation regarding this phenomenon (DiMaggio & Powell, 1983). The institutional theory examines the causes that lead to organizations adopting similar strategies and structures, which is called isomorphism (Kauppi, 2013). A key principal in this isomorphism is the legitimacy of organizational practices. In this case the legitimacy refers to practices that are seen as proper and desirable by a firm’s stakeholders (Glover et al., 2014; Kauppi, 2013). Stakeholders are individuals, organisations or groups who are affected, or can affect the accomplishment of firm’s objectives (Freeman, 1984). The Institutional theory thus identifies how external pressures to the firm affect firms to adopt certain practices (Hirsch, 1975). Three drivers have been identified that create isomorphism: coercive-, normative-, and mimetic isomorphism (DiMaggio & Powell, 1983).
11 Normative isomorphism appears as organizations feel the need to conform to certain social obligations in order to be perceived as more legitimate (Zhu & Sarkis, 2007). This involves new rules and legitimate practices being introduced within organizations to be seen as a sustainable organization (Glover et al., 2014). From earlier research, it showed that normative pressures to implement environmental practices mainly originated from customers in developed countries (Sarkis et al., 2011).
Mimetic isomorphism takes place due to uncertainty. In previous research on supply chain decision-making, it was found that uncertainty surrounding environmental decisions complicates this process (Wu & Pagell, 2011). Therefore, as an organization is uncertain how to reach an end, it will model itself according to organizations they perceive to be successful (DiMaggio & Powell, 1983). By doing so, the organisation hopes to replicate the path of success of other organizations.
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3. METHODOLOGY
3.1. Research design
The main purpose of this study is to identify how food supply chains, and the organizations within them, make their decisions regarding the environmental sustainability. To answer the question an inductive case study research has been constructed. The case-study design best suits this research for multiple reasons. First, case study research has been recognized to be extremely suitable for (inductive) theory building purposes. Secondly, a case study allows for studying the phenomenon in its natural setting. Thirdly, a case study allows for an exploratory lens for answering questions where the phenomenon is not fully understood or the variables are unknown (Karlsson, 2009). Since the decision-making process of firms within supply chains regarding environmental sustainability is not fully understood in literature, this exploratory lens is necessary. Given the above explained reasons, a case study approach best suits our research purposes.
3.2. Data collection
The primary source of data comes from semi-structured interviews with the interviewees. The interviews have an average length of 1 hour. An important aspect of an inductive approach is not to impose our preordained understandings from literature on the experience of our interviewees. Therefore, the interview questions have not been constructed around existing theory and terminology, but around the expected sense-making of the interviewees (Gioia, Corley, & Hamilton, 2013). Since sustainability was found to be multi-faced, an important aspect is to not focus solely on environmental sustainability, but on the broader concept of sustainability (in particular social sustainability). The interview protocol, and explanation regarding the structure of the interview, can be found in Appendix B.
13 An additional source of secondary data will come from company documents addressing their sustainability practices.
3.3. Case selection
First, the unit of analysis for this research is a single supply chain. What we define as a chain can be seen in figure 3.1. This means that a single case consists out of the different players within the same food supply chain. The food systems considered in this research are defined as follows: “Food systems entail the overall supply chain from agriculture to production, trade, distribution,
consumption and the waste production” (Sala et al., 2017, p. 388).
The cases are selected based on certain selection criteria. First, a theoretical replication logic was followed selecting the cases. Therefore, an additional case within the same product chain should be expected to give different results (Karlsson, 2009). Furthermore, 4 additional selection criteria were selected that are important to our study. Firstly, the chain/case must be clearly traceable for comparing it to an LCA study. This implies that the product can be clearly traced back to a single-supplier and single-producer. Secondly, chains must be accessible for this research, given the time and resources available. Thirdly, the chain should have a LCA studies available to be able to compare the case to. Lastly, the LCAs that are available should adopt a ‘cradle-to-grave’ scope. A ‘cradle-to-grave’ scope implies that the system boundaries of the LCA study end at the consumption of the product (Thoma et al., 2012).
The different cases that were considered and evaluated based on the described criteria are presented in table 3.1. From this table, it becomes clear that the Pork and Milk chains are both suitable candidates. In this research will we therefore focus on the milk and pork chains.
Selection criteria Pork Milk Potato Coffee Sugar Beer
Traceability X X X X X X
Accessibility X X X - X X
LCA availability X X X X X X
Cradle-to-grave X X - X - -
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3.3.1. The pork and milk chains
The cases that we selected are part of the agri-food supply chains. This agri-food supply chain is presented in figure 3.1 below. From the pork and milk supply chains 2 cases each are selected, which resulted in a total of 4 cases. The two cases in the same chain differ from each other, as 1 case is a regular production chain, while the other one was an organic production chain. Organic production addresses the public demands of high quality, safe foods that is produced with minimal environmental losses, and under optimal conditions for animal health and welfare (De Boer, 2003). What further separates the organic chain from the regular chain is that the use of chemical fertilizers, pesticides and genetically modified organisms is not allowed (Mondelaers, Aertsens, & van Huylevenbroeck, 2009). However, it was found that in terms of environmental impact the organic production method does not necessarily have a lower environmental impact per product unit compared to the regular production methods (Tuomisto, Hodge, Riordan, & Macdonald, 2012). Nevertheless, since organic production focusses on clear public demands, the decision-making process is expected to be different in these chains. Since different results are expected, adding such a case is in line with the earlier described replication logic (Karlsson, 2009).
Figure 3.1: schematic overview of the agri-food supply chain.
Customers were purposely not considered in this research due to multiple reasons. Firstly, the fact that they are a totally different entity compared to the rest of the players in the chains. Secondly, creating a general view of this player and its decision-making process would require a considerable number of interviews, because of the variety of customers. Thirdly, leaving out the customers enabled us to focus more and use the available resources to create a clear picture of the other players in the supply chain.
4 single-respondent semi-structured interviews were intended per case/chain. All 4 players within the same case should be linked to each other and belong to the same chain to be able to assess cooperation and pressures between these players. In figure 3.2 below, the different players that are needed to complete the 4 cases are depicted. Certain players are present in multiple chains,
Feed
producer Farmer Processor
Wholesailer/
15 and for the organic pork chain even at multiple activities (organic pork farmer processed its own meat). This implies that the number of required interviews to complete the 4 cases is 10.
Figure 3.2: schematic overview of the 4 cases and the required interviews.
3.4. Data gathering
The aim of this research was to interview players that are considered to be the ‘best in class’ in the area of sustainability. Therefore, the data gathering started by contacting processors that were market leaders in both the pork and milk chains in the Netherlands. Afterwards, farmers that were linked to these selected processors were contacted. From there feed producers were contacted that were partners of the farmers. Unfortunately, the feed producers that were contacted declined cooperation with this research. Besides that, all other large feed producers in the Netherlands also declined cooperation with our research, and for this reason this player could not be part of this study. Lastly, the market leader retailer in both the regular and organic chains were contacted, which served as both a retailer for the milk and pork chain. In total 9 interviews were conducted, as can be seen in table 3.2. At farm level the owners of the companies were interviewed, while at the processing and retailer level the interviews were conducted with either quality or sustainability managers. Unfortunately, the organic retailer declined an interview due to time constraints, and
Feed Producer
Feed Producer Farmer Processor Wholesailer/ Retailer Consumer
Milk Farmer
Pork Farmer
16 was only willing to fill in the questions of the interview. This resulted into little possibility to go into depth. Therefore, this data turned out to be not useful for the further analysis and was hence left out.
Interview Who interviewed? Sustainability
report available?
1 Feed producer - -
2 Milk farmer Owner No
3 Pork farmer Owner No
4 Organic milk farmer Owner No
5 Organic pork farmer Owner No
6 Milk processor Manager Corporate Environmental affairs and Sustainability
Yes
7 Pork processor Quality manager Yes
8 Organic milk processor CSR and Communications manager Yes
9 Retailer Quality manager meat & Quality manager dairy
Yes
10 Organic retailer Quality manager No
Table 3.2: Overview of the interviews. Company reports: (Milk Processor, 2017; Organic Milk Processor, 2017; Pork Processor, 2017; Regular retailer, 2017)
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3.5. Data analysis
The interviews were, after consent of the interviewees, recorded by phone. These recorded interviews were afterwards transcribed, and all transcriptions were collected in a single database. The database was afterwards coded using the ATLAS.ti software. Data was coded an reduced according to the coding scheme suggested by Strauss & Corbin (1990). In the first stage the text of the interviews is taken apart and the concept that is described is identified and labelled. Since an inductive case study design was chosen, the codes/labels are as close as possible to what the interviewee described. For instance, this one sentence of the regular retailer was coded as followed: “Well, our effort on sustainability are limited to the private label products, but that is not only for
diary but for all products we have a sustainability level and the scope is only private label products.”. The code that was attached to this section was ‘Focus on private label’. After coding
all the interviews, certain codes were combined that had described the same concept. All the codes were then compared and 1st order concepts were created, which are presented in the left column in the coding tree (Appendix C). An example of this is that the 1st order concept ‘Sustainability focus’
had all relevant codes and quotes inside that explained where the company focused its sustainability actions on. The second stage of coding required combining the 1st order concepts
into 2nd order themes, as is shown in the second column in the coding tree (Appendix C).
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4. RESULTS
In this section, the results of the acquired data will be presented. First, the acquired data from the LCA studies of both the milk and pork supply chain will be briefly discussed. Subsequently, the results are structured according to the aggregate dimensions that were found during the data analysis: Corporate sustainability strategy and Sustainable Supply Chain Management. Since the interviews were conducted to get a broad view on their sustainability activities and decision-making process, only the relevant findings within the scope of the instrumental logic and the institutional theory will be discussed. Important findings that are out of the scope of our theoretical frame will be addressed in the discussion. At the end of each section the results will be summarized in a table (4.1 & 4.2) to create a structural overview.
4.1. LCA studies
Two LCA studies were found that filled the requirements stated in the methodology section. The players researched in both studies were the same as used in this research. Thoma et al. (2012) found that the total environmental impact, in terms of CO2 equivalents, of the supply chain of milk was unequally distributed over the players. The feed production stage accounted for approximately 21% of the total environmental impact, while the milk farming stage accounted for 51% of this impact. A different unequal distribution was found for the pork supply chain by Rougoor, Elferink, Lap, & Balkema (2015). In this chain the feed stage accounted for 65,5%, while the farm stage accounted for 28,7% of the total impact. This implies that in both chains the first two players account for the largest environmental impact, while the processors, retailers, and consumers together have a marginal impact. This implies that from an environmental perspective, sustainability initiatives should focus on the feed and farming stages.
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4.2. Corporate sustainability strategy
This section will present the findings that are all related to the internal company factors that shaped their actions regarding sustainability. The headings refer to the 1st order concepts found during the coding process (see Appendix B for the coding tree).
4.2.1. Sustainability philosophy
The commonly found perspective on sustainability was that the concept was viewed as complicated and considering out of several aspects or dimensions. Nevertheless, the meaning of sustainability differed across all interviewees. For example, the pork and milk farmer viewed sustainability from economic perspective, where extra cost enquired would make the company reluctant on pursuing certain actions. “I think that sustainability is a wonderful concept but it
should earn me some money as well. I look at sustainability from an economic point of view. If it is sustainable and it only costs me effort and it does not earn me anything, then I am not interested.” – Milk farmer
A different mindset was found in the organic chain for both the pork and milk farmers. Sustainability was viewed with a mindset of reducing the environmental burden. If the financial means were presented, the company would be willing to invest, even if a clear financial benefit was not present. “We need to protect the planet. In general, we try to take our responsibility. It fits
with our visions and ideas.” – Organic milk farmer.
The processing firms again were found to have a clear sustainability policy on paper addressing the three dimensions of sustainability. Besides that, the processing firms saw sustainability as a shared responsibility in the supply chain. “That doesn't mean that we don't have
a responsibility there [farm level], because as a supply chain you have a shared responsibility there.” – Pork processor. On top of that, the processing firms considered environmental problems
outside of their own activities as being within their scope. “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.” – Organic milk processor.
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concept, but for example also on environmental aspects in the feed such as the soy.” – Regular
retailer. However, the retailer believed that for the pork and milk products the biggest steps have already been taken on sustainability: “I think the big steps on sustainability are already behind us,
so we made big steps 5 to 10 years. […]. We had more progress in the past than we will in the future” – Regular retailer.
4.2.2. Sustainability knowledge
The knowledge regarding the environmental burden differed quite substantially between the different interviewees. All the processors and retailers in both the pork and milk chains had accurate knowledge regarding the fact that the biggest impact was not made in their activities but at farm level or at the feed production level. “When we talk about environmental impact, logistics
also, but when you compare it to milk production 85% of the impact is made at the farm and maybe 5% is packaging, 5% is logistic, 5% production site.” – Organic milk processor.
At the farm level, the accurate knowledge regarding the environmental burden was not present. In general, the interviewed farmers did not have a clear notion which party in the chain contributed most to the total burden of the chain. When being asked which activities or sources had the highest environmental impact, very diverging answers came up. The organic milk and pork farmers believed that the use of gasoline for the tractors and the electricity, had the highest impact on the environment. In the regular chains the pork and milk farmer did pointed towards the methane of the cows and the production of the feed. However, they did not have a clear idea how the emission of methane compared to the emissions of electricity and gasoline use, or how their own environmental impact was compared to other players.
4.2.3. Sustainability measurement
Firstly, at farm level, the impact of their own activities or their sustainability actions was not measured at all (regular pork farmer), or only in financial terms (regular milk farmer and organic pork farmer) “No, not really. Yes, in the records it will come forward in the financial outcomes,
but other than that, not really.” – Organic pork farmer. If they even wanted to measure their
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plastic and glass recipients... what is better for environment? We don't know.” – Organic milk
farmer.
For the processors, the measurement of sustainability was logically at a higher level than at the farm level. This meant for instance that in the Corporate Social Responsibility reports the environmental impact was quantified and the progress in recent years was reported. Nevertheless, when comparing the pork and milk chain, differences in measurement were found. The pork processor reported in the annual reports quantitative figures regarding their own water and electricity usage, and the decline in recent years. Nevertheless, in the entire report no quantitative measurement was used for the environmental impact at farm level or in the rest of their chain. On the other hand, the milk processor reported extensively regarding their sustainability activities, and several key figures measured the environmental impact at farm level in the form of greenhouse gas emissions.
Likewise, the regular retailer reported extensively on their sustainability activities. Different quantitative measures were allocated to environmental sustainability issues. Yet, in terms of the environmental impact the scope was limited to their own activities, which included transportation, energy consumption, cooling, water usage, and waste management. The only environmental indicators related to their supply chain partners were the percentage of certified products.
4.2.4. Sustainability focus
22 philosophy adopted by both farmers, was less extensive farming and focus on restoring/ preserving the biodiversity and soil quality. “In general, it would be better (for the environment) if the soil
would be used less intensively” – Organic pork farmer.
According to their sustainability philosophy, the pork processor believed that their sustainability activities should cover the pork chain and not merely stick to their own business activities. However, they focus their environmental sustainability actions on their own activities in the slaughterhouses and in transportation. When being asked about environmental reductions in the farm level they didn’t feel they could have a direct influence, since their impact on the farms is felt to be limited. “But then it will be more the discussion role as being a partner on the table,
rather than actively implementing something.” – Pork processor.
The milk processor however did have a clear link between the philosophy and focus. They felt the obligation to reduce greenhouse gas emissions produced at the farm level. Therefore, a lot of focus is on educating the farmers in how to reduce their environmental footprint, as well as incentivizing them to act more sustainable. “Yes. Of course. All the attention is on farmer’s level.” – Milk processor. A different focus that started to emerge was to cooperate with their customers (dairy buyers) to decrease the carbon footprint together. This meant that the milk processor started cooperating and discussing with their buyers how to decrease the carbon footprint in the most cost-effective way for both parties. “We start discussing with them "you can do your own investment,
but we can also support you with your objectives”, and then you can make agreements.” – Milk
processor. A similar focus was found at the organic milk processor, yet their actions were more focused on the biodiversity loss rather than on the carbon footprint. Carbon footprint reduction efforts remained focused on their own activities, since they didn’t have the means to measure their chain impact.
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4.2.5. Trade-off thinking
Since sustainability was viewed as a multi-faced concept, several companies within the agri-food supply chains acknowledged the fact that it involved trade-off decisions. Trade-off decisions between the economic and environmental aspects are known to be present in reality. On top of that, certain decisions seemed to require a choice between social and environmental sustainability, as explained by the pork farmer. This was shared by the organic milk processor, who explained that putting cows in the stable is not only more efficient, but would also be more beneficial for the environment. Yet, in the Netherlands there is a tendency to let the cows graze in the meadow as it is better for their natural behaviour. A different example of this trade-off thinking was provided by the pork processor, who stressed that further environmental impact reductions in terms of electricity or water use reductions could be achieved but that would be at the cost of social sustainability factors like health and safety. However, health and safety were considered by them as being more important.
Sustainability philosophy Sustainability knowledge Sustainability measurement Sustainability focus Trade-off thinking
Pork farmer Economic perspective
Unsure which activities contribute most
No measurement Efficiency and green energy Yes Organic pork farmers Reducing own environmental burden Unsure which activities contribute most Economic indicators Switch to green energy. Less soy in feed
Yes
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Milk processor
Environmental and social aspects & Supply chain responsibility Knows which activities contribute most Environmental indicators (CO2 equivalents) Reducing environmental impact at farm level. Yes Organic milk processor Environmental and social aspects & Supply chain responsibility Knows which activities contribute most No, lack of resources. Reducing environmental impact in own activities. Yes
Retailer Environmental and social aspects & Supply chain responsibility Knows which activities contribute most Economic indicators. Focus on private label products No
Table 4.1: Summary of results.
4.3. Sustainable Supply Chain Management
In the below section the supply chain and macro-environmental influences on the decision-making process of companies are presented. The headings represent the different kind of pressures identified in the data. Since consumers fall within the agri-food supply chains, this pressure is discussed in the internal supply chain pressures part.
4.3.1. Macro-environmental pressures
Pressures that were not directly aimed at companies, but were exerted on the macro-environment of which the company is a part of influenced different companies in both supply chains. One of the most important aspects was the pressure for a sustainable diet of consumers. “So, we see more
and more pressure on meat consumption, that is the first step, and the second step will be on dairy consumption. So, we see that if we don't act, the pressure of reduction of animal protein in a sustainable diet will be more and more.” – Milk processor. Although, the milk processor clearly
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4.3.2. External supply chain pressures
In general, little pressure was felt from institutions outside of the milk and pork supply chain, especially on the environmental sustainability side. None of the players actually experienced pressure from the government for environmental sustainability initiatives. Yet, according to the milk processor this pressure is expected to increase in the coming years by for instance the Paris Agreements of 2015: “So, until now it is quite voluntary and because we are a front runner we
know that we have to take steps.” – Milk processor. However, on the social side there were pressure
for sustainability factors like meadow grazing and animal welfare. Yet, the milk farmer did not feel obligated by this pressure to adopt a meadow grazing concept, while the organic milk farmer did not feel pressured due to their organic business model, which already confirmed to the social demands of meadow grazing and animal welfare. This limited external pressure was found to be the case for all organic players.
NGOs were found to be the biggest source of pressure for all players from outside of the chains. Especially in the pork chain this pressure was clearly experienced by the pork farmers and processor. The NGOs put pressure on the pork chain for the social sustainability activities like animal wellbeing, health and quality, not so much for environmental sustainability. Yet, the pork farmer considers the pressure to be unfair: “I think they can say so but they are not the ones being
an entrepreneur, so they don't have the responsibility over a family farm. So, it is really easy to scream and not to do anything.”.
The retailer experienced a decreasing pressure for the pork products in the last years, since the assortment has been altered according to animal wellbeing demands. For the milk products the pressure is expected to increase in the upcoming years. Yet, the expected pressures where again on social aspects like dehorning of the cows, and the decrease in antibiotics use.
4.3.3. Internal supply chain pressures
26 were even seen as a limitation in this process: “If the consumer thinks that it is good enough
[sustainability level], then they are not willing to pay more. If they think that it is a problem, then they want to pay more.” – General retailer. The average consumer is really satisfied with the
sustainability level of the products. Consumer pressures that were felt, were transferred to the processing firms in the form of requirements or cooperation efforts. Since, consumers are in general not willing to pay more, the organic milk farmers felt the main pressure on the price. This pressure was transferred through their wholesaler, where little attention was paid to how the product was produced, as long as they knew that it is labelled as biologic (organic). “So, the
pressure from them is always on price. They don't look at how we produce. They know it is biologic, but that is it and then they want to reduce the price.” – Organic milk farmer. A similar view was
found at the pork farmer, who described the consumer in the following way: “I think many
consumers are quite critical concerning the intensive sectors such as pig meat production, but they are not paying for it and I don't think that is appropriate.”
Although the retailer said to be pressuring the processors, the milk and pork processors did not experience this pressure for environmental sustainability initiatives. Accordingly, the pork processor put little pressure on their chain partners for environmental sustainability. Their pressure on the farmers remained on social sustainability aspects like transparency and animal wellbeing. However, the milk processor did put pressure on their partners/farmers to increase their environmental sustainability activities. This pressure was both in the forms of strict requirements and stimulating and educating pressures. An example of a strict requirement was the prohibition to use genetically modified (GM) feed “The only thing is that we say to our farmers that they are
only able to use concentrate from local produced feed or non-GM feed.” – Milk processor. The
stimulating pressures are in the form of educating the farmers regarding their environmental burden, or stimulating the adoption of green energy solutions at farm level. The plan is that this will eventually evolve in providing them with environmental footprint calculating tools, and incentives to decrease their footprint. Nevertheless, as being a cooperative, this was challenging for them: “So that is challenging because they are the largest contributor to the environmental
27 Macro-environmental
pressures
External supply chain pressures
Internal supply chain pressures
Pork farmer - Disproportionate pressure on social sustainability from NGOs.
Social sustainability pressure from both customers and processors. No environmental pressure felt.
Organic pork farmers
- - -
Milk farmer - NGO pressure, but mainly on sustainability aspects like animal wellbeing and pasture grazing.
Pressure felt from milk processor on social sustainability aspects.
Organic milk farmer
- Increased government
pressure for animal wellbeing and meadow grazing on the dairy sector.
Consumer pressure: price pressure. Price pressure was felt through the organic retailer.
Pork processor Public opinion
regarding sustainability aspects.
Little pressure from
government. NGO pressure is felt, but mainly on social sustainability aspects
Did not feel pressure from inside the chain. Accordingly, put little pressure on farmers for
environmental actions.
Milk processor Pressure for a sustainable diet.
Pressure starts at NGO. Currently pressure from government for
environmental sustainability is low.
Exerting pressure on the farmers. Both strict requirements as well as stimulating pressures for
environmental actions.
Organic milk processor
- Same pressure felt as milk
processor. Yet felt less pressure than the market leader (milk processor).
Felt no pressure from inside the supply chain.
Retailer - Main source of pressure is
NGOs but remain to social sustainability pressures.
Consumer is not very demanding on environmental sustainability. Pressure that is felt is transferred to processors.
28
5. ANALYSIS
In the results section, the data was reported as found within the 2 aggregate dimensions and the LCA analyses. In this section the data will be combined and analysed through the lens of both the instrumental logic and the institutional theory.
5.1 The dominant logic towards sustainability: the instrumental logic
Sustainability should for several players still be inherently linked to financial benefits, and is therefore seen as a means to an end. This decision-making process is in line with the earlier found instrumental logic in literature (Golicic & Smith, 2013; Hahn et al., 2015). This creates a certain limitation on the scope of actions that is considered, since actions that do not bring a financial benefit to the firm are not even considered by these players. Even if the leading cognition towards environmental sustainability is to decrease the environmental burden, firms seem to be led by how initiatives benefit the company. An example was provided by the pork processor, who was working on reducing its environmental footprint. Although their view on sustainability was open and considering multiple practices to reduce their environmental footprint, when investment decisions had to be made initiatives with clear benefits for the company were much easier approved by the management board. A different example is the fact that the retailer focused its initiatives solely on the private label products, since they are linked to their own brand and hence can enhance the firm value. This signals that even if environmental sustainability is seen as an end on itself, the benefit for the firm plays a crucial role in the final decision.
29 put great importance on the soil fertility and the biodiversity of their lands. However, this resulted in a lower yield and more labour intensity. This was found to be contradicting to the logic found at regular farmers, who preferred efficiency and ease of work. These seem to be important factors that make regular farmers unwilling to adopt an organic production method.
At the level of processors, a different element seemed to influence the decision-making process. In terms of logic, the milk, organic milk, and pork processor had the same scope and mindset regarding sustainability. Nevertheless, the milk processor focused its environmental sustainability actions more on the farm level activities (supply chain focus), while the pork processor focused its actions on their own activities of distribution and processing (focal company focus). An explanation for this difference in focus, and hence one of the main differences between the pork and milk chains, is the difference in measurement of environmental sustainability. The measurement of environmental sustainability was found to be a major complicating factor. The milk industry seems to be ahead of the pork industry in terms of environmental sustainability measurement, and this was acknowledged by the pork processor in the interviews as well: “Yes,
they are a bit ahead of us I think [the milk industry].”. Reasons for this backlog of the pork industry
were provided by the pork processor as well. Firstly, the pork processor was still in the initial stages of finding a proper and objective measurement approach for the environmental footprint, while the milk processor was in the stage of implementing the measurement tool. Secondly, the measurement is thought to be more difficult than in the milk chain due to the more decentralized feed supply of the farmers. This uncertainty around the measurement of environmental sustainability seems to influence the pork processor by making them hesitant about focusing on actively trying to decrease the environmental burdens outside of their own activities. This is in line with the idea of the instrumental logic, where (financial) benefits to the firm seem to be a decisive factor in the adoption of sustainability initiatives (Gao & Bansal, 2013). Environmental sustainability measurement seems to reduce the uncertainty around what benefits certain initiatives may bring to the business. Hence, initiatives will be easier implemented.
30 pork processor indicated that there were occasions where sustainability initiatives would either satisfy social sustainability or environmental sustainability needs. It was found that social sustainability factors such as health, quality, and animal wellbeing would be favoured over environmental sustainability factors, when having to choose between them. This means that for certain companies, social sustainability is prioritized over environmental sustainability as they are apparently more sensitive to this issue. Explanation for this can be found when assessing the different external pressures in the next section.
5.2 Institutional theory
According to the milk processor, the pressure for a sustainable diet is starting to evolve. In a recent report of the Dutch government the environmental burden of the food consumption in the Netherlands was presented. There it came forward that the largest burden on the environment was placed by the consumption of meat and dairy products (Valk, Hollander, & Zijp, 2016). Since both agri-food chains in this study produce such products, the pressure on these chains will most likely evolve in the coming years. This could be viewed as a normative driver, since the consumers will be encouraged to eat less dairy and meat products, and hence companies within these chains will be forced to decrease the environmental footprint of their products. This development can lead to normative isomorphism, if companies perceive this as a social obligation (Zhu & Sarkis, 2007). Nevertheless, except for the milk processor, no other company seems to feel this as a normative pressure as of this moment.
On top of that, the results show that the interviewed companies experience overall, little pressure for environmental sustainability. As of this moment, the government was not even perceived as a source of pressure when it came to environmental sustainability. With the Paris Agreement of 2015, government pressure is expected to increase. This resulted into the milk processor preparing itself for this future pressure. Yet, as of this moment, other players do not seem to be pressured to act in advance. This could clearly be seen as lack of pressure since in earlier research it was found that the government is an important player to promote voluntary environmental management practices (Sarkis et al., 2011).
31 retailers stated that they do pressure its suppliers to become more sustainable and adopt sustainability practices. This is apparently not perceived by the processors and farmers as pressure. When considering also social sustainability pressures, a dominant player in both chains can be identified. Both the pork farmer and milk farmer experienced social sustainability pressures from their respective processors. Nonetheless, from an environmental sustainability side, these were rather limited. The milk processor has its attention on farm level activities for reducing the environmental footprint of the chain, however this did not yet result into significant pressures felt by the milk farmer. The environmental pressure that was mentioned coming from the milk processor was a stimulating demand for reducing the energy consumption or switching to renewable energy, however this was not a hard requirement but on voluntary basis. In the pork chains, no environmental sustainability pressure was felt from within the supply chain. Therefore, there seems to be a lack of coercive pressures to drive further environmental sustainability adoption in both agri-food chains.
Social sustainability pressures were felt to be higher than the environmental sustainability pressures for all interviewed companies. This comes forward from several company reports as well. In these reports the companies presented their focus by determining what is important to them as well as the important sustainability factors of their stakeholders in the form of a materiality matrix. Materiality matrices are used to present issues that are deemed to be ‘material’ or ‘important’. These matrices are therefore used for decision-making purposes (Eccles & Krzus, 2014). For all companies, the most material sustainability aspects where on the social side of sustainability like quality and safety, animal wellbeing, ethical behaviour and integrity, and transparency. When this finding is linked to the finding that trade-off decisions are present between environmental and social sustainability actions, it seems that social sustainability initiatives are prioritized over environmental sustainability initiatives.
32 that pressure starts at the NGOs and is later adopted by consumers, the NGOs can also be classified as being a source of normative pressure. However, as with the consumers, the NGO pressures were mainly on social sustainability iniatives and very limited pressure from them was felt for environmental sustainability initiatives.
33 Feed
production
Farming Processing Retailing Consumer
LCA Pork 65,5% 28,7% 2% 1,4% 2,4% Pork farmer 40% 20% 10% 10% 20% Organic pork farmer 35% 35% 10% 10% 10% LCA Milk 21% 53% 6% 15% 6% Milk farmer 30% 20% 20% 20% 10% Organic milk farmer 10% 25% 20% 25% 20%
Table 5.1: Environmental impact distribution across the milk and pork chain measured in CO2 equivalents according to LCA results and believed by farmers (LCA results: Rougoor et al. (2015); Thoma et al. (2012)).
Enteric Methane Manure management Electricity Gas/Fuel LCA pork 17,6% 56,5% 20% 5,9% Pork farmer 20% 35% 20% 25% Organic pork farmer 50% 30% 15% 5% LCA milk 48,8% 44,3% 4,2% 2,7% Milk farmer 20% 30% 10% 40% Organic milk farmer 30% 15% 25% 30%
Table 5.2: Environmental impact distribution at farm level measured in CO2 equivalents according to LCA results and believed by farmers (LCA results Rougoor et al. (2015); Thoma et al. (2012)).
34 institutions, while this is not necessarily the case. Organic production might in some way even be seen as burden shifting as described by (Sala et al., 2017), since the total environmental impact has not lowered, but merely shifted towards other impact factors.
Besides that, due to the earlier described consumer pressure, the regular sector is moving towards the organic sector in terms of social sustainability, as was explained by the organic pork farmer: “The regular sector has been looking a lot at the organic sector in terms of animal
wellbeing” – Organic pork farmer. This kind of behaviour can be defined as mimetic behaviour,
35
6. DISCUSSION
The instrumental logic as described in the literature (Hahn et al., 2015; Matthews et al., 2016) was found to be present in the milk and pork supply chains. Especially the companies creating the largest environmental burden in the regular chains (the farmers) seem to view environmental sustainability rather as a means to create value than as an end on itself. On top of that, the relatively low institutional pressure for environmental sustainability did not really seem to affect the decision-making process of firms. The institutional pressures for social sustainability was perceived to be higher, of more importance to several companies and stakeholders, and therefore did had a significant influence on the decision-making process of companies. Yet, there also one of the explanations was found for the fact that environmental pressures were not acted on. Since social sustainability factors were perceived to be more important or material to the involved companies and its stakeholders, trade-off situations between environmental and social sustainability aspects would result into a favour for the latter.
Differences in terms of the decision-making process were found to be present between the cases/chains. The milk chain, and especially the processor in that chain, seemed to be ahead of the pork chain on the measurement of environmental sustainability. For this reason, the milk processor had its environmental sustainability actions more focused on the farm level activities, and hence on the activities that contributed most to the environmental burden of the chain. On top of that, social sustainability pressure was even more important and present in the pork supply chains compared to the milk supply chains.
The organic supply chains seem to adopt a different logic towards sustainability than the regular chains. This different logic did however not result into a better focus of their actions, since the knowledge regarding the environmental impact distribution was not accurate. Additionally, they felt less pressure from institutions to become more sustainable compared to the companies in the regular chains.
36 confirmed by their processors, as they were described in the same way. Third, since the meat and dairy sectors are increasingly pressured to become more sustainable, it is highly unlikely that different food products and their respective chains, which have a lower environmental impact, currently have a higher pressure to become sustainable. Since the retailers, consumers, government and NGOs are also present in other agri-food chains, their pressure is most likely comparable in other agri-food chains or even lower. Lastly, since the Netherlands, as indicated by several of the interviewees, is a front-runner on the aspect of sustainability in both chains, it is expected that studying this phenomenon in a different country would provide even lower institutional pressure and more instrumental logic.
6.1. Limitations and further research
Due to lack of willingness to cooperate with the research, we weren’t able to interview a feed producer. Since a supply chain view was adopted, and feed producers have a large amount of the environmental burden in both agri-food chains (Rougoor et al., 2015; Thoma et al., 2012), this is a limitation of this research. Future research should therefore focus on the role that the feed producer has within the agri-food supply chains. A different methodological limitation was the lack of proper data from the organic retailer, which resulted into a missing perspective in the organic chains. Lastly, the interview with the retailer was postponed on several occasions. This resulted in the interview was conducted over the phone, which made us unable to experience the non-verbal language of the interviewees.
The focus of environmental sustainability in this research has largely been on greenhouse gas emissions or CO2 equivalents. Nevertheless, as was found in the paper by Rockström et al. (2009) and also in the acquired data from the interviews, there are several other boundaries, like the biodiversity loss, land use, chemical pollution, and freshwater use. These also put a significant pressure on the earth’s systems. Although, assessing a firm’s environmental sustainability activities on the basis of CO2 equivalents is a starting point, further research should focus on addressing the other planetary boundaries.
37 be studied more in depth. Second, pressure for animal wellbeing seemed to play a big role in both the milk and pork chain. Future research should focus on agri-food supply chains that do not involve animals, so the decision-making process can be studied without his social sustainability pressure present. Lastly, consumers are not only part of the institutional pressures, but also one of the agents in the supply chain. It was presented by the retailer that consumers are in general reluctant to pay more for sustainable products. Therefore, their role and decision-making process should be studied further.
6.2. Theoretical implications
Adopting a supply chain view allowed us to discover the decision-making process within the agri-food supply chains. By doing so, this research has enriched the literature on sustainable supply chain management. An important addition is the finding that sustainability initiatives are largely driven by pressures from stakeholders, and hardly by internal motivation/logic. Due to the lack of pressure, and the trade-off decisions between social and environmental dimensions, environmental sustainability initiatives are not necessarily top priority in sustainability decision-making. Additionally, the effectiveness of the environmental initiatives was found to be rather low, given the lack of knowledge at farm level about the impact, and the lack of cooperation and coordination between partners on the subject of sustainability.
6.3. Managerial implications
38
7. CONCLUSIONS
This research had the aim to discover how decision-making in and between companies regarding the topic of environmental sustainability is influenced. This led to the following research questions:
1. How does the instrumental logic influence the decision-making regarding environmental sustainability for companies in the food supply chain?
2. How does the institutional theory influence the decision-making in the food supply chain regarding environmental sustainability?
The instrumental logic sets a scope for companies in what is considered when addressing environmental sustainability. This implies that once sustainability is seen as a means to increase value and not as an end itself, the focus will not necessarily be on the initiatives that have the largest benefit from an environmental perspective. The institutional theory clearly shows that external pressures to the firm force organisations to adopt certain practices. Although on the environmental dimension of sustainability the pressure is rather limited, evidence from the social dimension of sustainability shows that when pressure is higher, organisations are forced to adopt sustainability initiatives to comply to those pressures even if that is not in accordance with their instrumental logic. Additionally, it was found that social sustainability initiatives are more important to stakeholders of firms within the agri-food supply chain. Combining this with the fact that trade-off decisions exist between social and environmental sustainability activities, companies tend to focus on social sustainability initiatives. This again seems to limit the possibilities for companies to adopt environmental sustainability initiatives.
40
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