Name: Marleen Veenstra Student number: S3150755
Supervisor: Dr. M. M. Wilhelm Co-assesor: Dr. J. Shin
Wordcount: 13.096
MSc International Business and Management Master’s Thesis
Sustainability in the
Transport and Logistics
Sector: What makes
1 Details
Name: Marleen Veenstra
Programme: MSc International Business and Management
Student number: S3150755
Email: m.veenstra.21@student.rug.nl
Supervisor: Dr. Miriam M. Wilhelm
Email: m.m.wilhelm@rug.nl
Co-Assessor: Dr. J. Shin
Email: j.shin@rug,nl
University: University of Groningen
Faculty: Faculty of Economics and Business
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Sustainability in the Transport and
Logistics
Sector:
What
makes
managers prioritize CSR?
Abstract
The existing research on the influence of cognitive frames on CSR activities does not address differences in how managers prioritize sustainability goals and how managerial sensemaking affects this process. Using a single case study of a transport and logistics firm, this study seeks to assess to what degree managers prioritize sustainability, building on the concept of issue salience. Furthermore, internal and external drivers are identified which affect managers’ sensemaking perspectives. The study identifies two management categories based on the salience of sustainability.
Visionary managers prioritize sustainability to an equal degree as cost-efficiency and
quality of transport, while managers who prioritize cost-efficiency and quality of transport above sustainability are considered classical managers. Visionary managers value the degree of environmental impact they make, while classical managers value the cost-effectiveness of sustainable practices. This results in different approaches towards implementing sustainability goals. Several aspects explain the differences in managerial sensemaking that have been identified. Managers perceive the drivers to focus on sustainability differently, which results in different responses towards these drivers. Furthermore, managers differ in their perceived pressure to act instantly on these drivers, indicating some perceive sustainability as a long-term goal. Additionally, previous experience affects the degree of environmental impact that managers expect to be able to achieve and there is a difference in aspiration to become a leading company on the concept of sustainability. Cognitive frames affect to what extent sustainability is prioritized.
3 Table of contents Details... 1 Abstract ... 2 1. Introduction ... 4 2. Literature review ... 6
2.1 Firms’ and manager’s motivation to engage in CSR ... 6
2.2 Sense-making and framing of CSR costs and benefits ... 8
3. Methodology ... 11
3.1 Research context: CSR challenges in the transport and logistics sector ... 11
3.2 Research design ... 13
4. Results ... 17
4.1 Implications of different perspectives ... 17
4.2 Factors influencing sensemaking perspectives ... 23
4.2.1 External drivers ... 23 4.2.2 Internal drivers ... 26 5. Discussion ... 36 6. Conclusion ... 41 6.1 Managerial implications ... 42 6.2 Limitations ... 43 References ... 44 Appendices ... 50
Appendix 1 – Interview questions ... 50
4 1. Introduction
In recent years, the focus on corporate social responsibility in the transport and logistics sector has increased due to a growing awareness of the impact of the industry on the environment and human health. CSR is a broad concept, but in the logistics sector companies often focus on the sustainability of their processes which mainly encompasses the reduction of greenhouse gasses. Transport is one of the fastest growing sectors in terms of the consumption of energy and the production of greenhouse gasses (GHGs) in the EU (European Environment Agency, 2018). The sector is responsible for about 20% of global carbon emissions (WorldBank, 2014). Many firms in the transport sector are aware of this problem and try to innovate and improve their processes to be as environmentally friendly as possible. However, despite the attention and awareness of the problem, transport GHG emissions are actually increasing compared to the 1990 levels (European Environment Agency, 2018).
Although firms are increasingly aware that they need to decrease their impact on the environment, there is little evidence on the underlying reasoning that leads some managers choosing to focus on sustainability goals, while others do not. Considering the cost savings that arise from lower energy and fuel use of reduced CO2 emission, there is a clear economic incentive. Previous studies show negative effects on the financial performance of companies with problems regarding their social and environmental practices (e.g. DiSegni et al., 2015; Yawar and Seuring, 2018). Against this background, it is surprising that many transport and logistics companies choose to not to focus on CSR, and companies claiming to be ‘green’ do not always actively pursue sustainability goals. The degree of emphasis managers assign to sustainability in addition to economic goals can therefore be questioned. This problem can be related to managerial sensemaking, which touches upon the fact that it is known that there are sustainability-related issues in the logistics sector, but there are multiple elements that influence managers’ decision-making whether to focus on those issues or not.
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Murray & Montanari, 1986). Studying the mental frames and sensemaking processes within which CSR is embedded, may provide a better view of CSR (Basu & Palazzo, 2008). As CSR is a complex issue, firms need the support of external stakeholders, such as governments, in order to respond successfully to seemingly contradictory demands to address CSR problems (Calton and Payne, 2003).
Much of the current research on CSR in the transport and logistics sector focuses on sustainable supply chain management and is mainly about environmental topics, safety and sustainability (Carter et al. 2019). Industry specific research on sensemaking and framing of CSR in the transport and logistics sector is lacking. This indicates that there is no good idea on why managers in the transport and logistics sector choose to actively engage in CSR or not. Therefore, this research aims to answer the following question:
What accounts for differences in managers’ level of prioritization of sustainability goals? What is the role of managerial sensemaking in this process?
6 2. Literature review
2.1 Firms’ and manager’s motivation to engage in CSR
Numerous studies have considered the positive outcomes of CSR. CSR can lead to performance enhancing benefits, such as reduced costs of contracting (Jones, 1995), increased willingness to pay by consumers (McWilliams & Siegel, 2001) or enhanced stakeholder influence capacity (Barnett, 2007). Several scholars argue that CSR leads to reputation gain (Brammer & Millington, 2005; Gardberg & Fombrun, 2006) or increased reliability, stability and credibility (Doh, Littell & Quigley, 2015), which can reduce the ‘’cost of doing business abroad (Eden & Miller, 2004; Sethi & Judge, 2009). Such information can boost perceptions of social acceptability, or ‘’legitimacy’’ (Kostova & Zaheer, 1999) of firms as seen by local stakeholders. This is important for international firms due to the ‘’liability of newness and foreignness’’ they face in overseas markets (Marano et al., 2016). Porter and Kramer (2002) claim CSR to be a source of competitive advantage, where strategic philanthropy complements corporate goals. Nevertheless, not all scholars find positive outcomes when researching CSR activities. Studying the relationship between Corporate Social Responsibility and financial performance often leads to inconsistent results, due to the complexity of the relationship between the CSR and financial performance (Golrida et al., 2019). The complexity around CSR may arise due to the tensions between economic, environmental and social issues, resulting in complications for managers responding to these issues (Sharma, 2000).
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(Husted, 2003). Motivation driven CSR focusses more on the extrinsic reasons for a firm to engage in CSR activities, such as enhancing corporate reputation (Fombrun, 2005), anticipating on legal sanctions (Parker, 2002), managing risk (Fombrun, Gardberg & Barnett, 2000; Husted, 2005) and gaining customer loyalty (Bhattacharya & Sen, 2001; 2004).
Despite the significant contributions to research on CSR, little research has focused on the relationship between internal institutional determinants comprising of mental frames and sensemaking processes and CSR (Campbell, 2006; Greening & Gray, 1994; Jones, 1999). A similar point of view is taken by Durand, Hawn & Ioannou (2019), who argue that prior research mostly focusses on the external environment of organizations (Greenwood et al. 2011), as it draws upon institutional and resource-dependence theories (Oliver, 1991). Greenwood et al. (2011) reviewed work on how organizations explore and respond to seemingly incompatible expectations, but hardly any work within their research focuses on internal mechanisms for the motivations and the ability of organizations to respond to situations where firms experience various pressures from several institutional demand, while Oliver (1991) indicated that it takes both willingness and ability to respond to normative pressures that underly organizational responses.
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The difference why a firm chooses to respond to some issues but not others arises, as not all normative issues are assessed as equally salient and because resource mobilization aimed at addressing the issue is evaluated by costs and benefits analysis that is specific to the firm and the problem (Durand, Hawn and Ioannou, 2019). As resources are limited, there is a competition for internal resources and a fight for market position, which affects whether and how a firm implements responses to normative expectations. These tensions suggest that resource mobilization in order to address an issue generates costs and benefits for the organization, and these decisions are influenced by the way the decision makes perceive those costs and benefits at the time of the decision (Sprinke & Maines, 2010).
A similar view is taken by Muller (2018) who researched how corporate social responsibility affects financial performance as firms expand internationally. Similar to Durand, Hawn & Ioanna, this research takes a cost-benefit approach and argues that the costs of CSP outweigh the benefits when levels of internationalization are low, but when levels of internationalization are high, benefits outweigh the costs, leading to a U-shaped relationship. The concept of sensemaking needs to be further examined to uncover how managers perceive the willingness and ability of a firm to prioritize sustainability goals. .
2.2. Sense-making and framing of CSR costs and benefits
CSR’s core idea is that no company can afford to act in opposition to or isolation form society’s problems (Matten and Moon, 2005). It implies behaviour that includes a variety of social obligations towards stakeholders such as consumers, employees and other in the wider society (Habisch and Jonker, 2005). However, these phrases suggest that CSR should be the main focus for all firms and we know that this is not true in reality.
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with highly ambiguous signals, the decision-making process therefore highly depends on the frame managers use (Bogner & Barr, 2000; Hodginkson & Johanson, 1994; Kaplan, 2008). Sustainability confronts managers with situations in which they simultaneously need to address economic, but also environmental and social outcomes (Elkington, 1997; Gao & Bansal, 2013). Therefore, it is critical to understand which cognitive frames managers use to process issues they encounter with corporate sustainability decision making (Andersson & Bateman, 2000; Maon et al., 2008; Sharma, 2000; Sharma et al., 1999).
Considering the existing critique of an emphasis on institutional and resource-based views, a potentially richer description of CSR might emerge from studying internal determinants, such as the mental frames and sensemaking processes within which CSR is embedded (Basu & Palazzo, 2008). Sensemaking has been described as ‘’ a process by which individuals develop cognitive maps of their environment’’ (Ring & Rands, 1989: 342). In this view, activities such as CSR are seen as resulting not directly from external demands, but from organizationally embedded cognitive and linguistic processes. The mental models or frames that underlie organizational sensemaking influence the way the world is perceived within the organization, as well as critical decisions with respect to perceived external and internal demands.
In order to associate the concept of organizational sensemaking to its influence on an organization’s CSR activities, Basu and Palazzo (2008) propose a process model of organizational sensemaking explaining how manager think, discuss and act. They identify a firm’s CSR character consisting of three main dimensions: cognitive, linguistic and conative, where the cognitive process includes what firms think, linguistic processes comprise of what firms say and conative processes encompass how firms tend to behave. The authors note that it could be worthwhile to investigate if the sensemaking dimensions predict the nature of sustainability of an organization’s CSR, so if there is a relationship between how an organization thinks, discusses and prepares to acts and the type of CSR outcome it generates. The pattern of organizational sensemaking process dimensions may have more explanatory power than investigating an outcome of CSR.
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frames: a business case frame and a paradoxical frame. In their research, their cognitive framing perspectives add individual-level factors to the concept, where other scholars have focused on organizational factors (Plambeck & Weber, 2010). The business case frame is based on an alignment logic, where managers deal with ambiguities by trying to eliminate tensions and seek situations with a fit between various factors (Smith & Lewis, 2011; Smith & Tushman, 2005). The paradoxical frame stipulates that tensions and inconsistencies are highly salient in complex organizations, indicating it is impossible to eliminate tensions (Smith & Lewis, 2011; Smith & Tushman, 2005). Managers accept tensions by using paradoxical thinking and accommodate conflicting yet interrelated economic, environmental and social concerns. ( Gao & Bansal, 2013; Smith & Lewis, 2011; Smith & Tushman, 2005). Both frames represent the end points of a continuum, where one frame aligns environmental and social aspects with the economic dimension (business case frame) or by accepting the interrelated, but contradictory nature of these three aspects (paradoxical frame). The business case frame focusses mainly on economic attributes, where the paradoxical frame aims for a combination of economic, environmental, and social attributes (Hahn et al., 2015). In reality, the actual frames of decision makers will lie between the two end points (Doty & Glick, 1994). Thus, actual frames consist of different combinations of the underlying constructs of the business case frame and the paradoxical frame.
11 3. Methodology
3.1 Research context: CSR challenges in the transport and logistics sector
The EU increasingly expects firms to act upon CSR related issues, such as decreasing GHG emissions. The European Commission (2011, p. 6) has defined CSR as ‘‘the responsibility of enterprises for their impacts on society.’’ It has also emphasised CSR’s importance for achieving the objectives of its Europe 2020 strategy, noting that it ‘‘can help to shape the kind of competitiveness model that Europe wants.’’ In order to achieve emission reduction, several programs exist where firm can cooperate, track their performance on CSR related goals and share knowledge. Lean & Green is an example of a CO2 reduction program for the logistics sector. It consists of over 500 participants in 9 European companies who all strive for zero emission in their own way (Lean & Green, n.d.). It is a voluntary program that focusses on innovation and co-creation towards a sustainable transport and logistics sector. It helps companies anticipate on changing laws and regulations. However, the Lean and Green project mainly focusses on efficiency, but neglects the option of using different modes of transport for the purpose of GHG emission reduction. According to the White paper (European Commission, 2011), multimodal transport is the current answer to sustainable transportation.
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A well-known alternative for using fossil fuels are electric cars. However, electrification of truck fleets poses several drawbacks in the transport sector. The electric truck currently exist, but the battery is not compatible for long-distance routes. Even though there are electric trucks with a range up to 300 kilometres, the problem is that loading the battery requires more time than refuelling and loading stations are not extensively available. The benefits of electric trucks are that they have low noise, the usage is emission free and the variable costs per 100 kilometre decrease from €46,10 to €5,70. However, electric trucks are currently a significantly larger investment compared to diesel trucks. Electrification would decrease variable costs, but increase fixed costs (Emoss, n.d.).
A problem that will remain by focussing on road transport is congestion. Congestion occurs when demand for space exceeds the available supply, and the rate of vehicles wishing to travel exceeds the capacity or ability to provide acceptable travelling conditions (Lee, 1991). Congestion is a concern especially on the road and in the sky, imposing additional costs on firms. Infrastructure shapes mobility and no major change in transport will be possible without a reliable network and increased intelligence. The challenge is to diminish the dependence on oil within transport systems, without sacrificing efficiency or comprising mobility. In order to achieve GHG reduction goals, there is a need to use less and cleaner energy, enhance the use of modern infrastructure and reduce environmental impact. The White paper by the European Commission (2011) describes several actions on how to achieve this, including improved energy efficiency of vehicles across all modes, developing sustainable fuels and propulsion systems, optimising performance of multimodal logistics chains and using transport and infrastructure more efficiently.
13 3.2 Research Design
A single case study method was used as the basis of this research. Simons (2009) defines a case study as: ‘’an in-depth exploration from multiple perspectives of the complexity and uniqueness of a particular project, policy, institution, program or system in a ‘real life’ context’’. This research seeks to understand how decisions regarding sustainability are made with the influence of different managerial perspectives. The study aims to perceive thoughts and underlying frames, which are complex social phenomena that should be studied using a case study method in its specific and authentic context (Jonker & Pennink, 2010).
Case studies can have an exploratory, descriptive or explanatory nature (Yin, 2003). As there is little evidence on why managers differ in how they pursue sustainability goals and how sensemaking plays a role in this process, the study is both exploratory and explanatory in its nature. Furthermore, this research complies with the criteria established by Yin (2003) to determine whether a case study is the correct approach. The phenomena should be studied in their proper context and the researcher should not be involved in the case, and not exert influence on the context. The study tries to comprehend the phenomenon of managerial sensemaking and how this influences persuasion of sustainability goals and thus, seeks to answer a ‘how’ question. A case study design is therefore appropriate as it studies sensemaking perspectives and frames, which are dynamic and change over time. Personal interviews are conducted to attain evidence regarding different sensemaking perspectives on sustainability within a firm. Studying a single case will allow for an analysis of specific differences between managerial sensemaking perspectives and the implications these differences have within the firm.
Case selection
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The case firm was selected on its activity in the transport and logistics sector and network relations of the researcher, giving access to the managers included in the research. The case firm is a transport and logistics company founded in 1880, when they were distributing bicycles from manufacturers to shopkeepers. The company has grown towards a transporting company focussing on efficient transport solutions by making use of multimodal transport and offer their services throughout Europe. The firm offers several modes of transport to their customers, including road transport, sea transport, inland waterways and rail transport. The company currently has approximately 350 employees, is located in the Netherlands and owns a warehouse and a container terminal. Their sustainability goal is to transport CO2 neutrally by 2049, but their sustainability strategy on how to achieve this goal has to be further developed. Regardless, the firm markets itself as a sustainable company by being member of the Lean & Green project and shows affinity with the environment as the company colours have been shifted from red and orange to green.
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The purpose of this research is to investigate different sensemaking perspectives and by what means that influences how manager prioritize sustainability, indicating managers should represent a variety of perspectives and roles within a transport and logistics firm. Table 1 shows an overview of the managers included in the study, with a description of their role within the firm.
Table 1: Overview of managers per June 2020 (derived by the author) Interviewee number 1. 2. 3. 4. 5. 6. Interviewee’ s latest role in the company CEO General Manager Barge & Terminal General Manager Internation al General Manager Benelux Trade Manager Sales Manager Internation al Member of Board of Directors
Yes Yes Yes Yes No No
Total time active in the company 2 years, 6 months 2 years, 6 months 2 years, 5 months 2 years 2 years, 8 months 11 months Currently active in the company?
No No No Yes Yes Yes
Data collection
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Appendix 1. However, as this research was identified to have an explorative nature, new themes were allowed to emerge during the interviews.
Due to the influence of the Corona virus at the time of data collection, the interviews did not take place face-to-face. Virtual modes of communication therefore replaced face-to-face contact. All interviews were held through videoconference, using programs such as Skype and Teams. All interviewees were requested permission for audio recording the interview, which allows for full engagement with the interview. Additionally, secondary data was gathered in the form of reports and information available from public resources. The use of secondary data increases reliability and validity of the single-case study and provides in-depth understanding of role and activities of the interviewees.
Data analysis
Data analysis was performed based on audio recordings of each interview. Each interview was transcribed in order to apply the coding method in order to analyse the derived transcripts. The coding method applies predetermined codes to analyse the content of the interview (Myers, 2009). The initial coding list was developed by selecting subjects from the literature review that were discussed during the interviews. The nature of this research allowed new codes to emerge during the coding process. Codes that were less interesting or did not capture the research question were deleted in order to focus on the most outstanding findings. A list of the final codes can be found in Appendix 2.
17 4 Results
In order to illustrate how managers’ ambition to prioritize sustainability differs and how sensemaking plays a role in this process, a single case study with managers that work(ed) for a transport and logistics company based in the Netherlands were selected to uncover their perspectives on the concept of sustainability. In the beginning of 2020, the board of directors separated. Among the interviewees were three managers who are still active in the firm and three managers who were shareholders of the firm, but have left the company. The remaining shareholders are not active in the firm’s operations.
In this section the findings from the interview conducted will be presented. The most remarkable points that indicate the perspective of the particular managers will be discussed, followed by an analysis in order to uncover the differences and similarities between the managers and if their perspective played a role in who continued to work for the firm and who left.
4.1 Implications of different perspectives
Difference in prioritization of sustainability goals
A clear difference in the prioritization of sustainability goals can be observed. Although all managers acknowledge the importance of reducing GHG emissions, a difference can be perceived in their issue salience. Three targets were identified that were deemed important by all managers: sustainability, cost efficiency and quality of transport. A shift has been perceived in the prioritization of sustainability compared to cost-efficiency and quality of transport.
‘’In the beginning of 2000, a focus on sustainability was nice to have. We, as a multimodal company, had to convince the industry of the importance and possibility of using modes of transport other than road transport.’’ (interviewee 1)
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remain to prioritize costs and quality over sustainability. Some managers are convinced that compliance to one target does not impair the other targets.
‘’The beauty of transport is that quality of service, reduction of cost price and reduction of environmental impact can go hand in hand.’’ (interviewee 3)
However, other managers are not convinced that prioritizing sustainability equally to costs and quality is feasible for the company.
‘’ Sustainability is good, but it needs to yield something’’ (interviewee 4)
‘’ We use the train where possible, but we transport mainly by road. That way, we focus more on the reliability of our product than that being green
predominates.’’ (interviewee 6)
This results in different ways managers prioritize sustainability. Managerial sensemaking influences how issue salience is perceived. Mental frames influence managers’ perceived ability to prioritize all three targets or whether that is too complex. A focus on sustainability can be divided in two groups: degree of impact and efficiency. Managers with a focus on the degree of impact value the size of the impact they make. This would imply a change in processes that requires a larger investment, but also has a larger impact. An example would be to transition from road transport to rail transport, which results in more impact compared to lean projects and efficiency. These managers are committed to ensure their firm performs as sustainable as possible and are not instantly satisfied when some degree of impact is achieved.
‘’What matters to me, when you invest: how much impact do you make? Are you sure the million you invest could not make more impact when you invest it differently?’’ (interviewee 3)
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‘’We try to not drive a kilometre too many. That is costs, but also environment.’’ (interviewee 4)
The two types of approaches towards sustainability shows how the commitment to decrease GHG emission diverges among managers. A difference can be perceived in the degree to which a manager is content with sustainable practices that are fairly common and a managers who aim to decrease GHG emission to an exceptional degree, focussing on all points of improvement. The perceived ability to successfully implement sustainable projects without affecting the quality of transport seems to be of influence.
‘’When internalizing rail transport, you can make big money when you manage it well and have enough volume. However, managing the train can be a pitfall, as you need to make sure it is reliable.’’ (interviewee 2)
The financial results of the case firm have not been optimal for several years. Managing rail transport internally was an aim to improve financial results. However, this project was not managed properly, which resulted in missed deadlines and increased costs. Due to the difference in vision on how the firm should continue, several managers left the company. After the split in management, the rail project was discontinued due to the negative prospects of the project. The consequences of poor transport quality poses a reason for several managers to prioritize sustainability to a lesser extent in the short run.
‘’The current management has a smaller focus on sustainability, but that is also due to the circumstances. We first need to regain trust of our customers and meet their expectations, which currently involves road transport.’’ (interviewee 6)
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‘’I would like to give more attention to decrease of fuel consumption in the future.’’ (interviewee 4)
‘’I’m not sure if the current managers have the same environmental standards in the long run as the previous management.’’ (interviewee 6).
The long-term vision of managers with a focus on the degree of impact involves a focus on innovation that introduce new methods of sustainable transport.
‘’ In the long-run, a sustainable solution for heavy transport would be hydrogen power, but that is not yet properly developed.’’ (interviewee 2)
Examining these results, managers prioritizing sustainability, cost-efficiency and quality of transport to an equal degree concentrate on the degree of impact they make. This research identifies this group of managers as ‘visionary’. Interviewees 1, 2 and 3 can be observed to belong to this group of managers. Interviewees 4, 5 and 6 can be categorized as managers who prioritize costs and quality of transport and focus on efficiency as sustainable practices, which combines cost-effectiveness with an emission reduction. This group is identified as ‘classical’ and represents managers who acknowledge the importance of sustainability, but focus on aspects of doing business that have been prioritized longstanding, such as costs and quality. This does not imply that visionaries do not make use of efficiency to accomplish their goal, but combine efficiency with more radical investments. A list of representative quotes for each management category is included in table 2.
21 Table 2: Representative quotes derived from the interviews (derived from
author)
Visionary Classical
Issue salience ‘’The beauty of transport is that quality of
service, reduction of cost price and reduction of environmental impact can go hand in hand.’’ (interviewee 3)
‘’ We are not working so actively on rail transport, because it is currently not the most profitable.’’ (interviewee 5)
‘’ We use the train where possible, but we transport mainly by road. That way, we focus more on the reliability of our product than that being green predominates.’’ (interviewee 6)
Cost-effectiveness
‘’The train certainly makes money, because you can use very competitive pricing. It is certainly no more expensive and in some cases even cheaper than doing it by road. If you would convert your entire fleet to hydrogen trucks. I don’t even need a calculator for that, I can already tell you that you will not earn anything, but that it will cost you a lot of money. It depends on what you do to become more sustainable, you have to look at that per case, but there are certainly sustainability models that generate money.’’ (interviewee 2)
‘’if you look at lean, waste or collaborative projects, it can make money as well. Then you serve the environment and your own wallet.’’ (interviewee 4)
Quality of transport
‘’Rail transport had a bad image, as it was unreliable. Short sea transport also had a negative reputation, as it was slow. The reputation of these modes of transport is slowly changing.’’ (interviewee 1) ‘’A reliable service needs to be ensured. Otherwise, you will lose all customers that you attracted with your sustainable practices.’’ (interviewee 2)
‘’When we had the train, reliability was not good. So you can have a green product, but that’s not all that is important. What we need to do now is regain our customers’ trust and comply with agreements. That is less green. So, yes, green is our philosophy, but we cannot always achieve this.’’ (interviewee 6)
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‘’What’s good for our money can also be good for the environment and the other way around. When this is out of balance, we never do it.’’ (interviewee 4)
Degree of impact
‘’ The transition from road to rail leads to a CO2 reduction of 50%, but with a fairly small investment, you can ensure that the energy used by that train originates 100% from sustainable sources, such as wind energy or hydropower plants.’’
(interviewee 3)
‘’We could do more on the concept of sustainability, but we also make use of train connections. It does not make much sense to look at that, because that is already a very sustainable solution’’ (interviewee 5)
Short-term focus
x ‘’We’re working very hard to get the basic
processes and financial results in order’’. (interviewee 5)
Long-term focus ‘’ In the long-run, a sustainable solution
for heavy transport would be hydrogen power, but that is not yet properly developed.’’ (interviewee 2)
‘’I would like to give more attention to decrease of fuel consumption in the future.’’ (interviewee 4)
23 4.2 Factors influencing sensemaking perspectives
The approach to target sustainability and the prioritization of sustainability differs among managers. These differences arise from several drivers that exert a degree of pressure on managers to focus on sustainability and influence their sensemaking perspectives.
4.2.1 External drivers
Customers
The establishment of sustainability projects can happen in several ways. A company can intrinsically determine they want to contribute to lower GHG emissions, but there are few companies who invest without a revenue model resulting from the investment. Instead, sustainability projects are predominantly the result of customer request. These request often result in specific improvements in firm’s processes.
‘’Mainly large multinationals demand a sustainable proposition from their
transporters. If you make use of train transport, you are already sustainable, but often they ask or even prescribe a sustainable first mile and last mile transport as well.’’ (interviewee 2)
First and last mine transport consists of the distance between the factory and the railway station. The train never stops right in front of customers’ factories, resulting in a necessity for some degree of road transport.
Transport and logistics companies are mainly involved in business to business sales. Therefore, transport and logistics firms do not only receive pressure from their direct customers, but this effect resonates to the customers of their customers.
‘’The pressure we receive from our customers heavily depends on their customer relations’’ (interviewee 1)
Nevertheless, not all customers are front leaders of sustainable practices and do not request sustainable transport. Customers can be old-fashioned and prefer modes of transport they are familiar with. Or customers are interested in sustainable transport, but are not willing to comply with higher prices or a longer lead time.
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‘’ Sustainability interests customers, but it is not allowed to cost anything.’’ (interviewee 4)
Managers’ sensemaking perspectives are influenced by these pressures. Therefore, their response to such pressures may differ. Customers who value sustainability and demand sustainable practices in their supplier code of conduct may increase the prioritization of sustainable practices. On the contrary, transport company’s with customers that do not value or demand sustainable transport may decrease the perceived necessity of sustainability.
Government
Furthermore, the government influences sensemaking perspectives through the perceived risk involved with CO2 emission in the future. Due to the emission reduction goals set by the European Commission, various managers perceive a focus on emission reduction as risk-management towards laws and regulations that may or may not be enforced in the future.
‘’Our target is to transport CO2 neutrally by 2049. I think that should be sooner, as it will be imposed by governments.’’ (interviewee 5)
Companies want to become more sustainable, but it has to yield something. Otherwise companies cannot remain competitive. Without pressure from the government, the process of making the industry more sustainable will develop slowly. At the same time, the infrastructure to switch to sustainable practices should be present. Rail capacity should expand with increased usage of rail transport and hydrogen infrastructure for refuelling should emerge when hydrogen trucks are better developed. In addition, the price of sustainable investments should be close to equal or less expensive than more polluting trailers, which can be achieved through higher subsidies. The case of Italy, where multimodal transport is the norm, proves that governmental intervention works.
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Prioritizing sustainability is assumed to become linked to cost-efficiency, due to future regulations. Despite the current lack of laws regarding CO2 emission, managers are preparing for the future. National governments or the EU government may tax fossil fuel usage more heavily or put a price on a tonne of CO2 emission in the coming years. The higher costs involved with unsustainable transport in the future poses a driver to increase prioritization of sustainability goals. Several managers are convinced the government is the most important driver for sustainability.
‘’The financial stimulus is always the most important. That should largely
originate from the government.’’ (interviewee 2)
However, the views on when to act on this financial stimulus from the government differs among managers. Several managers are driven by European standards for GHG emission and target a reduction as high as possible to comply to those standards as early as possible. Other managers see large sustainability impacts as an ambition in the long term, when pressure from the government increases.
‘’I am convinced the government will make CO2 emission monetary sooner or later. It is therefore crucial to prepare ourselves urgently.’’ (interviewee 3) ‘’We are not guided by what the government says. We are not involved with that yet. We currently focus on what we think is good for people and the environment.’’ (interviewee 4)
Competition
Competition can affect managers’ sensemaking perspectives on whether to prioritize sustainability in two opposing ways. On the one hand, a focus on sustainability can be a form of competitive advantage. It is also a form of risk-management to be ahead of the competition when future regulations regarding GHG emission are enforced.
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‘’If we are forced to deal with sustainability, our competition will be forced as well. I think that currently, we would be in a favourable position have sustainable practices that are further developed than other competitors.’’ (interviewee 5)
Nevertheless, it is often too difficult for many firms to focus on sustainable transport and remain competitive. Intermodal transport remains more challenging to properly manage and a certain distance has to be met in order for it to be less expensive compared to road transport. Additionally, road transport can be offered more cheaply in other countries.
‘’Among our competitors are Eastern European drivers who are heavily underpaid. Especially on routes to Southern Sweden, which is too short for intermodal transport, it is difficult to compete.’’ (interviewee 5)
4.2.2 Internal drivers
Background & profession
A manager’s experience and position in the firm has a lot of influence on their mental frames and how they perceive their surroundings. As all interviewees have a different background and profession, each interviewee is described separately.
Interviewee 1 has worked in the logistics sector for over 30 years and is a person with a lot of experience in sustainable transport. Initially, he worked for a conventional company that mainly focused on road transport, but quickly realized that something needed to change in terms of sustainability. Therefore, he shifted his focus to multimodal transport. At first, they incorporated short sea transport and were among the first to sail between England, Scandinavia and the Baltic states. Later, they made the switch to rail transport, which originally was a request from customers like IKEA.
‘’I have set up several new connections for especially very large multinationals in the past. We especially focussed on Scandinavia, Italy, Spain and Poland. Furthermore, I was involved in developing our own rail terminal before. So I had a lot of experience before I started working for the case company.’’
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gained a lot of experience in several transport companies and has been involved in new and innovative projects.
Interviewee 2 seems very knowledgeable and visionary on the concept of sustainability. His history includes being responsible of the development of multimodal corridors with a focus on rail transport. When working for the case company, he was responsible for Barge and Terminal, where he managed the inland vessels and the inland terminal. Therefore, he is familiar with two modes of multimodal transport.
When switching from road transport to another mode of transport, the interviewee has noticed the impact it has on the changing firm. Buying a mode of transport as a service or carrying it out internally are two different approaches which require different competencies. The decision to carry out internally originally was meant to decrease costs. However, this decrease in operational costs is translated into a lower cost-price of transport. This indicates that a greater amount of customers will make use of rail transport as an alternative for road transport, which translates into a larger emission reduction impact. Due to mismanagement and negative future prospects, the case company does not employ their own train anymore, but the interviewee still believes in the concept.
‘’For us there is no question if more products should go by rail and if that will happen. Because it will happen.’’
The interviewee’s focusses on how to increase sustainability of the entire route. Rail transport replaces dozens of trailers from the road, but never rides from and to the factory. Process optimization from digitalization and alternative fuels can play a role in decreasing CO2 emission where it is not possible to use other modes of transport than road transport.
‘’I focus on the first and last mile of the route and I’ve been doing that for about
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Interviewee 3 is someone who has always worked in transport in which he focussed on the operational side of intermodal transport. He directed intermodal transport, with a focus on rail transport. This type of transport interested him due to the impact that can be made using rail transport.
‘’Professional freight transport is one of the three largest polluters worldwide. If
you can make an impact of 50 per cent CO2 reduction, that’s really cool’’
Besides the reduction in environmental impact, rail transport has other benefits as well such as the opportunity to be more cost-effective. He finds the operational activities in rail transport very interesting and in combination with the additional benefits, this way of transport is fascinating to him.
Interviewee 4 is a board member and is responsible for the Benelux department, but also for other departments, such as HR and ICT. Recently he began to play a larger role in the International department due to the resignation of several directors (including interviewee 1, 2 and 3).
‘’I have a very broad role in the firm. I am involved in a bit of everything.’’
He holds the position of General Manager Benelux, but is involved with intermodal and international transport, as well as Barge & Terminal, warehousing and value added logistics. His experience mainly consists of distribution, operations and quality and he has been in a director’s position for several years.
Interviewee 5 is a manager with a financial background. He started as a financial administrator and continued to develop to a more business related role. His current role is trade manager, which he describes as:
‘’someone who determines the consideration from the operation looking at sales and customers. I make choices which are best for our financial results.’’
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outsourcing transport by train to owning and managing a freight train. Another project involved the barge terminal, where road transport is replaced by inland vessels. Despite the contribution to a GHG reduction, these projects are mainly undertaken due to the cost effectiveness of these different modes of transport.
Interviewee 6 fulfils the position of international sales manager, which entails close contact with the case firm’s customers. He associates with many Scandinavian customers, who place a larger emphasis on sustainability practices compared to customers from other regions in Europe. The interviewee has been working for the firm since last year, and thus, is the most recently hired manager among the interviewees. Nevertheless, he has known interviewee 1 and 2 for a longer period as they have worked for the same company in former times. Interviewee 6 is interested in making sustainability increasingly captivating for customers by making CO2 reduction a tangible concept.
‘’You could tell your customers they saved 10.000 kilos of CO2, but to people that’s just a number. When you translate it to an amount of trees that need to grow in order to compensate for your CO2 emission, it makes it more insightful and lively.
Despite his affinity with sustainability, interviewee 6 is not familiar with the company’s sustainability goals. When asked about specific targets the company has in terms of CO2 reduction and whether or not he thought sustainability could lead to better financial results, he showed minimal knowledge.
‘’I don’t really know. That is more related to policy. I am more on the customer side.’’
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Personal morale
As governments do not impose penalties on large polluters, the social and environmental costs of pollution land in society nowadays. Even when laws implicate firms to decrease GHG emission, they can suffice to that condition by buying a few certificates from energy plants in Norway without having a direct impact. Therefore, personal morale affects sensemaking perspectives in how to prioritize sustainability actions of firms and prevents greenwashing. Although the degree of prioritization of sustainability is difficult to grasp, as all managers value the environment, several managers give concrete examples on why they value sustainable practices.
‘’My lifelong driver has been to leave a better world for the children.’’ (interviewee 3)
The morale of managers should nowadays align with the activities and behaviours of the firm. When this alignment is not in place, chances are employees will resign and move to other firms that they identify better with.
‘’ Around 2016/2017 I got fed up with the way they interacted with people. You can seem to be good for the environment, but I also find the human aspect important. Their real motivation was not so much the environment, but purely to earn as much money as possible. I was done with that, so I left.’’ (interviewee 1)
Organizational resources and capabilities
Investing in sustainable projects may have implications throughout the firm, especially when a change in business processes is involved. An example is the freight train project. Buying a mode of transport as a service or carrying it out internally are two different approaches which require different human competencies.
‘’When carrying out such a project, you do not only need more people, but you need a different profile of people with different competencies.’’ (interviewee 2)
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Ultimately, some employees need to be laid off when they cannot come along in the new processes.
‘’There are people who understand that the conventional model will not be competitive in the long run, but there are also people who are frightened by the idea that their job might look differently than they are used to.’’ (interviewee 2) ‘’There is some degree of tension between the possibilities and what you want, because it costs money and knowledge. It costs human capital that cannot participate anymore.’’ (interviewee 4)
Age additionally plays a role, as someone close to retiring age is less interested to change their responsibilities within their job, as someone who is young and recognizes the importance of emission reduction from knowledge gained during their studies. This morale can be perceived in the current trend of interest in employees. Agreement with the approach of doing business plays a larger role than formerly. Therefore, it is significant for firms to incorporate sustainability targets in their firm activities in order to attract human capital.
‘’ Previously, employees just wanted to receive their pay check and were not that interested in how the company made its money. Nowadays, people do not want to work for a company if they don’t agree with the way that companies does its business.’’ (interviewee 1)
As it has become easier and normalised to switch jobs, the importance of sustainability for companies has increased, due to the requirements employees set for companies they feel comfortable with. This urges managers to complement their own perspectives with influences from current or future employees. Included in this requirement is a degree of automatization which can replace human workers. Fewer people are attracted to the job of truck drivers. Therefore, automatization of processes should anticipate on the decrease of truck drivers.
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Level of internationalization
Managers’ frames are affected by identifying the opportunities that exist and their expectation to succeed. Managers differ in their views on who is has the largest opportunity to invest in CSR objectives.
‘’For small firms it’s too difficult to spend a lot of time, attention and money in
sustainability. Larger companies do have this opportunity. Investments do not have to be contradictory. It’s a mental shift, where people should be proud that they work for a company that wants to contribute to the environment.’’ (interviewee 1)
For companies similar to the case company, sustainability could lead to better financial performance, when executed well. It can lead to a competitive advantage, by distinguishing the company as a leading company. However, proper execution seems difficult. Rail transport can be less expensive than road transport when it is properly managed, there is enough volume and it is reliable. However, due to the diverse nature of the sector, transport firms cannot apply the same method of transportation to all their routes. A variation of methods is favourable that can be suitable to individual routes.
‘’Each segment requires a different approach to CO2 reduction. There is also a difference between short and long distance transportation.’’ (interviewee 2)
According to several interviewees, for distances shorter than around 1.000 kilometres, rail transport is not most profitable. Electrification could be interesting for short distance transport, but the opinions on cost-benefit of electric trucks differ.
‘’I have several years of experience, but a good business case on electric trucks is fairly difficult. You need to make use of subsidies, but otherwise it won’t work.’’ (interviewee 4)
‘’With proper loading infrastructure, a fair cost price can be handled. It is still higher compared to using fossil fuels, but it comes close.’’ (interviewee 2)
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Internal and external drivers affect managers’ sensemaking perspectives, which influences issue salience. Table 3 summarizes how internal and external drivers are perceived by visionary and classical managers. It is noteworthy to mention that sensemaking perspectives are individual attributes and may differ within the identified management categories, as can be identified in the governmental driver.
Table 3: Internal and external drivers as perceived by visionary and classical managers
Visionary Classical
Customers ‘’Mainly large multinationals demand a
sustainable proposition from their transporters. If you make use of train transport, you are already sustainable, but often they ask or even prescribe a sustainable first mile and last mile transport as well.’’ (interviewee 2) ‘’As transport is business to business, it is often a derived question from what the end consumer wants. Sadly, when it affects consumer selling price, there are lot of sustainability rules that can go overboard.’’ (interviewee 3)
‘’Several customers have very strict requirements they ask from their suppliers.’’ (interviewee 5)
‘’ Sustainability interests customers, but it is not allowed to cost anything.’’ (interviewee 4)
Government ‘’I think the most important driver is the
government. If the government doesn’t do anything, shippers won’t either.’’ (interviewee 2)
‘’I am convinced the government will make CO2 emission monetary sooner or later. It is therefore crucial to prepare ourselves urgently.’’ (interviewee 3)
‘’We are not guided by what the government says. We are not involved with that yet. We currently focus on what we think is good for people and the environment.’’ (interviewee 4) ‘’Our target is to transport CO2 neutrally by 2049. I think that should be sooner, as it will be imposed by governments.’’ (interviewee 5)
Competition ‘’Intermodal transport is also to
distinguish yourself as one of the
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leading companies, who have a sustainable proposition in their own business model.’’ (interviewee 2)
see ourselves doing that in the coming years.’’ (Interviewee 4)
Background & profession
‘’I was involved in developing our own rail terminal before. So I had a lot of experience before I started working for the case company.’’
(interviewee 1)
‘’I have done a lot of research and participated in several pilots. Currently, I still work a lot for TNO, a research institute, where I mainly focus on
hydrogen and connectivity.’’ (interviewee 2)
‘’I have always worked in finance. I started as a financial administrator and I am now trade manager.’’
(interviewee 5)
‘’I don’t really know. That is more related to policy. I am more on the customer side.’’ (interviewee 6)
Personal morale ‘’When you are a supplier for IKEA, they
will audit not only you, but also your subcontractors. Many were intimidated by this, but I thought it was great. It ensured you had your act together in your entire process, instead of pretending you made an effort on paper.’’ (interviewee 1)
‘’I am glad to read that innovations regarding hydrogen power seem to take a flight.’’ (interviewee 2)
‘’We have to take care of our planet and people as well.’’ (interviewee 4) ‘’Everyone has their responsibility and it is my job to convince customers to transport as green as possible.’’ (interviewee 6)
Organizational resources and capabilities
‘’We won’t continue the old way, we want to do it differently. We want to attract new, young and highly educated people.’’
(interviewee 1)
‘’The difficult thing is, you want to do everything, but it cannot be at the expense of everything else.’’ (interviewee 5)
Level of
internationalization
‘’Looking at transport per unit, rail transport is not more expensive on routes that are longer than 1.000
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kilometres. It can even be cheaper, depending on the profit margins the company wants to attain.’’
(Interviewee 1)
‘’For shorter distances electric trucks are an option. With proper loading
infrastructure, a fair cost price can be handled. It is still higher compared to using fossil fuels, but it comes close.’’ (interviewee 2)
36 5 Discussion
This research was undertaken to examine how managers prioritize sustainability differently and how sensemaking plays a role in this process. Conventional studies that draw on external institutional and resource-based views generally neglect the differences among managers. Although previous studies take managers’ cognitive frames into account, the resulting question of how this affects prioritization of CSR goals is not answered. This study aims to show how sensemaking processes differ among managers, which affects how they perceive the internal and external environment of a firm.
37 Figure 1: How managerial sensemaking affect prioritization of sustainability.
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such as the perception on how the government will impose costs on CO2 emission in the future or the personal morale that it is important to care about people and planet, but the response to these frames are different. Furthermore, there has been a shift in acknowledging the importance of sustainable transport in the past years. However, managers differ in their perceived pressures to act now or delay more significant contributions to emission reduction to the future and aim for a smaller impact currently. For several managers, prioritizing sustainability is a long-term goal, enabling the use of further innovations of institutions and regulation relating to GHG emission reduction. They prioritize stabilizing their current business operations. Others perceive pressures to act currently as a means of risk mitigation and prepare their business processes for future regulations. Therefore, the following propositions are suggested:
P1: Managers respond differently to pressures from internal or external drivers P2: Managers differ in their perception on when it is necessary to act on pressures from internal or external drivers.
Several managers have previously succeeded in achieving GHG reduction and cost-efficiency practices through sustainable projects. Due to their experience, they are more likely to pursue the same degree of impact as they achieved before. Other experiences could contain a positive outcome of lean projects or failed projects regarding emission reduction. These experiences influence the goals individual managers strive for and the degree of impact they seek to achieve. Furthermore, managers differ in their drive to excel in GHG emission reduction. Several managers aim for outstanding company achievements on the concept of sustainability, while other managers are satisfied with good financial results and a loyal customer base. This translates further to other drivers, for instance by questioning whether they want to attract customers with strict requirements regarding CO2 emission and to what degree they respond to pressures from such customers. This results in the following propositions:
P3: Managers differ in their experience, which affects their expectation of the degree of environmental impact that should be achieved
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Research by Durand, Hawn & Ioannou (2019) explores how issue salience aids in identifying organization’s willingness to responds to pressures. The main attributes of issue salience identified in this research are sustainability, cost-effectiveness and quality of transport. The concept of issue salience has aided this research in identifying two categories of managers: classical managers and visionaries. While Sprinke & Maine (2010) argue that tension arising from competition for internal resources influences the way managers perceive cost and benefits at the time of the decision, this research adds by identifying internal and external drivers that affect managerial sensemaking perspectives when perceiving the costs and benefits of issues that may or not may be equally prioritized, depending on the category of managers involved in decision making.
Similarly to Durand, Hawn & Ioanna, Muller (2008) takes a cost-benefit approach where he focusses on how CSR affects financial performance when firms expand internationally. Similar to Muller, this research finds that the costs of GHG emission reduction outweigh the financial benefits when internationalization is low. However, this is only sufficed to when the CSR goal is to focus on the degree of impact. Costs of radical investment in GHG emission reduction outweigh the financial benefit that can be gained from that investment, for example when investing in electrification of trucks, However, when the sustainability goal is efficiency, financial performance and CSR efforts can go hand in hand despite a low level of internationalization.
Furthermore, this study adds to the research by Muller as the focus in this research does not lie on the internationalization of the firm, but looks at individual routes and segments within the activities of the firm. Transport firms are highly internationalized due to the nature of the sector. However, this does not imply that the relationship identified by Muller is generalizable throughout the firm, but rather is applicable to individual segments and distances of transport.
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also be observed in the category of ‘classical’ managers. These managers show a prioritization of the cost efficiency and quality of transport targets, rather than equal prioritization of sustainability due to the perceived inability to align tensions that arise when radical investments in GHG emission reduction are made with cost efficiency and/or transport quality.
The case indicates that the complexity of the firm plays a role in the tendency towards a business case frame, as a struggling financial performance was among the reasons for a prioritization of cost-effectiveness and quality of transport. The business case frame aligns environmental aspects with the economic dimension which can be perceived in the type of sustainability goals strived by the ‘classical’ category. This results in a different approach towards prioritizing sustainability and a focus on GHG emission reduction using efficiency, which aligns with cost-effectiveness.
41 6 Conclusion
This study shows the influence of managerial sensemaking on issue salience of managers within the transport and logistics sector. Two management categories are identified which show how managers prioritize sustainability goals in relation to conventional targets, including cost-effectiveness and quality of transport. Managers who prioritize cost-effectiveness, quality of transport and sustainability to an equal degree comprise the visionary category of managers. Managers who comply with a conventional approach to issue salience, by prioritizing cost-efficiency and quality of transport, compose the classical management category. Despite the fact that sustainability is not prioritized equally by classical managers, the importance of CSR is generally acknowledged. Therefore, two approaches to accomplishing CSR goals are identified: efficiency and degree of impact. Efficiency poses the CSR approach that is generally implemented by classical managers. This CSR type includes cost-effective approaches such as lean-, waste-, or collaborative projects in order to achieve GHG emission reduction. Visionary manager value the degree of impact they make and aim for a significant decrease in GHG emission reduction. This can be achieved through more radical investments and changes in business processes.
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prioritize sustainability goals and how sensemaking affects how managers prioritize issues.
6.1 Managerial implications
The findings of this research have several implications for business practices and policymaking. The study describes the dynamic perceptions on the importance of emission reduction over time. The management categories identified in this research are based on the prioritization of sustainability goals and can therefore be used by companies to assess to what extent they prioritize emission reduction compared to costs and quality. As the case on which this research is built upon indicates, differences in the perception on firm strategy can result in resignation of managers who do not identify with the current strategy or future vision. It is therefore important that HR managers take managerial sensemaking and issue salience into account during hiring practices, to prevent diverging perspectives that could lead to unresolvable conflict within the firm. Overall, managers should acknowledge that younger employees in general have more affinity with sustainable practices due to the increased attention that has been given to CSR in the media and in universities and they should position the firm as a sustainable company in order to attract such human capital. Furthermore, managers should acknowledge that an increased prioritization of sustainability, both currently and in the future, implies that business processes may change, resulting in a different profile of employees, with different skills and competences. HR managers may need to take into account applicants’ ability to develop with the business processes in the future if change is anticipated.
