Sustainable Food Supply Chains Results of the Seminar Quality and Food Chain Management 2012
Acknowledgement This book is based on the results of the 2012 th Seminar on Quality and Food Chain Management. The work and knowledge of our students is collected in 14 papers on 225 pages collected in this book. The content of the individual papers is copyright of the individual authors. The Seminar was supervised by Dr. Robert Reiche and Prof. Dr. Gerhard Schiefer at the Institute for Food and Resource Economics at the Agricultural Faculty of the University of Bonn.
Compiled in October 2012 in Bonn, Germany.
Table of Content Chapter 1 – What are the characteristics of Sustainable Food Supply Chains? Milena Rmus
Economic Criteria for sustainable Food Supply Chains
5
Juan Esteban Diaz
Environmental Criteria for sustainable Food Supply Chains
25
Chapter 2 – The Role of NGOs in Sustainable Food Supply Chains Artur Khabirov
Topics addressed by NGOs to the Agri-Food Sector
39
Dirk Meyer
Standards for sustainable food supply chains I
52
Yaprak Has
Standards for sustainable food supply chains II
69
Chapter 3 – Creating Consumer Awareness on Sustainability in Food Supply Chains Katarzyna Urbanzyk
New european regulations and their requirements for the agri-food sector – the case of the food information regulation 1169/2011
84
Wojciech Dlugosz
A comparative study on product tagging for extended information provision to consumers 100 Ioulia Sidiropoulou
A comparative study on the integration of social media elements in communication concepts of agri-food industry and retailers (selected examples) 113 Bastian Kohl
A comparative study on current iPhone apps for business to consumer services
134
Felix Andreae
A comparative study on current Android apps for business to consumer services II
147
Chapter 4 – Case studies of sustainable food supply chains Kanan Amirov
Examples for sustainability in the South American beef supply chain
163
Esther Moos
Examples for sustainable Soy Supply Chains
177
Marc Orth
Examples for sustainable Fruits Supply Chains
195
Leandro Stocco
Examples for Sustainable Fish Supply Chains
210
Chapter 1 What are the Characteristics of Sustainable Food Supply Chains?
4
Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Milena Rmuš
Economic criteria for sustainable food supply chains
Abstract Following the global trend on sustainable development, we are experiencing a shift from traditional food supply chains to the sustainable ones. This affected the food chain in terms of the types of products that are producing and the kind of research that is required. The sustainable feature affected the supply chains in the way that they are becoming more complex and diversified. They are becoming more quality-driven and involve numerous actors from different segments of the market. Economic dimension of sustainability helps promotion of economic growth encourages open and competitive economy changes the consumer patterns and provide means for preserving social and environmental dimension.
Keywords Sustainable development, food supply chains, demand and supply, prices, maximization of return on investment, marketing, competitiveness
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Economic criteria for sustainable food supply chains
1. Introduction to the paper Rapid urbanization and increases in purchasing power cause important changes in dietary patterns of the consumer all over the world. This global trend affects food supply chains in terms of types of products that are produced and the production process itself. Following general idea of sustainable development as an integrated concept with aim to improve quality of life of both current and future generations, actors of the supply chains are facing the external pressure from policy makers and consumers as well an internal pressure from their leaders’ values and sense of responsibility. The concept of sustainability is multidimensional and includes ecological, social and economic objectives. While taking into account that three dimensions have strong relations and are inter-independent this paper focuses on criteria regarding economic dimensions of sustainable food chains. Economy is a very strong toll of sustainable development that to certain extent provides basis for other two dimensions of sustainability. It helps establishing existing and creating new enterprises and jobs in the food chain while allowing to combat poverty and to make changes in the development as a whole. The paper is structured as follows: after introductory part and methodology the general idea of sustainability is presented. The following part gives a detail overview of food-supply chains, their characteristics and main features. The last part is connected to the economic criteria for sustainable food chains. Although there are numerous criteria that could be seen as important when we talk about economic dimension paper focuses on following five: demand and supply, food prices, maximization of return on investments, marketing and competitiveness. These criteria are mutually supportive and sometimes even overlap it is not possible to draw a strict line between them. As a general requirement they must provide a information for decision makers in the supply chain.
2. Methodology The literature review was carried out to precisely define the problem area, research new approaches to the selected topic, sample current opinions regarding the topic and to fill in the gaps about research question.
3. The idea of sustainability The idea of sustainability presents the development in a way that meets the needs of the present without compromising the ability of future generations to meet their own needs 6
The idea of sustainability (Bruntland, 1987). Nevertheless the core of mainstream thinking on sustainability has become the idea of three dimensions (three pillars) of sustainability: environmental, social and economic sustainability. The adoption of sustainable development in production offers the industry a cost effective route for an improved performance among three pillars. Nevertheless, there are different approaches to how these pillars relate to each other. Although there is a strong and complex interdependency among them and they can develop synergies to certain extent, they are not always mutually supportive and can even compete with each other, so the task of sustainable development is to provide balance between these elements (IUCN 2006). According to Yakovieva et al. (2009) objectives of sustainable development are: 1) Within the economic dimension: promotion of economic growth, encouragement of open and competitive economy, and changing consumption patterns; 2) Within the social dimension: creation of productive employment, achieving equality; 3) Within the environmental dimension: reduction of resource use and protection of natural environment. Economy is a powerful tool which provides incentives for sustainable development in all levels of the society. It can be a motivating force for further research and efficient solutions for sustainable development and it can influence consumption decisions in multiply levels. Nevertheless, for economic activity, environmental and social issues are often considered as limiting factors. Strengthening of economic dimension is the basis for providing the means for preserving social and environmental functions. Economic prosperity is a very important element of sustainable development, but not all economic growth implies improvement for sustainable development. Only economic growth that reduces environmental impact can be viewed as part of sustainable development and thus promotion of economic growth is an important objective of sustainable development within economic dimension (Ruben et al. 2006). Although the environment dimension is considered to be a base for the sustainable development it often underpins social and economic one. Still persevering environmental quality is a precondition for developing a long lasting economic potential.
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Economic criteria for sustainable food supply chains
4. Food-supply chains The food supply chain is a series of links and inter-dependencies, from farms to food consumers, representing a strict correlation between primary sector (agriculture) and industrial one. It is a kind of route “from farm to fork� connecting 3 economically important sectors: the agriculture sector, the food processing industry up to distributions sectors (wholesale and retail). (Bekuviste et al. 2009 ;Bartha et al. 2009). The food chain actually assumes a process of transformation, meaning raw agriculture products moving through food chains are processed, packed, merchandised and finally consumed. Following the original idea for sustainable development the UK Sustainable Development Commission (SDC; DEFRA 2002) gave key principles for sustainable food supply chains: 1) Produce safe, healthy products in response to market demands and ensure that all consumers have access to nutritious food and to accurate information about food products. 2) Support the viability and diversity of rural and urban economies and communities. 3) Enable viable livelihoods to be made from sustainable land management, both through the market and through payments for public benefits. 4) Respect and operate within the biological limits of natural resources (especially soil, water and biodiversity). 5) Achieve consistently high standards of environmental performance by reducing energy consumption, minimizing resource inputs and using renewable energy wherever possible. 6) Ensure a safe and hygienic working environment and high social welfare and training for all employees involved in the food chain. 7) Achieve consistently high standards of animal health and welfare. 8) Sustain the resource available for growing food and supplying other public benefits over time, except where alternative land uses are essential to meet other needs of society. Sustainable food chains assume system of production and consumption that has strong implications for the economy, society and the environment. They provide preconditions for economic growth and employment and affect natural environment. Growing concerns about natural environment and society raised awareness of effects of sustainable production and consumption within food supply chain. Thus, food companies are 8
Food-supply chains experiencing growing pressure from stakeholders, customers, government, NGOs etc to pay more attention to sustainability of their supply chains. They are expected to deliver balance of three dimensions of sustainability and in that manner positively affect society and environment and assure long term economic development (Yakovieva et al. 2009). The sustainability of food chains can be enhanced through technical interventions, economic measures, within the framework of (inter)national legal standards and socio-cultural customs (Ruben et al. 2006). For all actors of the supply chain there is a clear challenge to recognize their corporate responsibilities to the chain as a whole. It is important to connect all elements of the food chain and strengthen the link between since different links in the chain are mutually dependent. They have to work together to avoid unnecessary costs and to assure that consumer’s requirements are communicated and met along the whole chain (DEFRA 2002) Deeper understanding of food supply chains is necessary to ensure improvements and maintain market position, and while short supply chains are relatively easy to understand and influence their performance, the larger and complex supply chains may be difficult to trace beyond their immediate suppliers and improvements and changes are almost impossible without thorough studies (Smith 2007). In order to survive all business involved in supply chain must response to consumers needs. Since consumers are not only concerned about price and they put more and more attention food safety, nutrition and quality it is very important that supply chains provide products that contain these elements together with convenient prices (DEFRA 2002). In addition, profits increasingly depend on information flows regarding demands for design, distribution, packaging and servicing of the products which will enable businesses to improve their position on the market and be more competitive (Ruben et al. 2006). Following a new global trend for sustainable products a lot of regulation emerged regarding this issues. Many actors of the food supply chain that don’t focus on sustainable development will find themselves obligated to commit on fulfilling sustainability goals by their costumers and government regulations (Smith 2007). Optimizing the individual stages in a chain usually results in sub-optimal overall chain performance. For this reason, food companies try to enforce regulations to all actors in the chain that become part of the global market and institutional environment (Ruben et al. 2006).
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Economic criteria for sustainable food supply chains
5. Economic criteria for sustainable food supply chains In the following section focus will be on the criteria regarding economic dimension of the sustainability of supply chains. Table below gives a short overview of the criteria and their main features which will be explained in detail.
Criteria
Main features
Equity
between
•
supply and demand
Issues
paradigm shift: from supply-oriented and
Awareness towards sustainability triggers
quantity-driven agriculture towards a qualitydriven demand- and market-driven food •
Food prices
•
the demand •
Suppliers
on
both
performance across the supply chain and
processing industry, food retails
as a source of innovation “produce what you can sell”
•
Pricing in food supply chains
•
Price transitions
• •
Price levels and profit margins
Price changes
commodities prices to
Price structure
prices
Non-price aspects
Price risks
Building of sustainable food chains requires
•
through
producer
Imperfect price transition for
maximizing
return
on
by
maximizing
return
on
Minimizing the time required for converting orders into cash
investment of their investors
Improving visibility
Factors effecting food business investment
Improving quality
Reducing costs
Improving services
Key role for consumers decision on moving
•
Promoting sustainability
towards sustainability
•
Promoting
Implementing the concept of sustainability
Commitments
agricultural
investment
towards
sustainable
•
of
Involving consumers directly into the process
sustainability
patterns
consumption
whole supply chain in
attempt to differentiate business from competitors and strengthened brand name •
from
Pass through from producer prices to
Strategy
Actors of the supply chain aim to maximize value
Pass
consumer prices
into company’s strategies throughout the •
leveraging
investments
•
of
Supply side actors: conventional agriculture,
their
10
in
•
•
source
opportunity
Demand side actors: consumers
•
Competitiveness
major
•
return of investment
Marketing
a
chains
Maximization
are
Sustainable food chains as competitive
•
Bargaing power
advantage
•
Consumer behaviour
Economic criteria for sustainable food supply chains •
Consolidation and concentration for stronger
•
Access to market information
competitive position
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Economic criteria for sustainable food supply chains
5.1 Equity between supply and demand Rising awareness of sustainability triggered the demand for sustainable products. Interest in sustainable food chains is mostly initiated by consumers as their purchasing decisions are not based just on price, packaging and appearance but they have higher demands regarding quality, traceability and environmentally friendly products and thus they are demanding new ways of producing products (Ruben et al. 2006). Consumers also want to know where their food comes from and how it is produced and they are willing to pay more to obtain food products that meet the standards of sustainability. A fundamental premise is that demand drives supply and that producers must meet buyers’ demands in terms of quantity, quality and delivery deadlines in order to grow and create jobs. This of course implies that the all actors in the sustainable food supply chain behave in sustainable manner. Precondition for good functioning of the market and stable economic growth is continuous balancing of supply and demand. This approach can be summed up in the dictum “produce what you can sell” and not “sell what you can produce”. During the years supply chains were affected by malfunctioning of the market due to the supply and demand disruptions. Supply side capacity constraints make it more difficult to meet demand requirements. For these reasons there is a constant effort to put demand and supply to balance since increased globalization and stricter regulatory framework are complicating the international trade. Increased levels of economic uncertainty additionally create a variability in demand and supply and make it more difficult to accomplish demand and supply balancing. Shorter product lifecycles and rapid rates of technology change, demanding customers who have created additional time-to-market pressures by requiring better on-time delivery, order fill rates and overall service level efficiencies (IBM 2008). On the supply side of food supply chains there actors are: conventional agriculture, food processing industry and food retails. Suppliers are main source of innovation and they create opportunities for leveraging the performance across the supply chain. For that reason it is very important to closely collaborate with the suppliers to create value through all the supply chain. The growth in demand for sustainably produced food created an incentive for food industries to invest in farmers in order to help them to make their products more sustainable. On the demand side actors we can find consumers. Food consumption is shaped by preferences, taste, time, financial and other constraints. Nutrition styles differ by household specific characteristics while main purchase criteria are: price, quality, freshness, shelf life and taste. On the other hand, human care about society and future generations is imposing 12
Economic criteria for sustainable food supply chains new purchasing patterns, making a new trend of sustainable consumptions. Nevertheless, the precise extent to which consumers are willing and able to differentiate between products and brands on the basis of sustainability performance will remain a contentious issue (Chater et al. 2002). A strong brand may serve as a signal of quality, thus helping to secure consumer loyalty. At the same time it may make it harder for potential rivals to compete, dissuading them from entering the market and making it difficult for retailers not to carry the product (Bukeviciute et al. 2009). The prices that suppliers and supermarkets agree depend in the first instance on supply and demand. Forecasting of demand enable retailers to guarantee supply of products at more or less stable prices (Ruben et al. 2006).
5.2 Food prices Prices are dependent on market mechanisms and reflect interaction between supply and demand. Food prices have exhibited large fluctuations worldwide in the past years. These fluctuations in prices occurred at various levels of the food supply chain, i.e. at farm level, at global market level and other wholesale levels and at consumer level. Long-term prospects of rising food prices, highlights the necessity to increase the efficiency of the food supply chain to ensure consumer food prices reflect the evolution of inputs prices (Bukeviciute 2009, Bunte et al. 2009). Clarke (2002) distinguishes five aspects when discussing pricing in supply chains: 1) Price levels and profit margins. Firms may earn ‘excess’ profit margins. Profits are considered to be excessive if they exceed the level deemed necessary to induce firms to produce, to invest and to innovate. Firms may also earn insufficient profits. Profits are insufficient in the sense that they are not high enough to induce firms to produce, to invest and to innovate. 2) Price changes. Buying firms may or may not react to changes in supplier prices (or final prices). Firms may react instantaneously or with a lag, and they may react asymmetrically to decreases and increases in supplier prices. Asymmetries in the reaction to supplier prices generate temporary profits. 3) Price structure. There is more to pricing than unit prices. Firms may also agree to fixed payments, e.g. listing fees, slotting allowances and even retrospective payments. 4) Non-price aspects. Contracts also lay down product specifications. These specifications may substitute for price and other financial transfer clauses.
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Economic criteria for sustainable food supply chains 5) Price risk. A firm’s well-being does not only depend on expected income, but also on the price and income risks the firms are exposed to. Price risks make firms more vulnerable, ceteris paribus. 5.2.1 Price transmission Price transmission along the food chain has attracted considerable interest in the economic literature and it is noted as one of the key issues of supply chains. Price transmission refers to the way how prices changes in one level of supply chain react to the price changes in other level of the supply chain. Price changes at one level of the food supply chain do not necessarily transmit to the other levels. Lack of transparency on price formation along the food chains has increased delays and asymmetry in price transmissions and low comparability of retail prices. This phenomenon might be explained with the market power of companies that wishes to increase their profits (Bunte 2006; Beukeviciute 2009). The magnitude of the price pass-through is different among different segments of the foodsupply chain. We can differentiate pass through from agricultural commodity prices to producer prices and pass-through from producer prices to consumer prices. The magnitude of the pass-through from producer to consumer prices appears to be higher than the pass through from commodity prices to producer prices since commodities represent only a small share in total production cost (Bukeviciute et al. 2009). Consequently, farmers receive too little and consumers pay too much (Bunte 2006). It is also important to mention that speed and magnitude of the pass-through largely depends on whether we are talking on price decrease or increase and thus price transmission is assumed to be asymmetric. Actors along supply chain have more interest on speeding up the price pass-through as price decreases in order to raise their profit margins. According to Bunte (2006) there are three types of imperfect price transmission: 1. Price changes are not fully transmitted. 2. There is a time lag between the price adjustments at the respective stages. 3. There is an asymmetry in reaction between positive and negative price shocks. Since agricultural commodities make up only a small proportion of the overall production costs of food, food consumer prices have tendency to increase more in slower pace than agricultural prices (Bartha et al. 2009)
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Economic criteria for sustainable food supply chains The food price development is affected by conditions of competition on markets. At more intense the level of competition, price levels are likely to be lower, as firms face competitive constraints that force them to lower the cost and respectively the prices. If we consider firms involved in more competitive market, change in input prices will drive the output prices to go up since firms are operation on low margins. On the other hand, if we look at the firms involved in less competitive markets there is still a danger that output prices will go up since they will try to use their market power to gain more profits (Bukeviciute et al. 2009). Also, the removal of trade barriers, relatively inexpensive transport and technical advances may go in favour of price formatting forcing it to fall down.
5.3 Maximization of return on investments Economists expect that the food chain has to provide maximum return on the capital invested in the chain. As mentioned above in the first point of DEFRA’s key principles for sustainable food supply chains, producing safe, healthy product in response to market demand is a good way of supporting development and at the same time making food chains more sustainable. Food businesses that see the value of sustainable food chains impose standards of sustainability on their suppliers at every stage of supply chain. Nevertheless, adopting more sustainable agricultural practices may not be possible for many actors of the supply chain due to lack of knowledge, equipment and money. Food businesses are willing to help their suppliers to overcome this difficulties thus assuring and strengthening their own supply chain sustainability. There are numerous examples where food businesses provide attractive credit lines, training, inputs and equipment for their suppliers (Smith 2007). There are numerous factors that can affect business investments in more sustainable food supply chains. Among these factors it is important to mention resources, products, vision, culture and nature of the supply chain. Resources might support investments, taking into account their availability, price, closeness, scarcity etc providing a competitive advantage for the firms. Firm can maximize their profits by producing high quality products and having a good brand reputation along with the long term business vision. Culture is also an important factor when we talk about investments in more sustainable food supply chains. Culture of enrolment in communities they operate and support of national and local priorities can largely affect the outcome of the business. The nature of the supply chain itself can also be an important issue when maximizing returns on investments. Local or conserved food supply chain where consumers purchase a recognizable farm products can go in favor of supporting investments as well as a good relationships with suppliers and good understanding of the own supply chain (Smith 2007).
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Economic criteria for sustainable food supply chains 5.3.1 Strategy to maximizing ROI Objective of the food supply chains is customer satisfaction but at the same time actors of the supply chain aim to maximize their value by maximizing return on investment of their investors. This strategic objective can be achieved by: 1) Minimizing the time required for converting orders into cash On first instant it may seem that it is just needed to reduce the production cycle in order to get fasted returns on investment in terms of money. Still this objective goes much further than just simple shortening of production cycle and includes time to get raw materials and inputs for the production, to control their quality etc. It can also includes time that is needed for finished products to get to the retailers, transportation time and the time that is needed for product to actually be delivered to producers. These issues require better time management, making scheduled activities that can cover simultaneously all above mentioned activities as soon as each order arrives to the supply chain. 2) Improving visibility Computer technology and networking allows actors of the supply chain to get real time information about production cycle, close monitoring over product movements, investors, market changes, logistics etc. However there are still some issues that need to be taken in consideration when we talk about visibility of supply chains. Organizations and people have incentive to hide information or to select which information will be sent to each of the partners although sometimes particular information are at significantly important for proper function of the supply chain. Another problem is visibility of demand. Actors of supply chain need to know the market demand for the products and the demand of each one of the partners along the supply chain. 3) Improving quality Quality is set of characteristics that products of service must have in order to fulfill customer requirements. In order to improve quality of their products it is important that every actor of the supply chain is involved in the process, thus the collaboration among actors is a main key of assuring higher quality. Apart from collaboration it is important to mention the quality insurance which is a guaranty that required level of quality of services and products is reached. Quality insurance is often supported by the ISO (International Standard for Organization). Another important feature is quality control, meaning that all the products 16
Economic criteria for sustainable food supply chains should be controlled in every stage of the production in order to avoid mistakes in production process in later stages of production where correction mistakes would imply significant costs. 4) Reducing costs The result is global growth opportunities, rising input costs and greater pressure to lower the costs in the food and beverage supply chain at a time when it is becoming ever more complex. Following the global trend of rise in input prices there is a pressure on actors of supply chains to lower the cost of the production in order to assure low food prices. There are couple of ways in which cost of production can be reduced. One could be packaging as it is being used as a competitive edge and an area to reduce costs, including new portion packs, use of “smart” label technologies, and customers demanding less material waste and environmentally sustainable packaging. There is also transportation where decision makers face many challenges, such as customer requirements, regulatory requirements, carrier availability, shipment visibility, and much more. Fortunately, transportation planners can apply best practices and technology to develop a well-controlled freight management program. It is recommendable to improve logistics and to adopt “smart” technologies to minimize fuel use and food miles. Another very important aspect of reducing costs is investing in research to develop a new ways of producing products, as well as their visibility, promotion which significantly affect the reduction of the cost and provide a competitive advantage. Developing the technologies to improve functioning of supply chains along with deeper understanding of sustainability issues linked to farming and food can help reduction of the length of the supply chain making it more efficient. 5) Improving services Reduction of time that is needed from the point when customer orders the products and until the point it is delivered could substantially improve customer services, making products more attractive for consumers. Also the improvement of the quality of products information and information of the supply chain itself could make a significant contribution to the customer services. The massive increase in input costs is creating a substantial imbalance between production costs and return on investment. Lot of big companies nowadays make a decision to create an own plantations, farms, etc which reduces processing, transportation and transaction costs and making more sustainable food chains by assuring safe and healthy products. 17
Economic criteria for sustainable food supply chains
5.4 Competitiveness Competitiveness in food supply chains may be viewed as ability to produce profitability and maintain market position and long- term viability in relation to competitors in the chain. Competitiveness of any level of supply chain depends on competitiveness of other levels of the supply chain, on policy climate and position of competing supply chains. Key element of competitiveness is the rapid adjustment to changes in consumer demands (Ruben et al. 2006). The degree of market power in the supply chain varies by product category largely depending on relevant markets in which these firms operate. (Bukeviciute et al. 2009) Sustainable food supply chains might be imperative for long-term commercial growth and competitive advantage. Working under high environmental and social standards on voluntary bases now, might result with a competitive advantage in future since the stricter regulations upon this dimensions of sustainability will inevitably come into force as idea of sustainability is becoming more and more popular. In that scenario competitors will find themselves in situation where they will have to catch up with the legislation in this area and firm that operate in chains that already follow the pattern of sustainability will have experience and insight which they could use to obtain the leading role in the market. Food chains are very complex, involving many actors at different levels. Individual food businesses may be able to create more sustainable food chains and generate profit from sustainable production especially if they have their own niche markets. Nevertheless, individual businesses will never have enough power to significantly improve the sustainability or compete with larger food corporations that have bigger share on the market. This provides an incentive for business to cooperate on issues of sustainability making joint initiatives to improve their position on the market and thus gaining competitive advantage. Larger food companies have lower average cost of production due to economic of scale which gives them the competitive price advantage in markets (Smith 2007). Partnerships are established in every step of the supply chain, starting from individual farmers, all the way up to the international markets and consumers (Fresco 2006). The process of consolidation is particularly noticeable in retail sector with an increase presence of large food retailers. As global markets are becoming more integrated, consolidation may lead to efficiency and put pressure on lowering down the prices. However, this is a two-way street, since positive effects of the consolidation process can be outweighed by potentially negative ones such as anti-competitive behaviour and abuse of dominant positions on the market which are hard-core restrictions of competition and may lead to malfunctioning of 18
Marketing food supply chains. Still, degree of concentration is not the only factor for achieving competitiveness on the market. In this context it is important to include other elements a well, such as the number of players in the market segment, entry and exit barriers to the market, differentiation of products and importance of the brands (Bukeviciute et al. 2009). Although competitiveness can be gained by convenient location and availability of resources, the access to market information is becoming the crucial advantage when we talk about maintaining a competitive market position, together with integrated production, logistics and information and innovation systems (Ruben et al. 2006). Consumer behaviour can also largely affect the competitiveness since it is a decision-making process based upon the characteristics and preferences towards products. Consumers make their purchasing patterns based on many variables such as price, quality, availability of products, brand image etc so actors of the food supply chain are strongly focused on satisfying consumer needs and preferences in order to gain better competitive position. It is important to mention that there is a diversity of markets and actors along the chains and thus it is necessary to monitor potential anticompetitive practices since asymmetry in bargaining power can lead to inefficiencies
6. Marketing The American Marketing Association (2007) gave a definition of marketing as follows: “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large�
Marketing offers a variety of important strategies in changing consumer behaviour and influencing their attitude and beliefs. In this context marketing can play a key role for consumers as decision makers in moving towards sustainability (Jones et al. 2007). The marketing is not only important within boundaries of the firm, but its influence spread over inter-relationships with consumers, customers, suppliers and distributors (Min et al. 2000) Marketing of sustainable food supply chains is concept which focuses on achieving synergy of three dimensions of sustainability through creating, producing and delivering sustainable solutions while in the same time continuously satisfying needs of consumers and actors in the supply chain (Charter et al. 2002).
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Economic criteria for sustainable food supply chains Marketing in sustainable food-supply chains assumes researching of customer needs, preferences and expectations and ability of supply chains to meet those expectations while comparing it to competitor strategies. Also, it requires gathering of information on stakeholders attitudes toward sustainability dimensions. For food chains promoting sustainability, key strategic choice would be to identify the markets that are likely to grow as a result of sustainable concerns and to promote products can be positioned in these markets as leading products regarding sustainability performance (Charter et. al 2002). A growing number of companies are looking to recognize the role of sustainability as an integral part of their business strategies. The main goal is to implement the concept of sustainability into company’s strategies throughout the whole supply chain (Jones et al. 2007). The marketing concept of sustainable food chains should be compatible with philosophy of all the partners in supply chain so that it can achieve it purpose (profit and consumer satisfaction) efficiently and effectively (Smith 2007). Food businesses often influence consumers using marketing tools by choosing which food to make available and promote using packaging, product placement and pricing. Firm needs to obtain information about suppliers, competition, customers and technological trends in order to establish which supply chain best servers its customer needs. The firms in food business should have close relationship with costumers in order to satisfy their current and future needs, as well as with other participants on the market to identify their influence on consumer preferences. (Min et al. 2000). Growing number of companies are looking to emphasize their commitments towards sustainability in attempt to differentiate their business from their competitors and strengthened their brand name and reputation by claiming to have different, better, more nutritious or more sustainable products (Jones et al. 2007; Min et. Al 2000). In order to increase sustainable patterns of consumption it is important to understand more about how consumers make their purchasing decisions. (Jones et al. 2007). People make their purchasing decisions based on variety of factors, such as price, quality, personal preferences, etc. Individuals and businesses do not just purchase brands, but also buy companies philosophies and policies. Following widely spread idea of more sustainable products it is expected that consumers will more and more pay attention to make their purchase “more sustainable” and slowly changes the traditional consumer patterns. Through the literature is argued that the price will still play a key role in consumer choice, so in order for marketers to choose adequate strategy it is important to examine consumers’ willingness to pay. 20
Conclusion Being seen as a firm that is a role model or leader, when it comes to environmental and social responsibility can create positive climate for business. Also, reputation, integrity and responsibility are not just key factors for business success but also for creating better environment among employees and thus may play a key role when it comes to operating on international markets. Although complying with social and environmental standards might be an indicator of quality for the consumers, to sell product on the market successfully it is demanded to have somehow “trustworthy agencies”. In local supply chains it is somehow easier to promote “trust” because of the possibility of personal contact and long-lasting tradition of product brands. On the other hand complex food supply chains have other approaches to their customers. For them important information are placed on packaging, linked to the product or a brand name, usually promoted via media and internet (Smith 2007). The complexity of the concept of sustainably and its priorities, including environmental and social issues makes somehow impossible to involve consumers directly to the process. Simple advertising of more sustainable products and contribution to more sustainable food chains is not what motivates people to make a change in their consuming patterns. Instead marketing experts try to concentrate on number of more simple issues where consumer would feel that they are involved in the process and give their contribution to sustainability. (Smith 2007)
7. Conclusion The decisions of actors along the whole food chain have a major impact on sustainability. Many of the options for food businesses and potential routes to more sustainable food supply chains discussed can create benefits both for the businesses involved and for others in the supply chain—from farmers to consumers. The best economic benefits for actors of the supply chain could be gained by improving the sustainability of the chain as a whole, so the main purpose of this paper is to outline the economic criteria need for achieving more sustainable food chains. There is a continuous need to redesign chain processes in order to better satisfy consumer demand and improve efficiency of these processes. The human awareness and regulations in many countries triggered the demand for sustainable products and thus actors of the supply chain are trying to answer to the demand by making their chains more sustainable. An important factor to address the economic problems in the food system is to understand supply chain dynamics. 21
Economic criteria for sustainable food supply chains It is important to develop relationships with farmers and growers to encourage them to create value for more sustainable raw materials and develop joint programs for mutual benefit along the chain. In order to achieve this goal it is important to understand issues associated with agriculture of raw materials and to develop partnerships at all levels of the supply chain. The rapid rise and fall of agricultural commodity prices and its delayed impact on food prices have raised numerous questions about market transparencies, inequalities in bargaining power and anticompetitive practices that lead to market distortion and effect competitiveness of the supply chains. Therefore it is of outmost importance to remove market distortions that have contributed asymmetries in price transmission along the food supply chain. (EU Commision 2009) Increased concentration in food retailing resulted in rise in food prices as retails get products at lower prices but they do not actually pass those savings to consumers. If this trend continues we can expect the further increase in prices because the competition among retailers will decrease. The policies to address this issue should be develop to ensure that food actors do not exchange price information and pursue anticompetitive behavior among dominant actors in a supply chain (Kaditi 2011). Furthermore, while marketing and sustainability at first sight might not seem like supporting concepts, apparently these two concepts have something to offer each other. Numerous companies are publicly claiming that they are pursuing the idea of sustainability although that may seem as a marketing trick and it is driven by profit incentives still these marketing campaigns are inevitably rising awareness regarding sustainability, implementing the idea in all levels of the society since marketing is an important tool when it comes to changing behavior and influencing attitudes and beliefs of the consumers. Of course there is a constant debate whether marketing has power to promote radical changes in lifestyles and truly influence the sustainable behavior of the consumers (Jones et al. 2008) Although the paper outlines the most important economic criteria, further research is needed to establish the real impact of these factors on the sustainability making an evaluation of the performance of the supply chains
22
References
References Bartha A., Balogh V. and Nabradi A. (2009). “The current situation of EU’s food chain”, Paper prepared for presentation at the 113th EAAE Seminar “A resilient European food industry and food chain in a challenging world”, Chania, Crete, Greece, date as in: September 3 - 6, 2009 Brundtland, G. H. (1987). “Our Common Future”, Oxford: Oxford University Press. Bukeviciute,L., Dierx,A. and Ilzkovitz, F. (2009). “The functioning of the food supply chain and its effect on food prices in the European Union”, European Commission, Directorate-General for Economic and Financial Affairs Publications , B-1049 Brussels , Belgium Bukeviciute,L., Dierx,A., Ilzkovitz, F. and Roty, G. (2009), “ Price transmission along the food supply chain in the European Union”, Paper prepared for presentation at the 113th EAAE Seminar “A resilient European food industry and food chain in a challenging world”, Chania, Crete, Greece, date as in: September 3 - 6, 2009 Bunte, F., Bolhuis, J.,Bont, C., Jukema, G. and Kuiper, E. (2009). “Pricing of food products”, Memorandum 09‐ 074, November 2009, Project code 40871, LEI Wageningen UR, The Haguervation Union Bunte, F. (2006). “Pricing and performance in agri-food supply chains, LEI, Wageningen University and Research Centre, P.O. Box 29703, 2502 LS Den Haag, The Netherlands Charter, M., Peattie, K., Ottman, J. and Polonsky, M.J. (2002) “ Marketing and sustainability”, Centre for Business Relationships, Accountability, Sustainability and Society (BRASS), in association with The Centre for Sustainable Design, April 2002. Clarke, R. (2002). “Buyer power and competition in European food retailing”. Edward Elgar, Cheltenham. Commission of the European Communities (2009). “COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS - A better functioning food supply chain in Europe”, Brussels, 28.10.2009 , COM(2009) 591 DEFRA (2006). “Food IndustrySustainability Strategy”, Department for Environment, Food and Rural Affairs, Nobel House, 17 Smith Square, London SW1P 3JR, UK European Commission, Agriculture Directorate-General (2001). “A Framework for Indicators for the Economic and Social Dimensions of Sustainable Agriculture and Rural Development”, Brussels Fresco O. L. (2006). ”Sustainable agro-food chains – Challenges for research and development”, FAO, Via della Terme di Caracalla, 00100 Rome, Italy.
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Economic criteria for sustainable food supply chains IBM (2008). “Supply Chain Risk Management: Management A Delicate Balancing Act - A multi-faceted view on managing risk in a globally integrated enterprise”, IBM Business Consulting Services, Route 100, Somers, NY 10589, U.S.A Ilbery, B. and Maye, D. (2004). “Food supply chains and sustainability: evidence from specialist food producers in the Scottish/English borders”, Department of Geography, Coventry University, Priory Street, Coventry CV1 5FB, UK IUCN (2006). “The Future of Sustainability: Re-thinking Environment and Development in the Twenty-first Century”, Report of the IUCN Renowned Thinkers Meeting, 29-31 January 2006 Jones, P., Clarke-Hill, C. and Comfort, D. (2008). “Marketing and sustainability”, The Business School, University of Gloucestershire, Cheltenham, UK, and David HillierCentre for Police Science, University of Glamorgan, Pontypridd, UK Kaditi, E. (2011). “ Market Dynamics in Supply Chains: The impact of globalization and consolidation on food companies mark-ups”, Katholieke Universiteit Leuven, LICOS Centre for Institutions and Economic Performance, Waaistraat 6 – mailbox 3511, 3000 Leuven, Belgium Min, S. and Mentzer J.T. (2000). “The role of marketing in supply chain management” , Department of Marketing, Logistics and Transportation, The University of Tennessee, Knoxville. Tennessee, USA Ondersteijn, C., Wijnands, J., Huirne, R. and Kooten, O. (2006). “Quantifying the agri-food supply chains”, Springer, P.O. Box 17, 3300 AA Dordrecht, The Netherlands Ruben, R., Slingerland M. and Nijhoff H. (2006) “Agro-food chains and networks for development – Issues, approaches and strategies”, Wageningen University and Research Centre (WUR), P.O. Box 9101, 6700 HB, Wageningen, The Netherlands Sznajder, M. (2007). “Towards sustainable food chain - concept and challenges (Case study- the diary food chain in Poland)” , Department of Agrifood Economics Agricultural University of Poznań, Poland, Brusseles 7.12.2006, Belguim Smith, B. G. (2007). ”Developing sustainable food supply chains”, Unilever Research and Development, Colworth House, Sharnbrook, Bedford MK44 1LQ, UK, Phil. Trans. R. Soc. B (2008) 363, 849–861, doi:10.1098/rstb.2007.2187, Published online 31 August 2007 Yakovieva, N. , Sarkis, J. and Sloan, T. (2009). “Sustainable benchmarking of supply chains”, WORKING PAPER NO. 2009-02, CLARK UNIVERSITY, George Perkins Marsh Institute
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Juan Esteban DĂaz
Environmental Criteria for Sustainable Food Supply Chains
Abstract An essential step in the path towards environmental sustainability is the availability of criteria for its evaluation on food supply chains. Regeneration, substitutability, assimilation and maintenance of critical natural capital were the four criteria identified and presented in this paper. Regeneration and substitutability are concerned to the use of renewable and non-renewable resources respectively. Assimilation considers by-products generation and its release to the environment in the form of waste or pollution, and maintenance of critical natural capital evaluates the preservation of essential environmental resources, capacities and functions. In this sense the whole extended food supply chain can be evaluated, including not only the environmental impacts generated by extraction of raw materials and production systems, but also postproduction stewardship operations.
Keywords Backstop resource, stewardship concept, by-product, critical natural capital, lifecycle assessment.
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Environmental Criteria for Sustainable Food Supply Chains
1. Introduction Manufacturing and production operations are commonly viewed as the enemy of environmental protection (Beamon 1999) due to depletion of natural resources, ecosystem disruption and waste generation (Fiksel 1996). Nowadays, quality, safety and environmental conformity are factors taken into consideration by consumers for their purchase decisions (Wognum et al. 2011). In this sense, environmental impact is regarded as a dimension of product quality. This has promoted the development of strategies towards sustainability (Wognum et al. 2011). An operation is not sustainable when the environmental degradation exceeds earth's ability to compensate and recover (Beamon 1999). Elkington (1998) defined sustainability as the situation where the needs of the present generation are met, without compromising the satisfaction of the needs of future generations. More specifically, the World Commission on Environment and Development (1987) defined sustainable development as “a development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Considering these two definitions, in order to achieve an environmental sustainable development, it is necessary that the biosphere is able to provide society with sufficient natural goods and services of adequate quality in the long run (OECD 2001). Seuring and Müller (2008) defined sustainable supply chain management as “the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development, i.e., economic, environmental and social, into account which are derived from customer and stakeholder requirements”. The continuous change in the quality from raw materials to final product is the main difference between food supply chains and another supply chains (Radhika et al. 2005). The traditional supply chain is defined as an integrated process where raw materials are transformed into final products and delivered to customers via different distribution channels (Beamon 1998). In this sense, optimization on procurement of raw materials from suppliers and the distribution of products to customers are the main goals intended to be achieved (Beamon 1998). If the goal pursued is to achieve environmental sustainability, then a fundamental shift is needed, which can be reached through reductions in resource use, waste generation and a move away from one-time use and product disposal. Sustainability also requires cooperation between all participants involved in a food supply chain. Transparency is also needed because at the end, consumers will decide the premium granted for the improvement achieved (Wognum et al. 2011). 26
Criteria for environmental sustainability The shift from problem-solving environmental management techniques to fully integrated environmental management (EM) is the challenge for producers (Beamon 1999). Likewise, a shift from treating emissions to an Integrated Product Policy (IPP) must occur, where a holistic approach of environmental performance is obliged (Wognum et al. 2011). But in order to make this happen is necessary to have the criteria specified to evaluate food supply chains in respect to environmental sustainability. Therefore, the objective of this paper was to find out the main criteria to evaluate environmental sustainability on food supply chains.
2. Methodology A literature review was carried out following a four step process proposed by Mayring (2003), which included: material collection, descriptive analysis, category selection and material evaluation to identify, evaluate and interpret the conceptual content and relevant issues of the topic analyzed.
3. Criteria for environmental sustainability Regeneration, substitutability, assimilation and maintenance of critical natural capital were the four criteria identified to evaluate environmental sustainability in a food supply chain. Each criterion is presented in this paper.
3.1 Regeneration An efficient use of renewable resources is required in the path towards environmental sustainability (Daly 1990; OECD 2001; Moldan et al. 2012). A not fixed stock, which can increase or decrease, is the main characteristic of a renewable resource (Pearce and Turner 1990). A sustainable food supply chain should be designed in a way that the levels of its inputs are determined taking into consideration the natural growth rate of the renewable resource employed. So the limitation of resource use is set by the long-term rate of natural regeneration, which must not be exceeded by the rate of harvest (Daly 1990; OECD 2001; Moldan et al. 2012). If the rate of natural growth is persistently exceeded by the rate of harvest, then this resource will be driven to extinction. It is important to consider that the resource population of some renewable resources presents a critical level, under which the extinction becomes imminent; this is known as the critical minimum level of the population (Pearce and Turner 1990). This level is shown as Xcritical in Figure 1.
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Environmental Criteria for Sustainable Food Supply Chains
Figure 1. Use of renewable resources (own depiction based on Pearce and Turner 1990 and Clark 2005)
An important concept that must be understood is the corresponding to maximum sustainable yield (MSY), which is the maximum quantity of the resource that can be taken on a sustainable basis, without reducing its long term stock. MSY is depicted in Figure 1. Establishing the maximum sustainable yield as a threshold of resource depletion is not an optimal management policy because if for any reason the population decreases under the specific level determined, the long term stock of the resource can be affected. Therefore, it is more convenient to look for stable steady states to define the level of harvest of a specific renewable resource. A steady state is the condition where the rate of harvest and growth rate of the resource are equal. Depending on the growth function exhibited by the resource and on the harvest function employed, there might be several steady states. Therefore, the identification of those steady states where the condition of stability is fulfilled becomes critical. A steady state is considered to be stable when, after variations of the stock, the equilibrium can be restored as a consequence of the interaction of harvesting and growth rate of the resource (Pearce and Turner 1990). Achieving environmental sustainability according to this criteria would imply that the participants in a food supply chain must have a perfect knowledge of the growth functions of all renewable resources employed and their respective harvesting functions, so a sustainable quantity of these resources can be taken without affecting its long term stock level. Less 28
Criteria for environmental sustainability flexibility would be also implied because the production will be restricted by the growth rate of the resources employed. Therefore, implementing modifications, as a variation in quantities produced, will require a total re-adaptation of the whole range of operations involved in the food supply chain. This re-adaptation must consider input’s growth rate and not market demand, as the main constrain to determine maximal quantity produced.
3.2 Substitutability The essential feature of non-renewable resources is that during an economic time scale a significant growth is not exhibited. In this case, when the resource has a fixed stock, the key point is to find out the optimal rate at which the resource should be depleted (Conrad 1999), so when this has occurred an alternative will be available. To achieve environmental sustainability, non-renewable resources must be used efficiently at a level that can be offset by substitution with renewable resources or other forms of capital (Moldan et al. 2012).
Figure 2. Use of non-renewable resources (own depiction based on Pearce and Turner 1990)
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Environmental Criteria for Sustainable Food Supply Chains
To do so, it is important to have knowledge about the stock size of the resource (Xtotal), the quantity demanded and the period of time in which a backstop resource will appear (T) to substitute the current one at a price pT (all these conditions are shown in Figure 2). Having the knowledge of this information, it is possible to determine a sustainable way to deplete this resource. Therefore the challenge is to find out when this backstop resource will be available (Conrad 1999). In this sense, research and development must be considered as one of the essential activities carried out by a food supply chain in the path towards environmental sustainability. Sustainability can only be achieved through innovations and development of environmental friendly technologies, which can replace the currently employed non-renewable sources by renewable ones, to obtain inputs of energy and/or matter. By substituting the use of nonrenewable for renewable resources in a sufficient quantity, the present needs theoretically could be covered without compromising the wellbeing of future generations.
3.3 Assimilation A sustainable food supply chain must consider assimilation capacity of the ecosystem where its operations are carried out, so the generation of by-products in the form of waste and pollution are held under the available assimilative capacity of the environment (Daly 1990; Moldan et al. 2012). This symbiotical coexistence of industrial development and environmental protection is the goal that producers have to achieve. To do so, the basic structure of the entire supply chain must be re-defined, by taking waste and resource use minimization into consideration. Product design, manufacturing by-products, by-products produced during product use, product life extension, end-of-life recovery (Linton et al. 2007), recycling, re-use and/or remanufacturing operations are issues that must be integrated (Beamon, 1999) into a sustainable food supply chain. By doing so, a more efficient use of resources can be achieved, which will lead to a lower assimilative capacity required from the environment, due to decrease of by-products released in the form of waste and/or pollution. 3.3.1 Product design Product design is regarded as the most important factor to achieve sustainability (Wognum et al. 2011). The design for obsolescence, common in a consumption oriented society, must be replaced by a design focus on extension of product life; by doing so, the depletion of
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Criteria for environmental sustainability resources will be reduced (Linton et al. 2007). Therefore, products should be designed to facilitate recycling and built with durable non-hazardous materials (Wognum et al. 2011). Reduction of by-products can be achieved through lean production techniques (Zink 2005; Zhu and Sarkis 2004; King and Lennox 2001) and cleaner process technologies (Kemp, 1994; Johansson, 1992). Reusing, remanufacturing, recycling, incinerating or disposing of byproducts is dependent in high degree of the product design (Linton et al. 2007). Through an adequate product design and continuous improvement activities (Linton et al. 2007), byproducts can be used as inputs for different food and non-food production process (Frosch and Gallopoulos 1989). The uncertainty about quality and quantity of the recovered products along with the time required for collection and transportation of these products are some of the problems raised by the extension of the supply chain (Linton et al. 2007). Dealing with this uncertainty is one of the biggest challenges on product design, especially when striving for lean production where a standardized process and perfect knowledge of inputs and outputs is required. 3.3.2 Extended Supply Chain The extension on the traditional supply chain is intended to recognize that the environmental effects of an organization include not only the environmental impacts generated by extraction of raw materials and producing process, but also the use of goods produced and their final disposal (Lamming and Hampson 1996). This consideration of total immediate and eventual environmental effects of all products and processes is known as the Stewardship concept. Consequently, the maximum limit of all by-products generated within a food supply chain should be lower than the assimilative capacity of the environment where these operations are being held.
3.4 Maintenance of Critical Natural Capital Strong sustainability works on the condition that non-negative change in the natural capital stock must be produced, and this natural capital is considered in aggregate terms, separated from manufactured capital (O’Connor 2006). The magnitude of the environmental impact that a product will generate depends on its characteristics and the nature how it is produced, distributed, consumed and disposed of (Lenzen et al. 2007). Therefore, optimization in operations from a broader perspective is needed. Looking at the entire production system and postproduction stewardship, instead of just focusing on a specific process step is a way how sustainability can be achieved (Linton et al. 2007). 31
Environmental Criteria for Sustainable Food Supply Chains The entire lifecycle of the product must be considered on food supply chains, and the product must be optimized not only from a cost standpoint, but also considering the total cost, which include effects of resource depletion and by-products generation (Linton et al. 2007). It means externalities must be considered, which correspond to those costs from a production activity that are not borne by the producer, but by other members of society (Lynam and Herdt 1989). According to O’Connor (2006) critical natural capital refers to “specific environmental resources or system capacities that perform important welfare support (or other) functions and for which no substitute in terms of manufactured, human and social capital exist”. Since there is no way to aggregate the whole natural diversity, which is the case of natural capital; the introduction of the concept of critical natural capital provides an operational advantage to frame strong sustainability in terms of requirements for maintaining these essential resources, capacities and/or functions (O’Connor 2006). Environmental standards or thresholds below which the critical natural capital is not maintained must be defined by policy applications. Once environmental limits have been set, a cost minimization analysis to achieve a specific target must be executed (O’Connor 2006). Through the criterion of strong sustainability the notion of “economic costs for respecting the integrity of the environment” acquire operational meaning on the interface of the environmental and economic spheres (Faucheux and O’Connor 2001, 2003; O’Connor 2006). The need for these essential environmental functions as a pre-condition for economic and social sustainability is the justification for maintaining the critical natural capital (O’Connor 2006). Therefore, a food supply chain can be considered as sustainable under this criterion, when the environmental limitations are well known and respected in a way that critical natural capital can be maintained. This implies another challenge: perfect knowledge of the critical natural capital that can be affected along the food supply chain and the elements included within this critical natural capital. 3.4.1 Lifecycle Assessment Lifecycle assessment (LCA) is a methodology employed to evaluate a product’s lifecycle regarding to the environmental impact generated by all the processes involved. Inputs and outputs in a supply chain are systematically associated with a certain product in the LCA to determine the environmental impact of a specific product (Wognum et al. 2011). LCA can be used for at least four purposes to support this criterion. First, the overall lifecycle balance of environmental burdens of a product can be improved by identifying the resource 32
Summary and Conclusions or emission intensive processes within a product’s lifecycle. Second, modifications on these processes can be evaluated and the effect on the total environmental burden of these modifications can also be analyzed. This presents the advantage that real solutions can be tested to solve a problem and not just to shift a problem from one phase of the lifecycle to another. Third, alternative products or processes can be compared in different parameters as carbon footprint, toxicity, land use, among others. Fourth, implementation of LCA is sometimes a requirement to achieve a product registration; two examples are the Green-toGold-label from the US and the Eco Label from the EU (Wognum et al. 2011). A way to achieve a better control in the organization is through the implementation of certified environmental management systems (EMSs). They can be based on ISO series, BS7750 (British Standard), EMAS (EU Eco Management Audit Scheme), among others (Wognum et al. 2011).
4. Summary and Conclusions Regeneration, substitutability, assimilation and maintenance of critical natural capital were the four criteria identified to evaluate environmental sustainability on food supply chains. The natural growth rate of renewable resources employed within a food supply chain has to be considered while determining the level of inputs employed. The established levels must correspond to a stable steady state for each resource, so a sustainable quantity can be taken without affecting its long term stock. Therefore, input’s growth and not market demand, will define maximum quantities produced by a food supply chain. Substitutability is related to find out the optimal rate at which non-renewable resources should be employed (Conrad 1999), so when a resource has been depleted, an alternative in the form of renewable resource or other forms of capital will be available. (Moldan et al. 2012). The available assimilative capacity of the environment must be taken into account while establishing thresholds for by-products generation within a food supply chain. Product design must focus on the extension of product life, non-use of hazardous materials and facilitate stewardship operations. Moreover, the basic structure of the entire supply chain must be re-defined to the extended supply chain. Through this, a more efficient use of resources can be achieved, leading to a decrease of by-products released on the environment in the form of waste and/or pollution. As a consequence, a lower assimilative capacity from the environment will be required. 33
Environmental Criteria for Sustainable Food Supply Chains Maintenance of environmental essential resources, capacities and functions, known under the concept of critical natural capital, requires that all the operations carried out within a food supply chain fulfill environmental standards and not exceed thresholds below which the critical natural capital can be negatively affected. Therefore, environmental limitations must be well known and respected to achieve sustainability according to this criterion. Achieving sustainability is a complex process that requires a deep knowledge and understanding of the characteristics and capacities of ecosystem along with involvement and commitment of every single participant of a food supply chain. Effort, collaboration, investment and a complete re-definition of the way a normal firm works are necessary in the path towards environmental sustainability; where production must be based first on the consideration of environmental limitations and then on demand or costumer requirements.
Table 1. Environmental criteria for sustainable food supply chain*
Environmental Criteria for Sustainable Food Supply Chains Regeneration
Substitutability
Assimilation
Maintenance of critical natural capital
Use of renewable resources
Use of non-renewable resources
By-products generation in the form of waste and/or pollution
Maintenance of essential environmental resources, capacities or functions
*own depiction
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References
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Chapter 2 The Role of NGOs in Sustainable Food Supply Chains
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Artur Khabirov
The Role of Non-Governmental Organisations in the Agri-Food sector
Abstract “Non-government organizations as a third sector institutional framework are playing a crucial role in providing strong support to the development issues� (Aurora et al, 1994 and Rajendran, 2003), especially in the areas where the government and private sectors are showing less interest. One of the main sectors is agriculture. Many states across the world provide support for modern agriculture, mainly to increase the productivity for commercial purpose without considering the environment sustainability (Pingali, 2001). In recent years many governments have taken steps to provide sustainability of agriculture however these actions have not succeeded so far. Hence NGOs are appearing as a new thrust for the sustainability of agriculture. Many NGOs are trying to develop a framework so called Low External Inputs and Sustainable Agriculture (LIESA) for promoting Sustainable Agriculture Development as alternative to High External Input Agriculture. Organic agriculture is a production system that sustains the health of soils, ecosystems and people. It relies on ecological processes, biodiversity and cycles adapted to local conditions, rather than the use of inputs with adverse effects, combines tradition, innovation and science to benefit the shared environment and promote fair relationships. The objective of the study is to analyses of the role of NGOs in agri-food sector and, actions they undertake to promote sustainable agricultural development.
Keywords: Non-government organizations, agriculture, support organic agriculture system.
39
The Role of Non-Governmental Organisations in the Agri-Food Sector
1. Introduction Non-Governmental Organizations, or NGOs, have emerged as important stakeholders in discussions over the terms and conditions under which business, government, and multilateral institutions manage the process of globalization, one of the most vexing issues facing public policy-makers, corporate executives, and broader societal interests around the world. At the same time, non-governmental organizations are increasingly influencing both government and corporate policy directly, by undertaking research and often highlighting the shortcomings of both business and governmental actions in terms of social, ethical, and environmental responsibility and thereby reducing the role of latter in social welfare services. “Non-government organizations as a third sector institutional framework are playing a crucial role in providing strong support to the development issues” Rajendran (2003). Today NGOs plays an important role in many sectors, especially where the government and private sectors are showing less interest. The areas where NGOs still exist are agriculture, health, education, environment protection etc. The Government agencies involved in these areas started cooperating and collaborating with NGOs. Non governmental organizations have also significant and emerging role in meeting this goal. In many developing countries, agriculture is still the engine for economic growth. “Many countries across the world provide support for modern agriculture, mainly to increase the productivity for commercial purpose without considering the environment sustainability” Pingali (2001). Contemporary agriculture technologies have clearly increased the production and labour efficiency, but there are still some problems, such as: low nutrition, poor taste, adverse effects on soil productivity, harm to the environment, decrease in water table, increase salinization, pollution due to fertilizers and pesticides, genetic erosion, reduced socio-economic values and similar effects on environment. Therefore, the concept of sustainability of agriculture has been actively discussed in last few years. The concept of “sustainability” has been mentioned in Earth Summits 1992 and 2002. The Earth summit offered key actions on agriculture with a view to sustainability and reducing poverty and hunger, protecting biodiversity and access to resources for small farmers everywhere. In recent years many governments have taken steps to provide sustainability of agriculture. However, these actions have not succeeded so far. Hence NGOs are appearing as a new thrust for the sustainability of agriculture. The sustainable agriculture is a way of raising food that is healthy for consumers and animals, does not harm the environment, is humane for workers, respects animals, provides a fair wage to the farmer, and supports and enhances rural communities. According to Reddy (1995): “There are concerns regarding increasing productivity under organic farming”. 40
Introduction Table 1. Features for different farming systems Farming systems Issues
Conventional
Traditional
Ecological (organic)
Productivity
High
Low
High
Sustainability
Low
Moderate
High
Farm complexity
Simple
Complex
Complex
Environment
Uniform
Diverse
Diverse
Market
Subsistence
Subsistence/market
diversity Production orientation Inputs – Seeds
High
yielding Local
Improved/local
varieties Synthetic inputs
High
Low
Nil
Source: Werf and Narayan, 1998. Table 1 show that sustainability have the highest importance under ecological agriculture and quite low from the conventional or modern farming system. This can be explained by the fact that organic agriculture seeks to enlarge ecological processes that foster plant nutrition while conserving soil and water resources. However conventional or modern agricultural system has limited advantages on issues like application of external inputs, such as fertilizers, pesticides and farm complexity as compared with ecological agriculture. At earliest days of human civilization agriculture was more sustainable without any external inputs but nowadays due to the improvement in science and technology agriculture became more commercialized and consequently unstable. In order to feed the increasing population large-scale external inputs termed as High External Input Agriculture (HEIA). “Under the influence of Modern and Commercial system, agriculture become unstable and has negative implications like uneconomical, environmental degradation and socially not adaptable and in the long run unsustainable” (Rejinties et al.). Many NGOs are trying to develop a framework so called Low External Inputs and Sustainable Agriculture (LIESA) for promoting Sustainable Agriculture Development as alternative to High External Input Agriculture. The Technical Advisory Committee of the Consultative Group on International Agriculture Research (TAC/CGIR, 1998) defines, that “sustainable agriculture is the successful management of resource for agriculture to satisfy changing human needs, while maintaining or enhancing the quality of the environment and conserving natural resources”. Sustainable agriculture and Ecological agriculture aims at maintaining or enhancing the quality of the 41
The Role of Non-Governmental Organisations in the Agri-Food Sector environment and conserving the resource. Also, ecological agriculture aims at completely avoiding the chemical inputs. Organic agriculture system is based on ecological principles and applying ecological practices to maintain soil fertility, to manage crop and animal health and to keep soil and water in a good condition.
2. Types of NGOs The NGOs can be classified into various types, based on different factors, such as orientation or level of co-operation. NGO types by orientation can be grouped into following categories:
Charitable orientation
Service orientation
Participatory orientation
Empowering orientation.
NGO type by level of co-operation can be grouped into:
Community- Based Organization
City Wide Organization
National NGOs
International NGOs;
The Non-governmental organizations forms a heterogeneous groups and they have a long list of organizations working in different areas with a varied scope of work. The alternative terms used in addition to “NGO” include private voluntary organizations, civil society, independent sector, self-help organizations, grassroots organizations, volunteer sector, transnational social movement organizations, and non-state actors (NSA’s). 2.1
Agriculture NGOs
Agricultural non-governmental organizations (NGOs) often specialize in certain types of activity as set out in their mission statements. Larger NGOs may have a division that specializes in certain agricultural objectives, while the remainder of the NGO is involved in other aspects of development. Agricultural NGOs increasingly have moved away from relief or emergency supplies and toward sustainable development, using technological research with the objective of slowing or stopping environmental and social degradation in rural areas. Agricultural NGOs also are moving toward the goals of fair trade, community empowerment and participation in decision making, helping to channel more political power to communities or to specific social groups, such as women. Other NGOs are concentrating on building up businesses in rural communities through the provision of microcredit. 42
Principles underlying NGO work NGOs concerned with research support the development of new technologies that are relevant to farmers in a particular region, making use of the skills and experience of the farmers combined with modern technologies to improve productivity. This agro-ecological approach may involve specialist issues such as soil management, introducing modern methods of cultivation that combine well with the skills of the farmers. Research often is directed toward eliminating the pests that threaten crops in some regions or to health issues caused by harmful insects or bad sanitation in rural areas. Agricultural NGOs frequently combine their activities with the wider goal of social organization and empowerment, ensuring that rural communities may have a voice in their own future and be heard by governments. For example, helping communities to deal with their basic health needs and the education of their children may be combined with training adults in social organization and political participation. An emphasis on sustainable land use may be supplemented by education on land rights and land tenure, enabling rural communities to defend their rights against encroachment from large business or political interests. Other NGOs may be concerned with fair trade, enabling rural groups to form cooperatives and stand up for a fair price from participating organizations in industrialized countries. Some agricultural NGOs concentrate on the supply of microfinance, including loans, savings and insurance. Within the area of microfinance, some NGOs concentrate on the supply of microcredit to farmers and other rural businesses on fair terms, to enable them to build their businesses and account for their use of funds in a responsible way. These NGOs open the possibilities of business expansion for rural entrepreneurs who otherwise would not be able to obtain a bank loan because of their inability to raise collateral for loans and their lack of a credit history.
3. Principles underlying NGO work Over the last decade, field experience and academic research have provided a lot of information about NGO project activities. To promote sustainable agricultural development, NGOs developed 4 key principles, which are:
Participatory development
Wider impact (expanding the scale of NGO involvement)
Sustainable development
Agroecology 43
The Role of Non-Governmental Organisations in the Agri-Food Sector 3.1
Participatory development
Participatory development is an approach that has been developed and tried extensively by NGOs. The goal of participatory development is to teach people a process by which they can develop their own agricultural and community programs by means of ICT and resources. In contrast to large, heavy-handed, top down development programs usually financed by governments and multilateral aid agencies, participatory development projects are smallscale, self-help, and bottom-up. They attempt to use available technology and resources. “The poor themselves participate in the planning, implementation, and management of their own projects, which leads to more appropriate project activities, more interest, and better maintenance of projects” (Fisher 1993). The concept of participatory development is based in the belief that, “despite their poverty, poor people possess substantial resources, knowledge and understanding of their circumstances, the will and persistence to make things better, and the capacity to organize and mount collective action” (Annis and Hakim 1988, 1). 3.1.1 Case study of International Institute for Communication and Development International Institute for Communication and Development (IICD) is a non-profit foundation established by the Ministry for Development Cooperation of the Netherlands in 1996. IICD's aim is to support sustainable development through the use of information and communication technologies (ICTs), notably computers and the Internet. The Institute supports policy processes and projects involving the use of ICTs in the following sectors: health, education, "livelihoods" (mainly agriculture), and governance. Using ICT in agriculture, like internet or mobile phone, could help farmers decide what to grow or manufacture, when and how to sell it, what price to ask for it and therefore make better business decisions. Agricultural cooperatives can work together to earn certification and to sell higher volumes for higher prices. Farmers and small businesses in a same manner can boost productivity and quality by asking for expert advice and by using ICT to improve administrative and business skills. Most farmers in LDCs don’t know the current market prices for what they grow especially in rural area. They have to take what buyers will give them. But by using ICT farmer can get a daily market price updates on his mobile phone and he would know when to sell and at what price, and this means he earns more. 3.2
Wider impact
The second key principle is “wider impact” through the capacity development. NGOs are increasingly involved in policy issues and cooperative arrangements in order to improve the 44
Principles underlying NGO work payoff and change the way of development. At the community level the organizational methods of NGOs can enhance people’s abilities to deal with the larger society, and ultimately to address the institutional problems that must be faced if long term improvement is to be achieved. Bebbington (1996) argues “that in a rapidly changing world, indigenous communities are increasingly required to forge new market relationships, manage the development of on- and off-farm technologies, and negotiate new relationships with other organizations and institutions”. This will require “modernized” forms of indigenous management techniques. International NGOs, as outsiders, can and do play a role in this process. The efforts by the NGOs within the communities indicate the potential for a larger impact. The emphasis on participatory development requires individuals to work together, which ultimately will lead to a more enduring local social organization and community cohesion. 3.3
Sustainable Development
The third methodological principle for NGO work is “sustainable development”. Sustainable development refers to the maintenance or expansion of production without degrading the natural resource base or social structures upon which a production system depends. Most NGOs claim to be proponents of sustainable development, but there is no consensus about its meaning. Issues of ecology, economy, social organization, time, scale, and technology are all relevant. NGOs are key players in determining what must done in order to promote sustainable development, but participatory development and local control are also parts of the sustainable development process. 3.4
Agroecology
The last key principle is agroecology, which provides the farming techniques for promoting sustainable agricultural development among small holders. Altieri (1992), Altieri and Hecht (1990), and Kaimowitz (1993) outline “an agroecological approach to small farm development that focuses on recovering and building upon traditional resource management techniques”. “The starting point is the improvement of traditional mixed farming systems in small autonomous units of production by encouraging and building on indigenous knowledge, experimentation and adaptation” (Conway and Barbier 1988, p. 668). However, in order to survive in today’s commercial economy, farmers must be competitive and diversified into more profitable crops. “Modern inputs and methods are used to assist, complement, and improve upon what farmers already do well” (Kaimowitz 1993). Agroecological methods focus heavily on soil and slope management practices, such as cover cropping, composting, no-till and conservation tillage, contour plowing, crop rotation, and 45
The Role of Non-Governmental Organisations in the Agri-Food Sector physical and biological barriers to erosion. Pests, diseases, and weeds are managed using biological, mechanical, and sometimes chemical methods. Annual crops, livestock, and trees are brought together to gain maximum use of space, and there is greater emphasis on multiple cropping systems that are adapted according to the constraints set by small farmers. Agroecological methods are generally labor and management intensive, not capital and technology intensive; and by definition, they are sensitive to ecological and cultural constraints. 3.4.1 Case study of Greenpeace Greenpeace is a non-governmental environmental organization with offices in over forty countries and with an international coordinating body in Amsterdam, The Netherlands. Greenpeace states its goal is to "ensure the ability of the Earth to nurture life in all its diversity" and focuses its campaign on worldwide issues such as global warming, deforestation, overfishing, commercial whaling and anti-nuclear issues. Greenpeace uses direct action, lobbying and research to achieve its goals. The global organization does not accept funding from governments, corporations or political parties, relying on more than 2.8 million individual supporters and foundation grants. Greenpeace is an independent global campaigning organization that acts to change attitudes and behaviour, to protect and conserve the environment and to promote peace in the world. One of the campaigns of Greenpeace is sustainable agriculture by encouraging socially and ecologically responsible farming practices. 3.4.2 Green Revolution Over the past years, agricultural outputs have nearly tripled. But this so-called "Green Revolution" comes at unbearable costs for the environment, public health and social welfare. Industrial farming with its dependency on fossil fuels, toxic inputs and ignorance for common goods has proven to be a dead-end road. The spread of Green Revolution agriculture affected both agricultural biodiversity and wild biodiversity. There is little disagreement that the Green Revolution reduced agricultural biodiversity, as it relied on just a few high-yield varieties of each crop. This has led to concerns about the susceptibility of a food supply to pathogens that cannot be controlled by agrochemicals, as well as the permanent loss of many valuable genetic traits bred into traditional varieties over thousands of years. To address these concerns, massive seed banks such as Consultative Group on International Agricultural Research’s
46
Principles underlying NGO work (CGIAR) and International Plant Genetic Resources Institute (now Bioversity International) have been established. There are varying opinions about the effect of the Green Revolution on wild biodiversity. One hypothesis speculates that by increasing production per unit of land area, agriculture will not need to expand into new, uncultivated areas to feed a growing human population. However, land degradation and soil nutrients depletion have forced farmers to clear up formerly forested areas in order to keep up with production. A counter-hypothesis speculates that biodiversity was sacrificed because traditional systems of agriculture that were displaced sometimes incorporated practices to preserve wild biodiversity, and because the Green Revolution expanded agricultural development into new areas where it was once unprofitable or too arid. Nevertheless, the world community has clearly acknowledged the negative aspects of agricultural expansion as the 1992 Rio Treaty, signed by 189 nations, has generated numerous national Biodiversity Action Plans which assign significant biodiversity loss to agriculture's expansion into new domains. 3.4.3 The Problem: Genetic Engineering Genetic engineering enables scientists to create plants, animals and micro-organisms by manipulating genes in a way that does not occur naturally. These genetically modified organisms (GMOs) can spread through nature and interbreed with natural organisms, thereby contaminating non-"GE" environments and future generations in an unforeseeable and uncontrollable way. Proponents argue that genetic engineering is worth the risk because it helps alleviate the global food crisis. However, globally speaking, lack of food is not the cause of hunger. Political challenges and failures are the cause of world hunger with an estimated one billion victims. In other words, more food doesn't necessarily mean fewer hungry. Also, according to recent carbon footprint analysis, the entire chain of food production and consumption accounts for 20 percent of global greenhouse gas emissions. Reducing these greenhouse gas emissions and increasing the long-term storage of carbon in the soil are therefore essential measures to prevent a climate catastrophe. 3.4.4 Facts and figures (backed by recent scientific studies) Destructive agriculture relies on non-renewable and artificial resources (fossil fuels, agrochemicals and genetically engineered seeds) that damage the natural resources needed for food production. 47
The Role of Non-Governmental Organisations in the Agri-Food Sector Fossil fuels: “in the most industrialized countries, agriculture requires up to 20 percent of the total fossil fuel used in each nation” (Pimentel et al., 2008). Chemical fertilizers, mostly made of natural gas but also of coal and heavy fuels in some countries, require the highest share of this oil energy (about 1.5 percent, but more than 3 percent in countries like India). “Diesel needed for irrigation and to power machines and the petroleum needed for pesticide production, combined represent about 1 percent of the total fuel used” (Bellarby et al., 2008). As a consequence of this fossil fuel dependence, current grain price movements reflect almost exactly the roller-coaster fluctuations of the oil market. Agrochemicals: “use of synthetic nitrogen fertilizers has increased globally by more than 8fold from 1961 to 2006, while grain yields increased globally by 1.5-fold in the same period” (FAO stats, 2009). 3.4.5 The Solution: Organic Agriculture The benefits of ecological farming are: -
Ecological farming provides the ability of communities to feed themselves and ensures a future of healthy farming and healthy food to all people.
-
Ecological farming protects soils from erosion and degradation, increases soil fertility, conserves water and natural habitats and reduces emission of greenhouse gases.
-
Ecological farming is both a climate change mitigation and adaptation strategy. Ecological farming can provide large-scale carbon sinks and offer many other options for mitigation of climate change. In addition, farming with biodiversity is the most effective strategy to adapt agriculture to future climatic conditions. A mix of different crops and varieties in one field is a proven and highly reliable farming method to increase resilience to erratic weather changes.
-
Ecological farming both relies on and protects nature by taking advantage of natural goods and services, such as biodiversity, nutrient cycling, soil regeneration and natural enemies of pests, and integrating these natural goods into agroecological systems that ensure food for all today and tomorrow.
4. Conclusion The third sector (NGOs) has an important role in promoting and implementing different development activities. In recent days, the demand for organic farming products are increasing day by day because of its high nutritive value, good taste and growth with organic 48
Conclusion nutrients. In many countries, such as India, government has set up a program like Organic Village. This program is involved in promoting Sustainable Agriculture Development with the help of NGOs. These NGOs are very prominent in effective implementation of government programs towards sustainability of agriculture and in influencing awareness program and marketing facilities. The government should take more interest and improve organic farming with the help of NGOs. In this direction, the governments should support the NGOs.
49
The Role of Non-Governmental Organisations in the Agri-Food Sector
References Altieri, M.A. (1992). Where the Rhetoric of Sustainability Ends, Agro-Ecology Begins: Grassroots Field Work in Latin America. CERES: The FAO Review (pp. 33-39). Annis, S. and Peter H. (1988). Direct to the Poor: Grassroots Development in Latin America. Boulder: Lynne Rienner Publishers. Bebbington, A.J. (1996). Organizations and Intensifications: Campesino Federation, Rural Livelihoods and Agricultural Technology in the Andes and Amazon. World Development 24 (pp. 1161-1177). Bellarby, J., Foereid, B., Hastings, A. and Smith, P. (2008). Cool Farming: Climate impacts of agriculture and mitigation
potential.
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http://www.greenpeace.org/international/press/reports/coolfarming-full-report. Bingen, R.J and Mpyisi, Edson (2001). Non-governmental organizations in agriculture development: Preliminary survey results. Food Security Collaborative Working Papers from Michigan State University, Department of Agricultural, Food and Resource Economics, (pp.9-10) Conway, G.R. and Edward B.B. (1988). After the Green Revolution: Sustainable and Equitable Agricultural Development. Futures 20 (pp. 651-670). E-agriculture (2010). Can mobile phones improve agricultural productivity, resilience and food security? Retrieved
from:
http://www.e-agriculture.org/events/can-mobile-phones-improve-agricultural-
productivity-resilience-and-food-security Fisher, Julie (1993). The Road from Rio: Sustainable Development and the Nongovernmental Movement in the Third World. London: Praeger Publishers. Greenpeace
(2009).
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Agriculture.
Retrieved
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http://www.greenpeace.org/usa/en/campaigns/genetic-engineering/ International Institute for Communication and Development (2009). Promote Sustainable Agriculture. Retrieved from: http://www.iicd.org/ Kaimowitz, David (1993). The Role of Nongovernmental Organizations in Agricultural Research and Technology Transfer in Latin America. World Development (pp. 1139-1150). Olano, J.N.D (1993). Non-government organizations' (NGOs) role in agricultural research. Philippine Journal of Crop Science, 1993 Pimentel, D., Williamson, S., Alexander, C., Gonzalez-Pagan, O., Kontak, C. and Mulkey, S. (2008). Reducing Energy Inputs in the US Food System. Human Ecology 36, (pp. 459-471).
50
References Pingali, P.L. (2001). Environment Consequences of Agricultural Commercialization in Asia, Environment and Development (pp. 483-502). Rajendran, S (2003). Non-Governmental Organization and Sustainable Agriculture Development in India, Paper presented at the Sixth ISTR International Conference, held at Ryerson University, Toronto, Canada From 11th to 14th July 2003. Reddy, R (1995). Environment and Sustainable Agriculture Development: Conflicts and Contradictions Siddaraju V.G. (2010). Role of non–governmental organizations in promoting sustainable agriculture development in Karnataka. International NGO Journal The Technical Advisory Committee of the Consultative Group on International Agriculture Research (TAC/CGIAR) (1998). Sustainable Agriculture Production: Implications for International Agriculture Research, Rome: FAO. WiseGEEK.
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51
Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Dirk Sebastian Meyer
The role of Non-Governmental Organisations for standardisation in the Agri-Food Sector
Abstract Sustainability is gaining more and more importance in the agri-food sector. With increasing market power coming in the retail sector, standards are employed and handed throughout the value chain. Compliance with these standards is thus crucial to secure market access for producers in the agri-food sector. Important key players in this standard setting field are non-governmental organizations, acting in third-party certification and co-operating with market forces and public legislation. To assess some of the most important nongovernmental standards, a working definition for NGOs is developed, a short categorization of standards is introduced and some exemplary standards are analysed. While many areas of the supply chain are covered by standards, an assessment of the efficiency in evoking change towards more sustainable practices is met with difficulty.
Keywords Sustainability, agri-food, NGO, supply chain, standard, private, public, Fairtrade, trade, certification.
52
Introduction
1. Introduction Agri-cultural trade is changing. The agri-cultural trade of the 21st century is largely characterised by global supply chains (SWINNEN 2007), in which the post-millennial supplier of agri-cultural goods has to cope with an “ever-growing set of standards to secure access to markets” (TALLONTIRE ET AL. 2011) and meet the demands of dominant retail chains (FULPONI 2007), and subsequently their customers. More and more, the pressure that drives change in the agri-food sector is coming from “powerful buyers” that influence the way these supply chains develop (RAYNOLDS
ET AL.
2007). AS consumers on satiated markets increasingly
incorporate social and ecological aspects into their consumption decisions, their combined pressure has led to the implementation of several standards, mostly in the area of labour standards and Good Agricultural Practice (GAP) (TALLONTIRE ET AL. 2001). In addition to these, standards relating to environmental sustainability show an ever growing importance in consumer’s minds regarding the goods provided by agri-food trade and the accompanying production processes (GIOVANNUCCI
AND
PONTE 2005; BULLER
AND
MORRIS 2004; FULPONI 2007).
Due to the high competition in these markets, adherence to dominant global private standards has many times grown to be a prerequisite for access to retail shelf space (FULPONI 2007; HENSON 2008). This quick picture of the agricultural markets of the 21 st century demonstrates high importance of standards for sustainable food supply chains, and shows why this dynamic holds interest for producers, as well as consumers in the agri-food sector. This paper thus focuses on analysing the impact of non-governmental organizations (NGOs) on the standard-setting procedures pertaining to sustainable food supply chains. Its goal is to provide an extensive catalogue of standards that have been developed by the major NGOs thus far, to showcase the areas of the supply chains they address, to give examples for product groups that are covered, and finally, summarize those findings in an easily reviewable manner. Through this approach, an assessment of the effectiveness of these standards can be attempted. The introduction served the purpose of drawing a short picture of the current agri-cultural economy and the trade it incorporates. The following section will deal with the current state of literature assessing the topic, and give short definitions pertaining to standards and nongovernmental organizations. Then “sustainability” in food supply chains will be addressed, and how standards play into this complex. The methodological part thereafter will describe how information on the analysed standards was gathered from the NGOs involved. The results section then shortly displays the results of the analysis, devoting short sub-sections to each standard processed. Following this, the summary and conclusions section will summarize the findings so far and give an overview of the subject matter covered in an 53
The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector easily understandable tabloid manner; future possible research areas of interest are mentioned thereafter.
2. Literature review During the accumulation and analysis process of the current literature regarding the role of NGOs in standards for sustainable supply chains it quickly became obvious that, although this topic is quickly gaining in importance and relevance, the scientific coverage of the subject matter up to date is scarce at best. It is therefore even more important to advance this area of research by answering the following questions in this section: What is meant when speaking of NGOs in this paper? What is sustainability with regard to food supply chains? And finally: Which standards are employed in food supply chains? This analysis will then shed light on the different types of standards, the way that standards are set up and how NGOs proceed when developing and employing standards in a given area of interest.
2.1 NGOs – A working definition When assessing and picturing the impact of NGOs on standards for sustainable food supply chains, the logical first question that arises is: What is an NGO? NGOs in the following are understood as “non-profit groups that combine resource mobilization, information provision and activism to advocate changes in certain issue areas” (SPAR AND LA MURE 2003). These NGOs are now widely regarded as key actors in the agri-food sector (RAYNOLDS ET AL. 2007; HENDRICKSON ET AL. 2008) and have been growing in importance in the field of third-party certification standards, procedures and labels, largely “due to their greater legitimacy and credibility” (RAYNOLDS ET AL. 2007). These standards have been found to cover virtually all aspects involved in the value chain, such as “farm locations, inputs, and methods, environmental protection measures, employment terms and conditions, and processing, trade, and retail criteria” (RAYNOLDS
ET AL.
2007). While NGOs address an even
wider variety of economic, societal and environmental topics, the analysis of standards will here be focused on sustainability-related standards in the agri-food sector.
2.2 Sustainability in food supply chains For a long time, sustainability aspects did not play a big role in the consumption considerations and patterns of consumers. Lately, however, due to increased NGO activity, consumers have become “aware of ethical and environmental aspects related to food and agricultural trade” (MAERTENS AND SWINNEN 2008). FULPONI (2007) sees the increased interest more in the consumers themselves as “they are also demanding that production and processing methods be environmentally sustainable, animal friendly and obey recognize 54
Literature review labour and social standards” (FULPONI 2007). For these reasons, amongst others, the development of standards with regarding to these sustainability issues has been an area of increasing interest. This is especially important, because these standards can “play a key role for addressing inequality (…) in international trade” (GIOVANUCCI AND PONTE 2005).
2.3 Standards in sustainable food supply chains When talking about sustainability in food supply chains, an important question to bring up is to ask why sustainability related issues would be of interest to corporations producing and selling products. While environmentally friendly marketing is constantly growing and being employed successfully in a wide area of goods and practices (MCCLUSKEY 2007), the standards in sustainable food supply chains do not only address environmental issues. These standards also address quality and social concerns, with rising interest of traceability across the whole chain, both from consumer and producer sides (MCCLUSKEY 2007). This change in demand on agri-food markets leads to changes in the whole structure of these markets. Food standards are more and more becoming drivers in vertical coordination of agri-cultural production and processing (SWINNEN
AND
MAERTENS 2007). SMITH remarks on this, that “Public/Private/NGO
partnerships are vital to ‘raise the baseline’ for commodity supply chains” (SMITH 2008). 2.3.1 Typology of standards To detail the different types of standards, it is necessary to first clarify some terminology that is often used when talking about standards. The first distinction is between public and private standards. Public standards can refer to any sort of standard that is put forth by governments or public institutions for a given industry (HENSON 2008; HENSON
AND
HUMPHREY
2009). Private standards, on the other hand, are viewed as being “set (created) by commercial or non-commercial private entities, including firms, industry organisations and NGOs” (HENSON 2008; HENSON
AND
HUMPHREY 2009). The second distinction would be made
between mandatory and voluntary standards. While there is a common conception, that most public standards are mandatory and have to be met by entrepreneurs in a given industry, some examples can be found for public voluntary standards. One of these examples would be the EU-organic standard, which sets forth certain rules that have to be met in order for agri-culturists to brand their products with the official EU-organic label. However, producing organic produce is not mandatory for agri-food producers in general. Table 1 shows an overview over this classification of standards.
55
The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector Table 1: Classification scheme for standards
Public
Private
Mandatory
Regulations
Legally-mandated private standards
Voluntary
Public voluntary standards
Private voluntary standards
Source: HENSON AND HUMPHREY 2009
Following the aforementioned classification of public vs. private, and mandatory vs. voluntary standards, we can identify most standards set forth by NGOs as private voluntary standards, with some having reached the area of private mandatory standards. An example for this would be the “ISO 9000 [standard] in EU directives covering CE marking for telecommunications and electronic products� (HENSON AND HUMPHREY 2008). As we will later see, some private mandatory standards have grown to be quasi mandatory as nonadherence leads to exclusion from business and trade (an example would be standards regarding dolphin-friendly catching practices in tuna fisheries). HENSON AND HUMPHREY (2008) further refine their categorization by suggesting three different types of private standards: 1. Individual company standards: Mainly set forth by large food retailers and enforced throughout their supply chains. 2. Collective national standards: Set by collaborative organizations confined to individual countries, such as industry associations and NGOs. 3. Collective international standards: Standards that are designed to be used by organisations across different countries. This leads to the prerequisite of the standard-setting entity having international scope, as can be seen in multinational agglomerates of companies or internationally active NGOs. This classification allows us to focus on collective national and international standards for the purpose of this paper, as the scientific focus is adjusted onto standards set by NGOs. 2.3.2 Standard-setting procedures To explain how standards are set-up and enforced, one has to acknowledge that standardsetting procedures are changing with their respective markets. While some of the standards present in the agri-food chain are of a public nature, private standards are growing more and more important (FULPONI 2007; MCCLUSKEY 2007). In modern standard setting, corporations, NGOs and civil society undergo extensive discussions and bargaining processes to set 56
Literature review standards, “outside the classic boundaries of governmental and intergovernmental authority” (GIOVANUCCI AND PONTE 2005). These new procedures then function as “new forms of social contract where the state (…) provides a form of basic guarantee while (…) NGOs and firms are in charge of hammering out the agreements” (GIOVANUCCI AND PONTE 2005). But why do NGOs play such an important role in modern standard setting procedures? NGOs and other private organisations are sought to partake in standard development processes, as their unique characteristics and insider knowledge about social and environmental issues (SMITH 2008) facilitates adaptive solutions: As SWINNEN
AND
MAERTENS (2007) have put it
“private companies are often better informed about technical possibilities”. In this way, NGOs are often recruited and relied on for monitoring activities regarding social, ethical and environmental production circumstances (FULPONI 2007), effectively being “’complicit’ with either retailers or third party certifiers” (HENDRICKSON
ET AL.
2008) in setting standards. Not
only do they play a vital role in creating more sustainable supply chains, they can also function as an amplifier of trust in product claims through their skills and insights (SMITH 2008). Apart from these cooperative procedures, NGOs are sometimes forced to take more drastic courses of action to further their agenda. Even when not explicitly asked, NGOs often-times find it part of their mission to monitor sourcing behaviours, especially of the retailing sectors (FULPONI 2007). When discontent with the retailers business, NGOs can then pursue strategies that are aimed at damaging a company’s image, such as “naming and shaming” (RAYNOLDS ET AL. 2007) in which they uncover and subsequently publicize possible flaws, i.e. socially or environmentally questionable practices, of major companies. These publications often resulted in consumer reactions: Consumers boycotted products believed to be produced in non-ethical practices, and rewarded the more considerate companies with a rise in demand (RAYNOLDS ET AL. 2007). In this fashion, NGOs largely targeted and pressured big companies that rely heavily on their highly visible brand names, especially when their economic importance implies political influence (RAYNOLDS
ET AL.
2007; SPAR
AND
LA MURE
2003). This high visibility provided an even bigger threat for brands placed on niche markets, where consumers are more conscious of corporate practices and their consequences (HENDRICKSON
ET AL.
2008). The message that NGOs want to deliver is as simple, as is it is
effective: “that there is a problem, and that the firm or firms in question can address this problem by altering their corporate behavior” (SPAR AND LA MURE 2003). The effectiveness of these threats is sometimes so high, that some of the corporations in question have decided to pre-empt this pressure by complying with NGO demands on a voluntary basis. Some even differentiate their products and segment markets by communicating adherence to private 57
The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector standards (FULPONI 2007) and “being the first in their industry to accede to NGO demands” (SPAR AND LA MURE 2003). This can effectively recruit similar levels of adherence to standards, as if the standard would have been employed by public regulatory institutions, because once one firm has gone and implemented a voluntary standard, the rest of the competition may be forced to follow this example to secure shelf place in the retail sector (MCCLUSKEY 2007). This phenomenon pertains to so-called de facto mandatory standards (HENSON 2008).
3. Methodology Since the literature review has shown what private standards are, and how NGOs play into the development and employment of these standards, we now want to gather a list of some of the most important NGO-developed standards regarding sustainability in the agri-food chain. A list of major NGOs involved in standard development procedures has been compiled through examination of on-product labeling in German retail stores and supermarkets. This has been supplemented by online research and discussion with colleagues working on similar topics. To identify characteristics of standards, such as the areas of the supply chain and the goods they cover, as well as their efficacy, the web-presence of the respective NGOs was visited to gather information. The websites consulted can be found in the references. This web-based content analysis should serve as a piece of pioneer work in the research of sustainability in agri-food chains and the involvement and importance of NGOs therein.
4. Results This section will provide brief characteristics of a selection of prominent NGO set standards that relate to furthering sustainability in food supply chains. It will introduce the different NGOs analysed, present a selection of their standards, and briefly display them with the product groups and areas of the supply chains they cover.
4.1 MSC – Marine Stewardship Council The marine stewardship council is a non-profit organization operating in the seafood sector under the motto “Fish for today, fish for tomorrow” (MSC 2012a). It was founded in 1996 as a cooperative initiative of the Worldwide Fund for Nature and Unilever (WWF 2011), gained independence in 1999 (OWENS 2008), and is now “the world’s leading certification and ecolabelling programme for sustainable seafood” (WWF 2011). Their self-proclaimed mission incorporates using their self-developed ecolabel and fishery certification programme to further the concept of sustainable fishing practices. To do this they collaborate with fishers, 58
Results retailers, processors and consumers. This leads to the requirement of sustainability, and traceability throughout all links of the supply chain (MSC 2012b). Benchmarks reached by MSC include the 2006 commitment of prominent retail chain Walmart to, in a 5 years’ timeframe, only source their wild captured fish supply through MSC-certified fisheries (MSC 2012b), and a recognition rate of the MSC ecolabel of 23% in shoppers across USA, Canada, UK, Germany, France and Japan in 2010 (MSC 2012a). 287 fisheries are engaged in the MSC program, out of which 177 are certified, 110 are in assessment, and another 40 to 50 fisheries are undergoing confidential pre-assessment (MSC 2012a). The MSC provides two standards concerning seafood: The MSC environmental standard for sustainable fishing and the MSC chain of custody standard for seafood traceability. Both of these standards are certified through a third-party accreditation organisation, the Accreditation Services International GmbH (ASI). In the case of adherence to the rules and requirements set out in the individual standard agreement, a certificate will be issued to the applicant, accompanied by annual reviews to ensure continuous adherence to MSC standards. This also incorporates use of the MSC ecolabel, as seen in Fig. 1.
Fig. 1: MSC Ecolabel (http://en.wikipedia.org/wiki/File:MSC_ecolabel.png)
The MSC environmental standard for sustainable fishing is meant for wild-capture fisheries of all sizes, types and location. It is built on the following three major principles: 1. Sustainable fish stocks: The fishing activity must not exceed sustainable levels. It has to be kept in such boundaries, that it could continue indefinitely. 2. Minimising environmental impact: Structure, productivity, function and diversity of the marine ecosystem have to be maintained. 3. Effective management: The fishery has to comply with all local, national and international laws and must exhibit management practices that can adapt to changing circumstances and maintain sustainability. (MSC 2012a)
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The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector These three principles are then further explained through 31 more detailed criteria. A certificate, once issued, is valid for five years. After those five years the certification process has to be undergone in full again, if the fishery wishes to remain in the MSC programme. The MSC chain of custody standard for seafood traceability is focussed on traceability, and documents the traceability, storage and record-keeping systems “from boat to plate” (MSC 2012a) in all business involved in the seafood supply chain. This certificate is valid for three years, after which the audit has to be taken again.
4.2 FSC – Forest Stewardship Council Since many food items, such as dairy products, cereals, and fruit juices are packed into cartons, the author has found it to be of interest to include the Forest Stewardship Council into the analysis, as the FSC logo (Fig. 2) is ubiquitous in retail shelves.
Fig. 2: FSC logo (http://en.wikipedia.org/wiki/File:FSC_logo.svg)
The FSC has been founded in Toronto, Canada 1993, and has had its FSC Secretariat relocated to Bonn, Germany in 2003. It is an international, multi-stakeholder, non-profit organization that aims to “ensure that forests meet the social, ecological, and economic rights and needs of the present generation without compromising those of future generations” (FSC 2012). As can be seen, this vision statement matches widespread sustainability definitions exactly; so to summarize, FSC aims to further sustainable forestry. As of August 10th 2012, FSC has 162.522 million ha certified, with 23,929 CoC certificates and 1,133 FM/CoC certificates (these certificates will be explained later on) (FSC 2012). FSC certification is largely built on ten principles that have been first published in 1994 and, under numerous revisions, found their latest version in January 2012 (FSC 2012). These ten principles require forest owners and/or managers to: 1. Comply with laws and FSC principles. 2. Abide to tenure and usage rights, alongside proper legislation and documentation. 3. Acknowledge of indigenous peoples’ rights. 4. Acknowledge of community relations and worker’s rights. 5. Secure long term economic, social and environmental benefits from the forest. 60
Results 6. Maintain or restore the ecosystem, alongside biodiversity, resources and landscape. 7. Have a management plan implemented, monitored and documented. 8. Assess and monitor progress towards management goals. 9. Maintain high conservation value forests. 10. Plan and manage plantations according to FSC Principles and Criteria (FSC 2012). While FSC offers three different types of certification, they all undergo the same five step model to hand out new certificates. A summarized representation of this five-step model is pictured in Fig. 3. Each of these certificates is valid for five years, and is linked to annual surveillance audits to assess continuing compliance. 1. Contact to FSC accredited certification bodies
2. Decision on certification body and signing agreement
3. Certification audit
4. Audit Report based on data of audit
5. Positive certification decision leads to FSC certificate Fig. 3: Five-step FSC certification procedure (FSC 2012)
The first type of certification FSC offers is Forest Management Certification (FM). The core procedures of this certification are an in depth review of the forest management systems and the assessment of social, economic and environmental conditions at the forest. Should there be minor areas of ‘non-conformities’, a certificate will still be handed out, as long as actions will be taken to take care of these non-conformities. Similarly to MSC, the second type of certification offered by FSC is the Chain of Custody Certification (CoC). This standard contains all rules and requirements set forth for processing procedures, and ensures identification and/or segregation of FSC certified materials from non-certified. This is of particular interest when businesses are aiming their products at socially aware markets. Lastly, FSC certifies Controlled Wood. This standard postulates rules that apply for mixing FSC certified materials with uncertified materials under controlled conditions. 61
The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector
4.3 ETI – Ethical Trading Initiative The Ethical Trading Initiative is an alliance of companies, trade unions and voluntary organisations working to improve workers’ conditions involved in the production or growth of consumer goods. The products then span “from tea to T-shirts, from flowers to footballs” (ETI 2012a). Founded in 1998 (SCHALLER 2007), the efforts put forth by ETI have affected over 9.8 million workers worldwide (ETI 2012a). As of now, their alliance incorporates 53 companies, including well-known names such as Tesco, Marks & Spencer and German Tchibo GmbH, eight trade unions and 15 NGOs (ETI 2012a). The working conditions they are trying to improve span across “wages, hours of work, health and safety and the right to join free trade unions” (ETI 2012a).
Fig. 4: ETI Logo (http://www.ethicaltrade.org/sites/default/files/eti_logo.jpg)
ETI membership includes abidance to the ETI Base Code, which is offered on their website in, at the point of writing, 23 languages, including lesser-known languages such as Sinhala and isiXhosa. The second step for ETI membership is abidance to the ETI Principles of Implementation. After inclusion in the ETI programme, members have to submit annual reports. The ETI Secretariat also validates at least 20% randomly selected members, to assess reliability of the annual reports. The ETI Base Code is built on nine principles, alongside further details and explanations in the original document. These principles address issues such as the freedom of choice of employment, the provision of regular employment under safe and hygienic working conditions, and the absence of discrimination (ETI 2012b). The ETI Principles of Implementation then express six core principles to which all members have to commit. They include, amongst others, the commitment to ethical trading and transparency guidelines (ETI 2012c).
4.4 FLO – Fairtrade International Fairtrade International is a non-profit alliance of three producer networks, 19 labelling initiatives, three marketing organizations, and one associate member (FLO 2012a). The abbreviation FLO comes from the original name of the organization, Fairtrade Labelling Organizations International, which was split up in 2004 into two separate organizations: Fairtrade International, which is responsible for setting standards and supporting producers, 62
Summary and conclusions and FLO-CERT, which handles certifications and audits. Throughout this paper, the abbreviation FLO will be used to refer to both entities as a symbiotic complex.
Fig. 5: Fairtrade logo (http://www.fairtrade.net/fileadmin/templates/layout_2011/images/fairTradeLogo.gif)
FLO aims to “connect disadvantaged producers and consumers, promote fairer trading conditions and empower producers to combat poverty, strengthen their position and take more control over their lives� (FLO 2012a). Operating from their main office in Bonn, their different standards address issues of social, economic and environmental development, as well as the issues of forced and child labour. As can be seen in the List of all Fairtrade standards (FLO 2012b), their standards give rules and guidelines regarding minimum prices and premiums, trade standards, hired labour conditions and many more aspects. The product groups they cover reach from vegetables and fruit, over herbs and herbal spices, tea, sugars, cocoa, coffee and nuts, to even gold and flowers. These standards are then supported by guidance documents, which are, just like the other documents, offered in up to four languages. For easier reference, the FLO standards are grouped into four main categories: 1. Standards for Small Producer Organizations 2. Standard for Hired Labour 3. Standard for Contract Production 4. Trade Standard Inside of these, the minimum prices and premiums are set forth by the FLO.
5. Summary and conclusions From the initial literature review and introduction we found out that most standards set by NGOs are international, private voluntary standards, with some having grown to reach de facto mandatory status, when their importance has grown so much that a competitive position is impossible in the case of non-adherence to a given dominant standard. This is especially the case, when retail shelf space is considered. Standards employed by dominant 63
The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector retail chains are subsequently handed down the supply chain, and thus force upstream agriculturists to comply. From the results part we could identify some of these standards with their different sustainability implications, and how the respective NGOs go towards certifying their standards. We have seen that standards set out by NGOs cover a wide range of products, from food over textile products, and even such production process attributes as working conditions and trading circumstances are incorporated into individual standards. The findings of this paper are shortly summarized in Table 2 for easier review.
64
Summary and conclusions Table 2: Summary of findings
Organisation MSC – Marine Stewardship Council
FSC – Forest Stewardship Council
ETI – Ethical Trading Initiative FLO – Fairtrade International
Standard Environmental Standard for Sustainable Fishing Chain of Custody Standard for Seafood Traceability Forest Management certification
Target Sustainable fisheries
Chain of Custody certification
Manufacturers, processors and traders
n.a.
Controlled Wood
All supply chain links (Mixed sources of wood)
n.a.
ETI Membership
All supply chain links (working conditions)
All areas
Standards for Small Producer Organizations
Small producers
Fairtrade products*
1 year
Standard for Hired Labour
All companies employing hired labour to produce fairtrade products Small-scale producers in yet non-democratic organizations Companies and producers trading Fairtrade products
Fairtrade products*
1 year
Fairtrade products*
1 year
Fairtrade products*
1 year
Standard for Contract Production FLO – Fairtrade International
Trade Standard
Products Wildcaptured fish
All supply chain links
Forest managers
Validity 5 years
Ecol. sust.
Soc. sust.
Econ. sust.
n.a.
n.a.
n.a.
3 years
Wood and woodproducts
5 years
Unlimited
Source: Own depiction, based on SCHALLER (2007), OWENS (2008), WWF (2011), ETI (2012a), ETI (2012b), ETI (2012c), FLO (2012a), FLO (2012b), FSC (2012), MSC (2012a), MSC (2012b). Remarks: Ecol. sust.:
Adressing issues of ecological sustainability
Soc. sust.:
Adressing issues of social sustainability
Econ. sust.:
Adressing issues of economical sustainability
n.a.:
not applicable
* Fairtrade products are cane sugar, cereals, cocoa, coffee, fibre crops (including cotton), fresh fruit (including banana and wine grapes), gold, herbs, herbal teas & spices, honey, nuts, oilseeds and oleaginous fruits,
65
The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector prepared and preserver fruit and vegetables, secondary products, tea, timber and vegetables (including pulses and potatoes) (FLO 2012b).
So while we see that numerous standards are already in place, it is difficult to assess how effective they are in evoking change in general. A different approach, where one NGO is selected and then analysed by referencing scientific literature, as well as public journalism and customers’ behaviour would probably lead to a more insightful result. It could, however, be seen that NGOs are focussing their effort to evoke change towards more sustainable production practices, especially in the area of labour practices and environmental protection.
6. Future outlook Since the topic of standards regarding sustainability is relatively new to the scientific community, there are still a lot of areas uncovered. A really extensive list on all standards that are related to sustainability aspects with regard to food supply chains would be of immense value, but exceeded the scope of this seminar paper. It would be of special interest to categorize these standards based on who sets those (NGOs, market organizations, dominant retail chains etc.) and analyse, which of them have translated into national or trans-national legislation. Another possible area of future research is the analysis of how widely recognized these sustainability related standards are, and if they have truly arrived in consumers’ minds when purchasing their everyday commodities. Perhaps, this could be done in an empirical fashion with pre-designed questionnaires showing various existent and non-existent labels, asking customers at the point of sale to identify the shown labels, and state whether or not they have seen them before. This would give empirical insight as to how relevant the issue of sustainable standards in food supply chains really from the consumers’ perspective.
References Buller, H. and Morris, C. (2004). Growing goods: the market, the state and sustainable food production. Environment and Planning, Vol. 34, (pp. 1065-1084). ETI – Ethical Trading Initiative (2012a). Information retrieved from http://www.ethicaltrade.org/, August 15th 2012. ETI
–
Ethical
Trading
Initiative
(2012b).
The
ETI
Base
Code
–
English.
Retrieved
from
http://www.ethicaltrade.org/sites/default/files/resources/ETI%20Base%20Code%20-%20English_0.pdf, August 15th, 2012.
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References ETI
–
Ethical
Trading
Initiative
(2012c).
ETI
Principles
of
Implementation.
Retrieved
from
http://www.ethicaltrade.org/sites/default/files/resources/Principles%20of%20Implementation%2C%20 ENG.pdf, August 15th, 2012. FLO – Fairtrade International (2012a). Information retrieved from http://www.fairtrade.net/, August 24th, 2012. FLO
–
Fairtrade
International
(2012b).
List
of
all
Fairtrade
standards.
Retrieved
from
http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-0803_LIST_OF_FLO_Standards.pdf, August 24th, 2012. FSC – Forest Stewardship Council (2012a). Information retrieved from http://www.fsc.org/, August 12th, 2012. Fulponi, L. (2007). The Globalization of Private Standards and the Agri-Food System. In: Swinnen, J. F. M. (Ed.), Global Supply Chains, Standards and the Poor – How the Globalization of Food Systems and Standards Affects Rural Development and Poverty. CAB International, Wallingford (pp. 5-18). Giovannucci, D. and Ponte, S. (2005). Standards as a new form of social contract? Sustainability initiatives in the coffee industry. Food Policy, Vol. 30 (pp. 284-301). Hendrickson, M., Wilkinson, J., Heffernan, W., Gronski., R. (2008). The Global Food System and Nodes of Power. Retrieved from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337273, June 5th, 2012. Henson, S. (2008). The Role of Public and Private Standards in Regulating International Food Markets. Journal of International Agricultural Trade and Development, Vol. 4, Issue 1 (pp. 63-81). Henson, S. and Humphrey, J. (2009). The Impacts of Private Food Safety Standards on the Food Chain and on Public Standard-Setting Processes. Codex Alimentarius Comission, Thirty-second Session, May 2009. Maertens, M. and Swinnen, J. F. M. (2008). Standards as Barriers and Catalysts for Trade, Growth and Poverty Reduction. Journal of International Agricultural Trade and Development, Vol. 4, Issue 1 (pp. 47-61). McCluskey, J. J. (2007). Public and Private Food Quality Standards: Recent Trends and Strategic Incentives. In: Swinnen, J. F. M. (Ed.), Global Supply Chains, Standards and the Poor – How the Globalization of Food Systems and Standards Affects Rural Development and Poverty. CAB International, Wallingford (pp. 1925) MSC – Marine Stewardship Council (2012a). Information retrieved from http://www.msc.org/, July 25th, 2012. MSC – Marine Stewardship Council (2012b). Video retrieved from www.youtube.com/watch?v=LuntwfdQAsc, July 25th, 2012. Owens, M. C. (2008). Sustainable Seafood Labeling: An Analysis of the Marine Stewardship Council. Retrieved from http://www.people.fas.harvard.edu/~hiscox/Owens.pdf, July 27th, 2012.
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The role of Non-Governmental Organisations for Standardisation in the Agri-Food Sector Raynolds, L. T., Douglas, L. M., Wilkinson, J. (2007). Fair Trade: The Challenges of Transforming Globalization. Routledge, Taylor&Francis Group, New York. Schaller, S. (2007). The Democratic Legitimacy of Private Governance. An Analysis of the Ethical Trading Initiative. INEF Report 91/2007, University of Duisburg-Essen, Institute for Development and Peace, Duisburg. Smith, B. G. (2008). Developing sustainable food supply chains. Philosophical Transactions of the Royal Society: Biological Sciences, Vol. 363, No. 1492 (pp. 849-461). Spar, D. L. and La Mure, L. T. (2003). The Power of Activism – Assessing the Impact of NGOs on Global Business. California Management Review, Vol. 45, No. 3 (pp. 78-101). Swinnen, J. F. M. (2007). Introduction. In: Swinnen, J. F. M. (Ed.), Global Supply Chains, Standards and the Poor – How the Globalization of Food Systems and Standards Affects Rural Development and Poverty. CAB International, Wallingford (pp. 1-2). Swinnen, J. F. M. and Maertens, M. (2007). Global Supply Chains, Standards and the Poor: some Conclusions and Implications for Government Policy and International Organizations. In: Swinnen, J. F. M. (Ed.), Global Supply Chains, Standards and the Poor – How the Globalization of Food Systems and Standards Affects Rural Development and Poverty. CAB International, Wallingford (pp. 259-266) Tallontire, A., Opondo, M., Nelson, V., Martin, A. (2011). Beyond the vertical? Using value chains and governance as a framework to analyse private standards initiatives in agri-food chains. Agriculture and Human Values, Vol. 28, No. 3 (pp. 427-441). WWF
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from
Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Yaprak Has
Standards for Sustainable Food Supply Chains
Abstract Due to globalization agri-food sector and food supply chains also transformed from public oriented to private oriented. Private food standards; regarding food security, quality and environmental, social (labour rights) aspects started to vary and specialize with respect to consumer demands or the enforcement of NGOs and other initiatives. The pressure of consumption and retail chains, international food trade relations put an emphasize on the context of these standards, who they are developed by and to whom they serve. Thus there is a need to look further to the inter relationships between public regulations and private standards and try to understand the process of the successful implementations.
Keywords Food supply chain, agri-food system, NGOs, Codex Alimentarius, Private food standards, food security, food quality, non-governmental organizations (NGOs), FSC, Fairtrade, Grameen Danone, SA8000:Soical Accountability Standard, social responsibility.
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Standards for Sustainable Food Supply Chains
1. Introduction Standards for food sector have become crucial for the global agri-food value chains in the last 15 years. Traditionally, it was government agencies who were responsible for monitoring food safety and quality however due to globalization of the agri-food system, consolidation of the food retail industry and rise of the private quality levels and consumer demands this monitoring and evaluating system operationalized within third party certifiers, stating the ‘new standards’.(Hatanaka, M, 2005) Private firms and alliances, NGOs have created and pioneered many food standards for food safety, quality and welfare related, socio-economic aspects of the agri-food production. (Henson, Humphrey, 2009) We can differentiate between the standards as public and private standards. The most common standards can be observed under private standards since they are created through a process of consensus. Thus our main focus will be focused on the private standards that set a success story or on the way of setting a standard at the end of a process of needs from the agri-food sector and actors of this governance process. (Henson, Caswell, 1999) In the context 3 successful NGO stories will be reflected due to constraints with the paper and these will focus on animal welfare, nutrition, social entrepreneurship and process quality. The methodology will focus on the target group that adopts these standards, the context of these standards and the issues they address briefly. The content of this paper will follow as the types of standards, attributes of standards and case studies that deliver a success story on the way of setting a democratic governance system with respect to food security, quality and welfare issues. During the literature research, Spencer Henson and John Humphrey’s extended articles and views about understanding the complexities of private standards with regards to international trade relations were categorically substantial. They both emphasize the contradictions about these standards with World Trade Organization (WTO) and Agreement on Sanitary and Phytotsanitary Measures (SPS) and Agreement on Technical Barriers to Trade (TBT) with regards to transparency of the market. They more accurately focus on the standards’ effect in maintaining public regulation and their credibility. However we will try to focus on NGO’s influence in setting and enforcing stakeholders in forming these standards on the way of setting regulations in this process of governance. There is also a new rising literature that more in depth look into the relations between Multinational cooperations (MNCs) and non-governmental organizations (NGOs) that foster more the role and inclusion of small-scale producers in a supply chain. (Perez, 2008) 70
Defining standards As methodology, we will try to define food standards and focus on ‘Legally Mandated Private Standards’. In the second part we will further analyses the process of setting food standards and in the third part we will look at the attributes of private food standards before we go into case studies which are Food Certification Scotland/Soil Association, Grameen Danone & GAIN social entrepreneurship and SA8000:Soical Accountability Standard.While examining these case studies our scope will be who adopts them, whom they serve to and what issues they address. And in the last part we will discuss the scale and context of these standards regarding prior CODEX Alimenterius and international trade aspects and the challenges these NGOs face and probable contradictions in the agri-food sector regarding setting the food standards.
2. Defining standards Defining the standards can be hard since there is an ambiguity in types of standards we are considering. Thus before defining each of them we should make differentiation between the types and contexts of these standards. Then it would be easier to define the ones that influence regulation with the help of NGOs. When we look at the types of standards we see that they are either public or private standards. However due to the constraints of our paper we will focus on the ones that were successful examples that turned into implementations and that were constructed with the efforts of NGOs which is the group “Legally Mandated Private Standards”. These private standards are also called sometimes in the literature voluntary standards since they were developed by NGOs and other non-mandated initiatives. These standards also vary according to the area of interest such as food security, quality and socio economic aspects however we cannot set clear boundaries among these where some of the standards serve to multiple of these areas. And beyond these motives they are a nice tool for us to define sustainability as well. (Yakovleva 2007).
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Standards for Sustainable Food Supply Chains Table 1: Types Of Standards
Types of Standards
Their Context
Public, mandatory standards
Regulations
Public Voluntary Standards
Created by public, adoption voluntary
Legally Mandated Private Standards
Developed by private, made mandatory by public
Voluntary Private Standards
Developed and adopted by private bodies.
Resource: Henson S. and Humphrey, J. (2010). “Understanding The Complexities of Private Standards in Global Agri-Food Chains as They Impact Developing Countries”, Journal of Development Studies, October, Vol.46, No. 9 (pp. 1628-1646), p.1629.
When we look at the success stories regarding NGOs we can say that also voluntary private standards are on the way of becoming a regulation since the pressure the MNCs and big capital investors put on the system finally makes the majority to act in this way. So it is more crucial to see the pattern of the big firms’ and MNCs success stories through a way of balancing the rights of the others and their profit maximizing attitudes. As we have stated before these standards tend to contradict with CODEX Alimentarius. These standards, guidelines and recommendations provide guidance to governments and serves as a guideline to follow WTO (World Trade Organization) obligations. It also serves as a set of rules in developing private standards however most of the new standards may contradict with CODEX. The context of Codex contains rules about veterinary drugs in meat, maximum residual level of the veterinary drugs and other details about food and consumer safety.( Seuring, 2011) It is also stated that due to the speed of standard setting in the global agri-food sector, the members of these new ones are not many and serve to narrower interests since they are too focused. Thus a system to combine both scales would be more nourishing.
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Defining standards Table 2: Types Of Private Standards Individual Firms Standards
Collective Standards
National
Nature’s Choice/Nurture(Tesco)
Assured Food Standards
GlobalGAP
Filiéres Qualité (Carrefour)
Freedom Food
British Retail Consortium Global Standard(BRC)
Field to Fork (Marks&Spencer)
Qualitat und Sicherheit (QS)
International Food Standard
Collective Int. Standards
Shared Planet(Starbucks)
Safe Quality 1000/2000
Food
(SQF)
A recipe for disaster (Marks&Spencer&Greenpeace)
Marine Stewardship Council
Grameen Danone & GAIN social entrepreneurship
Forest Stewardship Council
FCS
Rainforest Alliance SA 8000 IFOAM standard Resource: Henson S. and Humphrey, J. (2010). “Understanding The Complexities of Private Standards in Global Agri-Food Chains as They Impact Developing Countries”, Journal of Development Studies, October, Vol.46, No. 9 (pp. 1628-1646), p.1632.
After looking at the process of setting standards we will more in depth look at the case studies which is first Greenpeace working with Food Certification Scotland regarding animal welfare and aquaculture. The second one is Grameen Danone that is more related with integrating developing countries and supporting them in the context of nutrition and health. This is a growing part of the literature since the standards put a lot of pressure that cannot be followed by most of the countries. In order to balance market power and small scale producers and also customers (with regards to price) this example is a success story to be followed. (Lee, Mardsen,2009). And the last one is SA8000 that is related with process quality while It is a pioneer to rise to the point to be an indicator for development however it also lacks the points to integrate to developing countries and small scale producers.
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Standards for Sustainable Food Supply Chains
3. Process of setting standards When we look at the process of setting the standards we see that there are five functions that should be performed in order to call them standards:
Standard setting: The operationalization of a standard through written rules and procedures.
Adoption: A decision by an entity to adopt the standard which may be the same entity that develops the standard.
Implementation: Implementation of the application by another entity.
Conformity Assessment: Procedures of verification by third party certifying bodies.
Enforcement: Procedure to respond to sanctions in case of not obeying to the actions that are recognized.
It can be stated that these functions are also defining the process of legitimization of the standards. The important point is to define the process and how it turns into something legal from a de-facto position.
When we look at the first type of standard which is ‘Public/Mandatory Standards’ they are prepared by public regulators and adopted by them also. Then they are introduced to private firms and inspected by official inspectors. In the second type of standard, ‘Public Voluntary Standards’, the standard setting and adoption of the regulation process is again held by public regulator and implementation is again by private firms. However in conformity assessment level, Third Party Certification (TPC). This TPC is an important regulatory mechanism in the global agrifood system which shows the shift from public sector to private sector in the recent years which is due to main actors such as supermarket chains, producers and NGOs. (Hatanaka, Bain, Busch, 2005) Thus in this second type of standard the process is left to private sector as we can observe. Moreover the enforcement is also done by public/private certification body while in the 1 st type of standard it was public/legal chairs.(Henson, Humphrey, 2009) In the third type of standard, ‘Legally-Mandated Private Standards’, the standard setting step is held by private bodies like firms or NGOs; adoption step is held by legislature/public body, implementation is done by private firms; the assessment is held by private bodies but enforcement is done by legal/public chairs.
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Attributes of standards Lastly in the fourth type of standard, ‘Voluntary/Private Standard’ the standard setting step is held by private bodies or NGOs; adoption is different than the rest held by private firms/organisations; implementation is held by private firms and assessment, enforcement steps are held by private auditors. There are a lot of contradictions within these systems in terms of acknowledgement and credibility which may bring the necessity to add public sector into it.(Henson,2010) Another important aspect is the hierarchy of these standards with respect to countries and international agreements where some standards go only regional. Due to constraints of our subject we will focus on the ones that are developed by NGOs and discuss about these problems regarding market power versus consumer rights and food justice in the conclusion part.
4. Attributes of standards When we examine the attributes of the food standards we see that they are classified under sensory, health, convenience, and process technology, impact on environment and supply/demand relations. As we can see in the table according to the customer demands the attributes of the products are formed and the private sector change the way they produce and what they produce. All of these attributes refer to a branch of the sector while the political bargaining power is more crucial in the areas of animal welfare since they are going out of species wildly; food security regarding Genetically Modified Food topic and due to technological developments the biotechnology products and about fairtrade since labor rights are underestimated to lower the costs in production. In liberal market, private sector is growing rapidly and public regulations are usually not enough to secure these areas. Due to constraints with the paper we will try to highlight 3 case studies from these main areas of threat.
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Standards for Sustainable Food Supply Chains Table 3: Attributes of Standards Attributes
Consumer/government demand
Developments
Sensory
Taste, tenderness, from, color
İncreasing awareness about food sensitivity(allergies, diabetes)
Health
Functional foods(healthy food)
Adaptation of legislation with stricter labeling rules
*fresh food with limited additions
Compliance monitoring
Time/energy saving, eating, disposal
İncrease in sales of convenience food(prepared meal)
Convenience
storage,
Strong increase in out of home eating Process technology
Animal welfare
İncreasing legislation on animal welfare
Nature of production system(organic, traditional)
İncreasing consumer interest in regional and natural production
Feeding regime
Strict legislation regarding animal feed content
Transportation distances
*consumer reluctance in EU(against gene tech, nano tech)
İnput pesticides)
materials(fertilizer,
Biotechnology İmpact on environment, people
Supply and demand
Manure disposal, soil/water damage, deforestation, pollution, packaging, food miles, global warming
Attention of leading retailers (tesco) in envir. Labeling
LABOR/HUMAN RIGHTS(child labor, working conditions &safety, ,contracts, education/housing/food, legal rights, civil rights) COMMUNITY(Edu. Support, eco development, employee volunteer, healthcare, culture)
Strict legislation against manure disposal
Fair Trade
CSR policy at many multi-national companies
Procurement(favoritism, bribery, gifts, obscure contract, rebidding past deadlines
İncreasing attention to Fair trade products
-attention of global food companies to sustainability issues(rainforest alliance:chiquito bananas)
*leg. Against child labor CSR at multi-national companies
Resource: Henson S. and Humphrey, J. (2010). “Understanding The Complexities of Private Standards in Global Agri-Food Chains as They Impact Developing Countries”, Journal of Development Studies, October, Vol.46, No. 9 (pp. 1628-1646), p.1632.
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Case Studies
5. Case Studies 5.1 Food Certification Scotland and Soil Association The campaign was first set with the name ‘A Recipe for Disaster’ putting focus on Aquaculture and the threat upon fisheries. The Soil Association certifies organic farmed Atlantic salmon, brown trout, Arctic charr (Salvelinus Alpinus Alpinus) and it also offers certification for shrimp and mussels and working towards for shellfish lately. And Food Certification Scotland (FSC) certifies various salmon farm schemes including organic salmon. The Soil Association was the first certification body to care about organic aquaculture and they set their first tasks in 1989 about standards as a response to farms’ requests. In 1998 the Soil Association Aquaculture Standards were given approval by the Soil Association Council and organic trout and salmon went on sale in the UK in 1999. (Greenpeace Report, 2005) The EU Organic Livestock Regulation came into force in 2000 and recognized aquaculture as eligible for organic status and in July 2000, the Soil Association, FCS, and the Organic Food Federation published their UK Organic Aquaculture Standards which were later on recognized by UK Department for Environment, Food and Rural Affairs (Defra). This standard that is built on Soil Association’s standards are based on the principles of nutrient cycling within closed systems, water quality, fish feed and confinement. Other aquaculture and marine life related NGO actions are of Marine Conservation Society’s, The Royal Forest and Bird Protection Society of New Zealand, Monterey Bay Aquarium Seafood Watch, The Blue Ocean Institute. These actions list and work on the species that are under threat however putting regulations internationally is hard to achieve by all of them and the content can be different according to the area of implementation. For example, for seafood imported from New Zealand, the Forest and Bird guide is being used and for the fish from the USA or Canada, Monterey Bay Aquarium and Blue Ocean Institute guides are used. When there is no list the Seafood Choices Alliance and European NGOs refer Marine Conservation Society and Greenpeace.
5.2 Grameen Danone and GAIN Social Entrepreneurship The second example is attributed to nutrition and social entrepreneurship. Grameen Danone Foods Ltd. Was started as a ‘social business enterprise’ in 2006 pioneered by Muhammed Yunus, the founder of the Grameen Bank and Franck Riboud, the Chief Executive of Danone, as a low-cost and highly nutritious food bringing project to the people of Bangladesh. They together decided to produce a fortified yoghurt to improve the nutrition of poor people in Bangladesh and both improve the living conditions of some of the poorest communities of
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Standards for Sustainable Food Supply Chains Bangladesh by involving them into production, distribution and sales of the yoghurt.(Galib, Hossain, Arun, 2009) The micro-yoghurt was opened in Bogra in 2007, developed by Danone was supported by GAIN as a certification auditor. Milk is sourced from a cooperative of micro-farms, financed by Grameen and distributed by micro-entrepreneurs of the region. There are nearly 500 women who are trained to sell these yoghurt earning 30$ a month. In this process Danone provides expertise in technical issues like construction, plant maintenance and yoghurt production and Grammen co-finances and creates the link between the local people and the MNC(multinational company). And they are planning to build up 50 more plants by 2020. These also set some standards within the country that cannot meet the international standards that are enforced by other entities. ( Social Innovator, 2012) The reason this project is a success with regards to food supply chain standards is that one of the biggest and unfortunately the most underestimated fact is that the standards that are set cannot be met by developing countries and putting a great pressure on small scale producers. It is common to see these days a wide range of corporate codes, standards, certification, eco-labeling and social projects based on innovations between associations, NGOs MNCs (Aleman, Sandilands, 2008). The implementation of these into developing countries has been neglected however these small-scale farms and indirectly people of developing countries has a big economic presence in terms of being the ‘Bottom of the Pyramid’ (BOP). (Renting, Mardsen, Banks 2003). As supply chains spread globally, foreign companies also try to interact closely with them since they see these people as not only producer but also customer.( Aleman, Sandilands, 2008). This is contradicting since we might not be sure if they are thinking about the level of food quality, labor rights or human nutrition however Muhammed Yunus states that the imbalances in the global distribution of income is crucial and one-third of the countries show no increase in GDP per capita since 1980 and 50 percent of the developing countries showed an increase in population below poverty line. Thus it can also be set as a constraint to private sector to set social entrepreneurship also as a goal than taking only profit maximizing. This system can be established by people on a voluntary basis to pursue social, environmental and economic goals. (Galib, Hossain, Arun, 2009) The campaign provides children many nutrients and to people recruitment opportunities and according to Muhammed Yunus the spill-over effect of this project will help the developing countries to catch the standards that are necessary to provide food security, quality, as well. (Hawkes,2009). 78
Case Studies
5.3 Social Accountability Standard Social Accountability International (SAI) is a NGO dedicated to improving workplace conditions and combating sweatshops regarding labor rights. GAP Inc. become involved in SAI’s Vietnam Program which provided training to select facilities to help them implement SA8000 standards which certifies factories based on the SA8000 workplace standard. GAP Inc. also works closely with SAI in Central America. This is the world’s first auditable social certification standard for decent workplaces across all industrial sectors. It is based on conventions of the ILO (International Labor Organization), UN and national laws. (Miles, M., Munilla, L., 2006) In 1990 a group of stakeholders decided to address a set of standards that will set basis for industrial relation and human resource system since they discovered that there was no reference to UN human rights and ILO conventions in agri-food sector. Council of Economic Priorities with SAI established the codes. In 1996 SAI Advisory Board developed SA8000- a standard based on international norms- not a regulation of a country or NGO and used international methodology of the ISO. In 1997 SAI also developed procedures for accrediting certification organizations based on current systems with regards to ISO9000, ISO12000, Forest Stewardship Council (FSC) and organic standards. And in 2007 the standards developed more and increased the stakeholders which also made them as a reference standard like International Organization for Standardization. (Miles, M., Munilla, L., 2006) If we look at the structure of it is a process type standard rather than product-type standard. There is no seal or label on goods produced by companies against the standard. SA8000 focuses on child labor, forced labor, health and safety, freedom of association and right to collective bargaining, discrimination, discipline, working hours, compensation and management systems. We can say that it is the main stem of fair trade standards since it has a bigger scope based on international agreements.( Diabat,Govindan, Panicker, 2012). In order to be certified to SA8000, upon application auditors from these certification bodies visit facilities and assess corporate practice on a wide area. They evaluate the performance of the company’s management systems and compare them with SA8000 criteria. The companies who adopt this certification can be examined from International Trade Center and currently 51 countries and when we look at the international trade center database we can see that it is now an indicator of sustainability and development. (Banks, Bristow, 1999) When we look at the structure of this formation we see that in the first stage in starts as a n alliance between ISA and private firms however in the second stage social aspects tie firms to indirectly the regulations of international organizations such as UN and ILO. The so called 79
Standards for Sustainable Food Supply Chains popularity and range of usage of the alliance turns it into a standard that is being referred to and it is in fact a basic starting point for other standards and an indicator of development which makes it a successful story also. However SA8000’s process oriented context misses the emphasize about the standards’ pressure on developing countries and smallstakeholders. It is also an interpretation of quality and has no interface to adapt it into developing countries.(Ventura, P. 2003)
6. Conclusion Due to the effect of globalization we can say that agri-food sector is facing a rapid change in terms of standardization. Specialization is gaining importance while private sector differentiates within itself due to their own interests. The main differentiation among standards for food supply chain are between private and public ones. Unfortunately there is no distinct connection between Legally mandated private standards which are developed by private and made mandatory by public and the voluntary private ones. The ones who are adopted publicly stay national or sometimes even regional. The ones we gave were the ones who achieved to extend their context and that were more objective. The biggest threat is that agri-food sector is growing each day due to demand for food and increasing population and the suppliers are usually developing countries. However both the supplier and customer prfile of these countries cannot meet the standadrds that are asked by MNCs. The implementations that these big companies go for are usually focus on minimizing their costs and maximizing profits however in the literature we can observe that these companies try to find the gaps legally in the least protected zones. Thus some of these standards may seem to serve as a ‘standard’ or a social entrepreneurship project but when we compare the principles we can see that they are contradicting with the basic regulations already. Thus an in depth analysis depending on comparison at all scales and aspects should be held properly. Moreover private standards focus more on process attributes while public standards focus on product standards. And due to high level expected they act as barriers that limits acceptance to the sector which limits small-scale farmers. The top-down manner of private standards must be more combined with NGO-auditing kind of way to soften the periphery effects. It is true that having standards is easier for customers to be sure of the things they consume however we must not forget that the ambiguity in the context makes the power of the market and capital dominate the sector and consumers.
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References
References Aleman, P., Sandilands M. (2008). “Building Value at the Top and Bottom of the Global Supply Chain: MNC-NGO Partnerships and Sustainability”, California Management Review, V.51, No.1, Fall 2008, (pp.24-49). Banks, J. and Bristow G. (1999). “Developing Quality In Agro-Food Supply Chains: A Welsh Perspective”, International Planning Studies, Vol. 4, No. 3, (pp.317-331). Diabat, A., Govindan K. and Panicker V. (2012). “Supply Chain Risk Management and Its Mitigation In a Food Industry”, International Journal of Production Research, (pp.1-12). Ghalib, A., Hossain, F., Arun T. (2009) “Social Responsibility, Business Strategy and Development:The Case of Grameen-Danone Foods Limited”, Australasian Accunting Business and Finance Journal, V. 3, Issue 4, (pp.1-16). Greenpeace (2010), “Supermarkets’ Insatiable Appetite For Seafood”, A Recipe For Disaster, (pp.1-96) Retrieved from: http://www.greenpeace.org.uk/MultimediaFiles/Live/FullReport/7281.pdf, August, 20th, 2012. Hawkes, C. (2009). “Identifying Innovative Interventions to Promote Healthy Eating Using ConsumptionOriented Food Supply Chain Analysis”, Journal of Hunger and Environmental Nutrition, Vol.4, No. 3-4, (pp.336-356). Hatanaka M., Bain, C. Busch, L. (2005), “Third Party Certification In The Global Agrifood System”, Food Policy, 30 2005, (pp. 354-369). Henson S. and Humphrey, J. (2010). “Understanding The Complexities of Private Standards in Global Agri-Food Chains as They Impact Developing Countries”, Journal of Development Studies, October 2010, Vol.46, No. 9 (pp. 1628-1646). Henson, S. and Humphrey, J. (2009). “Them Impacts of Private Food Safety Standards on the Food Chain and on Public Standard Setting Processes”, FAO /WHO Report. Henson, S.J. (2007) The role of public and private standards in regulating international food markets. Journal of International Agricultural Trade and Development, 4(1), pp. 52–66. Henson, S.J. and Caswell, J.A. (1999) Food safety regulation: an overview of contemporary issues. Food Policy, 24, pp. 589–603. Henson, S.J. and Humphrey, J. (2009) The Impacts of Private Food Safety Standards on the Food Chain and on Public Standard–Setting Processes. ALINORM 09/32/9D–Part II (Rome: Codex Alimentarius Commission). Henson, S.J. and Jaffee, S. (2008) Understanding developing country strategic responses to the enhancement of food safety standards. The World Economy, 31(1), pp. 1–15.
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Standards for Sustainable Food Supply Chains Henson, S.J. and Northen, J.R. (1998) Economic determinants of food safety controls in the supply of retailer own-branded products in the UK. Agribusiness, 14(2), pp. 113–126. Henson, S.J. and Reardon, T. (2005) Private agri-food standards: implications for food policy and the agri-food system. Food Policy, 30(3), pp. 241–253 Lee R. and Mardsen T. (2009). “The Globalization and Re-Localization of Material Flows: Four Phases of Food Regulation”, Journal of Law and Society, March 2009, Vol. 36, No. 1, (pp. 129-144). Miles M., Munilla L. (2006). “The Potential Impact of Social Accuntability Certification on Marketing: A Short Note”, Journal Of Business Ethics, V. 50, No.1, (pp.1-11) Renting, H., Mardsen T. and Banks J. (2003). “Understanding Alternative Food Networks:Exploring the Role of Short Food Supply Chains In Rural Development”, Environment and Planning, 2003, Vol. 35, (pp. 393 411). Seuring, S. (2011). “Supply Chain Management for Sustainable Products- Insights From Research Appliyng Mixed Methodologies”, Business Strategy and the Environment,2011, Vol. 20, (pp. 471- 484). SOCIAL
INNOVATOR(2012).
Grameen-Danone
Partnership,
Bangladesh,
Retrieved
from:
http://socialinnovator.info/ways-supporting-social-innovation/market-economy/social-businesspartnerships/partnerships-betweeen/grameen-danone-partnership-b, August 22nd, 2012. Ventura, P. (2003). “Non-Governmental Organization Participation in the SA8000 Standadrd: The Challenges and Benefits of Southern NGO Accreditation in the SA8000 System”, Capstone Collection, (pp.1-14). Yakovleva, N. (2007). “Measuring the Sustainability of the Food Supply Chain:A Case Study of The UK”, Journal of Enivornmental Policy and Planning, Vol. 9, No.1, (pp. 75-100).
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Chapter 3 Creating Consumer Awareness on Sustainability in Food Supply Chains
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Katarzyna Urbanczyk
Transparency regarding food products in particular of the Regulation 1169/2011
Abstract Transparency in food is one of the principal issues of the actors involved in the food chains, NGOs and legislators. To provide transparent information to consumers European Union adopted the new Food Information Regulation 1169/2011. The purpose of the regulation is to enable consumers to make healthier and more informed choices while buying food. The aim of this paper was analysis of requirements and major changes specified by the Food Information Regulation. The paper presents the impact of the regulation on the food industry. Moreover, it specifies conditions to attain food transparency, and identifies the major challenges for the actors involved in the food chains. It thereby provides an overall framework to achieve food transparency, and solutions which may improve food labeling, such as extended packaging and network information exchange.
Keywords Food products, Food transparency, Consumer awareness, Food labelling, Stakeholders, Information exchange
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Introduction
1. Introduction Modern consumers shows an increasing interest about food safety and quality of the products that they eat and buy. Their requirements according transparent information on the quality of the entire food chain are growing rapidly. They call for food products that can be fully trusted and information they can rely on (Trienekens, Beulens, 2001). Therefore, the high quality food, fairness and connected services and information should be guaranteed. And is ensured particularly by retailers who state requirements to be met by their suppliers, and is further emphasized by NGOs and legislators (Beulens et al., 2005). To meet with consumer and governmental demands, the outstanding importance have an enlarged exchange of information about the characteristics of products, processes, and resources between stakeholders in a food chain. Transparent food products can be achieved by openness and communication, and the key role is information exchange about the origin and history of food products which make the food chain more visible (Trienekens et al., 2011). To support consumer and NGOs requests, European Union adopted the new Food Information Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers (Food Standards Agency, 2011). Entry into force new legislation replace the current requirements for the labelling of foodstuffs set out in Directive 2000/13/EC and the nutrition labelling requirements of Directive 90/496/EEC. Moreover, the Regulation (EC) of the European Parliament and Council No 1924/2006 on nutrition and health claims on foods and Regulation (EC) of the European Parliament and Council No 1925/2006 on the addition of vitamins and minerals and of certain other substances will be amend (FIR, 2011). The new regulations has been introduced in accordance with actualization, simplification and standardization of the EU food labelling law. Principal of this regulation is to enable consumers make informed and safe choices, by providing full information, and assuring the smooth functioning of the internal market (Kaszewska-Romańczuk, 2011). The new legislation shall help producers, suppliers, retailers and all the other actors involved in a food chain to communicate and provide better product information to their customers. However, changes in the labelling of food products will be challenging for both manufacturers and for enforcement staff. Likewise, replacing the previously used labels will require major investment. In this paper I will discuss requirements posed by the Regulation 1169/20011, its application, food transparency and the major challenges for the food industry.
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Transparency regarding food products in particular of the Regulation 1169/2011
2. Literature review 2.1
Food Information Regulation overview
Food Information Regulation 1169/2011 (FIR) is quite comprehensive and extensive document consisting 55 articles and 15 detailed annexes. It set up “common definitions, principles, requirements and procedures to form a clear framework and a common basis for Union and national measures governing food information (…)” (FIR, 2011). FIR was adopted after more than 8 years of consultation between various stakeholders and legislators.The main purpose of the regulation is to transform, facilitate and clear current legislation on labelling, and also harmonize nutrition labelling in the whole internal market of the EU (Collier, Macara, 2012). As it is written in the Regulation (2011), new food labeling requirements should lead to: “(…) the high level of health protection for consumers and guarantee their right to information and ensure that consumers are appropriately informed as regards the food they consume. This regulation serve the interests of the internal market by simplifying the law, ensuring legal certainty and reducing administrative burden, and benefit citizens by requiring clear, comprehensible and legible labelling of foods (…)”. The scope of the regulation is very broad. It applies to any food as defined by Regulation No 178/2002, i.e. to “any substance or product, whether processed, partially processed or unprocessed, intended to be, or reasonably expected to be ingested by humans” (McKeena, 2011). Moreover, this regulation deal with several areas of food information, contains country of origin, allergen labelling, and date of durability. Although, the main changes introduced here are the mandatory nutrition declarations and settings of a minimum font size. These two aspects of the regulation will embrace a wholesale redesign of almost all of packaging currently on the market, where the minimum font size is a peculiar challenge for the packaging industry (Lorraine, 2012). The requirements contained in the regulation should lead to increase of the readability of labels, clear and complete information about the allergens, and administration of the country of origin in the case of beef, swine, sheep, goat and poultrymeat. These requirements applies to all stages of the food chain, during which information on food are provided to consumers, including products supplied by and to mass caterers, as well as catering provided by transportation companies, and also non pre-packed foods sold in restaurants (Bogusz-Kaliś, 2012). The new regulations come into force on the twentieth day following its publication in the Official Journal of the European Union, i.e. December 13, 2011. However, food businesses 86
Literature review will have three years to adapt these rules, because the provisions of the Regulation shall apply from December 13, 2014, except for Art. 9 (1) concerning the introduction of nutrition information, which shall apply from December 13, 2016 and Part B of Annex VI, which shall apply from January 1, 2014 (FIR, 2011). 2.1.1 Mandatory food labelling Due to the growing concern of consumers about dependence of health on nutrition and selection of a suitable diet adjusted to individual needs, the legislators made compulsory labelling all food products with the nutritional value. To the exceptions of this requirement belong, i.e.: unprocessed products, containing a single ingredient or category of ingredients, yeast, drinking water, herbs, spices or their mixtures, alcoholic beverages, salt and salt substitutes, as well as food in a package, which the largest surface is less than 25 cm2. Though, the labelling of foodstuff will now have to provide the information on energy, fat, saturated fat acids, carbohydrates, sugars, proteins and salts (instead of sodium as previously). Wherein the mandatory nutrition labelling might be supplemented by the information about the other nutrients. Also, according to the new requirements, the content of individual mandatory nutrients, shall be expressed per 100 g or 100 ml. Although, it may be given as well per portion or per unit amount of foods that is easily recognizable for the consumer, but only when the number of portion or unit quantity contained in the package are provided on the label and if, the information is consistent (Kaszewska-Romańczuk, 2012). What is more, a nutrition declaration should be presented in the same format and in the same field of vision, also for the prepacked food it shall be in the principal field of vision and using a front size. The further information that are required by the regulation and should be included on the package are, i.e. The particulars referred above shall be indicated with words and numbers. They may additionally be expressed by means of pictograms or symbols (FIR, 2011). 2.1.2 Other labelling requirements The new rules are designed to ensure that the labels will be more readable, which will enable consumers to find easily the information about the food product while shopping. Therefore, in the regulation appointed the minimum font size where the x-height, is equal to or greater than 1,2 mm (Fig. 1). In case of the packages or containers whose the larger surface is less than 80 cm2, the x-height of the front size should be equal or greater than 0,9 mm. It is also important that the mandatory information on food must be indelible and 87
Transparency regarding food products in particular of the Regulation 1169/2011 cannot in any way be hidden, obscured, detracted or interrupted by other writings and illustrations (FIR, 2011).
Fig 1. (Annex IV, FIR L 304/46, 22.11.2011)
Legend: 1 – Ascender line 2 – Cap line 3 – Mean line 4 – Baseline 5 – Descender line 6 – x-height 7 – Font size
The new rules on food labeling may also include the obligation to provide additional information: "formed meat," or "formed fish" for meat and fish products, which may give an impression that they are made of a whole piece of meat or fish, but actually fold of different pieces incorporated together by other ingredients. Another requirement which changes existing rules, is indication of the name of a specific plant from which the oil or fat that is used as an ingredient in a food product was derived from. Among the other mandatory information, which should be included on a package is an indication in the name of meat products, meat preparations and fishery products containing added proteins (including hydrolyzed proteins) of a various animal origin, information about the presence of those proteins and their origin (FIR, 2012)
2.2 Product transparency and traceability Transparency in the food sector, mainly considering consumers, is the core issue on the agenda of consumer representatives and legislators. The gist is ensuring consumer confidence in food, food production, food provenance and the actors involved. Providing that, will lead to higher effectiveness and competitiveness of the European food market. Indispensable component in creating and sustaining customers trust in food, is transferring to them adequate communication and signals from food chains and networks, which should be based on transparency and traceability (Shiefer, Deiters, 2012). Hosfede et al. (2005) defined transparency as: “Transparency of a supply chain network is the extent to which all the network’s stakeholders have a shared understanding of, and access to, product and process related information that they request, without loss, noise, delay and distortion”. In accordance with Schiefer and Deiters (2012): 88
Literature review “Transparency is not meant to know everything but to create awareness on the issues consumers and customers in the chain are interested in, involving information on the safety and quality of products and processes, and increasingly on issues around environmental, social and ethical aspects.” The food value chain is very complex and involve extensive range of stakeholders, such as farmers, suppliers, food processing enterprises, trade or retailers and consumers as the final customer in the chain. To be able to reach transparency in food, all of these actors must be involved in information exchange. Although, the important role in this process play farmers, whose farms are the basis for all food production and their suitable integration into transparency draft is the prerequisite to obtain transparency in food, the food industry as well as farmers, is involved in the transparency issues. The European food industry is the largest manufacturing industry at the European level which employ 4.2 million people and have a total turnover of almost 1 trillion Euros (source: www.fooddrinkeurope.eu). And it is not only delivering information to other actors in the food supply chain, consumers and governmental organization, but also it is being the brand holder and the main provider of innovation in food products (Schiefer, Deiters, 2012). There are four major motivation in the food industry towards transparency:
first, companies needs to obey with individual demands of consumers and legislative demands;
second, ability of quick retraction of failures from the market or limitation of the accidents by links downstream the supply chain and minimization of costs;
third, increasing information exchange through integrated information systems, simplification of product and process attributes by linkage to process efficiency, that will lead to optimization of business;
fourth, differentiation of intrinsic and extrinsic products characteristics by appropriate labelling, which will lead to extra value added (Trienekens et al., 2012).
Another important stakeholder which determine the final stage in the food value chain is retail. It is delivering goods to consumers and also according to Schiefer and Deiters (2012): “provides the interface between the value chain and the consumer as the final customer”. Retail is also focus on having all of the information that customers might ask for and ensuring good quality and safety of the products that its consumers demand (Schiefer, Deiters, 2012).
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Transparency regarding food products in particular of the Regulation 1169/2011 To enable transparent information exchange in the food supply chain, the resource and products characteristics and detailed record of processes must be included. It will let on product differentiation, traceability, production management and obey with new rules and regulations. The principal issue toward products information is the composition and sensory feature of the products and information about the residues like pesticides or hormones. Considering exchanging information about the process the major concern according to Trienekens et al. (2012) is: “the origin of the product and its components in case of a composite product, also the history of the product, storage time and quality degradation, quantity variation within and between different products, resources used and waste�. Therefore, the Food Information Regulation requirements shall fulfill these characteristics, as it was discussed and listed in the previous chapter. Almost always in the food industry production and processing standards are related with quality and safety standards (Trienekens, Zuuber, 2008). Thereby, to protect these standards, since the 1990s, Western retailers and food industries have determined various standards for the production and processing of food, such as British Retail Consortium (BRC), GLOBALGAP and Safe Quality Food (SQF), where for instance GLOBALGAP is a basic production standard for farmers, designed and posed on farmers by consortium of retailers. The principal purposes of food quality and safety standards are supporting consumer and retailer aims on the entire supply chain and increase of production consistency across the supply chain, which shall ameliorate the efficiency of markets. To harmonize supply chain activities and control food quality and safety, these standards are nowadays adopted by importers and supermarkets around the world. However, it should be mentioned that food industry is actually increasingly concern not only about generic standards that focus on quality and safety of food, but also on its extrinsic features, like high-quality, Products of Designated Origin (PDO), animal welfare, or sustainability, that are labeled as such to generate extra value added (Trienekens et al., 2012). Therefore, food products labelling is serving an important role in communication and exchanging information between different actors in the food value chain, as well as in creation the added value. 2.3
Challenges and perspectives for the food industry in particular of Regulation 1169/2011
Consumers, legislators, NGOs and other actors involved in the food chains, demand various features of the end products, like safety, healthiness, animal welfare, fair trade, sustainability, no child labour, no use of pesticides and hormones, etc. In order to provide information about these attributes, the smooth information exchange and transparency shall be guaranteed. However, these external requirements determine a number of 90
Literature review challenges to actors involved in the food chains. Also, another major challenges for food sector is to achieve heterogeneous and at the same time predictable product portfolio and enable consumers to get the same quality at each purchase and by that attain their loyalty (Trienekens et al., 2012). Additionally, everyday challenge for consumers is selection of the food that corresponds to their healthy diet, which mainly rely on their knowledge and base on the information on food composition. Thereby, the labelling of ingredients, food composition and nutritional factors is needed in a transparent manner to permit consumers to judge the healthiness and appropriateness of any food for their diet (Schiefer, Deiters, 2012). According to Wognum et al. (2010) : “Labels for consumers (…) are used to inform consumers of the value, quality, and environmental friendliness of production of the food they buy.” Nevertheless, in had been revealed by many reports that consumer complaints and absence regarding their requirements are connected to labelling. However, by adopting the new Food Information Regulation the policy makers step forward in improving food labelling. According to the European Consumers’ Organization (BEUC) the new food information regulation will improve legibility of labels with the minimum font size (1,2mm) and also, since a nutritional declaration will be mandatory and will have to be listed per 100g/100ml, will allow comparisons between products. However, Monique Goyens, Director General of BEUC, said: “Consumers will be able to make more informed choices on food products, but the regulation will not enable them to choose the healthiest products at a glance” (source: www.beuc.eu). Also, the FLABEL (Food Labelling to Advance Better Education for Life) an EU-funded project which has explored the impact of food labelling among consumers in Europe and involved 12 partners (academia, non-governmental organisations (NGOs), retailers) from 8 European countries, obtained results which demonstrate that: “(...) significant bottlenecks which prevent nutrition labelling from having a positive effect on consumer choice is lack of motivation and attention of consumers. Also the average attention to nutrition labels is between just 25 and 100 milliseconds. This is too brief a period for the information to be processed meaningfully. Consumers need to be motivated to engage with nutrition information – for instance, by having a health goal – in order to pay greater attention to nutrition labels. (…) The most promising option for increasing consumers’ attention to and use of nutrition labels would be to provide information on key 91
Transparency regarding food products in particular of the Regulation 1169/2011 nutrients and energy on the front of the pack in a consistent way. Complementing this information with a health logo can also increase attention and use, especially when the consumer is under time pressure.” (source: www.flabel.org). Furthermore, FLABEL presented some recommendations that should be consider by the EU policy makers:
Reflection of nutrition labelling in a extensive context: “Rather than focus solely on the label itself, policy interventions should consider how this slots into the “bigger picture” of nutrition education and health motivation”;
Pattern guidelines on the use of nutrition labelling: “improving consistency and familiarity could help to improve consumer use of nutrition labels (widespread use of front-of-pack nutrition information would be particularly desirable)”
Identifying the use of nutrition labelling as a main encouragement for product reformulation and innovation: “Many manufacturers will strive to develop foods with a more healthful nutrient profile in order that they can put certain health logos and nutrient claims on their products” (FLABEL, 2012).
Also, the Food Information Transparency Initiative (FITI) which refer to the Food Information Regulation, is a joint project of Orange House Partnership, Schuttelaar & Partners, Bureau Brussels and Caesar Experts. According to the Chair of the FITI, Mr Koëter this project: “(…) is future oriented with respect to both the availability of modern communication tools and the type and level of detail of food information considered as relevant by the consumer (…)”. This project can be consider as the future challenge for the actors involved in the food chains. Its main approach is to enable consumers to get the access to further information about the food products by using smart phone, supermarket scanner or home computer. And, the information would include: ingredients, origin of ingredients, production and processing details, nutrition values, safety, health aspects, environmental aspects, ethical aspects, packaging details storage and use conditions and shelf life. Also, it aim is to include as many product brands as possible. Nevertheless, presently that extensive packaging provided by electronic means must be supplementary to on-pack labelling and cannot substitute the food label, by reason that low income consumers do not necessarily have a smart phone or a home computer (FITI, 2011). Besides that, the other challenge for the policy makers is overcoming the issue pointed out by UEAPME (Union Européenne de l’Artisanat et des Petites et Moyennes Entreprises – European Association of Craft, Small and Medium Size Enterprises), which claim that extending requirements on country of origin, to milk and dairy products “will generate
92
Summary and Conclusions problems for small food operators that change ingredients very frequently.� (source: http://www.euractiv.com).
3. Methodology Undertaken research problem is discussed on the basis of empirical data, which were obtained using secondary research. Completed secondary data analysis focused primarily on the analysis of the requirements adopted by the Food Information Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers. It has been also review the transparency of food products and the major challenges for the food industry in the near future. The study used secondary sources of information, consisted of literature sources, the results of the institutions involved in the control of food in the EU, as well as results of projects according to food transparency and food labels.
4. Summary and Conclusions The food value chain is very complex and involve broad range of stakeholders, such as farmers, suppliers, food processing enterprises, retailers and consumers. To be able to reach transparency in food, all of these actors must be involved in information exchange. Consumers, as the final customer of the food chain, need simple, clear and transparent information to make optimal purchasing decisions. Additional information raises consumer welfare as it enables them to make better choices. One of direct communication channels to consumers are product labels and logos. They might support consumers evaluation and comparison of products on the market or lead them to make more healthy and sustainable choices (European Consumer Agenda, 2012). Therefore, it is very important to provide adequate labelling of food to the consumers. This process shall be easier after implementing the Food Information Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers. This regulation establishes the major requirements and responsibilities towards food information, especially for food labelling. It lays down the means to ensure the right of consumers to information. Also it establishes the mandatory food information and minimum font size which should guarantee better readability of the labels and healthier choices. The principle for requiring mandatory food information is empowering consumers to make choices that suit their individual dietary needs (FIR, 2011). Moreover, food certification and labelling can support public policy objectives across fields such as food safety, public health 93
Transparency regarding food products in particular of the Regulation 1169/2011 and diets, social and ethical issues, environment and natural resource protection, and climate change and energy use (Schiefer, Deiters, 2012). However, as it was confirmed by several studies, consumer motivation to read and understand nutritional information contained on the labels while shopping is low. Thereby, new sources of consumer information are developing quickly. More popular are becoming social media, community sites and blogs, which are platforms to share feedback on products and services. People check online before buying in shops, consequently there is an increasing impact of online activity on offline markets. Therefore, the industry is also trying to provide new ways of supplying information to their consumers, such as the Food Information Transparency Initiative (FITI) which main approach is to enable consumers to get the access to further information about the food products by using smart phone, supermarket scanner or home computer. Likewise, mobile web applications offering consumer information are multiplying rapidly. And it is highly possible, that smart phone applications will be a major instrument in the future which will provide to them information. Although, electronic devises might facilitate reaching further transparency in food products, simplify exchange of information and extend product labelling, however the question is how it will influence small and medium enterprises and manufacturers and also people from developing countries that do not have access to these systems. It may be an interesting future issue for NGOs and legislators.
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References
References Beulens A., Broens D-F., Folstar P., Hofstede G.J. (2005). Food safety and transparency in food chains and networks. Relationships and challenges. Food Control 16 (pp.481-486) Bogusz-Kaliś, W. (2012). Nowe wymagania w znakowaniu żywności, Przemysł spożywczy, 2012 (pp. 10-14) Collier T., Macara P. (2012). European Union: The New EU Regulation On The Provision Of Food Information – Its Application To Airlines. Clyde & Co, 2012 Kaszewska – Romańczuk, K. (2011). Czas na zmianę etykiet – Nowe przepisy w zakresie znakowania żywności. Wiedza i jakość, 2011 (pp. 4-6) Lorraine E. (2012). EU food legislation: presenting the facts, Packaging Professional Magazine, 2012 (pp. 6-8) Schiefer G., Deiters J. (2012). Strategic Research Agenda on Transparency in the Food Chain Towards 2020. University of Bonn/ILB. ISBN 978-3-941766-09-9 Trienekens J. H., Beulens A.J.M. (2001). The implications of EU food safety legislation and consumer demands on supply chain information systems. Proceedings of the 11
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Annual World Food and Agribusiness
Forum. International Food and Agribusiness Management Association, Sydney Australia. Trienekens J. H., Zuurbier P.J.P (2008). Quality and safety standards in the food industry, developments and challenges. International Journal for Production Economics 113 (1), 107-122. Trienekens J. H., Wognum P.M, Beulens A.J.M., Van der Vorst J.G.A.J. (2012). Transparency in complex dynamic food supply chains. Advanced Engineering Informatics 26, 55-65. Wognum P.M., Bremmers H., Trienkens J.H. Van der Vorst J. G.A.J., Bloemhof J.M. (2010). Systems for sustainability and transparency of food supply chains - Current status and challenges. Advanced Engineering Informatics 25 (pp. 65-76) A European Consumer Agenda (2012). Boosting confidence and growth final. Commission Working Stuff Document on Knowledge-Enhancing Aspects of Consumer Empowerment 2012-2014. Retrieved from: th
www.europarl.europa.eu/.../2012/0235/COM_SWD(2012)0235_EN, July 19 2012 BEUC
(2011).
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improvements
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consumers
but…
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from:
http://www.beuc.eu/BEUCNoFrame/Docs/1/PEGDPJODHECCMELDAMOCDCPPPDWY9D7NAY9DW3571K th
M/BEUC/docs/DLS/2011-09631-01-E.pdf, July 7 2011 Euractiv.com
(2011).
EU
food
labelling
rules
ready,
new
round
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th
http://www.euractiv.com/consumers/eu-food-labelling-rules-ready-ne-news-506334, July 8 2011. Food
Standards
Agency
(2011).
New
food
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regulation
published.
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from:
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Transparency regarding food products in particular of the Regulation 1169/2011 Food
Safety
Authority
of
Ireland
(2011).
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information
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from:
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November 18 2011. REGULATION (EU) No 1169/2011 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2011 on the provision of food information to consumers. Official Journal of the European Union from nd
November 22 2011, L 304/18
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Annex I.
Annex I. SUBSTANCES OR PRODUCTS CAUSING ALLERGIES OR INTOLERANCES (Regulation (EU) Nr 1169/2011 (Annex II)) 1. Cereals containing gluten, namely: wheat, rye, (a) wheat based glucose syrups barley, oats, spelt, kamut or their hybridised strains, including dextrose ( 1 ); and products thereof, except:
(b) wheat based maltodextrins ( 1 );
(c) glucose syrups based on barley;
(d) cereals used for making alcoholic distillates including ethyl alcohol of agricultural origin;
2. Crustaceans and products thereof;
3. Eggs and products thereof;
4. Fish and products thereof, except:
(a) fish gelatine used as carrier for vitamin or carotenoid preparations;
(b) fish gelatine or Isinglass used as fining agent in beer and wine;
5. Peanuts and products thereof; 6. Soybeans and products thereof, except:
(a) fully refined soybean oil and fat ( 1 );
(b)
natural
mixed
tocopherols
97
Transparency regarding food products in particular of the Regulation 1169/2011 (E306), natural D-alpha tocopherol, natural D-alpha tocopherol acetate, and natural D-alpha tocopherol succinate from soybean sources;
(c)
vegetable
oils
derived
phytosterols and phytosterol esters from soybean sources; (d) plant stanol ester produced from vegetable oil sterols from soybean sources; 7. Milk and products thereof (including lactose), (a) whey used for making alcoholic except:
distillates including ethyl alcohol of agricultural origin;
(b) lactitol; 8. Nuts, namely: almonds (Amygdalus communis L.), hazelnuts (Corylus avellana), walnuts (Juglans regia), cashews (Anacardium occidentale), pecan nuts (Carya illinoinensis (Wangenh.) K. Koch), Brazil nuts (Bertholletia excelsa), pistachio nuts (Pistacia vera), macadamia or Queensland nuts (Macadamia ternifolia), and products thereof, except for nuts used for making alcoholic distillates including ethyl alcohol of agricultural origin; 9. Celery and products thereof; 10. Mustard and products thereof; 11. Sesame seeds and products thereof; 98
Annex I.
12. Sulphur dioxide and sulphites at concentrations of more than 10 mg/kg or 10 mg/litre in terms of the total SO 2 which are to be calculated for products as proposed ready for consumption or as reconstituted according to the instructions of the manufacturers; 13. Lupin and products thereof; 14. Molluscs and products thereof
99
Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Wojciech Dlugosz
“A comparative study on product tagging for extended information provision to consumers�
Abstract Consumer Awareness for food products can be created amongst others through extending product information. Current development level of computer technology allows a simple and fast access to product information for consumers. In this paper is compared and evaluated the main methods of product tagging, which can be used to provide extended information to the consumers. In addition, it has been shown the relevance of product tagging technologies for the supply chain, product lifecycle management (PLM), sustainability, transparence and prospective development trends.
Keywords tagging, barcode, QR-Code, Data Matrix, RFID-Technology, sustainability, transparency, Product Lifecycle Management (PLM), Augmented Awareness (AR);
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Introduction
1. Introduction “It is commonly agreed that strong brands have high level of awareness among their consumer segments, with the strongest brands having high unaided awareness coming to mind first when the product or service category is thought of” John Jameson (1999). The consumer awareness can be improved through extending information provided to consumers. Currently available tagging technology offers many capabilities for product tagging and identification, which makes the product to an intelligent product. There are different definitions of intelligent products in consideration to various levels. McFarlane defines an intelligent product as product with following properties: possessing a unique identification, capability of communicating effectively with its environment, retaining or storing data about itself, deploying to display its features, production requirements, capability of participating in or making decisions relevant to its own destiny. Kärkkänen takes into consideration the definition additionally interior and exterior control of supply chain performance. On this level of point of view has the product at one's disposal following properties: globally unique identification code; links to information sources about the product across organizational borders, either included in the identification code itself or accessible by some look-up mechanism; possibility to communicate what needs to be done with them to information systems and users when needed (even pro-actively). According to the Ventä’s definition the intelligence of product is based on his constant status and environment monitoring hence he accommodates himself optimal to the environment and environment requirements (Meyer, Främling and Holmström 2009) An intelligent product is related to an intelligent packaging, which acts as a carrier of an extended information to the suppliers, the sellers and the consumers. The intelligent packaging is defined as a packaging system, which is to perform sophisticated functions such as recognition, recording, monitoring communication and the use of systematic logic capable of facilitate the decision-making, to extend shelf life, to increase the product security, to provide information and warnings about possible problems. (Yam, Takhistov and Miltz 2006) These above mentioned intelligent features could be ensured through using of different product tagging technologies. In the further sections of this work these are presented and compared to each other.
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A comparative study on product tagging for extended information provision to consumers
2. Tagging on products - comparison of capabilities Product tagging can be considered at different levels. On the one hand the product tagging is consumer oriented, which influence the consumer behavior and awareness through informative product labeling. On the other enterprise oriented, where production and supply chain processes through tagging methods will be made easier.
2.1 Barcode-Tagging The most important and currently the most disseminated product tagging methods are barcodes. These are a visual depiction of information as bars and free spaces in which the information can be stored, transformed, processed and verified in a simply way (Gao Prakash and Jagatesan 2006). Since the Barcodes were introduced in the 70s, they found their application not only in the production and manufacture of goods and products but also at the post office as stamps, transport (tracking-tracing), retail and healthcare to identification of patients and store their medical records. Traditional barcoding is coupled with the Universal Product Code (UPC) and every day accounts for billions of scans all over the world. (White, Gardiner, Prabhakar and Razak 2007). So that these unique tagging allows tracing and monitoring of products around der world. Linear barcode refers to the way of decoding of numbers and letters in sequences strips of different widths as well as free spaces between e.g. code 39 (Gao, Prakash and Jagatesan 2006). This kind of code is characterized by less information storage capacity, so that only small number of information e.g. international article number, country of manufacture, kind of product and price can be stored and processed. According to research study of Zebra Technologies, which was made in 2006, 98% of European companies called as major benefit the improved efficiency through usage of barcode tagging, in addition 32% increased accuracy of orders and billing, 26% a costs reduction and only 16% of the interviewed persons see this technology as still not enough well-engineered (Zebra Technologies and IT reseller 2006). With increasing amount of information, which via barcode is mediated, this technology was further modified and enhanced. This is why is arose a new range of barcodes so-called 2Dbarcodes. On the one hand these differ from linear barcodes visually and on the other hand through storage capacity, encoding/decoding methods. The 2D-barcodes can be differentiated in two groups like stacked 2D Code and Matrix Code. The most important stacked 2D codes are Code49 and Portable Data File (PDF417). The code49 can encode 49 alphanumeric characters or 81 digits, furthermore disposes above 102
Tagging on products - comparison of capabilities three modes of error detections like bit parity, last character of each rank as the check character and two till three check character at the end of codes. Compared with code 49 can stored the PDF417 till 2000 characters. The second feature of PDF417 are 0-9 adjustable error-correction levels hence the safety level by the decoding can be increased. With the portal data file can be recorded e.g. medical records of patients, order data, accounting file and many other data in an easier and faster way (Gao, Prakash and Jagatesan 2006). The second group of 2D barcodes so-called Matrix Code are especially Quick Response Code (QR) and Data Matrix. The Quick Response Code (QR) is composed of item icons, which are depicted as squares. Each item icon can save minimal 21x21 till maximal 177 x 177 items. Therefore in one QR-Code can be stored 4296 alphanumeric respectively 7089 numeric characters. Because of reading and decoding method is QR tagging consumer oriented. QR code can be read/scanned employing digital camera of a smartphone. Commonly with a QRcode will be stored URL direct links and most notably can be applied in e-commerce. Other applications of QR tagging are e.g. storing of business cards, online tickets, boarding cards etc. Currently innovative technology of augmented awareness (AR) uses the QR codes to provide extended information to users of this technology (Beccue and Strother 2011). Data Matrix Code short DMC is composed of square item icons similar to QR-Codes but here the horizontal line and vertical line act as search items. In a DMC can stored 2355 alphanumeric or 3116 numeric characters. The most important application of DMC's is using them as postage stamps or encoding of credit cards information’s (Gao, Prakash and Jagatesan and 2006). In the last years was developed a new type of barcode so-called GS1 DataBar. This kind of code through its properties should resolve all weak points of past barcodes. Beside the GTINarticle number can be stored here also features like weight, minimum durability date or serial number. Because of these properties this type of barcode can be used for tagging weight variable products e.g. fresh products like fruits, vegetable and cheese. Furthermore the reading process is independent of position and direction so that is most applicable for Point of Sale (GS1 Germany GmbH 2008).
2.2 RFID-Technology Radio-frequency identification has been developed to the same time as barcode technology. Despite particular properties of this technology is came across onto refusal by the producers and retailers. The reason for was great cost of introducing. Primal at beginning 2003 some companies e.g. METRO or TESCO have implemented the RFID technology into their business. Primal at beginning 2003 some companies e.g. METRO and TESCO have implemented the RFID technology into their business as tagging of products or pallets (Wilding und Delgardo 103
A comparative study on product tagging for extended information provision to consumers 2004). “RFID is a revolutionary information exchange system that can create an environment in which every object can be automatically recognized, tracked and traced from factory to shelf only using a single tag on each product item or pallet” Jones (2006). “A typical RFID System is made up of: a reader, which creates an electromagnetic field and some passive tags without an own voltage supply. They can be read only if they are in the interrogation zone of a reader which supplies the power required through a coupling unit” Gandino, Montrucchio, Rebaudengo and Sanchez (2007). “A reader emits radio waves to capture data from an RFID tag , and the data is than passed onto a host computer for analysis an decision making“ Yam, Takhistov, Miltz (2006). “RFID tags are advanced shape of data carrier for automatically tracking and tracing of information” Maass and Kowatsch (2008). In regard to the power source to distinguish are two types of RFID-tags on the one hand active and on the other hand passive tags. As opposed to active tag, disposes the passive tag no own power source. Further differences between these tags are production cost and durability. During the passive tags are cheaper and longer viable are the active tags more expensive and their durability is limited because of integrated battery. The reading process is dependent on type of tag. Active tags can be read above longer distances while the passive tags can be read only in immediate proximity (Bendavid and Cassivi 2010). The advantages of passive tags are dependent on an application it means which products and at which environmental conditions should be tagged. There gives two kinds of RFID systems based on portal or portable systems. There gives two kinds of RFID systems based on stationary or portable reader. Stationary RFID system is characterized by fixed reader on a designated place. In this case information will be read while crossing a RFID gate and by use of wireless-network information can be sending to the database and in this way compared. However Portable RFID system is based on a mobile reader. A mobile reader can be implemented in a mobile phone and be used by quite a number of people (Bendavid and Cassivi 2010). Closely linked to the RFID technology is the application of micro-chips. These have been developed especially for Auto-ID identification by the using of wireless-communication. Because of higher costs per chip is the application of micro-chips on some areas limited. Among an Application of microchips the quality control can be improved and tracking and tracing of individual products simplified. After Bovine spongiform encephalopathy (BSE) scandals arises tendency to tagging of livestock with microchips. Thereby information’s like breeding history, removals or medical inspections can be stored. In this way all these information’s about one animal fast and easy can be verified. By contrast with barcodes offers RFID and microchip technology on the one hand more storage capacity on the other hand more precise and quicker information processing. The most important point of RFID 104
Tagging on products - comparison of capabilities tagging in compare to the barcode technology is the possibility to store real time information. Rewritable tags can store real time information among the supply chain so that the consumer or retailer has access every time on the updated information (Wolinsky 2006).
2.3 Non electronically product tagging Besides the barcode/RFID tags exist non electronic methods of product tagging, which can influence the consumer behavior. The most popular method of product tagging is traffic lights method. „The traditional nutrient facts panel on the back of packaged food products provides extensive information about product composition, expressed in relative and absolute quantification of nutrients. Many studies show that consumers have difficulties interpreting these food labels, however, especially older consumers and consumers with lower level of education and income” Vythab, Steenhuisab, Mallantab and Molab (2006). This is the reason for introduction of a simplified tagging-method on products as help at purchase decision making. The traffic lights tagging is a multiple traffic lights, which contains more than three items. Respectively of substance concentration like fat, salt, sugar and saturated fatty acids will be shown in different colors. In this case green means a low, yellow medium and red a high concentration. The British food agency “Food Standards Agency” (FSA) has proposed the traffic lights as a simple nutritional information tagging. This tagging method is already used by the most companies of food industry. In this way consumers can analyzed the nutritional information of food products easier and faster. Especially comparison of food products in one category is much easier. The traffic lights should be circumstanced good visible in the front of packing. Values are aimed at standards of FSA and they concern 100 gram or 100 milliliter of each product (VerbraucherzentraleBundesverband). Other possibility to non-electronic tagging on products is labels of testing institutes or organizations, which hint at special product characteristics. „Fair Trade products are goods and services that are produced, traded and sold in accordance with these Fair Trade principles and, wherever possible, verified by credible, independent assurance systems such as those operated by FLO (“Fairtrade-Certified”) and WFTO (Sustainable Fair Trade Management System)” WFTO (2009). Time-temperature-indicators are the next alternative to product tagging. The self-adhesive strips on the packing or containers can record temperature alterations and shown them visually. This technology has been developed combined with barcode and RFID-technology. Due to high costs of this technology is not widely used. (Yam, Takhistov and Miltz 2004)
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A comparative study on product tagging for extended information provision to consumers Gas-indicators are the next product tagging method. Here will be recorded physiological and physical changes of a food product e.g. transpiration processes in vegetables and fruits. Prospective integration these indicator-labels with barcode and RFID-technology allow not only visual recognition but also electronic recording and information processing. Similar to time-temperature-indicators is the technology still too expensive for widely using on packing (Yam, Takhistov and Miltz 2004). DNA-tagging concept is based on the fact, that every animal is genetically unique. The own animal DNA-code of can be used to identification of meat products. Introduction of this technology requires a huge data base and collection of reference samples, which allow further comparison. Especially in this regard requires this technology an innovations and improvements (Yordanov und Angelova 2006). A more innovative product tagging method is a biosensor. These can detect record and transmit chemical changes in a food product. In this case a bio-receptor identifies specifically analyze and converts biochemical signals in a quantifiable electronic response. This technology is currently commercial not (Yam, Takhistov and Miltz 2004).
3. Relevance of product tagging With rising industrial growth increases number of products on the market. It causes on the one side greater choice for the consumers on the other side greater competition between the producers. Accordingly producer is forced to shorten the product lifecycle and supply chain, even so extend product variety at constant product quality and reducing of investment costs. These are challenges, which with help of more suitable product tagging and efficient management can be overcome. Also consumers can be influenced in consequence of product tagging. Currently available product tagging technologies allow providing of extending information about products to the consumers and consequently can influence their awareness.
3.1 Mobil Tagging Rapid development in sector of mobile communication, e.g. smart phones with General Packet Radio Service (GPRS- 2G), High Speed Downlink Packet Access HSDPA-3-3,5G) or Long Term Evolution (LTE - 4G) and wireless network access opens up a new window for many business areas allows also through mobile tagging for consumers easier and faster access on product information. Augmented Reality – technology (AR) is currently the most innovative technology on the market. AR offers the possibility to providing of extended information to consumers. The requirements for use this technology are a smartphone with a digital 106
Relevance of product tagging camera, AR App-software and internet access. In this case objects or products will be photographed and through AR App processed. The software recognized the objects and starts the search for information. The found information is showing on the display. Due to using QR-codes also URL's and videos can be linked. “Mobile technology has jolted retailing in unprecedented ways. As a mechanism for marketing and completing transactions of goods and services, mobile has become a priority for marketers. Augmented Reality, particularly leveraged as a way to provide enhanced product information in physical locations, will be widely adopted by brands by 2013 […] Luis von Ahn, a Carnegie Mellon professor, defines human computation as the ability of humans to solve problems that computers cannot. Technologist Will Wright is intrigued by the potential of mobile Augmented Reality to deliver what he calls situational awareness, a proximity value in space or time” Beccue and Strother (2011). „Mobile Tagging describes the decoding of 2D-barcodes by using the camera of a mobile device. With special software, a short message or an internet address can be converted into a 2D-barcode resembling a crossword puzzle, which is called a tag" Rieger (2008). Tags can be scanned through digital camera of a mobile phones and with an especially software so-called code reader decoded. As a result of this the decoded information will be showing on the display or the user can be linked directly to the web site. Code generators partially are pre-installed on the mobile devices or can be downloaded as an application. There are two kinds of mobile tagging. On the one hand "pull tagging" if the consumer decodes the visible codes, on the other hand "push tagging" if the barcode will be send to the consumer. "Pull tagging" is applicable to mobile advertising, mobile social networking, business card tagging, product packing, customer relationship management, customer selfservices and mobile e-commerce. In contrast to "pull tagging" is the "push tagging" applicable to mobile ticketing, couponing, automatic identification and mobile payment (Rieger 2008). “Consumer-oriented companies will strongly profit from new forms of direct customer interaction and advertising based on mobile tagging. Any physical product or product-related information such as packages, manuals or catalogues can be equipped with a tag. The tag can then directly lead to a website which will connect the consumer with the manufacturer” Rieger (2008).
3.2 Supply Chain Management “The food supply chain from source to consumer can sometimes be a complex one with many different organizations often forming part of the supply chain” Jones (2006). The complexity of supply chain is the weak point in regard to tracking, tracing and monitoring of products. “Tracking and Tracing is a crucial factor in the agro-food sector. A traceability system may 107
A comparative study on product tagging for extended information provision to consumers lead to many benefits, such as: fast product withdrawal, protecting the consumer, minimizing the financial impact and improving consumer confidence, higher efficiency, providing information on internal logistical and quality, feedback loop and reliable information to businesses, consumers and authorities” Gandino, Montrucchio, Rebaudengo, and Sanchez (2007). While by barcode-tags the stored information is limited and every changes of information status requires new information encoding, printing and product labeling, the rewritable RFID-tags allow recording and storage larger quantity of real-time information without to replace the tag. This ability of RFID-tags enable every time a faster access to more precise information for producers, supplier and retailer. Consequences of it are improved product control along supply chain, abbreviation of cycle time and improved management. Furthermore using the stored information producers can plan their production also can develop new products more effectively. According to case study made by Center of Logistics and Supply Chain Management, Cranfield School of Management has been confirmed, that due to using of RFID technology in company the product losses along the supply chain can be halved, several quality issues solved due to traceability saving money on recalls and protecting brand image. In addition labor of supplier also inventory level can be reduced and product availability as well customer services can be enhanced (Wilding and Delgardo 2004)
3.3 Product Lifecycle Management Currently business models are oriented on product innovation. Due to high competition on the market products have to differ from each other, and at the same time to fulfill consumer requirements. “Total management of the product lifecycle is critical to innovatively meet customer needs throughout the entire life cycle without driving up costs, sacrificing quality, or delaying product delivery” Meyer, Främling and Holmström (2009) Barcode- and RFID-tags offer the possibility to collect and store product information each phase of lifecycle and can use this information in the same or other phase. In this way product design and applications can be adjusted on customers’ requirements. Many companies such as METRO, Wal-Mart already use RFID-tags and claim the same from producers from whom they obtain their commodities. The reason is better and more precisely data collection and storing along product lifecycle. On the one hand allows this aimed adjustment of products/product assortment on customers’ requirements and on the other hand aimed product developing and closer coordination between producers, retailers and service. Analysis of stored real-time data and warning messages facilitates to solve problems in regard to product quality and product malfunction. 108
Relevance of product tagging „Product tagging e.g. Radio frequency identification (RFID) is receiving significant importance for the Product Lifecycle Management (PLM) especially for one important part of PMLProduct Data Management (PDM). The product components and related data today represent a unit only in the early phases of the product lifecycle; this means that they build a virtual product unit in the phases of development and construction, only. In the late phases of their lifecycle (manufacturing, use and disposal) this product unit is splitted, separating the physical product from the related product data.” Erkayhan, S. (2007) In consideration of RFID-tags properties such as storage of real-time information and direct processing through different IT systems also faster data access emphasize more appropriate application of RFID-tags in PLM than barcodes, but this not means that the barcode tags should be replaced through RFID-Tags.
3.4 Sustainability and Transparency „Sustainability is defined as a situation in which the needs of the present generation are met, without impending on the satisfaction of needs of the future generation“ Wognuma, Bremmersa and Trienekensa (2011). Currently more and more food producers take into account a sustainable production. This tendency is influenced on the one hand through consumer demand on the other hand through concerns about well-being of the next generation. The most important factors, which influence consumer’s decision making, are especially safety, price, product quality, health, product source and manufacturing process. Different labels on packaging such as traffic lights, fair-trade label etc. send clear signals to the consumers if the chosen product is healthy or is consistent with sustainability rules. “The economic basis of transactions within Fair Trade relationships takes account of all costs of production, both direct and indirect, including the safeguarding of natural resources and meeting future investment needs. Trading terms offered by Fair Trade buyers enable producers and workers to maintain a sustainable livelihood; that is one that not only meets day-to-day needs for economic, social and environmental well-being but that also enables improved conditions in the future. Prices and payment terms (including prepayment where required) are determined by assessment of these factors rather than just reference to current market conditions. There is a commitment to a long-term trading partnership that enables both sides to co-operate through information sharing and planning, and the importance of these factors in ensuring decent working conditions is recognized.” WFTO (2009) “Recent food crises have increased customer awareness of the impact on public health of food production, processing and distribution in Europe and beyond” Wognum, Bremmersa and Trienekensa (2011). Frequent occurrence of food scandals lead to loss of confidence in 109
A comparative study on product tagging for extended information provision to consumers the food products. The result of this is uncertainty at the purchase decision making. The consumers prefer to get a lots of reliable product information as possible. This is only through transparency in the supply chain possible. “Transparency is driven by needs and is meant to create awareness on the issues society, consumers and enterprises in the food sector are interested in, involving information on the safety and quality of products and processes, and increasingly on issues around environmental, social, and ethical aspects. Consumers’ trust in food, food production, the origin of food, and the actors involved is a core requirement for the functioning of food markets and the competitiveness of industry” Schiefer (2011). Product tagging technologies allow tracking and tracing of food products. Additionally rewritable tags provide extending real-time information, what can increase the transparency along the supply chain. Rising number of wholesalers e.g. HIT future store, EDEKA Mohre, METRO contribute to transparency by providing the electronic information portals for consumers, which act as barcode or RFID-tags reader. The consumers obtain the product information by scanning of barcode and RFID-tags as result of this the product information will be shown on the display.
4. Conclusions Consumer Awareness of food can be improved by appropriate product labeling and therein contained extended product information. Since decades exist the various technologies for product tagging and labeling with different properties. However not all technologies has been established at the same time e.g. barcode vs. RFID tagging. The main reasons for that are high cost of introducing and not enough developed system to use these technologies. Barcode technology was initially introduced to improve supply chain processes such as improving the efficiency of ordering, invoicing and to reduce costs associated with these processes. Product information stored in the tags is used to optimize the processes in the supply chain and PLM. Rapid development in sector of mobile devices (introducing of smart phones on the market) has enabled using of new features such as barcode reader on mobile phone. As result of this is the possibility to use them from a width number of people to decode of stored product information. Comparison of product tagging methods showed that for constant updating of product information as real-time information the RFID Tags are best suitable. In this way is expected that using of RFID technology or a combination of different product tagging methods will rapidly increase in the next years. Even a non-electronic product labeling increased in importance. By food scandals drop consumers’ confidence in food products. This leads to decreasing demand. However producers try to change consumer awareness, by introducing of quality or other labels, which send positive signals to consumers. Non-electronic labels such as UNICEF, Fairtrade, Stiftung Warentest or Fresenius 110
References institute have to reinforce consumers’ awareness. In the next years is to expected, that number in this way tagged products will be raising. Electronic as well as visual product tagging methods call for transparency. Product tagging should be used more to strengthen of consumer awareness and not only acts as one of marketing strategies.
5. References Bendavid Y., Cassivi L. (2010). “Bridging the gap between RFID/EPC concepts, technological requirements and supply chain e-business processes”; JTAER vol 5, ISSUE 3/Dec. 2010/1-16 Dr Richard Wilding, Tiago Delgardo (2004). “RFID Demystified: Part 3 Company Case Studies”. Logistics & Transport Focus, Vol. 6 No.5, June 2004; (pp. 32-42) Dr. Volker Rieger, Arne Linnemüller (2008). “Mobile Tagging: New Business Opportunities through 2DBarcodes”. Opinion Paper Detecon Consulting 2008 Ellis L. Vythab, Ingrid H. M. Steenhuisab, Sanne F. Mallantab, Zinzi L. Molab, Johannes Brugc, Marcel Temminghoffd, Gerda I. Feunekese, Léon Jansenf, Hans Verhageng & Jacob C. Seidellabc (2009). “A Front-of-Pack Nutrition Logo: A Quantitative and Qualitative Process Evaluation in the Netherlands Journal of Health Communication”: International Perspectives Volume 14, Issue 7, 2009; (pp. 631-645) Erkayhan, S (2007). “The Use of RFID enables a holistic Information Management within Product lifecycle Management (PLM)”. RFID Eurasia, 2007 1st Annual, IEEE 5-6 Sept. 2007; (pp. 1- 4) Gandino F., Montrucchio B., Rebaundengo M., Sanchez E.R.; “Analysis of an RFID-based information system for tracking and tracing in an Agri-Food chain”. RFID Eurasia, 2007 1st Annual 5-6 Sept. 2007; (pp. 1-6) Gerben G. Meyer, Kary Främling, Jan Holmström (2009). “Computers in Industry- Intelligent Products: A survey”. In Computers in Industry, Volume 60, Issue 3, April 2009; (pp. 137–148) Gerhard Schifer (2011). “Transparency in Food: A Challenge for Research and Sector Initiatives”. Int. J. Food System Dynamics 2(2), 2011, 112-113 GS1 Germany GmbH (2008). “GS1 Supply Chain Management, Effiziente Prozesse im Fokus”. 2.Auflage, GS1 Germany GmbH Köln; ISBN 978-3-00-025792-6 http://www.itrportal.com/articles/2006/12/12/3487-accuracy-tops-uk-barcode-benefits
J.Z. Gao, Prakash, L.; Jagatesan, R. (2007). “Understanding 2D-Barcode technology and Applications in MCommerce – Design and Implementation of a 2D Barcode processing solution”. Computer Software and Applications Conference, 2007. COMPSAC 2007; 31st Annual International; (pp. 49-56)
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A comparative study on product tagging for extended information provision to consumers James Jameson (1999). “The New Direct Marketing: How to implement a profit-driven marketing strategy”. David Shepard Associates 1999, 3th edition; ISBN 0-07-058056-1; (pp. 76) Jones, P. (2006). “Networked RFID for use in the Food Chain”. Emerging Technologies and Factory Automation 2006; ETFA '06. IEEE Conference on 20-22.09. 2006; (pp. 1119-1124) K.L. Yam, P.T. Takhistov, J. Miltz (2006). “Intelligent Packing: Concepts and Applications”. Journal of Food Science, Volume 70, Issue 1, pages R1–R10, January 2005 Mark Beccue, Neil Strother (2011). “Mobile Augmented Reality: Apps and Sensors, Browsers, Image Recognition, Real–Time Search”. ABI research report, 2011 P.M. (Nel) Wognuma, Harry Bremmersa, Jacques H. Trienekensa, Jack G.A.J. van der Vorstb, Jacqueline M. Bloemhofb (2011). “Systems for sustainability and transparency offoodsupplychains – Currentstatus and challenges”. Advanced Engineering Informatics, Volume 25, Issue 1, January 2011; (pp. 65–76) Verbraucherzentrale-Bundesverband
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Ioulia Sidiropoulou
A comparative study on the integration of social media elements in communication concepts of agri-food industry and retailers (selected examples)
Abstract Sustainability is a concept that introduces and incorporates environmental protection, social development and economic growth. In the 21st century the number of companies which adopt a sustainable business profile continuously increases. Corporate Social Responsibility (CSR) reports, “green� labels and advertisement are some of the tools that a company could use in order to communicate its sustainable activities. Nowadays, Social Media is used by large number of people in their daily life, constitute a new tool that can be used to communicate such corporate activities to consumers. This paper introduces the concept of sustainability and notes the importance of Social Media in communicating sustainability issues on behalf of agri-food companies. Aim of this paper is to describe what is happening in reality therefore a variety of companies were selected and examined concerning the issues mentioned above.
Keywords Sustainability, Social Media, Agri-food industries and retailers, Facebook, YouTube, Twitter, Blogs
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Introduction
1. Introduction Considering the extent of turnover, the number of employees and the companies which operate, food industry is the leader in the manufacturing sector in Europe. More precisely, in 2005 the turnover in food industry was 836 billion euro and four million employees were part of it (Mariani M., 2007) Because of the aforementioned magnitude of the agri-food sector its environmental, social and economic impact is of great importance. Depending on the way a company operates the impact could be positive or negative. What is the way in which an industry operates? Does it care for the environment? Does it implement new technologies to mitigate the Green House Gas (GHG) emissions? Does it care about the reduction of waste? What about the social profile of the company? Are the employees satisfied? Are they treated in an appropriate way? What about the society as a whole? Does it benefit from the function of this specific industry? Finally what is the economic profile of the company? Is it a market leader, does it own a competitive advantage? The answers to these questions indicate the “attitude” of an industry and are closely related to the meaning of sustainability, a term that concerns the agri- food industries and retailers which want to gain a respectful position in the market and a competitive advantage aiming to increase their profits. Nowadays it is very important for an industry to operate in a sustainable manner, mainly because of the pressure of Non Governmental Organizations (NGO’s), of governments and of course of consumers who become constantly more aware of sustainability issues (Peattie & Charter, 2003). However the reasons for a sustainable profile are not only restricted to the above. An industry which operates in a sustainable way can ensure that it will operate in the future too (Roarty, 1997). Therefore the main concern of an industry or a retailer is not only to operate in a sustainable way but also to communicate this to the customers. There are different ways in order for sustainability to be communicated to the consumers such as CSRs, through which industries announce their efforts to be more and more sustainable (Málovics, G. et al., 2008). In addition, sustainability can be communicated through advertisement or via labels on the products which is a direct and easy way in order for the consumers to be informed (de Boer, J. 2003) Nowadays, a totally new era related to communication has begun and the name of it , “Social Media”.
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Integration of social media elements in the communication of sustainability This study aims to identify the different aspects of sustainability, explore simultaneously the meaning of Social Media and investigate whether sustainability is communicated through Social Media or not. The main focus will be on, how sustainability used to be communicated to the customers and to what extent this situation has changed with the introduction of Social Media in our lives. Do companies use Social Media to communicate sustainability and if “yes” how? What is the content that is provided through Social Media? Initially the different aspects of sustainability are discussed and how they are communicated to the consumers and then it is examined the meaning of Social Media and their importance as a communication tool of sustainability. The last part deals with the combination of these two terms, specifically the integration of social media elements in communication concepts of agri-food industry and retailers. In order to identify that, examples of selected industries and retailers are used.
2. Different aspects of sustainability According to United Nations (1987), sustainable development is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (United Nations 1987). In addition the concept of sustainability includes three different dimensions namely the environmental, the social and the economic one (European Commission, 2001).
2.1 Environmental, Social and Economic sustainability The environmental aspect of sustainability focuses to the stewardship of natural recourses in such a way to ensure their availability in the future. Nevertheless issues like the protection of landscapes, the quality of drinking water and soil, the reduction of GHG emissions and in general the protection of the environment, are part of the concept as a whole. (European Commission, 2001) According to Khan 1995 “resources should be harvested in a slower rate than they can be generated and wastes should be emitted at a lower rate than they can be absorbed by the environment (Khan, 1995). The social aspect of sustainability combines notions such as equity and sharing and refers also to the extinction of poverty, the maintenance of a strong society and the protection of public health. Notions like food safety, human rights, acceptable working conditions, ban of 115
Communication of sustainability and social media forced or child labour and enhancement of education and healthcare complete the meaning of sustainability’s social dimension (European Commission, 2001; A. D.Basiago 1999). In general sustainability in social terms on behalf of the industry and retailers means to act ethically and give benefits back to the society. The economic aspect of sustainability refers to economic growth, to competitiveness and the degree of efficient use of resources. (European Commission, 2001). The three dimensions of sustainable development are closely related with each other as shown in Figure 1. Economic sustainability ensures that the means for social and environmental sustainability are available, and environmental operations benefit the society as a whole increasing at the same time the economic benefits for industries and retailers (reduction of cost, existence of competitive advantage)
Figure 1. Interdependency among different dimensions of sustainability (Forestry Commission of Great Britain 2011)
3. Communication of sustainability and social media Food industries and retailers not only care to operate in a sustainable way but also require communicating this to the customers and benefiting from it. Sustainability can be communicated through 1) Advertisement in mass media (television, radio, newspapers, magazines), 2) Labelling and 3) Corporate Social Responsibility (CSR) reports which are
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Integration of social media elements in the communication of sustainability generated by companies and aiming to inform the public of their activities (de Boer, J. 2003; Málovics et al., 2008). Nowadays a new mean for communication of sustainability has arisen and called Social Media. In this paper it is examined whether this is true or not by using examples but first the meaning of social media is elucidated.
3.1 Social Media: Definition Social Media is the general term for web-based software and services, that allows users to come together online and exchange, discuss, communicate and participate in different forms of social interaction. That interaction consists of texts, images, and videos (Ryan & Jones 2009). Social Media is used from people who want to communicate with others, expressing their thoughts and their feelings. Facebook, Twitter, YouTube, Flickr, LinkedIn, Blogs are different platforms that provide people with this possibility (Kaplan & Haenlein 2010). In the 21st century great number of people uses social media in their daily life and this fact could not be ignored by the companies. Social media has become a new way through which companies promote their products, enhance their image and communicate with their customers trying to keep them engaged with their brands (Mangold and Faulds 2009). The use of Social media is two sided, on the one hand it allows companies to communicate with their customers and on the other hand it gives the opportunity to the customers to talk with each other (Mangold & Faulds 2009). Facebook, Twitter, YouTube and Blogs are four among the Social Media that in this paper are taken into consideration. Initially it is examined to what extend companies use some the aforementioned media and subsequently the communication of sustainability through them is elaborated. Facebook: Facebook was created in 2004 and it is the world’s largest social network with nearly one billion users around the world, with roughly 200 million of them in the United States (The New York Times, 2012). “Facebook is a popular free social networking website that allows registered users to create profiles, upload photos and video” (WhatIs.com, 2009) Twitter: Twitter was created in 2006 and it is “an online social networking and microblogging service that enables its users to send and read text-based messages of up to 140 characters known as "tweets” (Wikipedia, 2012)
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Do companies use Social Media? Selected examples YouTube: YouTube was created in 2005 and “it is a video-sharing website on which users can upload, view and share videos” (Wikipedia, 2012) Blogs: The word “Blog” is a contraction of the words web log. Blogs are created, managed and maintained mostly by individuals or companies. Considering the case of a company, blogs can become a tool in order for a company to communicate with consumers. (Ryan & Jones , 2009).
4. Do companies use Social Media? Selected examples In order to ascertain whether companies and retailers use Social Media and to what extent seven agri-food companies were studied, namely Nestlé , Pepsico, Unilever, Kraft, McDonald’s, Starbucks and Walmart. -
Nestlé is a food company and that provides products like cereals, chocolates, coffee, chilled and frozen food, dairy products and beverages.
-
Pepsico, Unilever and Kraft are also food companies which provide products such as food and beverages.
-
Starbucks it is a company which provides coffee, drinks, salads and fast food.
-
Walmart is a retailer corporation, and
-
McDonald’s is a food service retailer.
4.1
Social Media, Selected examples
Aiming to investigate whether the selected agri-food companies and retailers use Social Media or not the following Table 1 was constructed. According to Table 1 the importance of social media in peoples’ daily life is recognized and therefore companies and retailers have already chosen to have a presence in them adopting this new way of communication. More precisely Nestlé, PepsiCo, Unilever, Kraft, McDonald’s, Starbucks and Walmart use Facebook, YouTube and Twitter whereas Blogs are used mostly by Nestlé, PepsiCo, Starbucks and Walmart. Blogs require a better commitment than for example Facebook and this may be the reason that some of the selected companies do not choose to use blogging.
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Integration of social media elements in the communication of sustainability
Table 1: Use of Social Media by agri-food companies and retailers
retailers
Agri-food companies and
Social Media Facebook
YouTube
Blogs
Nestlé
X
X
X
X
PepsiCo
X
X
X
X
Unilever
X
X
X
-
Kraft
X
X
X
-
McDonald’s
X
X
X
-
Starbucks
X
X
X
X
Walmart
X
X
X
X
4.2 Social Media and communication of sustainability. As shown in Table 1, agri-food companies use Social Media. Do they communicate sustainability through them or are they used as pure marketing tools? In this part of the study the seven companies and retailers mentioned above are examined separately with regard to the above question. 4.2.1 Environmental Sustainability and Social media As it has been already mentioned the meaning of environmental sustainability includes reduction of water and energy use, decrease of emissions, waste recycle, animal welfare and in general protection of the environment. Whether environmental sustainability of companies and retailers is communicated through Social Media constitutes an issue that has to be examined. Below the communication of environmental sustainability through Social Media among the different chosen companies is discussed. Nestlé in its official Facebook profile, its Twitter, Blogs and YouTube, attempts to introduce issues regarding its environmental behaviour. For example statements like a) “Nestlé Mexico’s new employee building has been certified as the ‘greenest’ in Latin America and b) “A new solar power system has been installed in Italy the ice cream with the brand “Coppa del Nonno” is produced with renewable energy”, indicate the purpose of the company to point out its environmental behaviour. Moreover through Social Media Nestlé wants to inform consumers that a great amount of resources is invested in environmental activities every year in order:
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Do companies use Social Media? Selected examples -
to improve its environmental performance,
-
to reduce GHG emissions,
-
to use water and energy in an efficient ways (installing solar system),
-
to optimize the use of natural resources and
-
to recycle
PepsiCo has a slogan, communicated through Social Media, to summarize its activities; “performance with purpose”. More precisely PepsiCo refers to: -
water efficiency,
-
implementation of renewable energy and
-
the adoption of new technologies that contribute to the protection of the environment such as new irrigating methods, new methods of packaging and alternative usage of waste.
Unilever publicizes through social media activities which promote: -
renewable energy use ,
-
efficient water management (“70% of all water used in the factory is recovered and reused this is supplemented by recycling rainwater that falls on the factory’s 22.000 square meter roof”) ,
-
cogeneration of heat and power which implies reduction of GHG emissions and
-
protection of animal welfare.
1. The company also encourages people to reduce their wastes as stated for example in Facebook: “Have you got vegetables that you’re about to throw away? Don’t let them go to waste, use Knorr to make a delicious and sustainable vegetable soup with them. Have you got any leftover recipes?” Kraft communicates through social media its efforts to: -
reduce waste generated by its production processes,
-
recycle and choose alternative methods for fertilizing plants, with comments like: “We’ve reduced manufacturing waste by 50% since 2005! And we’re sending zero waste to landfill at 36 manufacturing plants in 13 countries. Just a couple of examples: In Russia we’ve turned 15,000 tons of coffee grounds into fertilizer, and in the U.S., we’re turning waste into energy!”
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Integration of social media elements in the communication of sustainability McDonald’s shows its environmental sustainable profile promoting issues such as: -
sustainable supply chains,
-
environmental responsibility,
-
animal welfare,
-
encourage local farming activities,
-
“green” logistics,
-
appropriate land use,
-
global rainforest policy for beef,
-
introduction of Green restaurants, cooperation with Greenpeace (McDonald’s and Greenpeace support the moratorium against illegal deforestation),
-
recycle and use of alternative sources of energy (80% of Cooking oil is being recycled and 30% of fuel that used in our delivery trucks is biodiesel) and
-
sustainable packaging efforts from renewable materials (31% from recycled fibres)
Starbucks implements recycle activities and inform its customers through social media with the phrase: “bring your own mug and reduce the use of disposable cups”. Starbucks according to comments in Facebook and uploaded videos in YouTube possesses certified green buildings and that includes: -
less energy used,
-
mechanism to control the flow of water in the stores,
-
environmental friendly materials which were used to built and decorate the stores (recycled leathers, reuse materials for decoration) ,
Fair trade products are also supported by Starbucks. Walmart communicates issues like protection of the environment, specifically: -
protection of the land,
-
protection of the air :“deliver more drive less”
-
introduction of “green trucks” (nitrogen in the tires, aerodynamic shape, reduces emissions, increases miles per gallon)
-
use of renewable energy (wind power)
-
recycle and reduction of waste.
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Do companies use Social Media? Selected examples An overall view is showed in Table 2, where is indicated that every company has comments in Social Media regarding recycle. It is something expected since companies have realized the important role of every individual to the recycling procedure, therefore in that way they try to motivate people to contribute to recycling procedures. Issues about water and energy use and emissions are also communicated in a very satisfactory level.
Agri-food companies and retailers
Environmental Sustainability Water
Distribution/
Waste/
Animal
/Energy
Emissions
Recycle
Welfare
Nestlé
X
X
X
-
PepsiCo
X
X
X
-
Unilever
X
-
X
X
Kraft
-
-
X
-
McDonald’s
X
X
X
X
Starbucks
X
-
X
-
Walmart
X
X
X
-
Table 2: Environmental sustainability through social media
4.2.2 Social Sustainability and Social Media In order to examine whether social sustainability is promoted through social media , three different of its aspects were considered, namely labour opportunities( equal opportunities to men and women, help people who are in need, fair trade deals) , community developments (promote education of children, learn people to adopt a more healthy way of life, contribute to a better life for citizens of developing countries) and food safety (adequate food for all without any danger for people’s health). Nestlé. Regarding labour opportunities and community developments Nestlé wants to reassure its customers that the company has been committed to enhance the lives of people: -
in Vietnam (supporting more than 20.000 farmer households),
-
in China and in India (helping explain science and climate change to young students, providing clean water ),
-
in Africa (improving the nutrition knowledge and promoting healthy lifestyles among school children through the teaching of healthy eating, encouraging physical activity )
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Integration of social media elements in the communication of sustainability -
in Morocco ( supporting local area through encouraging the development of the dairy industry throughout the private sector) and other developing regions.
Apart from the above examples Nestlé emphasizes to its supporting activities towards children’s obesity and underlines its activities that promote educational programmes and a healthy lifestyle. Janet Voûte, Nestlé’s Global Head of Public Affairs says that: “We are convinced the best way to leverage our capabilities and expertise is by working in partnership with other organisations to help promote healthy nutrition and physical activity through community-based programmes” Regarding food safety Nestlé via an uploaded YouTube video wants to inform consumers that the way in which coffee is being produced is absolutely safe for consumers, samples are being tested regularly during the production process and final products are absolutely clean and suitable for consumption. PepsiCo. Concerning social sustainability, Pepsico helps people who live in developing countries to improve their lives, providing drinking water and education but also underlines the importance of food safety and gender equity for all people. PepsiCo also refers to nutrition issues announcing that it attempts to reduce added sugar, sodium and fat across its food and beverage portfolio while increase whole grains, fruits and vegetables. Unilever supports fair trade, cares about developing countries and introduces new products which are produced according to health standards (e.g reduction of salt in its products) Kraft communicates issues like: -
offer help to people who need it, for example supply of drinking water, equipment and products to people who faces natural disasters, with statements like: “Our thoughts are with the people of Thailand as they continue to struggle with the worst flooding in 50 years. The Kraft Foods Foundation and our local business are donating $100.000, as well as product, equipment and volunteers to help with relief efforts.”
On the other hand are publicized through social media efforts that intend to: -
educate people and help them to adopt a healthy lifestyle
-
preserve farmers’ prosperity
-
provide better opportunities to women regarding job as it can be understood from the following statement: “Did you know that a third of our executives are women? In fact, our female employees earned 46% of all recent promotions to manager, senior manager and corporate executive”. 123
Do companies use Social Media? Selected examples As for food safety Kraft declares that it is a company’s priority. McDonald’s. According to the official Facebook page “McDonald’s is a people’s business. We operate with the belief that it’s essential to be a part of the communities that we serve.” The company communicates its efforts to: -
support programs that improve health and well being of children worldwide “for 37 years, Ronald McDonald House Charities has been working to improve the health and well being of children – touching nearly 4.5 million children worldwide every year”.
-
provide nutrition information through packaging and
-
promote physical activities
in addition McDonald’s highlights the fact that is recognized as a great place to work providing workplace flexibility and mobility to the employees. McDonald’s also emphasizes on food safety similarly to the other companies. Starbucks. In Starback’s Facebook, Twitter, videos in YouTube and Blog everyone can read comments about -
the importance of people,
-
the donations of the company,
-
the support of the farmers,
-
the help that is provided to people who need it, like AIDS patients etc,
-
the protection of children and
-
the support of fair trade .
Comments like following: “We always figured that putting people before products just made good common sense.”, “Our relationships with farmers yield the highest quality coffees.”, “Send kids to school not to work” can confirm it. Walmart cares about local farmers , supplies food to families which are in need, helps to end hunger in America, educates farmers to sustainable farming techniques and all of these can be understood through Walmart’s comments in Social Media.
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Integration of social media elements in the communication of sustainability Table 3 shows an overview of social sustainability’s forms which are communicated through
Agri-food companies and retailers
Social Media Labour
Social Sustainability Community Food Safety
Opportunities
Developments
Nestlé
X
X
X
PepsiCo
X
X
X
Unilever
X
X
X
Kraft
X
X
X
McDonald’s
X
X
X
Starbucks
X
X
X
Walmart
X
X
-
Table 3: Social sustainability through Social Media
4.2.3 Economic Sustainability and Social Media Economic sustainability relies in environmental and social sustainability in such a way that the other two aspects of sustainability can create competitive advantage for the company and lead the company to economic growth. Nestlé. With comments concerning the quality of provided products, the production process, the differences in the final products which are provided depending on the different nutritional habits that every country has, the substances that exist in some products (like omega- 3 fatty acids) and the general check of the supply chain, Nestlé attempts to boost its image, create a competitive advantage against its competitors and finally gain bigger share in the market. PepsiCo. A company can focus to specific properties of a product or specific production processes in order to obtain competitive advantage in the market. Therefore PepsiCo highlights its new fully compostable bag and its new bottle which is entirely made from plant material, trying to show that it differs from the other companies and care for the environment. Unilever. Concerning economic sustainability Unilever communicates through Social Media the high quality of its products in order to convince more consumers and increase its profit. Kraft does not explicitly mention statements related to economic sustainability but this conclusion can be derived since there is interdependency among the three pillars of sustainability. 125
Conclusion McDonald’s. This company emphasizes a lot to the quality of its products trying to gain competitive advantage against its competitors. Phrases like “We are proud of our quality ingredients”, “We're excited to share the quality story behind each potato, patty & leaf”, and “You can’t have great taste without great quality” shows that this company focuses on that to attract customers. Walmart. Similarly to the other companies , Walmart also tries through environmental and social activities to achieve economic growth.
Table 4 shows an overview of the presence of economic sustainability through Social Media.
Agri-food companies and retailers
Economic Sustainability Competitive
Economic Growth
advantage Nestlé
X
X
PepsiCo
X
X
Unilever
X
X
Kraft
X
X
McDonald’s
X
X
Starbucks
X
X
Walmart
X
X
Table 4: Economic sustainability through Social Media
5. Conclusion Social Media has become popular to people around the world constituting without a doubt an attractive communication tool (Kaplan, & Haenlein, 2010), a fact that could not be ignored by the agri-food industry. Nowadays Social Media provide opportunities to companies in order to promote their products, to contact their customers and engage them with their company activities (Kaplan & Haenlein , 2010). On the other hand sustainability is a concept which is adopted by companies in order to meet consumers’ preferences and gain bigger share in the market and therefore higher revenues. In this paper research was carried out on seven agri-food companies and retailers and their attempt to communicate their sustainable profile through specific Social Media (Facebook, YouTube, Twitter, Blogs). 126
Integration of social media elements in the communication of sustainability According to this research sustainability issues are communicated through Social Media and a new era concerning the way of communication has already begun. Moreover Social Media offer to the companies the ability to communicate with consumers directly, with low cost and more efficient in contrast to more traditional communication tools (Kaplan & Haenlein, 2010). Conversely communication though Social Media entails also risks on behalf of the companies that use them. Dissatisfied customers may decide to complain publicly, for example on Facebook or on Blogs, a fact which may harm the company’s status (Ward & Ostrom, 2006). Although sometimes consumers’ comments can harm the prestige of a company, still Social Media should be integrated as a communication mechanism because it is nevertheless beneficial. “It is better to be involved than be absent”.
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References
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Annex of the used web resources for this paper http://www.facebook.com/Nestle#!/photo.php?fbid=10151023963124393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10151021608944393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10151003796059393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10150988756364393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10150976448229393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10150973741924393&set=a.173589839392.113942.2428 7259392&type=1&theater
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Annex of the used web resources for this paper http://www.facebook.com/Nestle#!/photo.php?fbid=10150939133724393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10150896760074393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=10150781473139393&set=a.173589839392.113942.2428 7259392&type=1&theater http://www.facebook.com/Nestle#!/photo.php?fbid=173590894392&set=a.173589839392.113942.242872593 92&type=1&theater http://www.facebook.com/PepsiCo#!/photo.php?fbid=10150778978536695&set=a.384565166694.172042.26 0431051694&type=3&theater http://www.facebook.com/PepsiCo#!/photo.php?fbid=10150682203006695&set=a.384565166694.172042.26 0431051694&type=3&theater http://www.facebook.com/PepsiCo#!/photo.php?fbid=10150334843466695&set=a.384565166694.172042.26 0431051694&type=3&theater http://www.facebook.com/PepsiCo#!/photo.php?fbid=10150266393411695&set=a.384565166694.172042.26 0431051694&type=3&theater http://www.facebook.com/PepsiCo#!/photo.php?fbid=384565171694&set=a.384565166694.172042.2604310 51694&type=3&theater http://www.facebook.com/#!/unilever http://www.facebook.com/unilever#!/photo.php?fbid=10150602567823124&set=a.10150602563498124.3773 05.24496278123&type=3&theater http://www.facebook.com/unilever#!/photo.php?fbid=10150740310583124&set=a.10150445402293124.3557 93.24496278123&type=3&theater http://www.facebook.com/unilever#!/photo.php?fbid=10150938517758124&set=a.10150445402293124.3557 93.24496278123&type=3&theater http://www.facebook.com/unilever#!/photo.php?fbid=10150595798858124&set=a.10150445402293124.3557 93.24496278123&type=3&theater http://www.facebook.com/kraftfoodscorporate/photos#!/photo.php?fbid=344143712304603&set=a.1278074 67271563.32893.106000626118914&type=3&theater http://www.facebook.com/kraftfoodscorporate/photos#!/photo.php?fbid=274238409295134&set=a.1278074 67271563.32893.106000626118914&type=3&theater http://www.facebook.com/kraftfoodscorporate/photos#!/photo.php?fbid=127811227271187&set=a.1278074 67271563.32893.106000626118914&type=3&theater
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Integration of social media elements in the communication of sustainability http://www.facebook.com/kraftfoodscorporate/photos#!/photo.php?fbid=127807470604896&set=a.1278074 67271563.32893.106000626118914&type=3&theater http://www.facebook.com/#!/McDonalds http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150786814343057&set=a.10150786813633057 .430873.22092443056&type=1&theater http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150786814448057&set=a.10150786813633057 .430873.22092443056&type=1&theater http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150786815428057&set=a.10150786813633057 .430873.22092443056&type=1&theater http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150786815643057&set=a.10150786813633057 .430873.22092443056&type=1&theater http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150786817593057&set=a.10150786813633057 .430873.22092443056&type=1&theater http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150713967693057&set=a.10150713966543057 .421620.22092443056&type=1&theater http://www.facebook.com/?ref=tn_tnmn#!/photo.php?fbid=10150786818523057&set=a.10150786813633057 .430873.22092443056&type=1&theater http://www.facebook.com/walmart/app_147149775368148#!/photo.php?fbid=10151013789289236&set=a.3 85715789235.163710.159616034235&type=1&theater http://www.facebook.com/walmart/app_147149775368148#!/photo.php?fbid=10151008805134236&set=a.3 85715789235.163710.159616034235&type=1&theater http://www.facebook.com/#!/photo.php?fbid=10150896062084236&set=a.385715789235.163710.159616034 235&type=1&theater http://www.facebook.com/#!/photo.php?fbid=474458209235&set=a.474458004235.256834.159616034235&t ype=1&theater http://www.facebook.com/#!/photo.php?fbid=474458114235&set=a.474458004235.256834.159616034235&t ype=1&theater http://www.facebook.com/#!/photo.php?fbid=474458029235&set=a.474458004235.256834.159616034235&t ype=1&theater http://www.facebook.com/#!/photo.php?fbid=474458129235&set=a.474458004235.256834.159616034235&t ype=1&theater http://www.facebook.com/#!/photo.php?fbid=476110659235&set=a.476110614235.257928.159616034235&t ype=1&theater
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Annex of the used web resources for this paper http://www.facebook.com/unilever?v=app_274419425907645#!/photo.php?fbid=10151024575784236&set=a .385715789235.163710.159616034235&type=1&theater YouTube: http://www.youtube.com/watch?v=crIDMGkjjc4&feature=bf_next&list=PLF9E2EF6C0991574F http://www.youtube.com/watch?v=Q-3sKMYytvM&list=PL3A30A43604DDF5FE&index=2&feature=plpp_video http://www.youtube.com/playlist?list=PL3A30A43604DDF5FE http://www.youtube.com/watch?v=hYqr8sgkSxs&list=PL3A30A43604DDF5FE&index=8&feature=plpp_video http://www.youtube.com/watch?v=3FS9trOigig&feature=results_main&playnext=1&list=PLF9E2EF6C0991574F http://www.youtube.com/watch?v=JAwoeCQLzOA&feature=related http://www.youtube.com/watch?v=oM_W21QKgZY&feature=youtu.be http://www.youtube.com/watch?v=QuXM9ylA0_o&feature=related http://www.youtube.com/watch?v=dGUoBZBHqLc&list=PL02F6C38183BEEA1D&index=8&feature=plpp_video http://www.youtube.com/watch?v=_WUkKGkpq-A&feature=autoplay&list=PL02F6C38183BEEA1D&playnext=1 http://www.youtube.com/watch?v=qG6Hlt48BSM&list=PL02F6C38183BEEA1D&index=12&feature=plpp_video http://www.youtube.com/watch?v=RfeKTREaIsY&feature=BFa&list=PL02F6C38183BEEA1D http://www.youtube.com/watch?v=zmdZYENXrxI&feature=BFa&list=PL02F6C38183BEEA1D http://www.youtube.com/watch?v=ugIPdkALcEg&feature=autoplay&list=PL02F6C38183BEEA1D&playnext=1 http://www.youtube.com/watch?v=QuXM9ylA0_o&feature=related http://www.youtube.com/watch?v=DAgUYrjOmmc http://www.youtube.com/watch?v=TABeNWa6x3M&feature=related http://www.youtube.com/watch?v=RfeKTREaIsY&feature=related http://www.youtube.com/watch?v=RFksCOQq4W0&feature=relmfu http://www.youtube.com/watch?v=cpYhgqPRivw http://www.youtube.com/user/unilever?feature=results_main http://www.youtube.com/watch?v=anyw3Shcino&feature=related http://www.youtube.com/watch?feature=endscreen&NR=1&v=PgerCEC0ENA http://www.youtube.com/watch?v=qvpWVu6ZICk&feature=relmfu http://www.youtube.com/watch?v=fiX4NjDLe2U&feature=relmfu http://www.youtube.com/watch?v=bVs07KR8t-k&feature=relmfu
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Integration of social media elements in the communication of sustainability http://www.youtube.com/watch?v=R4-77YON_Zg&feature=relmfu http://www.youtube.com/user/kraftcookingschool?feature=results_main http://www.youtube.com/watch?v=vSqIzZpfCqs http://www.youtube.com/watch?v=jBbL7OWjVL4 http://www.youtube.com/watch?feature=endscreen&v=7ySsy5u4wUw&NR=1 http://www.youtube.com/watch?feature=endscreen&v=kkC5qYH0ln0&NR=1 http://www.youtube.com/watch?v=8-1Fn26Hpsc&feature=related http://www.youtube.com/embed/Bnx0jiNgylU http://www.youtube.com/embed/hfZ67IMCZGc?rel=0 http://www.youtube.com/watch?v=qM30O-9rGvE&feature=youtu.be http://www.youtube.com/embed/lLR57qSqInM?rel=0 http://www.youtube.com/watch?feature=endscreen&v=Iwvy8I_uukw&NR=1 http://www.youtube.com/watch?feature=endscreen&NR=1&v=P_zgtlW2TWY Twitter: https://twitter.com/#!/nestlecsv http://twitter.com/PepsiCo/ http://twitter.com/#!/Unilever_Press http://twitter.com/#!/kraftfoods/ http://twitter.com/#!/mcdonalds http://twitter.com/Starbucks/ http://twitter.com/Walmart Blogs: http://www.nestlecocoaplan.com/ http://pepsicoblogs.com/ http://www.starbucks.com/blog http://www.walmartstores.com/CommunityGiving/
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Bastian Kohl
A comparative study on current iPhone apps for business to consumer services
Abstract This paper is about how consumer awareness, regarding mainly the aspect sustainability, is created and already implemented in iPhone apps. Different apps of discounters, retailers, barcode readers, nature safety bonds und brands are compared concerning selected criteria. Quickly it becomes clear, that information concerning sustainability is roughly provided through most of the apps yet. Some provide additional Information compared to one on the packaging. In most cases this is a really time consuming process, which can’t be realized for all products in your shopping basket. In addition to this you would need a bunch of apps to gather all information for only one product and it takes time to search the apps. So at the moment the PC might still be the easier alternative. Although the situation is not satisfying, there are a few promising new technologies, which might help.
Keywords Sustainability, Consumer, Awareness, iPhone, App, Packaging, Barcode, QR-Code, Information, Smartphone
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Integration of social media elements in the communication of sustainability
1. Introduction to the paper Nowadays smartphones become and more popular and are spread through nearly all levels of society. They help us to simplify parts of our everyday life by providing immediate information through GPS, internet and photography. (Apple 2012) says that “There’s an app for nearly everything” - overall more than 500.000. In this paper we try to find out, if any of these 500.000 apps helps to create consumer awareness and how they use the given technical possibilities. Consumer awareness can shortly be described as how an individual understands his rights as a consumer with regard to offered products and services. This includes the right to be heard, safety, choice and information (businessdictionary.com). Concerning the apps the most important category is information about sustainable products. In the Brundtland report (1987) sustainability is defined as a development which ensures a healthy planet for future generations and meets the needs of the actual population. This development is limited by the actual state of technology, the distribution of natural resources and capability of the earth to absorb human emissions. Therefore rich people have to adopt their lifestyles and the development of population size has to harmonize with the productive potential of the ecosystem. Here the new technologies can help by giving immediate information about e.g. the carbon footprint of a product or if it is fair trade. According to (Watson et al. 2002, 2004a,b) smartphones are not just extension of a Personal PC, which just provide the same features in a portable way. There are some differences, which have to be considered by building new information systems. Because of its technical features a Smartphone offers more ways to deal with- and to process information. Compared to a PC it is of course not able to do CPU-intensive tasks, but it is able show information, locates your position and can simplify in store shopping. Special apps can help people to recognize “green” and sustainable products and may help to adapt their lifestyle (Pitt et al. 2010). In this paper we focus on food and nutritional products when regarding the sustainable aspect of apps.
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Literature review: The iPhone 4s offers the following technical possibilities which play an important role for the testing of apps (Apple 2012): Cellular and Wireless:
UMTS/HSDPA/HSUPA (850, 900, GSM/EDGE (850, 900, 1800, 1900 MHz) 802.11b/g/n Wi-Fi (802.11n 2.4GHz only)
1900,
2100
MHz);
Location:
Assisted GPS and GLONASS Digital compass Wi-Fi Cellular
Camera, Photos, and Video:
8-megapixel iSight camera Autofocus Front camera with VGA-quality photos and video at up to 30 frames per second Photo and video geotagging
When talking about apps and sustainability it is interesting to know that apple gives information about the environmental footprint of the iPhone production process. Carbon footprint of an iPhone compared to other electrical devices according to (Apple 2012):
Fig 1: CO2 emissions of an iPhone in Comparison (Apple 2012)
2. Literature review: Since this a new topic, there are only a few papers which roughly address this topic. The most interesting paper is the one of Pitt et al. (2010) in which he describes how we can integrate smartphones in a “sound environmental information systems strategy”. He sees smartphones, with the iPhone as example, as a possible instrument to contribute to a more sustainable environment. And by that names the U-commerce as a theoretical framework 136
Integration of social media elements in the communication of sustainability that helps to explain and enhance sustainable strategies for Smartphone apps. According to (Junglas and Watson, 2006) the U-commerce consists of 4 U’s:
Ubiquity, which means access to information without restrictions of space and time.
Uniqueness means to be able to identify exactly the characteristics of a person or entity.
Universality stands for compatibility between devices.
Unison means that there is only a single point of truth.
Two other interesting scientific papers are from Martin et al. (2008, 2009) in which the remote picture food method (rpfm) is described, validated and tested on reliability. Yet it is just a method to measure real-time food intake of free living individuals, but it could be used for further purposes.
3. Methodology: The aim is to find, identify and in some cases test apps in order to find if they help to create consumer awareness and if they address the topic sustainability. Apps are searched via iTunes, which has to be installed on a PC. A Search on the iPhone itself is also possible, but it is much easier and faster to do this on a normal sized Screen. ITunes offers a kind of categorizing the apps, but because this turned out to be useless we started searching for apps by using the standard search entry field. Search terms were famous German discounters and retailers like “ALDI”, “Lidl”; “Edeka” and “REWE”. Other search terms were “barcode reader”, “sustainability”, “bio and food” and NGO’s like Greenpeace and WWF. Within the search results is first looked for promising names of apps and then the description is read. A selection of free apps with a promising description were downloaded and transferred to the iPhone. Installed on the iPhone the apps are ready to test. To test the apps, which include a barcode reader, typical food packages out of the fridge and the stock at home are taken. WLan is disabled while testing to simulate the “in store” situation. The information displayed on the iPhone is then compared to the one printed on the packaging. The criteria we look at are:
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Results: •
Comprehensibility of the given information, clearness of the message
•
Customization of information
•
Additional information provided
•
Exploitation of technical possibilities (Internet, Camera, GPS)
•
Does the app create consumer awareness?
In addition to the app store, websites which test apps are searched concerning this topic. Search terms are “sustainable” and “sustainability”. If apps are for free and seem to fit, they are downloaded in iTunes, otherwise only the short online description is considered. The collected apps are categorized into the four groups “retailer apps”, “barcode scanner”, “lifestyle guides” and “product specific guides”. In the results part the groups are characterized and one representative app is described further in detail. The products we test with the barcode scanners and retailer apps are “Chillies whole” (“Fuchs”), a frozen pizza (“Wagner”) and cereals (“Dr. Oetker”) bought at “Edeka” and Green Tea (“Westcliff”) bought at “ALDI”. Although The “ALDI” app downloaded is fully called “ALDI Süd” it is in most cases just termed “ALDI”.
4. Results: The search in iTunes for the in methods mentioned search terms always returned hundreds of results, which often had nothing to do with the topic or even with the search terms. So it takes quiet some time to indentify useful apps. At least 20 apps are downloaded in order to have a closer look. The web search returned four websites, which tested apps concerning sustainability and food shopping. Weeyoo.de recommends six apps, but except “AllesBioRegional” none of the apps seems to be made for the food market. “AllesBioRegional” is classified as a Lifestyle app and will be described later in this chapter. Bergruener.de offers a big list of different sustainable apps, although there are some seasonal fruit calendars which can be counted to the lifestyle category most of these apps are made for the non food sector. The most promising app “Good Guide” is a barcode scanner and should return information about the sustainability of a product, is only working in the USA, so it can’t be tested further. Testschmecker.de gives a short summary about two barcode scanners, two fish guides and two lifestyle apps. One of the barcode scanners is “Barcoo” which will be described later. 138
Integration of social media elements in the communication of sustainability Gizmondo.de presents a short test of “meal snap”, an app that makes use of the remote food picture method. That means it is able to estimate the amount of calories eaten. All you have to do is to take a picture at the beginning and at the end of your meal. Because it is not for free the app is not tested, but Gizmondo.de says that the app works pretty fast and good with smaller meals.
4.1 Retailer Apps: Overall the apps do not offer additional information about sustainability. In most cases they include a shopping list or help the user to find nearby shops via GPS and then display it on Google maps, or you have to enter your position manually. In some cases the app offers you some recipes in which the scanned product is an ingredient. All apps are able to show special offers, but you won’t need this feature that often because in most cases you have the possibility to see the same offers in leaflets or the internet. And we assume the consumer to write a shopping list and to inform himself about special offers before he starts the shopping tour. So this feature might only in a few cases be relevant. Some apps have special features like a barcode scanner. The “Edeka” app has this feature and is able to tell you if the scanned product is available in Edeka stores and gives you the possibility to add it to the app internal shopping list. The “ALDI” and the “Norma” app contain the best feature concerning sustainability. They include a QR-Code scanner for fresh meat products. This feature tells you the date of slaughter, packing date, place of manufacture and place of origin. Why this feature (fTrace) is hard to find in the “ALDI” app is not understandable. Table 1 gives a short overview of some discounter- and retailer apps and also demonstrates that there are no big differences and that efforts to create consumer awareness are poor.
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Results: Features/app
ALDI
Lidl
Edeka
REWE
Shopping List
Yes
No
Yes
Yes
Shop locator
Yes
Yes
Yes
Yes
Special offers
Yes
Yes
Yes
Yes
Barcode Reader
Yes (QR)
No
YES (all)
No
Extra
Origin of fresh Online shopping
Recipes,
Info/feature
meat
Calculator
Use of technical Internet; features
Camera
Raise
Poor
GPS, Internet, GPS
Internet,
BMI- GPS, Internet, GPS
Camera No
Poor
No
awareness Table 2: Discounter- and retailer apps in comparison
4.2 Barcode Scanners: In general they offer more information and make use of all technical devices. You need the camera to scan barcodes and QR-codes and in addition graphical edited information is added via internet. This depends a lot on how many people already bought the product and on if somebody was willing to enter additional information. E.g. “Barcoo” shows a graphical illustration of the GDA’s and adds a food traffic light, which is not typical on German packaging. There is also the possibility for the users to rate products and give reviews. Price comparison is also included, but here again at this point and for comments the contribution of many users is need. This can work well in bigger cities where many people and lots of stores are located in a small area, but in rural areas this might not be granted. 4.2.1 Example chili (Fuchs): Barcoo gives no additional info, just a picture and a short description. Price comparison results only in one price for an online shop. Two comments exist which say that chili is sharp. Because nobody has added it yet, you are able to enter info: e.g. food traffic lights. But there is no control if it you enter the right information and everybody is able to change it. Even though there is a fair trade- and sustainability label on the packaging the app doesn’t offer any information about that. 4.2.2 Green tea (Westcliff): Here we first try out another barcode scanner named “codecheck”. But this results in a timeout of the request when using 3G data transfer rate. Since the “ALDI” scanner only
140
Integration of social media elements in the communication of sustainability works with fresh meat, we try again “Barcoo”. It recognizes product and offers information about sustainability; not about the product itself, but about ALDI in general. At first sight you only see that “WeGreen” collected different evaluation data from several rating companies, which results in an average grade of 4, 1 (poor) and the traffic lights color yellow. If you want to know more about the single ratings you have to read lots of text because “ALDI” is evaluated by seven different rating companies; each with its own rating scale and criteria:
IÖW future ranking: “ALDI” has no sustainability report, results in color red and place 101 of 160
Reprisk: Gives a value between 0 and 100 for the risk “ALDI Süd” has the value 18 and that means medium risk
CSR: “ALDI” receives silver in the check and gets a green sign
Company image ranking: “ALDI” has 29 points which means bad reputation
Brandscope: “ALDI” has 0 of 10 points, therefore it gets red
Serviceplan groups: “ALDI” placed 56 (in the middle)
Faircompany: “ALDI” is certified as a “fair company” and by that is obliged to treat its trainees fair
This is only a short extract out of the evaluation. How the rating companies work and what are their exact criteria has to be read in additional text in the app. 4.2.3 Frozen pizza (Wagner): For the frozen again “codecheck” resulted in a timeout. “Barcoo” worked fast and reliable as with most products. It shows graphical edited information of the GDA’s and there is a “WeGreen” sustainability report for “Wagner”. This time the traffic lights is green and that is sufficient for the moment, because you don’t want to read 10 pages of different evaluation criteria for every product or company when you are on your purchasing.
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Results: 4.2.4 Cereals “sugar reduced” (Dr. Oetker): This time we only scan with “Barcoo”, because it turned out to be the most reliable and the app with the most additional information. Again we can see the GDA’s graphically edited. The special here is additional information from the consumer advice, which says that the product description is misleading.
Fig 3: Barcoo (Cereals) GDA lightsthe graphical Figure 2 totraffic 4 show
Fig 4: Barcoo (Cereals) edited values outputnutrutional of “Barcoo” in comparison
Fig 2: nutritional values on packaginggiven to thecereals information
on the packaging. Here consumer awareness is raised, not really sustainable behavior, but of the misleading imprint “sugar reduced”. The graphical editing is common for most products and as you can see, only the packaging data is one to one transferred to “Barcoo”, where it is just graphically altered. This might help a little to comprehend the GDAs.
4.3 Lifestyle apps: In most cases lifestyle apps only offer normal information out of the internet, which is just transformed into app format. This means that you have to read a lot on a tiny screen. This can be easier done at home. Sometimes the apps appear to be totally useless: e.g. “AllesBioRegional” is supposed to be able to tell you the next location for organic food. The database of this app seems to be very limited, because even in Bonn it tells you the next shop for organic food is a 200km far away Edeka. Some promising apps like “Good Guide” concern sustainability, but only work in the USA. A good example for just copying internet information is “aid: Mein Essen – Unser Klima”. It shows the connection between food and climate and how you can personally influence this by buying and eating only certain food. Although the app raises awareness, it is exhausting to read lots of text on the iPhone.
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Integration of social media elements in the communication of sustainability
4.4 Product specific guides: These guides offer precise but limited information. In most cases you find seafood guides like “Seafood Watch” and “WWF Fischratgeber”. Whereas “Seafood Watch” offers a shop locator, which seems not to work for locations in Germany, both apps group eatable fish in “Best Choice” (green), “Good Alternative” (yellow) and “Avoid” (red). Another option is to browse the apps for a certain fish species. So this helps the consumer to adapt his lifestyle towards more sustainability, but only for a limited range of products. Here again the apps use mostly the internet feature and to a lesser extend GPS. Nevertheless the given information is clear and precise and can be used while shopping without wasting too much time.
5. Summary and future perspective: After testing representative Apps for each category it can be said, that at the moment the situation is not really satisfying. In most cases the consumer awareness isn’t raised and the topic sustainability can only rarely be found in some apps. Discounter apps only offer a shopping list, a shop finder and special offers. This may simplify your purchasing, but you have no additional info, compared the PC or leaflets. Exceptions are “ALDI” and “Norma” with a meat tracing feature. So at least here the topic sustainability is touched. Barcode readers are a little bit more convenient: more information is given, products can be rated and commented, info is graphically edited and sometimes there are additional info’s compared to ones on the packaging. “Barcoo” works pretty well with 3G, but “codecheck” seems to work only satisfying with WLan, which mostly is not available at in store shopping. Information about sustainability is only given, when other users entered it before, but after all there seems to be some information provided for popular products and brands. Even if the “WeGreen” rating is a good starting point, the system behind it is confusing. Lifestyle guides give information about a special topic or section of food. In most cases this does not differ from the normal Information in the Internet, which can be easier read in front of a PC. Sustainability is addressed here, but you better read it at home. Product specific guides offer precise information, e.g. about threatened species and sustainability. But in most cases they are only for a small section of food. At the moment you would need lots of apps, at least four to five to get the whole information or some additional information. This means you have to know what apps you 143
Summary and future perspective: want, that they exist or invest time to search. In the supermarket it would even take you time to switch between different apps, for slightly more information and awareness is not created. So in most cases the apps seem to be a nice gadget, which you can use and test at home with bought products. Nowadays it is much easier to just take a look at the information printed on the packaging, because you had search the Barcode on it anyway for scanning. When the product is produced environmental friendly or fair trade it’s normally imprinted as a kind of advertisement. For the moment it would be desirable that every discounter app includes a tracer for meat, that barcode reader work more reliable and only offer verified and more data. Lifestyle guides are nearly useless and could be integrated as a “nice to have” feature in e.g. product specific guides. These guides are pretty good, but we need more of them and it would be convenient if many guides were pooled up in one app. The best would be if just take picture of the fish or food and the app tells you if it is produced sustainable. To raise awareness and make people adapt to a sustainable lifestyle via apps it is necessary that shrink down the number of apps to one or two. These apps have to provide precise and comprehensible information at a glance. Instead of searching for a barcode you should just make a picture of the front of the packaging and the app recognizes the product. This is the part where the “remote food picture method” can contribute. Data and information shown have to be verified, so that wrong decisions due to false data are avoided. If this is going to happen in the near future is questionable because a huge amount of work has to be done. Databases have to be connected together and new data like pictures has to be entered, someone has to verify the entered data and we would need faster mobile phone networks. In the end this means costs, that would make the app expensive and by that it would be doubtful if people still use the app.
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documents.net/ocf-ov.htm, August 31 , 2012. Watson, R. T., Pitt, L. F., Berthon, P., Zinkhan, G. M. (2002). U-commerce: extending the universe of marketing. Journal of the Academy of Marketing Science Fall, (pp. 329–343). Watson, R. T., Akselsen, S., Monod, E., Pitt, L. F. (2004a). The open tourism consortium: laying the foundations for the future of tourism. European Management Journal 22 (3), (pp. 315–326). Watson, R. T., Berthon, P. R., Pitt, L. F., Zinkhan, G. M. (2004b). Marketing in the age of the network: from marketplace to U-space. Business Horizons 47 (6), (pp. 33–40).
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Felix Andreae
A comparative study on current Smartphone Apps for business to consumer services in Google Play
Abstract At first sight the idea to influence the sustainability of the purchasing behaviour via smartphone applications seems to be doomed to fail. But the number of smartphones has increased tremendously in the past few years and they are becoming more and more integrated into the in-store decision making process of many customers (DELOITTE. DIGITAL, 2012). In this paper a closer look is taken on current smartphone applications from Google Play that aim to foster sustainable consumption. To asses these applications evaluation criteria are developed out of recent scientific literature and the capabilities of smartphones are discussed. The main findings of this paper show that there are some very promising applications available that help their users to conduct a more sustainable lifestyle. However, most of the analyzed applications show deficits in either the content or in exploiting the smartphones technical advantages.
Keywords Smartphone applications, consumer awareness, sustainability, Google Play, involvement, retailers, smartphone capabilities
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Introduction
1. Introduction By now, every second person under the age of 30 in Germany has a smartphone and in the total population every third person owns one (BITKOM, 2012). While Apple used to be the market leader its competitors caught up in the past few years. Especially smartphones with Android as the operating system are widely used nowadays with a market share of 29 percent in Germany (PAKALSKI, 2012) and 52 percent in the US (THE NIELSEN COMPANY, 2012). An elementary part of smartphones are the so called applications, small software programmes that can fulfil useful tasks. Apple uses its iTunes Store for distribution, while Android users purchase their applications from Google Play. Currently, there are around 600000 different applications available on Google Play (ELMER-DEWITT, 2012). Most of them are made for informational purposes, for entertainment or to support the user in different ways. The numbers show that the smartphone has taken up an important role in people’s everyday life, especially in the life of younger people. Against this background it is not astonishing that the smartphone is already integrated in our decision making process during shopping. According to the consultancy DELOITTE DIGITAL the influence of the smartphone in our purchasing decision is increasing. DELOITTE DIGITAL found out that “mobile (defined as smartphones [...]) influences 5.1 percent of retail store sales in the United States - which translates to roughly $159 billion in forecasted sales for 2012” (DELOITTE. DIGITAL, 2012). This number is expected to increase to 17–21 percent by 2016. For food and beverage products this numbers are even higher with 5.7 percent of retail store sales being influenced by smartphones and an expected rise to 19–23 percent (DELOITTE. DIGITAL, 2012). Given the existing and increasing integration of the smartphone into the purchasing process the aim of this paper is to compare and evaluate current Android smartphone apps which intent to influence consumer awareness and to increase sustainable consumption. In the first section after the introduction the concepts of sustainability and consumer awareness are outlined. Furthermore, criteria to evaluate the smartphone apps are generated. In the third chapter the technical characteristics of smartphones and smartphone applications are described in order to point out what can be expected from the current applications. Following the criteria developed in chapter two, the fourth chapter compares and evaluates the current consumer awareness apps from Google Play. In chapter five difficulties in raising consumer awareness with smartphone applications are mentioned and some ideas are given how to circumvent those difficulties and in chapter six a conclusion is drawn.
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A comparative study on current Smartphone Apps for business to consumer services
2. Sustainability and consumer awareness Sustainability and consumer awareness are very complex and hard to define concepts. This paper will focus on the definition of sustainability given by the Brundtland Commission 1 and therefore on applications that aim to protect the environment and the resources. Following FULLER & MYERS (1941) who equate awareness with “problem consciousness”, consumer awareness is in this paper understood as the degree to which a consumer is cognizant of the consequences of his purchasing decisions. Even though every purchase, independent of the goods category, is influencing a person’s carbon footprint, this study only examines applications related to food products sold in retail stores. Similar to smokers who still smoke, although it is commonly known that smoking can cause cancer and other maladies, the overall consumption of environmentally harmful food products (e.g. beef) still rises despite all its negative effects on our environment. Hence, consumer awareness certainly is a key factor in the struggle against the squander of resources and against global warming. In their research VERMEIR & VERBEKE (2006) investigated the factors that influence the decision making process when buying sustainable dairy products. Their empirical findings suggest that consumers who are highly involved2 are more willing to buy sustainable products and that teaching people about the advantages of sustainable products will make them care more about sustainability. As will be discussed later, many of the surveyed applications are designed to raise involvement and point out the benefits of a sustainable lifestyle. The findings of VERMEIR & VERBEKE (2006) give a hint that lowering the perceived barrier to consumption of sustainable products would foster their consumption. Furthermore, the sales of sustainable products could also be increased by “emphasizing [the] personal relevance and importance to the individual, informing about product availability, informing consumers about their possible effectiveness, or increasing the social norms associated with sustainable consumption” (VERMIER & VERBEKE, 2006). It is functional to pick the findings of VERMEIR & VERBEKE (2006) as the basis for the evaluation of the applications. In order to influence the consumer awareness and sustainable behaviour an application should fulfil at least one of the tasks suggested by VERMIER & VERBEKE (2006). In chapter four it will be analyzed which of the tasks the applications attempt to fulfil in order to foster sustainable consumption.
“Humanity has the ability to make development sustainable to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs. The concept of sustainable development does imply limits - not absolute limits but limitations imposed by the present state of technology and social organization on environmental resources and by the ability of the biosphere to absorb the effects of human activities.” (UNITED NATIONS, 1987) 2 Involvement = “The degree to which an object or idea is centrally related to the value system of an individual. [...] In consumer behavior, the study of ego involvement addresses the question of how a consumer's value system is engaged when purchasing a product.” (MUNCY & HUNT, 1984) 1
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Technical capabilities Table 3 Tasks for Smartphone Applications in order to foster sustainable consumption
Tasks for Smartphone Applications 1. Raising involvement of the customer 2. Lowering perceived barriers to consumption 3. Emphasizing personal relevance of sustainable consumption 4. Informing about availability 5. Informing about possible effectiveness of sustainable consumption 6. Increasing the social norms towards a more sustainability aware society
3. Technical capabilities As one can see directly from its name a “smartphone” is not just simply a mobile phone. With a smartphone the user can do more than just talk and send text messages: A smartphone can fulfil many tasks and contains technical devices like a camera, shake sensors and fast processors which transform the phone into a multifunctional and portable miniature computer. The objective of this chapter is to describe what the technical advantages of smartphones are. This is important to know in order to have realistic expectations of the compared applications. PITT
ET AL.
(2011) point out that smartphones,
computers and laptops do share some technical characteristics, but there are important differences according to their operational areas. For example, even though many smartphones, laptops and PCs have devices to take videos and pictures, only the smartphone can serve as a close substitute to photo cameras. Besides cameras, most smartphones contain GPS sensors, Wi-Fi receivers, shake sensors, touchscreen displays and flash drives with sufficient storage capacities and allow the user to be online almost anywhere at any time. “These capabilities turn the [smartphone] into an omnipotent media capturing tool, allowing voice, pictures, and videos as sources of input” (PITT ET AL. 2011). In table 1 the capabilities of smartphones and computers are compared and it is shown were the advantages and disadvantages of smartphones are.
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A comparative study on current Smartphone Apps for business to consumer services Table 4 The computer-smartphone capability spectrum (PITT ET AL. 2011)
Computer Can do Processor intensive applications, statistical analysis, graphics
Can do better Spreadsheets, Word processing, email, Web browsing, multitasking
vs.
Smartphone
Can do equally
Can do better
Can do
Movies, music, games, books and other multimedia applications
Phone calls, indoor shopping, SMS, MMS, proximal searches, more portable
Motion detection and localisation, media capture and distribution, use ubiquitous, multiple networks easily
From table 2 one can deduce that the biggest advantage of a smartphone is its high mobility, making it available anywhere at any time. However, one can infer that its limited screen size and often virtual keyboard bring some disadvantages and making it cumbersome to type, read and process longer texts and papers. This has consequences for the applications. Smartphone apps which aim to increase consumer awareness and sustainable behaviour must deal with the technical limitations and exploit the capabilities of the devices. Long and detailed texts for example might promote sustainable behaviour if they are read on a computer screen, but are not suitable in applications that try to influence the in-store buying decisions. Other applications might use a combination of several technical advantages, like the permanent internet connection in combination with the GPS tracking device, in order to show the user where to find the closest store in which a certain environmentally friendly produced product is sold. It is very likely that smartphones will contain more advanced technical devices in the future making them faster and more location-aware (see BRANDON, 2010).
4. Applications in “Google Play� In Google Play the Android user can find plentiful different applications which are related to groceries and grocery shopping. This chapter will give an overview about the different applications on the market. Furthermore, the applications will be evaluated according to the tasks depicted in chapter two. This paper is not entitled to compare and evaluate every application available concerning grocery in Google Play, as this would be almost impossible to perform due to the sheer amount of applications dealing with this topic. Moreover, it would not make much sense to analyze all of them, because the applications that can be found often closely resemble each other. The structure, the pursued objective, the usage of technical devices, the software and/or the type of publisher are very similar in many cases. 151
Applications in “Google Play” Therefore, most of the available applications can be assigned to one of the following groups: the barcode scanning apps, the retailer apps, the lifestyle and educational guidance apps and product specific apps.
4.1 The barcode scanners Barcodes are on almost every packed product that one can find in the grocery store, they encode a so called GTIN3 number and are unique for every product (GS1 GERMANY GMBH). The barcodes are used for quick identification of the products at the checkout counter. The scanning applications use this unique characteristic of every product by using the camera of the smartphone to scan the barcode. Once a product has been identified the barcode scanners deliver some information about the product and show the comments on the products that users of the app have made earlier. The paper of KARPISCHEK, MICHAHELLES & FLEISCH (2011) about their barcode scanner my2cents gives a good insight into the way of functioning of those applications. my2cents enables the user to evaluate the scanned product by typing in short comments which can be read by others who scan the product afterwards. If a product is not contained in the database of the program yet, the user is asked to update the database him- or herself by entering the charateristics of the product. This system is problematic, because the technical disadvantages shown in chapter three come into effect. The small keyboards of the smartphones do not allow the user to type well elaborated texts, resulting in short and unsubstantial comments on products. This system neither helps the user in the decision making process, nor does it foster sustainability in any way. The intention of the app my2cents is to obtain “a user-generated, product-centric information stream” (KARPISCHEK, MICHAHELLES, & FLEISCH, 2011). Like in the app my2cents the users of the app Codecheck can add comments to the scanned products, but in addition Codecheck gives the customer information about product details, ingredients, environmental issues, labels and seals of quality. Another advantage of Codecheck compared to my2cent is that the user can enter new products via the computer, avoiding the difficult submission via the small touchscreen of the smartphone. Besides organizing the information that one can find on that product itself Codecheck gives additional information about the product in a well arranged way. In order to support the consumer Codecheck uses a traffic light system to evaluate the criticallity of the additives in the product and asses the quality of the labels and seals of quality of the product. Although it is not the main objective to support sustainable consumption or to rise consumer awareness the information given by the app about environmental issues, labels and seals of quality raises the involvement of the consumer. While the informational content of my2cents often equals to zero the app 3
Global Trade Item Number
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A comparative study on current Smartphone Apps for business to consumer services Codecheck gives additional and useful information about the product. This information rises the involvement of the conumers and thereby might foster sustainable consumption. A major problem of the barcode scanning apps is that they partially rely on the collaboration of the users. The example of my2cent shows that this can be unfavorable. Table 5 Evaluation of barcode scanners Raising involvem ent of the customer
Lowering perceived barriers to consumpti on
Emphasizi ng personal relevance of SC
Informin g about availabil ity
Informing about possible effectiven ess
Increasi ng the social norms
my2cent Codeche ck = Approach is regularly used in app = Approach is sometimes used in app, but often only rudimentarily = Approach is not used in app
Exploiting advantage s of smartpho nes
Suffering from smartpho ne deficienci es
4.2 The retailer applications The applications published by the different retailers have many things in common since they are all meant to intensify the business to consumer relationship and enable the retailers to advertise their products. The retailers have to exploit the opportunities and chances that the increased mobile connectivity of their customers offers in order to increase their sales (HALLEK, 2011/2012). When evaluating the retailer apps with respect to their effect on sustainable purchasing behaviour one always has to keep in mind the intention of the retailers to increase their revenue. With their apps the retailers want to create an added value and therefore the information and services given by the app are more focussed on sales enhancement, like recent offers, than on topics which might irritate the customer, like sustainability of production of a certain product. The apps of the retailers are obviously programmed to increase the customer retention. All of the tested retailer apps contain a shopfinder, using location services to pinpoint the customer and showing him/her the closest store. The apps also usually offer a virtual shopping list, a recipe book and the leaflet. Some of the retailers integrate code reading applications in their app to allow the user to retrieve additional information about the product, e.g. the Norma app gives the opportunity to trace the provenance of meat products via the f TRACE4 service. The EDEKA app has a QR code reader, but it is less used to convey product information and more used as an
4
Via the fTRACE-code on the package smartphone users can retrieve detailed information about the product. More information on http://www.ftrace.de/web
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Applications in “Google Play” advertising medium. The quality and usefulness of the extra information given by the EDEKA and the Norma code readers can be questioned. Even the app of Alnatura, which is a german retailer specialised on organic products and sustainable production, does not give any information on the sustainability of production nor any information that might be interesting for the involved customer. These findings support the assessment of HALLEK (2011/2012) who in his opinion paper written for the DETECON consultancy estimates that the technology trend of “mobile apps” has only a little influence on the trend of “sustainable products”. There might be several reasons why those two trends do not go well together. Transparency about the production process for example is often demanded and at the first glance the smartphone in combination with a code reader could provide the demanded transparency. But in the first place the retailers and producers might not have the intention to reveal every detail of the production; secondly the consumer might not know how to “read” the information, e.g. the road number of a pig fattening farm does not help the average customer. Thirdly, there is the chance that even a very detailed (and understandable) report of the production process is not beneficial, because the technical demerit of the small scale display of the smartphones come into effect. Table 6 Evaluation of retailer applications Raising involvem ent of the customer
Lowering perceived barriers to consumpt ion
Emphasiz ing personal relevance of SC
Informi ng about availabil ity
Informing about possible effectiven ess
Increasi ng the social norms
ALDI Nord ALDI Süd Alnatura EDEKA SPAR Mahlzeit REWE Meinkaufs box NORMA = Approach is regularly used in app = Approach is sometimes used in app, but often only rudimentarily = Approach is not used in app
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Exploiting advantag es of smartpho nes
Suffering from smartph one deficienci es
A comparative study on current Smartphone Apps for business to consumer services
4.3 Lifestyle and educational guidance apps There are a lot of applications for Android available which are made either to educate the consumer or to help the consumer to conduct a sustainable and environment friendly lifestyle. In this section the most interesting and one very promising app of this group will be presented. The apps Dirty Dozen, Carbon 3Rs, Environmental Educator, Klima App and mGreen Handbook for example use either video or text material to teach the interested user about the environmental consequences of their actions and about how to conduct an environment friendly lifestyle. By educating the people these apps fulfil some of the functions suggested by VERMEIR & VERBEKE (2006) shown in table 1. Except for the points two and four all functions are handled in one way or the other. In these guides the reader learns about how to protect the environment in different ways and how to avoid waste. However, because of the amount of information and the in some cases poor organization of the apps they are not really effective. The integration into the in-store decision making process is not given in any of those apps. These apps do not take any advantage of the strength of the smartphones. They neither use the interconnectedness nor the mobility of the smartphone in their favour. Consequently, these apps are redundant, since the services that they offer can be done in a better way by other less mobile and less connected devices like laptops, personal computers or even simple leaflets. The most promising lifestyle app is the app bio123. It informs about availability, lowers the perceived barriers of consumption and raises the involvement of the consumers by informing them about the latest news about sustainability and food topics. Bio123 offers the user information about where to find the next organic supermarket using the GPS device and the internet connection to track down the customer. Another option for the user is to choose a certain organic product and bio123 shows the providers in the surrounding. To make sure that as many organic products as possible can be found in bio123 the developers of bio123 wrote a software program that enables the organic retailers to integrate their inventory list via their point of sale system into the app (attempto, 2012). Bio123 is a well developed application which uses many of the smartphones advantages and is potentially contributing to a more sustainable lifestyle of its users.
155
Applications in “Google Play” Table 7 Evaluation of Lifestyle and Educational Guides Raising involvem ent of the customer
Lowering perceived barriers to consumpt ion
Emphasiz ing personal relevance of SC
Informi ng about availabil ity
Informing about possible effectiven ess
Increasi ng the social norms
Bio123 Carbon 3Rs Dirty Dozen Environme ntal Educator Klima App mGreen Handbook = Approach is regularly used in app = Approach is sometimes used in app, but often only rudimentarily = Approach is not used in app
Exploiting advantag es of smartpho nes
Suffering from smartph one deficienci es
4.4 Product specific apps Technically the product specific applications are educational guidance applications as well, because the intention of them is to inform the users about certain topics. However, it is practical to consider them as an independent group. By focussing just on one specific product group the product specific apps have the advantage that they reduce the users search cost for information to a minimum. Good examples are given by the applications of non profit organisations (NPOs). NPOs are believed to take a stand for their purposes and usually have a high credibility. Therefore, one could expect that NPO are predestined for using the new technological possibilities to promote their objectives. Surprisingly there are only few applications from NPOs. Three of them are dealing with the protecting of the worldwide fish and seafood stocks. The World Wide Fund for Nature Germany (WWF), the Marine Stewardship Council (MSC) and the Monterey Bay Aquarium (MBA) published applications, with which the user can check whether the fish he wants to purchase has been produced or caught in a sustainable way. Other examples for product specific applications are the Greenpeace Tissue Guide, published by 3rdWhale, which is giving the user information about the amount of recycled fibre in all kind of tissues and the Obst- und Gemüsekalender application which shows which fruits and vegetables are currently in season. The product specific apps are structured in a simple way and don´t exploit most of the smartphones technical capabilities. But their simplicity is a big advantage; most of these programs boot fast and one can find the desired information quickly. All of the product 156
A comparative study on current Smartphone Apps for business to consumer services specific applications use a traffic light system to indicate whether it would be good and sustainable decision to buy a certain product or whether the purchase would have a harmful effect on the environment. The fast, uncomplicated and ubiquitous availability of information on a specific product in combination with the intuitive traffic light system, which gives the user a simple and precise purchasing advice, turns the product specific applications into very handy tools to support a sustainable lifestyle. The integration of a barcode scanner which warns against environmentally harmful ingredients, for example palm oil, could facilitate the usage of product specific apps even more. Product specific applications could be developed for many other products; e.g. the Forest Stewardship Council (FSC) could follow the example of the MSC and introduce an app for sustainably produced wood products. Table 8 Evaluation of productspecific apps Raising involvem ent of the customer
Lowering perceived barriers to consumpt ion
Emphasiz ing personal relevanc e of SC
Informi ng about availabil ity
Informing about possible effectiven ess
Increasi ng the social norms
Greenpeace Tissue Guide MSC Seafood Finder Obst- und Gemüsekale nder Seafood Watch WWF Fischratgeb. = Approach is regularly used in app = Approach is sometimes used in app, but often only rudimentarily = Approach is not used in app
Exploiting advantag es of smartpho nes
Suffering from smartph one deficienc ies
5. Difficulties and outlook During the assessment of the different applications it stood out that smartphone applications are not able to fulfil the task shown in table 1 autonomously, they are for example not very feasible to raise social norms or to educate about personal effectiveness. In order to foster sustainable consumption and to increase the consumer awareness a holistic approach is needed in which the smartphone takes up a part in which it strengths are disclosed. As mentioned in chapter two the topics consumer awareness and sustainability 157
Difficulties and outlook are very complex. Figuratively speaking, these topics are simply too big for a device that small. Therefore, the apps urging the customer to sustainability should focus more on the instore decision making process. The barcode scanners and the product specific apps appear to already follow this approach. These types of apps are working fast and operating them is easy enough for in-store usage. In-store usage is critical for the applications since this is where the purchasing decisions are finally made and can be influenced efficiently. For increasing sustainable consumption one also has to take into account that the consumers are a very heterogeneous group. VERMEIR and VERBEKE (2006) “identified four different consumer segments based on attitude and behavioural intentions” and “...recommend different strategies to more effectively reach the different consumer segments”. In order to be more effective the applications have to work in accordance with the strategies and need to be targeted to the specific consumer groups. For developing such an application it would be very useful to find out about the effects of current smartphone applications on the purchasing behaviour of their users. This could be done by a broadly conducted survey among the users of the current applications. The results of such a survey would certainly unfold more about the weaknesses and strengths of the existing apps and could be used to improve the programs. Another interesting fact to know would be the critical amount of downloads for an application in order to work efficiently. This applies particularly to apps like my2cents that depend on the collaboration of the users. An inherent problem of all the sustainability applications is that people who do not care about the environment in the beginning will not download them. The basic education about sustainability has to be done elsewhere and the apps can always be just a supporting device. As discussed in chapter 4.3 the education can be done better with other methods and educational apps rarely exploit any of the smartphones technical advantages. The usage of the technical advantages is done better by apps like Codecheck or bio123 which utilize the camera, the GPS, the internet connection, external software etc to provide information and services to the user. Altogether the utilization of the smartphones technical capabilities could be extended. Deficiencies of this paper lie in the missing scientific foundation of the evaluation of the applications. To achieve this scientific foundation fundamental research has to be conducted. The failure of missing foundation could be limited by interviewing users, publishers and other stakeholders of the analyzed applications and by doing field studies. It was tried to minimize the bias caused by the missing fundamental research by deducting evaluation criteria from scientific literature. Another demerit of this paper is that mainly apps programmed for the German market have been analyzed. The reason was that foreign apps either were not available or the offered services did not work. For example the app 158
A comparative study on current Smartphone Apps for business to consumer services FindGreen and the HonestLabel were two very promising applications but could not be tested due to the fact that the offered services only work in North America. A study about apps on international level might deliver some more examples of interesting and innovative applications.
6. Conclusion In this study current smartphone applications from the Google Play platform have been examined. The focus of this paper was on applications that intent to raise the consumer awareness and/or aim to increase the sustainable consumption. In some cases this intention was obvious, in other cases it has been assumed and in case of the retailer apps the intention is a different one but the analysis of them made sense in the context of consumer behaviour. The results of this analysis suggest that at the moment there are only few apps that comply with the requirements for increasing sustainable consumption. On the one hand it was demonstrated that the technical capabilities of the smartphones are rarely exploited to full extend. On the other hand apps like the MSC Seafood Finder show that it is not necessary for an application to use a lot of technical potentials in order to be useful. With new technical improvements on this sector there might be new potentials for applications to increase sustainable consumer behaviour and if the expectation of DELOITTE.DIGITAL (2012) of a mobile influence factor of 19-23 percent for food and beverage products becomes true, there will be a big potential to influence the consumption behaviour via smartphones towards a more sustainability focussed consumption.
159
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Chapter 4 Case studies of sustainable food supply chains
162
Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Kanan Amirov
Sustainable Food Supply Chains – Case Studies Examples for Sustainable Supply Chains (Beef)
Abstract Up to date, importance of sustainability is increasing according to dynamics of markets. In course of time, consumers become more sensitive against daily food products in terms of organic products. Therefore, sustainability has essential role in the purchase decisions and development perspectives of different companies in food sector. Especially, production with environmental perspective is needed to be transparent in order to get progress in future activities of companies. Moreover, social and economic aspect of sustainability is also forced by government and non-government organization to be realized because of safety and fare trade in global market. On this purpose, it seems vital part of their corporative strategies and requires much more attention today than in the past. In this paper, the description of sustainable supply chain of beef market will be characterized with case study of VION.
Firstly, supply chain management is described with its key
elements and the whole this process is defined at the beginning of paper. Then, sustainability will be portrayed in the terms of the environmental, social and economic aspect in beef industry. However, the environmental aspect of sustainability is described more detailed than others. The current situation of this market will be analyzed in South America because of its big share in global beef production. Finally, evaluation and conclusion of South American beef market and its implementation with all features in VION will be stated in the context of sustainability. Official website of VION and other articles related to sustainable food supply chain management are used in the paper.
Keywords: Sustainability, supply chain management, case study
163
Introduction
1. Introduction The beef industry has a major role in food security in the global market. Therefore, supply chain management of beef production is required to be realized more sustainable. It is usually controlled by the different national governments because of that it is dominated by household slaughtering and wet markets, making food safety concerns pervasive. However, greater consumer assurance about the inspection of cattle slaughtering and beef distribution might be developed by the sustainable industry (BROWN AND WALDRON 2003). In beef production, it is obvious that sustainable supply chain management is related much more to the environmental aspect than social and economic aspects. Moreover, meat production is required to be transparent in the aspect of ecological (or environmental) against consumers. That is why, mostly environmental aspect of sustainability is needed to be analyzed and compared with the leader companies in the market (ALLGREEN 2012). In this paper, sustainable supply chain of South America is described generally and all gained dates are used to make evaluation about situation in VION that is leading company in European beef market. Still, South America collectively represents a global beef-production powerhouse where the comparative advantage is in low-cost beef production. Typically, beef can be raised at 3550% less in terms of volume than North American costs of production. Led by Brazil and Argentina, South America will continue to use its low-cost, low-price advantage to slug it out for a lion's share of the global beef market (PECK 2008). Generally, the main actors of beef market are from South America as well as from Brazil, Argentina, Uruguay, Paraguay and Chile. Each of these countries has economic potential in international beef market (RODRIGUEZ 2007). Keeping up with the latest developments is essential if you want to be a successful beef producer. That’s why it’s so important to see what others are doing and how they’re managing to improve the way they do business. South America is now producing worldstandard beef, but how exactly are they doing it?! (NAB 2005) VION became the European market leader in fresh beef, with a 7.4% market share after acquiring a 50% stake in the Germany-based Südfleish in 2007. Second largest in Europe is the Irish Food Group, operating 23 processing plants and realizing a turnover of around €1 billion in 2007. Cremonini, a leading beef processor in Italy, is the third largest player in the European beef scene. In 2007, Cremonini’s beef processing company INALCA was acquired by the Brazil-based JBS Swift, the world’s largest beef producer entirely focused on beef 164
Examples for sustainable Supply Chains (Beef) activities. By contrast, the USA-based Smithfield Foods has divested all beef activities, selling their beef unit to JBS Swift for USD 565 million in cash in March 2008 (RADEMAKERS 2012)
2. Supply Chain Management of Beef Production (VION study) The broad described definitions of supply chain is done by MENTZER et al. (2001) as “a set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances, and/or information from a source to a customer” (MENTZER et al., 2001). Supply Chain Management is the amalgamation of strategic business processes from end consumption back through original suppliers via interlinking stages. It can include all the scientific, production, technical and related activities involved in the matching of the product to a consumer need. A strategy for planning, implementing and controlling the production, processing, manufacturing, storage, packaging, transport, in-chain and in-store quality management and finally marketing and sales are all critical to success (RAYMOND 2006). In the commodity or generic beef market, inputs and outputs are bought and sold along a well-established transaction path where price is largely determined by cost and individual cattle weight. The beef supply chain is highly fragmented. It has five major players that are shown in Table 1. Ranchers (cow/calf operators) raise young calves. The young calves receive mothers’ milk and are weaned; the weaned calves graze on pasture and range land. Typically, the full grown calves are fattened in feedlots before slaughter where the feedlot buys the calves from the cow/calf or stocker operators. Commodity beef is generally ranchraised for six to nine months weighing. Typically, cattle producers sell livestock through local or remote auctions conducted over video or the internet. Live cattle prices are negotiated based on sex, weight, genetics, health, location and estimated cost to finish. Truckload quantities of stock with similar traits are purchased by feedlot operators to be delivered one to eight weeks in the future (PULLMAN AND WU 2009). During the finishing phase, prior to slaughter, diet has a strong impact on final meat characteristics such as flavor, tenderness and marbling. Dietary programs are typically designed to realize three goals: 1) meat consistency across herds that are raised in various climates and with varying diets, 2) weight gain maximization, and 3) cost minimization. Diets can consist of forage (harvested or grazed herbaceous plants such as hay and alfalfa) grains, corn, or vegetables such as potatoes. Though not the industry standard, cattle can also be finished in open pastures, or large enclosed areas, sometimes called ―bunkers, pens of
165
Supply Chain Management of Beef Production (VION study) varying sizes that are provide more space per cow than typical feedlots (PULLMAN
AND
WU
2009). Table 1. Beef Supply Chains
Source: Pullman and Wu 2009, p.p. 29.
Active in processing, producing and obtaining economic value from meat products (pork, beef and lamb), VION Fresh Meat employed 6,447 persons in 44 operating plants and 14 country offices in 2007, realizing a turnover of €5.4 billion. The Fresh Meat division operates worldwide, with meat processing plants concentrated in the Netherlands and Germany, and with sales offices all across Europe plus one in Australia. Key customers served by the division include retailers (such as Ahold, Wal-Mart, Aldi, Metro Group, Carrefour and Tesco), food service companies (such as Burger King and McDonald’s), and the branded food industry (including Unilever and Nestlé). The VION Fresh Meat strategy is largely focused on margin-driven growth in the Dutch, German and UK markets, and increased export to Italy, France, Spain, Greece, Eastern European countries, the USA and countries in Asia (RADEMAKERS 2012, p.p. 157). There are a number of factors that can achieve a successful supply chain in beef market. Following factors as s Strong Communication Strategy, Information Sharing & Openness, Aspirations to the ‘true worth’ of the product, Trust, Transparency, Specifications, Strict Production Protocol, Sustainability, Security, Reliability by Supply Chain Partners, Balance in Power. All of these factors have interactions and need to be realized together in order to gain sustainable development in the (RAYMOND 2006).
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Examples for sustainable Supply Chains (Beef)
3. Sustainability in Beef Production (VION study) Combining definitions of SCM and sustainability, SEURING and MÜLLER define SSCM as “the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development, i.e., economic, environmental and social, into account which are derived from customer and stakeholder requirements” (SEURING
AND
MÜLLER 2008, p.p. 2). As such,
members in a sustainable supply chain have to fulfill environmental and social criteria but equally have to remain competitive by meeting customer demands and related economic criteria (SEURING et. al 2008). Figure 1. Sustainable Supply Chain Management
Source: Carter & Rogers, 2008, p.369
General appearance of sustainable supply chain management is portrayed in Figure 1. However, environmental aspect of sustainability is needed to be more analyses in beef supply chain management.
3.1 Environmental Aspect In reality, ecological issues require companies to consider this factor in their production more carefully. That is why, the most of the current companies attempt to get ISO 14001 environmental certification through the support of a public-private partnership. On this purpose, the largest retail supermarket chain in Brazil, PÃO DE AÇÚCAR, launches a program to identify and support small suppliers of sustainable Brazilian products. The case of two Indian 167
Sustainability in Beef Production (VION study) auto parts manufacturers that received technical assistance from UNIDO showed the enhancement of their competitiveness to become suppliers to global markets (UN 2005). Generally, sustainability can be a powerful force for promoting social and environmental standards. Especially, beef producers need to have a wide understanding of many factors if they wish to build and maintain a successful, sustainable business:
Sustainable pasture management;
Maintenance of biodiversity;
Soil management;
Water management (minimization of greenhouse gas emissions; minimization of offensive odors and dust);
Efficient use of other resources such as fuel;
Good stock management, taking animal welfare into consideration;
Responsible use of chemicals;
Property management planning, including good risk management, with enterprise flexibility which enables adaptation to changing markets;
Good monitoring and recording systems which gather useful information about the enterprise and allow assessment of financial and environmental sustainability;
Air management (WALKER 2003).
Some of these factors play paramount important role in beef industry. For instance, Capper indicated that “It’s important to note that all food production has an environmental impact, but significant improvements in efficiency have clearly reduced the greenhouse gas emissions and overall environmental impact of beef production” (CLARK 2010). Nevertheless, the situation in South America is not satisfied in global level. For instance, Irish beef production systems are between 2 and 4 times more efficient than South American production in terms of climate change and greenhouse gas emissions (GHG). GHG emissions from imported Brazilian beef are estimated at up to 80kgs CO2-eq/kg, including land use changes (LUC) and 48kgs CO2-eq/kg, excluding LUC. Domestic EU beef production is far more sustainable in terms of carbon and water; with GHG emissions from Irish sucker beef production estimated at 18/22kg CO2-eq/kg meat (IRISH FARMERS’ ASSOCIATION 2011). In VION, water is an important resource for many production processes. The water which is used in the production processes is mostly cleaned in our own waste water purification plants, and only purified water is discharged to the surface water. Besides producing sustainable fuels 168
Examples for sustainable Supply Chains (Beef) and conserving the quality of the water, VION also has the social obligation to minimize its own water usage. For this reason, energy and water consumption levels at production sites are always recorded and optimized (VION 2012). In the context of climate change, it is obvious that the growth in South American beef exports and particularly exports from Brazil has come about on the back of widespread destruction of the Rainforest in the Pantanal and Amazon regions (THE IRISH FARMERS’ ASSOCIATION 2011). The use of energy plays a prominent role in VION’s various production processes, and this concerns both energy consumption and energy generation. Ecoson, one of VION Ingredients’ operations, produces energy in the form of sustainable biofuels and biophosphate. The main raw materials used for this are animal slaughter byproducts. These biofuels are used as sources of energy for VION Ingredients’ own production processes, and to produce green electricity (VION 2012) In South America, managing fertility is important in sustainable pasture management. When animals graze, nutrients are returned to pastures in the form of manure. Rotational grazing systems can be designed to distribute the manure more uniformly than continuous grazing. In any grazing system, cattle tend to congregate at watering and mineral feeding areas and shade; these areas can become nutrient sinks (ANON 1993). It can be stated that VION has production mostly in Europe. Therefore, different production conditions in Europe and several treatments are exits on purpose of applying high level technology in sustainable pasture management. Producers interested in animals that can produce well and finish on forage should look for a bull that has been performance-tested on forage instead of on grain. The South Mississippi Forage Bull Test Sale has tested bulls on forage (FRANK 2012). Efforts to improve the level of sustainability of the raw materials in the chains are still primarily focused on soy, an important ingredient for animal feed. VION has been represented for some years on some of the consultation bodies that work on more sustainable soy production (VION 2012) In beef production, different management programs, such as SPA and Integrated Resource Management, are helpful for record-keeping and evaluating an operation. These functions are vital to judge the economic health of the operation and to measure progress towards goals (FANATICO et. al). The waste that VION produces is mostly of other than animal origin. This is mainly packaging material, plastic, paper, and cardboard, which ends up in VION‘s waste flows. VION strives to achieve maximum added value of all natural materials of agricultural origin throughout its production chains. In addition, VION aims, as far as possible, to reduce waste from non-animal residual flows and the application of recycled 169
Sustainability in Beef Production (VION study) packaging materials. VION has hardly any waste of animal origin, as some 99% of all residues of animal origin are processed into other products or used for other applications. Moreover, VION has long term energy efficiency agreement with VIGEFT in order to reduce energy consumption and use (energy efficiency) throughout the chain by some 50%. Due to its knowledge of the sector, the market, and production processes, and its direct link to the food chain (VION 2012) Competition in the meat industry is intense and is intensifying further, among other reasons due to the increasing export power of Brazilian meat companies, the aggressive price policies of producers operating from relatively low-cost countries within the European Union, and the rising strength of the euro over the dollar and other currencies. Further pressure on margins is caused by rising costs to secure food safety, preventing and fighting cattle diseases, as well as societal pressures for natural environment protection measures and animal welfare. On the other hand, margins can be improved or sustained through processing slaughter by-products into value-added products (RADEMAKERS 2012).
3.2 Social Aspect In modern farming, “high-quality, nutrient-rich protein while improving environmental stewardship can only be achieved by using contemporary agricultural technologies and practices.�(CLARK 2010). Food safety, quality and price are the factors that make interest in consumers. According to this, VION also use high level technology in order to gain aimed socials goals. That is why; animal welfare is taken seriously for ensuring maximum safety for foodstuffs. It is also aimed to contribute to preserving the planet and is a competent partner in the struggle against hunger and malnutrition. And some arrangements are already haven for playing an active role in the fight against obesity. On the other hand, it is thought that the main social sustainability can be gained by the entrepreneurship, transparency and integrity in the company (VION 2012). Other social concerns about beef production include the amount of fat and cholesterol in beef, competition for food resources (i.e. raising grain for beef feed or human food). Moreover, greenhouse effect and global warming from methane produced by ruminants, the clearing of tropical forests for cattle pastures, and degradation of rangelands by poor grazing management practices can also be analyses in the aspect of social sustainability (CHEEKE 1993).
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Examples for sustainable Supply Chains (Beef)
3.3 Economical Aspect The main short-term development effect of participating in these chains is likely to be an increase in employment, though the lead firm can also help to tackle social and environmental issues such as child labor or environmental pollution, and participation in such value chains may offer sustainability as a way to step-by-step upgrading of their capabilities. Therefore, agricultural firms have to pay attention on economical issues of sustainability because of future existence (UNIDO 2004). Apart from defending the relatively stable meat business activities in Europe through cost cutting, and seeking growth through ongoing innovation of processes, technologies and propositions to customers, it has been no secret that an important part of VION’s future growth will be realized through acquisitions and joint ventures in the meat industry. According to CFO TON LAMMERS: “VION has a war chest of €150 to €200 million for future acquisitions and more capital will become available with the projected divestment of Banner”. Moreover, adding value to slaughter by-products can also deliver financial advantages for VION and reduce the pressure on fresh meat margins (VION 2012).
4. Evaluation and Conclusion Consequently, for running a sustainable enterprise in beef supply chain, producers need to have several factors like a farm plan which includes clear business goals; ensure the enterprise is economically viable; actively seek, interpret and use advice and new information have flexible management strategies to meet variations in climate and markets; ensure that their product meets market requirements; ensure that their production system meets consumer expectations in terms of animal welfare and demonstrated care for the environment; have no visible signs of land degradation on their property (or, if there are signs, be in the process of reversing any land degradation that has occurred); conserve areas of native vegetation on their property (WALKER 2003). The producer’s aim should be the profitable production, in the most humane and efficient way possible (best management practice), of a safe, consistent, high quality product, while maintaining or enhancing the quality of resources and conserving the natural environment. Most beef producers would not knowingly do anything that would degrade the resources on which their livelihoods depend. But not everyone is aware of the possible long-term consequences of some management practices that were developed before we fully appreciated many of the issues raised above. For an agricultural system to be sustainable, it also needs to be adaptable and to be prepared for change (WALKER 2003). 171
Evaluation and Conclusion There is the Global Roundtable for Sustainable Beef (GRSB) that is a global, multi-stakeholder initiative founded to advance sustainable production of beef, through the commitment of stakeholders in the beef value chain. The main purpose of this organization laid on establishing a multi-stakeholder initiative by achieving greater clarity and deepening alignment around the key issues that influence the sustainability of the beef production system. It aims to advance continuous improvement in the sustainability of the global beef value chain by some economic, environmental and social legislation. The GRSB envisions a world in which all aspects of the beef value chain are environmentally responsible, socially equitable and economically viable (GRSB 2012). In analyse of sustainability, certain aspect of it was defined in beef sector. They have various applications depend on activity areas of companies. If we compare situations between South America and VION in the context of sustainability, it will seem that second one has more advantage on it. Sustainability is core part of VION’s strategy because of that it is gotten and realized as value added actions in company. In spite of importance of environmental sustainability, all aspects of sustainability were stated in company’s mission as”Passion for Better Food is VION’s motto. The business seeks to offer healthy, high-quality products whilst maintaining a good balance between people, planet and profit. VION’s products and production methods continue to evolve in order to comply with the highest safety and quality standards” (VION 2012). However, it becomes really hard for VION to compete with South American companies in the beef sector because of the advantage of very low-cost domestic production, a huge unexploited potential for exports, and economies of scale – both in terms of production, sales power, and capital for takeovers. The diversity of distinctive and hard-to-copy strengths of major competitors confronts VION with much food for thought. For instance, a number of competitors (such as Perdigão) have important cost advantages over VION. Others enjoy a very strong supply base (such as Danish Crown), have outstanding technological capabilities, and own important genetic assets (such as Smithfield). If and when the European Union allows the import of Brazilian meat, this could have serious consequences for VION (RADEMAKERS 2012) DAAN VAN DOORN, CEO of VION commented on the common strategies of company as "the combined (VION/Grampian) group will become a major player in the European food industry. VION holds a central position in the supply chain and translates market and consumer developments to the agricultural sector. VION thereby provides an active contribution to and investment in a sustainable future for the agricultural sectors in the Netherlands, Germany 172
Examples for sustainable Supply Chains (Beef) and the UK." It obviously, described that mentioned firm plans to make wide range of corporations (like Ecoson, Rousselot) in order to realize sustainable production. There corporations help to use applied technology that will lead to safe and long term sustainable production in the beef sector. (VION 2012)
173
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http://allgreen.com/site/index.php?option=
com_content&task=view&id=300&Itemid=1, August 12, 2012 Anon (1993). Moving pastures. Science of Food and Agriculture. (p.p. 6). Carter, C. R., and Rogers D. S. (2008). A framework of sustainable supply chain management: moving towards new theory. International Journal of Physical Distribution & Logistics Management, 38(5), (p.p. 360-387). Cheeke, Peter R. (1993). Impacts of Livestock Production on Society, Diet/Health and the Environment. Interstate Publishers, Danville, IL. ( p.p. 241). Clark Brian (2010). Environmental Sustainability of Beef Production Has Improved Considerably over Last 30 Years, WSU Expert Says. Retrieved from: http://cahnrsnews.wsu.edu/2010/07/14/environmentalsustainability-of-beef-production-has-improved-considerably-over-last-30-years-wsu-expert-says, August 15, 2012. Colin, G. and Scott, A. (2003). Food Safety in Food Security and Food Trade. The School of Natural and Rural Systems Management, The University of Queensland, Australia. (p.p. 1). Fanatic B., Morrow R. and Wells A., (1999). Sustainable beef production. Appropriate Technology Transfer for Rural Areas. 1999. Fayetteville, AR. (p.p. 3). Frank Holmes (2012). Test Manager 565 Stallings Bridge Rd. Tylertown, MS 39667. Global
Roundtable
for
Sustainable
Beef
(GRSB).
(2012).
Retrieved
from:
http://www.sustainablelivestock.org/home/, August 17, 2012. Irish Farmers’ Association (2011). IFA Campaign against EU - Mercosur Trade Deal. Sustainability and Climate Change. (p.p. 2). Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z. G. (2001). Defining supply chain management. Journal of Business Logistics, 22(2), (p.p. 1-25). National Australia Bank Agribusiness (NAB) (2005). South American beef industry study tour, Retrieved from: http://www.nab.com.au/vgnmedia/downld/NAB_Beef_Study_Tour_2005.pdf, August 12, 2012. Peck Clint (2008). Ten Years Later. Retrieved from: http://beefmagazine.com/foreign-trade/0401-southamerica- beef-production-systems, August 12, 2012. Pullman Madeleine and Wu Zhaohui (2007). Country Natural Beef: A Maturing Co-op at the Crossroad1. Portland State University, School of Business, Portland Rademakers Martijn F.L. (2012). VION Food Group. International Food and Agribusiness Management Review Volume 15, Issue 2, (p.p. 160). Rotterdam, Nederland.
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Examples for sustainable Supply Chains (Beef) Raymond Nicola J. (2006). Quality Beef – Is Branding an Integral Element of Marketing? Nuffield Farming Scholarships Trust, (p.p. 9), Pembrokeshire, Wales. Rodríguez Ricardo (2007). Food Safety Issues in South America: A Case Study on Shiga Toxin Producing Escherichia coli. GO–GLOBAL Consortium Meeting Bangkok, November 2007. Seuring S., Gold S., Beske P., Jorg S., Romy M. (2008). Case Study Research on Sustainable Supply Chain Management – What Evidence has been found? Department of International Management, University of Kassel, Germany. United Nations (2005). Sustainable Supply Chain. Industrial Development Organization. Vienne. United Nations Industrial Development Organization (2004). Corporate Social Responsibility (CSR) and the Development Agenda: Should SMEs Care? Intereconomics, Working Paper No. 13. 2004. Vienna. VION (2012). Retrieved from: http://www.vionfoodgroup.com/en2/csr/key-themes-and commitments/ environment/, August 15, 2012 Walker Belinda (2003). Responsible, sustainable beef production: Issues facing today's beef producer. Retrieved from: http://www.dpi.nsw.gov.au/agriculture/livestock/beef/husbandry/general/production, August 15, 2012.
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Esther Moos
Case Study: Soy
Abstract The cultivation of soy is getting more and more important due to the immense increases of demand for soy in the last decades. But this expansion in soy cultivation brings several problems with it. Especially in countries, which cultivate a big share of the world’s soy, like Brazil for example, problems of environmental and social nature come up. Environmental problems, however, concern not only Brazil but the whole world. Some enterprises make attempts to counteract these problems by producing in a sustainable manner. They try to do even more, so they have to pay attention to the whole food supply chain and try to get it as sustainable as possible. One of these firms is presented in this paper: LIFE FOOD GMBH with its brand TAIFUN.
Keywords Soy, environment, Amazonia, Brazil, rain forest, deforestation, sustainability, supply chain, tofu, organic
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Examples for sustainable Supply Chains (Soy)
1. Introduction The worldwide demand for soy is increasing. About 80% of the produced soy is used for feeding livestock, because soybeans are an optimal feeding product due to their good protein quality and high contents of the essential amino acids lysine and methionine. Another usage of soy is for the human diet, for example in the form of tofu or soy products like soy milk. Also as base of oil, soy plays an important role. To meet the increased and still increasing demand for soybeans, there are two alternatives: Increase yield or increase cultivated area. (VOGT-KAUTE 2011; TADAYOSHI and GOLDSMITH 2009) A huge share of the world soy production is located in South America, Brazil alone produced 26% of the world’s soy in 2010. They used 35% of their whole harvested areas for the legume. (FAO 2012) With the immense demand for soy and therefore increasing cultivation, there are problems coming up of environmental and social nature. Environmentally critical is that for an expansion of the soy production often the rainforest located in the Amazonia is cleared. This fire clearance often brings other problems with it, for example an acceleration of the climate change. Also a loss of biodiversity is an important consequence, as well as the decreased function of the rain forest as a protection against environmental disasters. One of the social problems coming up with the immense cultivation of soy is that the land that is traditionally used by indigenous people, which should have the exclusive usufruct of the lands, with all its resources of the rivers, lakes, and soils, is taken away from them to extent the soy production, so they lose their livelihood. Also, the farmers that farmed the land for years are banished and forced to clear themselves land somewhere else or even move to the slums of the cities. (FAO 2011) This paper is intended to point out why the extended and still increasing soy cultivation is so critical, avowed by the role that the forests and especially the rain forests play in the world’s existence and changes, and by the social problems that come up with it. Also, the paper should show how these problems could be avoided using the example of a German enterprise, TAIFUN Tofu. This case and the firm are described in detail, with all the 177
Soy-cultivation attempts that are made to act and produce in a sustainable manner. Afterwards a critical analysis is made on whether the attempts are really sustainable or just marketing tactics.
2. Methodology In the first part (Chapter 3) of this study I give a short introduction about what soy is, for what it is used, and how much the demand and production has increased over the years, using scientific paper about these topics. To point out the problems that occur in the soy cultivation, I first asked myself where the most important areas of production of soy are located. For this, I consulted the website of the Food and Agricultural Organization of the United Nations (FAO) and derived from their statistics (FAOSTAT) that Brazil, together with some other countries like the United States of America, is a big player in soy production, so I concentrated myself on Brazil because in this example the problem can be seen best. In many papers descriptions of the social and environmental problems could be found. For a deeper knowledge about the rainforests and consequences of fire clearance I found a book by the WWF. Unfortunately I cannot go too much into detail about the consequences because that would go beyond the scope of this paper. The second part (Chapter 4), the case I looked at, is based on the website of the enterprise TAIFUN Tofu/LIFE FOOD GMBH. There, I found much information concerning the topic of sustainability. To analyze if TAIFUN Tofu really are as sustainable as they present themselves on their website, I browsed many websites of Non Governmental Organizations (NGOs) and looked for hints for criticism and information about TAIFUN Tofu/LIFE FOOD GMBH.
3. Soy-cultivation Soy has been an important crop for a long time, but the increasing cultivation brings several problems with it.
3.1 Overview The worldwide demand for soy is increasing. From 1961 to 2007 the increase of the production of soy was 4.6% annually and it is predicted to increase more in the future, by 2.2% annually up to 371 million tons in 2030. 80% to 90% of the produced soy is used for 178
Examples for sustainable Supply Chains (Soy) feeding livestock, because soybeans (Glycine max) are an optimal feeding product due to their high share of protein with especially high contents of the essential amino acids lysine and methionine. Soybeans are also very valuable for the production of oil, which is the mostused vegetable oil in the world. Another use of soybeans is for the human diet, for example in the form of tofu or soy products like soy milk, which plays a big role, amongst others, in the nutrition of vegans or people with lactose intolerance. To meet the increased and still increasing demand for soybeans, there are two alternatives: Increase yield or increase the area of cultivation. The increasing of yield has not been very successful yet, since 2000, yield has increased 6%, and this only contributes 19% to the total increase of soy production. The latter alternative can be achieved through substituting for other crops, for example by cultivating soy on fields that have been cotton-plantations before, through utilizing pasture as new cultivation areas or through replacing native vegetation, e.g., replacing rainforest or the cerrado in Brazil, which has emerged as most practicable. Since 2000, the world soybean production has increased by 36%, the area harvested with soy has increased 28%, and thus was responsible for 81% of the increased production. (VOGT-KAUTE 2011; TADAYOSHI and GOLDSMITH 2009; WWF 2011)
Fig. 1 World soybean production and area harvested (Masuda and GOLDSMITH 2009, p. 144)
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Soy-cultivation But going for already available farmland to get more land for soy production is limited by, amongst others, a decrease in quantity of farmland that is not already in production and an increased loss of land for urbanization. Therefore, replacing native vegetation like rain forest is becoming more important, but brings several problems with it.
3.2 Problems in the cultivation of soy concerning sustainability – environmental and social consequences of producing soy Of the three pillars of sustainability, economic, environmental, and social sustainability, mainly two are affected by the cultivation of soy: The environmental and the social aspect. Especially in Brazil problems can be observed in connection with the cultivation of soy. social +
environmental +
economic 0
Fig. 2: Soy cultivation affects two of the three pillars of sustainability (own depiction)
Forests are the species-richest habitats in the world. Of 1.3 million specified animals and plants, two third live in forests. They also are the livelihood for 1.6 billion human beings, among which are many indigenous peoples. Tropical rain forests play an even more important role. Although they only cover 7% of the world’s surface, they are home for 50% of all species worldwide, many of which are endemic, what means they can live only in the rain forests. In the Amazonia rain forest, the biggest coherent rain forest in the world, which belongs to over 60% to Brazil, one fifth of the worldwide biodiversity can be found. But forests, especially rain forests, also have other important tasks: They store 50% of the worldwide bonded carbon, thereby helping to counteract the greenhouse effect; they act as a protection against erosions, avalanches, as well as against floods; they store drinking water and regulate the water balance. If forests/rain forests get destroyed or converted to plantations, they lose many of their advantageous characteristics. Every forest converted by humans has a smaller biodiversity than native forests. One of the countries that is affected the most by deforestation is Brazil. 78% of their primeval forests have been destroyed up to now and every year it is getting more. (HIRSCHBERGER 2011; WWF 2011) Causes for deforestation: 1. Extension of agriculture: forests get destroyed to win more space for arable land and pasture. The Amazonian rain forest has lost 20% of its dimension to soy plantations and pastures for cattle; this space is lost irrevocable. 180
Examples for sustainable Supply Chains (Soy) 2. Extension of infrastructure: like settlements and roads for transportation of soy. In Amazonia the extension of the infrastructure will lead to an increase in deforestation, because better transportation conditions bring more people into the forests. 3. Use of wood (HIRSCHBERGER 2011; WWF 2011) Consequences of this deforestation are that the indigenous people that live in the Amazonian rain forest (and of course all the other forests) lose their livelihoods as well as their culture. But not only the forest-people are affected: also the people in highly technologized societies like in Europe or North America depend on the forests and their function, like, already mentioned, the carbon-storage and protection against environmental disasters, storage of drinking water, and others. One third of the biggest cities in the world source their drinking water from forest conservation areas. (HIRSCHBERGER 2011; WWF 2011) Because of limited possibilities of expansion of the soy cultivation in other countries, the biggest increase of agriculturally used land for soy will be in Brazil, associated with more deforestation of the Amazonia rain forest. The expansion of soy cultivation will also increase the problems of the smaller farmers that used to cultivate land in Brazil before. They have to and already have had to give way to bigger soy producers, are even forced or pressured to sell their land to the big producing firms, because of that lose the former community they used to live in and have to expand deeper into the rain forest and burn it to turn it into agrarian land so they can secure their subsistence. Otherwise they have to move to the slums of the bigger cities. Also the inequity in the area rises, the water sources are diminished or even completely destroyed, and the people who do not want to move away from their homes in the Amazonian area suffer from the immense use of pesticides and other chemicals. (STEWARD 2006; WWF 2011) Deforestation also has negative impacts on biodiversity. 86% of all endangered species are endangered because they lost their livelihoods due to deforestation. (HIRSCHBERGER 2011) There are also serious consequences for the climate. This problem also concerns the whole world, with all its people, plants and animals. By a destruction of the rain forests their characteristic changes from a carbon-storage to a carbon-source. The deforestation and degradation of forests accounts for 15% of the emission of climate gases by humans. Hence deforestation is the third biggest source of climate gases after production of electricity and the industry. Amazonia alone stores 120 billion tons of carbon. Destroying this rain forest 181
The Case: Life Food GmbH can lead to a much faster climate change. Attempts to act against this trend by planting new forests or plantations are not that useful. A plantation is only able to store one third to one half of carbon compared to a native forest. (HIRSCHBERGER 2011; WWF 2011) A solution to these problems could be to produce “responsible soy” in the future. This could be achieved by gaining higher yields, use unused land for soy production, plant in a soil preserving way and plan prospective. Since 2005, there exists the Round Table on Responsible Soy, RTRS, which set standards for a more responsible production of soy in 2010. The RTRS gives the nations the possibility to interpret the standards, but the requirements should not be less stringent than the standards created by RTRS for the international use. The standards should be applied on all kinds of soybeans in all soy producing countries and also be monitored. To point out all the details would go beyond the scope of this case study. (HIRSCHBERGER 2011; RTRS 2010; WWF 2011)
4. The Case: Life Food GmbH To have a look at a supply chain, I have chosen the German brand TAIFUN-Tofu, which belongs to the company LIFE FOOD GMBH, based in Freiburg.
4.1 Description of TAIFUN Tofu/LIFE FOOD GMBH For being able to have a good look on a company, and to decide whether they are really operating in a sustainable manner or, for example, just “greenwashing”, it is important to have some background information about the company, like the history of the firm, its certificates and what they say about their quality, and why they think that they produce in a sustainable manner. All information in this chapter is only taken from the website of TAIFUN Tofu. This chapter reflects what the firm wants the people to know about them, what is important for them, and also what they think about themselves. The company’s name is LIFE FOOD GMBH and its brand is called TAIFUN, but the two names are often used as synonyms. 4.1.1 History of the firm Wolfgang Reiner Heck and Klaus Kempff founded Life Food in 1987. In the beginning, it was a small firm that only produced 80 kg per week. At the same time, also the firm TAIFUN Naturkost was founded, which offered meals made of tofu in a market hall in Freiburg. The tofu they used came from Life Food. In the beginning, Life Food only produced fresh Tofu, but after a while they also produced vacuum-packed tofu, what means that they, from this 182
Examples for sustainable Supply Chains (Soy) moment on, could supply their products in a bigger area in wholefood shops. This was possible without problems because Life Food was an organic firm from the beginning.
In 1990, TAIFUN and Life Food have been turned into LIFE FOOD GMBH because they have been connected from the start anyway.
By the year 2000, LIFE FOOD GMBH has grown bigger and also could sell their products in other European countries. The company wants to be transparent from field to fork, so they harvest 300 hectares with soy in the area of the Upper Rhine. The rest of their organic soybeans they obtain from DEMETER-farmers in Brazil that are involved in a Fair Trade project.
In 2003 an environmental management system was implemented: ISO 14000.
In 2005, they won several awards, one of them from the ANUGA, Price for Innovation. Their own soy production has increased to 600 hectares.
2006: the project in Brazil that they initiated is doing well. They also assured themselves of that, because, amongst others, the executive board had been there.
In 2006, they initiated the campaign “TAIFUN against genetic engineering”.
In 2009, they were organic brand of the year with their product “Tofu Olive” amongst others because of their sustainable production. Also four of their products got the DLG-Award in gold in this year.
In 2010, they also started producing a small assortment of deep-frozen products. Also in this year, they organized a running festival with the motto “Vive la France” to highlight their connections to France. France is an important supplier of soybeans for TAIFUN and also an important country to export their products to.
This year, LIFE FOOD GMBH/TAIFUN-Tofu counted 160 employees and produced an amount of 70 tons of tofu per week. (TAIFUN 2012) 4.1.2 Quality and Certificates TAIFUN-Tofu produces only organic goods. Some are even organic-dynamic. Their inputs, the raw soybeans as well as the other ingredients, have their origins in a controlled organic cultivation. The “Prüfverein Verarbeitung ökologische Landbauprodukte e.V.” (pv) controls them once a year, inspecting if TAIFUN is actually following the “EU-Öko-Verordnung”. If they are, they receive a certificate, on that everybody could also have a look on at the webpage of TAIFUN. (http://www.taifun-tofu.de/de/img_pool/Oekobetriebszertifikat.pdf). Some of their products are additionally certificated by DEMETER. To prove this, the certificate is also 183
The Case: Life Food GmbH visible
on
the
webpage
(http://www.taifun-tofu.de/de/include/image.php?Imagegif=
unternehmen/DEMETERqualitaet.gif). Since 2011, the LIFE FOOD GMBH/TAIFUN-Tofu is also a member of “BUNDESVERBAND NATURKOST NATURWARENherstellung und Handel e.V. (BNN)�, freely translated: federal association of natural cost natural good production and trade. This association stands for organic food out of belief and wants to achieve a holistic and sustainable organic agriculture. BNN represents the interests of the natural cost industry in a political and economic level. The larger share of the people do not know what exactly a organic label or a DEMETER label means and what the requirements are to receive one of this labels. To inform these people, TAIFUN-Tofu has also linked the pages and requirements of pv, DEMETER, and BNN on their webpage. (TAIFUN 2012) 4.1.3 Environmental culture LIFE FOOD GMBH has some principles that they act on: The products of LIFE FOOD GMBH are only made out of renewable resources, and these resources have to come from organic cultivation, as long as this is possible, but at least 99% of them. The reason for this is that organic cultivation is important for the health and conservation of environment, and LIFE FOOD GMBH can make its contribution to conservation with these arrangements. LIFE FOOD GMBH is against genetically modified organisms and also does not use artificial or chemical additives. But they are aware of the fact that there can be minimal traces of genemodified materials in their natural cost products, due to the environmental conditions. Because of this, LIFE FOOD GMBH defined an internal critical value of 0.1%. If an input oversteps this internal value, it will be rejected. They brought out an information flyer in which they explained the situation why even in organic natural cost traces of GMO might be found. Their explanation is that there are genetically modified soybeans cultivated in all the important crop growing countries of soy. In the US, the share is 94%, in Argentina 98%, and in Brazil 64%. GMO-soy is used as forage or for oil extraction. During threshing, transporting, and processing of this GMO-soy, fine GMO-dust emerges that spreads easily everywhere. The organically cultivated soybeans cannot be protected against these dusts. So there can be minimal shares of GMOs also in the TAIFUN Tofu products. Life Food developed a controlling system, with which they check the soybeans on every stage of the food chain. All in all, they are checked seven times before they reach the consumer. The first check is made between the breeding of the different 184
Examples for sustainable Supply Chains (Soy) types and the ready basis seeds. The second check is made before the reproduction of seeds, and the third between reproduction and processing of the seeds. The fourth check is made before the seeds arrive the seed endorsement point, the fifth before the seeds are accepted as TAIFUN-Z-seeds. Then the seeds are given to the TAIFUN-farmers where they get planted. After the seeds have become soybean plants and got harvested, they are checked again at the sixth checking point. This is located before the beans reach the mills-under-contract of TAIFUN. After milling and before the pulverized soy reaches the production location of TAIFUN, there is a last control point. But even with this intensive controlling system also TAIFUN products are not guaranteed to be 100% GMO-free. Therefore, they do not want to certificate themselves with the label: “Without genetic engineering” any more like they used to, although by law it would be allowed to use that label with a GMO-share up to 0.9%. But TAIFUN does not want to support the mixture of GMO and organic soybeans in any way because
they
have
a
clear
statement:
“TAIFUN
against
genetic
engineering”
(http://www.taifun-tofu.de/de/img_pool/KontrollfrageGentechnik.pdf). They try to reduce or eliminate negative environmental impacts using a catalogue of arrangements
that
defines
aims
(http://www.taifun-tofu.de/de/unternehmen
/TAIFUN_tofu_uumweltprogramm.php?NID1=1&NID2=5&NID3=3). The company tries to use technologies that are reasonable in an economic and ecologic way. The LIFE FOOD GMBH sees itself as a role model for other firms. They want to be as transparent as possible, they want to be active in conservation, and they say that they aim all of their actions on ecological aspects, as long as it does not threat the economic situation of the firm. Also, LIFE FOOD GMBH sees the social aspects of sustainability, which is reflected in the support of the Fair Trade project in Brazil, where they pay the farmers they get the soy from a fair price, and they look at the needs of their employees, like health and social requirements, as well. The LIFE FOOD GMBH supports the European and especially the regional cultivation because of the shorter ways of transportation. The company has been obtaining all their electric energy from hydro-electric power plants since 2003. So, all in all, the firm presents itself as a sustainably acting firm with respect to all three categories of sustainability: environmental, social, and economic (TAIFUN 2012).
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The Case: Life Food GmbH 4.1.4 Soy Cultivation The catchphrases that describe LIFE FOOD’s soy cultivation principles are: regional, ecological, and non-genetically modified. They prefer to achieve soybeans that are cultivated in their region: the Upper Rhine. Almost 50% of the soy they use for the tofu production comes from the following regions: Markgräfler Land, Kaiserstuhl, Ortenau, Vorderpfalz, Lake Constance (Bodensee), and Alsace. All these areas are next to Freiburg, where the LIFE FOOD GMBH is located. In 2010, they exceeded their cultivation in Europe. They now work with farmers-under-contract in Lombardy (Italy) and Burgundy (France), as well as with ones from Lower Austria. One of the reasons for beginning to cultivate soy in Germany was that they tried to find a solution to avoid contamination of the soybeans that they convert to tofu. When the first GMO-soy was created in 1996, they did not any longer trust the soy that came from USA and Canada. Soy plants need a warm climate. This can be found in the region of the Upper Rhine as well. So LIFE FOOD GMBH started, with the help of eight farmers, to cultivate 40 hectares of soy. In 2010, the number of farmers had increased to 40 and the amount of hectares to 370. Today, also 350 hectares of contract cultivation in Europe can be added to this statistic. LIFE FOOD GMBH says they can trust these farmers from abroad because first, they control them, and second, it is not allowed to cultivate genetically modified soy in Europe. Not every sort of soybean brings the for the tofu production optimal amount of 44-45%, especially not in the German climate. So Life Food did research and found out what sort of soy plants would be optimal for the Upper Rhine and was given the right from the government to plant them in Germany. Additionally, they received the concession to reproduce their seeds. LIFE FOOD GMBH is successful with their contract cultivation because they work together with their farmers really closely, they offer advices if necessary and build networks. These networks contain universities, research institutions, agrarian consulting services based in the region, and more. The collaboration with their farmers is very close, also with the growers and millers. That closeness simplifies that they are able to control the way of their beans without any gaps starting with the reproduction of the seeds. Another advantage of this closeness is that they can have impact on the quality.
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Examples for sustainable Supply Chains (Soy) As they strictly do not want genetically modified soybeans, because of ethical and economic reasons, it is important for them also to hold these requirements for soybeans that they supply from overseas, from the south of Brazil. But these requirements are not the only thing that is important for the LIFE FOOD GMBH in Brazil. They also want to meet social and ecological needs. To fulfill that, they have a project there to support the small farms. They keep contact with them and also help them to develop seeds, so they can be sure that the Brazilian seeds are GMO-free and that the confident organic farmers can go on with their work. (TAIFUN 2012)
Fig. 3: Share of domestic soy harvest in comparison to total soy consumption of TAIFUN (TAIFUN 2012)
4.1.5 Survey of the food chain of soy in the case of TAIFUN Tofu Here the whole food chain of soy in the case of TAIFUN-Tofu is summarized under the aspects of sustainability: 1. The seeds: There are two possible ways for them to get seeds. The first is that they develop their own seeds in their own department of research and development. They are able to reproduce their own seeds because, as mentioned before, they have the permission of the government. The second possibility for them is to buy seeds and control them to be sure that they are GMO-free.
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The Case: Life Food GmbH 2. The farmers/the cultivation: They have farmers under contracts who get the seeds TAIFUN Tofu has developed or tested before. 50% of the soybeans they use come from the region of the Upper Rhine, 25% from other European countries (Italy, France, Austria), and the last 25% from overseas, the south of Brazil, from organic farmers. The cultivation always happens in an organic way with all requirements fulfilled that the “EU-Ökoverordnung” demands. The farmers are paid performance-based related to the share of protein. 44-45% of protein is ideal for the transformation to tofu. This performance-based payment has advantages on both sides: the farmers get more money compared to the former system where they were paid a fixed salary, and TAIFUN tofu receives the quality that is ideal for their production. 3. The production: Before the soybeans get processed, the harvest is checked again for whether it meets the demands of TAIFUN, including the absence of GMOs, and then it is ready to become tofu. First the soybeans get milled in mills-under-contract. After controlling they come to the TAIFUN factory and the milled soy gets transformed with the help of other basic ingredients: water, the coagulants Nigari (magnesium chloride), and calcium sulfate. As TAIFUN has more products than just natural tofu, there are more ingredients used depending on the actual product. For the processing, TAIFUN receives energy from the EWS (electric power company) Schönau, which characterizes itself as being without electricity generated by nuclear power and climate-friendly. They also declare that 95% of the electricity comes from renewable resources and the rest of climate-friendly power-heat cogeneration. According to TAIFUN, their electricity is produced in a hydro-electric-power plant. After the production comes the packaging of the ready products. The packages are made of polyethylene and polyamide without flexibilizers like phthalate. The weight of the packaging is 5g per 200g product and thus ecologically more sensible than, for example, a packaging made of glass. The packages TAIFUN uses are the best alternative under ecological and economical aspects at the moment. (ews-schönau, 2012, TAIFUN, 2012, WDR, 2012) 4. Transportation: Relating to the light-weighted packages, the transportation is, in comparison with heavier packages like glass, economically and ecologically sensible (TAIFUN, 2012). 5. Retailers: Are conventional food retailing as well as organic supermarkets all over Europe (ECOINFORM, 2012).
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Examples for sustainable Supply Chains (Soy)
4.2 Analysis First, it is to say that inherently the act of producing tofu out of soy is much more environmentally friendly and better for the climate than the usage of soy for producing livestock. The reason is that the production of livestock, like cattle and pig, create even more toxic greenhouse gases than road traffic. Also, it is wasteful to use up to 90% of the valuable soy bean as feeding stuff, because it needs ten kilo of soy to produce one kilo of meat, whereas for the production of 1.8 kilo tofu only one kilo of soy beans is used. (BRODDE 2011) I did intensive research to find criticism about TAIFUN. I searched on sites of every NGO of that I thought it could be related in any way with food, nutrition, social criteria and ecological criteria - Criteria which touch the production or cultivation of TAIFUN. The list of NGOs I related to the topic contains Amnesty International, BUND Foodwatch, NABU, Robin Wood, Welthungerhilfe and WWF. The only NGO where a slight criticism emerged was Greenpeace. They once mentioned TAIFUN in connection with an article about tofu. In this article, they stated as a positive characteristic of TAIFUN that this firm is very open and transparent. Another positive aspect the author LUBBADEH mentioned is that TAIFUN has been fighting against GMO-soy for years and that they support petitions and campaigns against GMOs. (LUBBADEH 2011) What was mentioned critically is that there was a finding of slices of GMO-soy, pesticides, and also flexibilizers at the end of 2010 by the magazine “Öko-Test”. The findings occurred in the product “Brat-Griller”. According to “Öko-Test”, TAIFUNs analyses revealed that the findings of flexibilizers came from the rapeseed oil they use for the “Brat-Griller”. In other samples that have been analyzed there have not been findings of flexibilizers. (Öko-Test 2011) Martin Miersch, the responsible person for the quality of the soybeans, explained to Greenpeace that they will increase their level of internal controls because the finding of flexibilizers has really shocked them (LUBBADEH 2011). Miersch also told Greenpeace that TAIFUN is not surprised by the finding of GMO and pesticides. TAIFUN receives 25% of their soybeans from Brazil, where the pesticide Endosulfan is used by conventional farmers. Due to rain or wind, small amounts of Endosulfan also get on the fields of the organic farmers. He also explained the GMO findings: By transportation and milling of GMO-soy dusts emerge. Small amounts of these dusts can get in contact with 189
The Case: Life Food GmbH the organic soybeans. TAIFUN cannot exclude a contamination with GMO-soy-dusts and, therefore, defined a critical value of 0.1% for their production. TAIFUN also published a press release relating to this topic with the statement that transparency has always been very important to them. They explain the situation with the same arguments as in the article in the Greenpeace magazine, but add a statement by the firm that produces the rapeseed oil TAIFUN uses. In this statement, the farmer von Bonin explains that he, to this point, cannot explain where the flexibilizers come from, but he will go on searching because he was also shocked by the finding. He asserts that this finding definitely is a single case. The whole statement can be read by following this link: http://www.taifun-tofu.de/de/img_pool/Stellungnahme_Rapsoellieferant.pdf. Furthermore, the press release says that in the beginning of 2010, Life Food had to reject the whole harvest of the Brazilian farmers, but directly started to work together with the farmers to ensure that the next harvest will meet their requirements again (http://www.taifuntofu.de/de/img_pool/234765734_Stellungnahme_TAIFUN_Oekotest3.pdf). In the report in the Greenpeace magazine also the question came up whether the soy production for making tofu has bad influences for the environment in form of deforestation or not. It is clarified that it is a fact that big areas in South America get cleared for the cultivation of soy, but that 80% of this soy gets used for feeding animals, also European animals like pigs and chicken. Therefore, the increased demand for soy, and related with this, the increased deforestation, results from the increasing demand for meat. For the production of tofu only a small amount of the whole soy is used. Additionally, if a person would only eat tofu instead of meat, there would not be an energy loss like the one that occurs in meat production. (LUBBADEH 2011) Also to mention are the labels that can be found on the TAIFUN products. They use the national Bio-Label
Fig. 4: Bio-Label (BMELV 2012)
190
Examples for sustainable Supply Chains (Soy) This label was implemented in 2001. All products that are produced and controlled in accordance with the EU statutory provisions, which guarantee uniform standards for organic farming, can be marked with this label. It stands for organic production and appropriate livestock breeding. (BMELV 2012) TAIFUN is controlled by the PRÜFVEREIN VERARBEITUNG ökologische Landbauprodukte e.V. every year, which verifies that they really meet the requirements of the EU statutory provisions. The certificate they get can be seen on their webpage. Some products also get the DEMETER certification. That means that for these special products additional requirements are fulfilled. A DEMETER certification requests an organic-dynamic art of subsistence strategy. (DEMETER 2012) Additionally, TAIFUN/LIFE FOOD GMBH is member of the “Bundesverbandes Naturkost Naturwaren Herstellung und Handel e.V.”. This organization acts for the interests of the branch of natural cost in a political and economical way. All BNN members bind themselves on the BNN-codex. One example for the guidelines is that the companies should put the equity of resources, equality of chances for all humans, nature, and environment conservation in the center of their activities; another principle is that the processes of production, the trade channels, and the declaration on products have to be transparent. (BNN 2012)
5. Summary and conclusion The soy production and cultivation brings many problems with it. That can especially be seen in countries that cultivate soy in huge amounts like Brazil. There, the expanding cultivation in answer to an increasing demand for soy leads to environmental and social problems. Deforestation or fire clearance of the Amazonian rain forest to get more land for the cultivation of soy has negative impacts on the whole world, like decreasing biodiversity, accelerated climate change, and the loss of the protective functions a native forest has. Also social aspects are concerned. Due to the deforestation indigenous peoples lose their livelihood. Small farmers that used to cultivate the land before are displaced by the bigger soy firms. Also problems like rising inequity and health-problems due to the chemicals used in soy cultivations strain the people.
191
Summary and conclusion Some enterprises attempt to go against these problems by acting and producing in a sustainable manner. One of these firms is the LIFE FOOD GMBH, a firm producing tofu under the name TAIFUN. They try to avoid the listed problems by cultivating soy in Germany and neighbour-countries, like France, Italy and Austria. With this local cultivation, they are as independent of soy from Brazil as possible and thus do not contribute to further deforestation. The only thing they do is supporting small organic farmers in Brazil to cultivate soy in a sustainable manner and buying their harvests to a fair price. Also in their production and their whole supply chain Life Food tries to be as sustainable as possible, for example, by only using organic, GMO-free, repeatedly controlled soy, and packages without ingredients that are harmful for human or nature, and by supporting their farmers-undercontracts, millers-under-contracts, and staff by paying fair loans and prices. The things LIFE FOOD GMBH promises seem to be true, at least no real negative criticisms can be found that cannot be explained by LIFE FOOD.
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Examples for sustainable Supply Chains (Soy)
References BMELV, Bio-Label, graphical depiction retrieved from http://www.bmelv.de/SharedDocs/Standardartikel /Landwirtschaft/Oekolandbau/Bio-Siegel.html (Last accessed: 09.07.2012, 21:33). Brodde, K. (2011). Fast wie Fleisch – Vom Nischenprodukt zur Massenware: Das Geschäft mit Tofu boomt und verändert die Branche. Die Zeit, 28.07.2011, No. 31. Retrieved from: http://www.zeit.de/ 2011/31/GLTofu/komplettansicht (Last accessed: 24.08.2012, 11:52). Bundesverband Naturkost Naturwaren. Kodex – Die Selbstverpflichtung der Naturkost-Branche. Retrieved from: http://www.n-bnn.de/html/img/pool/kodex_infobroschuere_web.pdf (Last accessed: 09.07.2012, 22:00). Demeter (2012). http://demeter.de/verbraucher/ueber-uns/unterschied (Last accessed: 27.08.2012, 12:48). ecoinform (2012). http://www.ecoinform.de/?id=5&adressdetail_marke=725 (Last accessed:
19.07.2012,
11:12). ElektrizitätsWerke Schönau (2012). http://www.ews-schoenau.de/ (Last accessed: 24.08.2012, 12:31). FAO (2011). State oft he World’s Forests. Can be downloaded online at: http://www.fao.org /docrep/013/i2000e/i2000e00.htm (Last accessed: 20.08.2012, 13:01). FAOSTAT (2012). Data retreived from: http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancor. (Last accessed: 20.06.2012, 19:23). Hirschberger, P. (2011). Die Wälder der Welt – Ein Zustandsbericht; Globale Waldzerstörung
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ihre
Auswirkungen auf Klima, Mensch und Natur; eine WWF Studie 2011. 2. Auflage 2011, WWF Schweiz, WWF Deutschland Lubbadeh, J. (2011). Tausendsassa Tofu. greenpeace magazin, 2011, Volume 5. Retrieved
from: http://www.
greenpeace-magazin.de/index.php?id=6505 (Last accessed: 07.07.2012, 18:43). Öko-Test (2011). Vegetarische Fleischersatzprodukte-Ein dicker Klops. January 2011. Retrieved from: http://www.oekotest.de/cgi/index.cgi?artnr=96706;bernr=04;seite=00;co=;suche=taifun (Last accessed: 09.07.2012, 13:45). RTRS (2010). RTRS Standard for Responsible Soy ProductionVersion 1.0. 10.6.2010. Steward, C. (2006). From colonization to “environmental soy”: A case study of environmental
and
socio-
economic valuation in the Amazon soy frontier. Agricultural and Human Values, 2007, 24, p. 107-122. Tadayoshi, M. and Goldsmith, P. D. (2009). World Soybean Production: Area Harvested, Yield, Term Projections. International Food and Agribusiness Management
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Review, Volume 12, Issue 4,
2009, p. 143-162.
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Appendix Taifun (2012). http://www.taifun-tofu.de/de/ (last accessed: 24.08.2012, 12:29). Taifun Information flyer. http://www.taifun-tofu.de/de/img_pool/KontrollfrageGentechnik.pdf. (Last visit: 27.08.2012, 11:47). Taifun
Statement
Oekotest3.
http://www.taifun-tofu.de/de/img_pool/234765734_Stellungnahme
_taifun_Oekotest3.pdf. (Last accessed: 23.08.2012, 15:58). Taifun
Statement
of
the
rapseed
oil
supplier.
http://www.taifuntofu.de/de/
img_pool/Stellungnahme_Rapsoellieferant.pdf (Last accessed: 23.08. 17:02). Taifun. Environmental program. http://www.taifun-tofu.de/de/unternehmen/Taifun_tofu_uumweltprogramm .php?NID1=1&NID2=5&NID3=3 (Last accessed: 27.08.2012, 11:48) Vogt-Kaute, W. (2011). Die Sojabohne – eine Körnerleguminose mit Zukunft?!. Topic of the month february, 2011.
Retrived
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Thema_des_Monats/Bofru_Thema_des_Monats_Februar2011.pdf (Last accessed: 24.08.2012, 12:15). WDR (2012). Fleisch-Ersatz im Trend - was steckt wirklich in Tofu, Seitan und Co?. Broadcast from Monday the 7th of May, 20:15-21:00. Seen at: http://www.wdr.de/tv/vorkoster/sendungsbeitraege/2012/0507 /index.jsp (Last accessed: 24.08.2012, 12:35). WWF. (2011). Faktenblatt zum Soja-Anbau in Südamerika. Retrieved from: http://ebookbrowse.com/ faktenblatt-soja-d-pdf-d88227763 (Last accessed: 24.08.2012).
Appendix
Bundesverbandes Naturkost Naturwaren – BNN
Bund für Umwelt und Naturschutz Deutschland – BUND
Bundesministerium für Ernährung, Landwirtschaft und Verbraucherschutz - BMELV
ELEKTRIZITÄTSWERKE SCHÖNAU - EWS
Genetically modified organism – GMO
Naturschutzbund Deutschland e.V. - NABU
Non-Governmental Organization – NGO
Prüfverein Verarbeitung ökologische Landbauprodukte e.V – pv
Round Table on Responsible Soy - RTRS
West Deutscher Rundfunk - WDR
World
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Wide
Fund
For
Nature
–
WWF
Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Marc Orth
Creation of a Sustainability Label by a Retailer Case Study of REWE´s Pro-Planet Bananas
Abstract Bananas are the most exported fruit worldwide. They are famous for impacts which their production has on nature and workers. In addition to several approaches that are made for improvements, one of Europe's biggest retailers, the REWE-Group, takes action now. They assign the Pro-Planet label to some Bananas, which are conventionally grown in a special region of Panama. The supply chain from production to import is handled by the Chiquita Brands International Inc., a company that has always been blamed to damage nature and infringe worker's requirements. Together, both companies formed an alliance and set up the “Tropenprojekt” (Tropenprojekt 2012). Which are the underlying intentions? What actions are both companies taking? Can aspects of sustainability be strengthened in the Pro Planet supply chain or could other efforts be more suitable? These questions shall be highlighted in this case study.
Keywords Banana; CSR; Green Product; Retail; Eco-labels; Pro Planet; Food-Supply chains; Sustainability; REWE-Tropenprojekt,
195
Introduction to the paper
1. Introduction to the paper Among the variety of approaches to maintain sustainability in food-supply chains, one approach is to set up a project that favours one or more of the three pillars of sustainability. Upon this an internal label can be created. The REWE-Group is running such a program for some bestsellers of their retail shops since 2008. In the following work, the case of the banana chain shall be described and analysed. The main actor is Chiquita, which covers all the way from production to distribution and REWE taking the role of the retailer. So let's hear their statements first: In the projects description (Pro Planet 2012), Rewe calls the label a navigation system to more sustainable products for consumers who pay attention to preservation of nature and social compatibility of products while shopping. About the project connected to Pro-Planet-Bananas, Dr. Martin Küssner, CFO REWE Supermarkets Germany says: “The partnership of REWE and Chiquita is based on the principle that conservation of endangered habitats and species is only possible with the support and participation of the community.” (Küssner 2009) Michel Loeb, Chiquita’s president of Europe and Middle East states: “Our partnership with REWE provides us with an opportunity to contribute to the rich biodiversity of the region and the well-being of local communities in Panama. This cooperative effort, working together with REWE and officials in Panama, is another example of our long-term commitment to corporate responsibility.” (Loeb 2009) If the project is an appropriate approach to support the environment and if this is reached by means of a sustainable supply chain will be discussed. Main questions are: •
Which intentions do the companies have?
•
Which instruments do the companies use?
•
Are there alternatives to these instruments?
•
What's the reaction of the affected people and the public?
•
Can we expect substantial improvement in the chain?
•
Can this method be applied to other sites?
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Examples for sustainable Supply Chains (Pro Planet)
2.
Review of Conditions on Common Plantations
2.1
Basics
Bananas are the world’s most popular and internationally traded fruits. In terms of value, this fruit is the fifth most traded agricultural product. The global export earnings of banana trading were reported to be more than US$ 7 billion in 2008. The industry is an important source of employment and income for millions of people in developing countries, but too often the industry is associated with negative economic, social and environmental impacts. Large-scale structures developed during the last century, because the market has been shared between few companies in harsh competition (Fig.1)
Fig. 1: Shares of global Banana trade in 2011; Source: Bananalink(2012), Adopted
2.1.1 Environmental Issues Bananas which are produced for export are grown in monocultures. One plantation covers several hundred hectares. Today it is just one single variety of global significance, the Cavendish. In such systems, big amounts of fungicides and pesticides are used. Tropical soils are depleted easily, so big amounts of fertilizers are also used. The results: •
poor Biodiversity and deforestation
•
contamination of water
•
soil erosion and loss of fertility
•
waste due to maintenance.
197
Review of Conditions on Common Plantations 2.1.2 Economic Issues The economies of many countries are highly dependent on the export of bananas. Thus, big companies can strongly influence those nations’ policy. In addition, the policy of importing countries has a big impact on the economies of exporting countries. For instance, discussions of import tariffs can determine if an exporting country's economy will crash or not. In the last decade price wars between retailers led to the so-called “Race to the Bottom” induced by the low prices paid by supermarkets. The reaction of supplying fruit companies was cost cuttings in connection with relocation of production to countries with cheaper labour and weaker regulations. Employers increasingly use sub-contracted labour amongst others to reduce their responsibility for working conditions, the respect of core labour standards or a living wage payment. Plantation workers have to accept casual labour at an ever increasing rate. They are hired on a daily or temporary basis. As a direct result in several countries membership of independent trade unions has fallen. 2.1.3 Social Issues The above mentioned economic conditions lead to social problems for workers. Many workers fail to earn a living wage to cover their basic needs such as housing, food, clothing and education. In the past, big producers tried to prevent the organization of trade unions, which is easy if people work on a daily basis. Work on a large-scale banana plantation means physical toil. 12 hour shifts are normal. Men in the field as well as men and women in a packhouse are exposed to toxic agrochemicals. Particular, if workers remain in the field while it is sprayed by planes. Serious health problems are widespread.
2.2
Some widespread Ways to maintain Sustainability in Banana Production •
Laws, e.g. for environmental restrictions, minimum wages or working conditions
•
Trade unions fight for better conditions for workers
•
NGOs do research and inform the public and try to influence on levels of trade or policy
•
Certification Standards that are used:
198
Examples for sustainable Supply Chains (Pro Planet) -Organic Agriculture: variety of standards with labels on bananas, 2,2% global* Price Premium, no chemical pesticides or fertilizers -Fair trade:
label on bananas, 1,7 % global * Price Premium, supports small farmers and social issues
-Rainforest Alliance: label used on bananas mostly in the USA, 11 % global * -SA8000:
Not on product, for advertisements and trade partners
-ISO14001:
Not on product, for advertisements and trade partners
-GlobalG.A.P.
Not on product, for advertisements and trade partners
*percentages of exported bananas were estimated by Liu (2009)
The certificates differ widely in their tasks and strictness. Some are criticized to be used for “Greenwashing” campaigns. Chiquita has to face such accusations, too. In particular for using the Rainforest Alliance label. Alex Nicholls, Professor of social entrepreneurship at Oxford University, stated that the Rainforest Alliance label is an easy option for companies looking for a “flash in the pan at a cheap price” (Poulomi, 2005). Ventura (2007) considers Rainforest Alliance to be too closely connected to the corporate buyers and not strict enough. Hausknost, rainforest-speaker of the organisation GLOBAL2000 concludes that Rainforest Alliance is a way for Chiquita to make people believe that environment would be substantially supported now, which would not be true in reality. He considers organic or fair trade bananas to remain the first choice (The Epoch times, 2005). While surveying organic food networks Raynolds (2003) found out that powerful corporate retailers and branders also benefit from organic certification, since the chain of custody and documentation requirements facilitate their control over suppliers and organic labels facilitate their participation in mainstream markets. Well, enterprise beneficial standards are on the market already. Anyway REWE starts a new approach.
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The REWE Tropenprojekt
3.
The REWE Tropenprojekt
3.1
Why?
To set up a project demands big efforts, if it shall have a serious outcome. I.e. there must be strong motivation to start it. To sell bananas is a profitable business as it was in the last decades. So, why to change anything? European consumers are increasingly concerned about the impact of their consumption choices. In 2009 Consumers International undertook a consumer survey in six western European countries. The majority of consumers felt that supermarkets should pay a price that enables suppliers to pay their workers a fair wage, even if it resulted in consumers having to pay more at the till. If consumers are concerned about the impact that their consumption choices have on people in developing countries, their local supermarket is an obvious focus for that concern. Consumers across all markets express strong intention to purchase from responsible companies (Anselmi, 2009). To implement Corporate Social Responsibility (CSR) in a company that has to maximize profits for its stakeholder sounds difficult and it may be even impossible to align CSR with profit aims. Besley and Ghatak (2007) studied this prejudice in mathematical terms to find the reason for present campaigns. In real world examples they modelled CSR as a response to consumer's preferences over public goods/bads and hence part of a profit-maximising strategy of firms whose businesses have external effects. An increasing amount of reports are made, which inform consumers about backgrounds of their products. In their efforts to gain market share by reducing costs, food retailers put pressure on their suppliers. This pressure to lower prices and costs is passed on down the supply chain (Wiggerthale 2008). For one of her studies, Prieto-Carr贸n (2006) conducted an in-depth interview with George Jaksch, Chiquita's senior director of corporate responsibility and public affairs. George Jaksch contends that supermarkets also have responsibility to foster decent working conditions on plantations and in packing-houses from which they source. He calls on the large supermarket chains to demand the compliance with CSR as a pre-condition for their suppliers. Jaksch maintains that a single company such as Chiquita cannot institute major changes on its own, but needs to work together with a range of stakeholders. For Chiquita, this includes retailers who are proactive in their CSR strategies (e.g. Migros in Switzerland) and are of great assistance to suppliers such as Chiquita. 200
Examples for sustainable Supply Chains (Pro Planet) If we summarize this, it seems like all the participants are interested in sustainability now. The participants are the consumers, who become increasingly informed about related issues till the end of the chain, a retailer who has to fulfill consumer's wishes and a producer/supplier who finally brings the demanded criteria on the field. Nature and workers’ voices were not heard on the consumer level in the past. Are they heard now? Or is it all just about satisfaction of the latter end in the chain again. After getting cheap products in the past, now we get cheap products with a label that calms our conscience?
3.2
Players in this Project
3.2.1 The Producer: Chiquita USA, Bocas Division, Panama Chiquita Brands International Inc. is one of the big players in production and trade of exotic fruits. With annual revenues of nearly $ 4 billion (about € 3,2 billion), Chiquita employs approximately 23 000 people and has operations in more than 80 countries worldwide. Chiquita (2009) released the following numbers: “As of December 31, 2009, we owned more than 35 000 acres (ca. 14 000 ha) and leased approximately 20 000 acres (ca. 8 000 ha) of improved land, principally in Costa Rica, Panama, Honduras and Guatemala, primarily for the cultivation of bananas and support activities. We lease the land for our Bocas division on the Caribbean coast of Panama from the Republic of Panama. The initial 20-year lease term expires at the end of 2017 and has two consecutive 12-year extension periods.” Since 2005 all Chiquita plantations are Rainforest Alliance and SA8000 certified. 3.2.2 The Retailer REWE Group, Deutschland In Europe, the REWE Group is number three among the retailers. In 2011 they had revenues of about € 48 billion in their food trading shops. In these 15 700 shops and other divisions of the enterprise 323 000 people are employed. The bananas described in this case study can be found in shops named Rewe, Penny or Toom which together count about 6 000 stores in Germany. 3.2.3 GTZ The GTZ is the international cooperation agency for sustainable development of the Federal Government of Germany. This organization operates all over the world. It stimulates processes of change and complex reforms and frequently works under adverse conditions. Its corporate goal is to improve the quality of people's life on a sustainable basis. 201
The REWE Tropenprojekt 3.2.4 CORBANA CORBANA is a public, non-governmental entity formed to develop the banana industry in Costa Rica. The voting share capital is distributed in equal parts between the national government, the three state banks and the banana producers. The mission is to serve the national producer by: Technical counseling of the government in banana matters, promotion of scientific research, offering market information and loans for small producers. 3.2.5 Other Participants ANAM: The National Authority of the Environment in Panama. ANAM watches over the environment of this Central American country. AAMVECONA: This organization works in the San San Pond Sak Wetland. It was created in the year 2000 to protect the coastal ecosystems of Panama. RUTA: The Regional Unit for Technical Assistance is a joint initiative between agencies and governments of the Central American countries and seven international development organizations. The mission is to promote sustainable development and poverty reduction in the rural areas of Central America.
3.3
The Region
San San Pond Sak Wetland, which is a Wetland of international importance which covers an area of 16 125 ha and is a protected area with the greatest biodiversity of Panama. This wetland is located in the province of Bocas del Toro, Changuinola district and its environment is influenced by the sea and the rivers that cross it. The population of San San Pond Sak traditionally works in agriculture and fishing. Poverty and little awareness of ecosystems push the population to hunting of endangered species, too. Among these species are Manatees and Sea Turtles. Situated in a region of intensive agricultural production this natural highlight is subject to many unnatural influences.
3.4 Rewe´s Strategy to improve the Company´s Sustainability with an internal Label In 2008 REWE decided to make sustainability a core element of its activities. Among a variety of activities, some products that are most popular amongst customers should become more “green”. The development of incorporated sustainability standards is rather new, what means that there is not just one way, but it's always worth thinking about developing something new. This is what REWE did. In the present, many scientists also are interested in 202
Examples for sustainable Supply Chains (Pro Planet) this topic. Styles et al. (2012) considered some steps to be necessary in the process. First the improvement of supply chains must be integrated into the retail strategy and operations. The systematic assessment of high risk and core (high sales volume) products, in order to identify priority products for improvement, environmental hotspots and improvement options, follows to apply the theory in practice. Assuring reliability means to include the identification of effective control points and mechanisms of influence in a third step. The pro planet process considers these sequences. Aims for selected products are: •
Labelling more sustainable products.
•
Offering more sustainable products for a broader class of consumers. Selection of products that can be sold to the mass markets.
•
Reducing problem areas in the value chain.
•
Making sustainable performance visible.
•
Continuously increasing sustainability.
The labelling process in a brief account: •
Hot spot analysis of the selected product An external institute analyses the way of the product from its production to its consumption. Issues of special interest are:
•
Use of resources
•
Climate protection
•
Biodiversity and animal welfare
•
Social responsibility
•
Product safety
•
Suggestions of the institute These are discussed in the company and with the partners who would have to work on these changes.
•
Feasibility Assessment In this step also trade partners and suppliers are involved to find the answer, if the hotspots can be dissolved or improved.
203
The REWE Tropenprojekt •
Implementation of measures The plan gets applied in practice.
•
Label awarding An internal committee decides if the measures make a significant improvement. If so, the label can be shown on the product and communicated to the public. Every three years the Hot-Spot-Analysis is revised.
This process is described in details on the REWE webpage. The REWE-Group sets up a complex way under participation of widely accepted organisations and experts on a decision level as well as in later steps. Steady in the Advisory Board are Colabora (Chair), NABU e.V. (Ecology), Die VERBRAUCHER INITIATIVE e.V. (Customer Organisation), Caritas international (Social Affairs) and a sustainability and medical expert. To have organisations on board which already enjoy the public's trust is an advantage for presenting a new label. Working with global enterprises poses threats to organisations. They risk to loose reputation if scandals show up revealing major mistakes or if they are not strict enough in their project, in which the external organisation is involved in. 3.5
Project Description
In the Pro Planet process, bananas were identified as a product that should enter the program. As mentioned above, bananas in fact are the most popular fruit. The identified hotspot is biodiversity. The project also covers empowerment of the citizens in Bocas del Toro province, Panama. The main objectives are conservation of biodiversity, promotion of environmental consciousness, strengthening local institutions and generating additional incomes. With the inclusion of new partners in 2009, the GTZ and CORBANA the project was expanded to Costa Rica. Objectives are: 1. Conserving Biodiversity: In the first step 130 hectares of pasture land located in the nature reserve, were donated to AAMVECONA for the purpose of restoration of the natural habitat. Volunteers including Chiquita employees have built a protected hatchery where 4500 turtle eggs have been relocated. Manatees also shall be supported. 204
Examples for sustainable Supply Chains (Pro Planet) 2. Raising environmental awareness: Children and adults, including Chiquita employees and their families shall be educated in environmental awareness in cooperation with the schools and education authorities of the region. 3. Additional income opportunities: Work with local communities, especially indigenous women, to develop small businesses based on handicrafts and tourism. This is of particular importance given the poverty and unemployment prevailing in much of the local population. 4. Strengthening local institutions and cooperation: Close cooperation with local communities, authorities, NGOs, scientific and educational institutions, whose support and participation is essential to the success of this initiative. During the years of 2009, 2010 and 2011 by REWE spent 10 eurocents per kilo of sold Chiquita bananas during special action weeks. All together it was 400 000â‚Ź. Chiquita is responsible for the execution of the project. Through the additional public-private partnership agreement with the GTZ and CORBANA a total budget of about 1,2 Mio. â‚Ź is available for the project until the end of 2012.
[Geb en Sie ein Fig. 2: certifications applied in this chain. The Pro Planet label is given by REWE itself Zitat aus
4. Signs of Improvement in the Chain- Results and Evaluation REWE is active and sets up big boards to make efforts running their program.
dem Doku
ment We can answer some of our introducing questions now. The Pro Planet labeloder aligns with accepted procedures. In fact, there is no negative report about the label. The REWE-Group die was awarded by the German Government recently with the CSR-Price 2012 forZusa their efforts to make supply chains more sustainable. These news were published by media mme and create a positive feeling for the customer who purchases a Pro Planet product. Thenfass companies ung eines inter
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Signs of Improvement in the Chain- Results and Evaluation actively announce what is done. Aims and procedures are explained in a way that mediates transparency. All the products offered under the label are signed and presented on the webpage. Particular the presented Tropenprojekt is actively shown by Chiquita as well as REWE, including many pictures of healthy and rich nature, which obviously is present in the project area. After we got many questions answered some remain and some more came up. The company claims to make a chain more sustainable. After we got to know the project, that achieved this label, don't we still have to ask if the project is directly connected to the chain? -
Is the product's origin the banana plantation or the region nearby? Is it legitimate to exclude the farms themselves from the chain and talk about biodiversity in the plantation area the same time?
-
As a consumer, purchasing this product, don't you think that on the production site everything is all right?
In fact, those plantations are certified with Rainforest Alliance, GlobalG.A.P. and SA8000; Labels, which are widely considered to prove compliance just with basic rules. In a Rainforest Alliance plantation all legal chemical fertilizers and pesticides are allowed, SA8000 proves the compliance with international labor laws. These are improvements! And how much improvement do we need? Something is done better now. But is it enough? (See Chapter 2.2) We started at a level that was not just unsustainable but irresponsible. Some time ago we didn't know anything about the history of our banana and whether we ate bananas which were planted on ground where a former rainforest was erased. This fruit eventually was harvested for us by a working child. Such bananas are still available in surrounding shops. Now that the consumer is more informed, he wants this navigation system that REWE mentions. Does he get it in this chain? The evaluated issues vary between consumers. Some of them show interest in selected CSR and disinterest in other CSR activities. It also varies depending on their information and knowledge level; consumer-company congruence; relevance of other product or brand attributes; evaluations of trade-offs between CA (corporate associations) and CSR; and the perceived credibility of various CSR information sources. (Beckmann, 2007) To assess the value of the project and the sustainability of the chain probably means to have a closer look beyond the label. The mentioned transparency provided by REWE makes it quite easy. Anyway, one or another may be surprised if he finds out that the banana in his 206
Examples for sustainable Supply Chains (Pro Planet) hand with those nice stickers which show biodiversity supporting attributes, is not grown organic. And the worker on the plantation eventually still has to struggle. Neither REWE nor Chiquita are claiming to enrich biodiversity on a plantation or paying price premiums to producers at any point of the Tropenprojekt. REWE is saying precisely that Pro Planet is a product line for the mass market. It is an addition to REWE's continuing offer of organic and fair trade products. Those products are more expensive, not just for the consumer, but also in production and for the retailer. How much sustainability do we want? REWE calls the label a navigation system to more sustainable products for consumers who pay attention ‌
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References
References Anselmi, P. (2009). Corporate Social Responsibility Monitor 2009. GlobeScan GfK Eurisko, Retrieved from th
http://www.sodalitas.it/files/18/Anselmi_Eurisko.pdf, August 25 , 2012 th
Bananalink (2012). All about bananas. Retrieved from: http://www.bananalink.org.uk/node/74; July 20 , 2012 Beckmann, S. C. (2007). Consumers and Corporate Social Responsibility: Matching the Unmatchable? Australasian Marketing Journal (AMJ), Volume 15, 2007(pp. 27-36) Besley, T. and Ghatak, M. (2007). Retailing public goods: The economics of corporate social responsibility. Journal of Public Economics, Volume 91, September 2007 (pp. 1645-1663) Chiquita (2009). Annual Report on Form 10-K year 2009. Retrieved from: http://www.faqs.org/secth
filings/100226/CHIQUITA-BRANDS-INTERNATIONAL-INC_10-K/#toc67883_5#ixzz24l9f1mLx, August 19 , 2012 Küssner
(2009).
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panama.de/index.php?option=com_content&view=article&id=1&Itemid=15&lang=de, July 20 , 2012 Liu, P. (2009). Certification in The Value Chain for Fresh Fruits-The example of banana industry, Food And Agriculture Organization Of The United Nations, Rome Loeb
(2009).
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panama.de/index.php?option=com_content&view=article&id=1&Itemid=15&lang=de, August 25 , 2012 Poulomi
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August 24 , 2012 Prieto-Carrón, M. (2006). Corporate Social Responsibility in Latin America. JCC 21 Pro Planet (2012). Pro Planet-The Rewe Group Navigation System for More Sustainable Products and Services. Retrieved
from:
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www.tropenprojekt-panama.de,
th
May 24 , 2012 Raynolds, L. T. (2003). The Globalization of Organic Agro-Food Networks, World Development, Volume 32, 2004 (pp.725-743). Styles, D., Schoenberger, H., Galvez-Martos J.L. (2012). Environmental improvement of product supply chains: Proposed best practice techniques, quantitative indicators and benchmarks of excellence for retailers, Journal of Environmental Management, Volume 110, 2012 (pp.135-150) The
Epoch
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http://www.epochtimes.de/chiquita-bananen-im-oeko-deckmaentelchen--6178.html, August 19 , 2012
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Examples for sustainable Supply Chains (Pro Planet) Tropenprojekt
(2012).
Kooperationsmodell.
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http://www.tropenprojektth
panama.de/index.php?option=com_content&view=article&id=17&Itemid=19&lang=de; July 20 , 2012 Ventura (2008). Examining the Rainforest Alliance’s Agricultural Certification Robustness. University Of th
California, San Diego, Retrieved from: http://irps.ucsd.edu/assets/021/8422.pdf, August 23 , 2012 Wiggerthale, M. (2009) Last Stop – Supermarket: The Scoop on Tropical Fruit-Retailers’ Buying Power: The conditions under which pineapples and bananas sold in Germany are produced. Retrieved from: th
http://www.oxfam.de/sites/www.oxfam.de/files/20101208_studie_last-stop.pdf, August 24 , 2012 Wiggerthale, M. (2009) Last Stop – Supermarket: The Scoop on Tropical Fruit-Retailers’ Buying Power: The conditions under which pineapples and bananas sold in Germany are produced. Retrieved from: th
http://www.oxfam.de/sites/www.oxfam.de/files/20101208_studie_last-stop.pdf, August 15 , 2012
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Institute for Food and Resource Management Chair for Business Management, Organisation and Information Management Seminar Quality and Food Chain Management 2012
Leandro Stocco
Sustainable Supply Chain Management in Iceland
Abstract In this investigation it was possible to understand the causes that are leading the global fish stocks to collapse and its possible impacts on the economy of Iceland, a country dependent on fish exports. In order to evaluate how the processor sector of fish products, where unsustainable issues frequently occur, are reacting to these problems, we first describe and analyze the global and local supply chain and afterwards the Icelandic Group was taken as a reference. It was possible to verify that the company is implementing a great variety of strategies to lead with unsustainable issues and therefore contributing to solve or minimize them. At the same time, it was clear that the Icelandic Group is not only improving their own business, but also influencing the actors of the supply chain that are interacting with it, and in addition to that the company is generating positive effects on the welfare of the society.
Keywords Sustainability, Fish, Iceland, Atlantic Cod, Supply Chain, Unregulated, Depletion, Traceability, Hazard Analysis and Critical Control Points (HACCP), Corporate Social Responsibility (CSR)
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1. Introduction The collapse of fish stocks is causing a crisis of worldwide proportions in the seafood sector since most of the major fish species commercialized globally are fully exploited or completely depleted according to a convergent evaluation of all organizations (UNEP 2009). An detailed assessment of the data indicate that around 75% of fish species with significant commercial value have been overexploited and some are almost in process of extinction, 52% of commercial stocks are completely exploited, close to their highest sustainability production stages, 25% are in very poor situation: 17% are overexploited and 7% are depleted, while only 1% is recovering from depletion (FAO 2006). A variety of causes related to unsustainable consumption and production patterns contributed to this scenario, such as increasing consumption levels, overfishing, unsustainable aquaculture, and also pollution and climate change can be pointed as relevant factors. Unsustainable practices are favored by lack of price transparency and information sharing, ill-adapted governance and institutions, open access, unfair fishing, Illegal Unregulated and Unreported fishing (IUU) and bad working conditions (UNEP 2009, HILBORN AND LITZINGER 2009, LINDEGREN et al. 2009). Governments and organizations working together in different institutional arrangements at local, regional and international levels try to administer and regulate the marine and inland water ecosystem and at the same time to reconstitute fish stocks by implementing different kinds of instruments including the UN Fish Stock Agreement, the FAO Code of Conduct for Responsible Fisheries, the Johannesburg Plan of Implementation of the World Summit on Sustainable Development and the Millennium Development Goals. However, these actions failed to stop the decline in fish stocks and therefore were not able to avoid the exacerbation of the fish crisis in the last decades (UNEP 2009). The regional and international co-operation taken into consideration that fishery is a Earth`s unowned natural resource characterized under the global commons conception and susceptible to the tragedy of the commons, i.e. the resources can be overexploited since no authority or institution has reasons to manage them in a responsible and sustainable manner (HARDIN, 1968). In addition to that interdependence in the fish markets has been evolving during decades or centuries and interaction and increasing connection across continents and countries in the fishing sector means that fisheries resources are not only a problem of the main consumption centers (OCDE 2010).
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The fish supply chain In cod fisheries, mastering the drying of cod by the Vikings allows to fish in the northern hemisphere for consumers in different places of Europe. From the fifteenth century onwards, the improvement of salting techniques also permits Basque and Portuguese fishers to explore new areas of the ocean and therefore accommodate market demand for salted cod (OCDE, 2010).
The development of techniques and the technology advancement
contributed to intensification of fishing, currently characterized by a heavily annual exploitation rate of around 60% of the fishable cod stock in the North Sea, an unsustainable situation according to Cook et al. (1997). The authors state that even recommendations of the International Council for the Exploration of the Sea (ICES), which advises fishery managers on the condition of fish stocks in the northeast Atlantic, for regimes close to the maximum sustainable yield could also be dangerous and lead to the collapse of cod stocks. In this context a substantial action to guard the stock and a significant and urgent reduction of exploitation rate should be considered in order to avoid a stronger stock decline. The corporate world in turn is attributing more significance to supply chain management as an essential instrument to improve worldwide operational efficiency in face of globalization and at the same time companies are including environmental and social aspects in their up and down-stream purchasing requirements according to strict quality standards (UNEP 2009). Nevertheless, the control or management of the supply chain requires that information flows with the product in all the stages of the chain, production, processing and distribution, which can be realized by the own enterprise or an auxiliary company. Given the high importance of the value chain approach to avoid fish stock depletion and the difficulties faced by governments, organizations and international institutions with the management of global natural resources, it is important to perform an analysis of a specific region and product in order to verify how firms are confronting the problems mentioned above. Of particular interest is Iceland, a country strongly dependent on fish export and characterized by a well-established and unified fish supply chain based in its own territory and where the cod stocks play a fundamental role in the fishing activity, since they are of primal commercial importance and are suffering from overexploitation.
2. The fish supply chain In this section a general framework of a standard fish supply chain will be described in order to understand how the fish industry is formed and designed what in turn make possible the comprehension of the challenges and problems of all actors in the fish sector. Additionally, a 212
Examples for sustainable Supply Chains (Pro Planet) special attention will be paid to Iceland and its leading and most important fish product, the Atlantic cod.
2.1 General characteristics of the fish supply chain The adaptation of the corporations to a globalized world has transformed the supply chain management in a fundamental instrument to enhance operational efficiency, which is able to support product development cycles, to extent product variety, to improve quality, to fulfil the customer contentment feeling and to attend demands and requirements of clients (UNEP 2009). Additionally, the value-chain approach offers an adequate framework where the connection among the sectors can be better understood and analyzed (OCDE 2010). An essential factor of the recent further development of the supply chain methodology is based on the recognition of critical control points in the entire production process where a fail could have happened in a determined time and the quality of the product could be jeopardized. The control of these critical points reduces attention to less important problems, therefore increasing the monitoring efficiency and guarantying a standard quality service. In the food market specifically the Hazard and Critical Control Point (HACCP) processes generate an adequate level of food safety and reduce waste derived from low quality material, making feasible the fulfilment of food safety regulation, the flow of information considering social and environmental characteristics of the production and providing evidence that rules were followed (UNEP 2009). The type of product, country of precedence and target market, for export or internal consumption, determine the extension of the supply chain, considering that the shorter the physical distance from producer to consumer, the smaller and more transparent the supply chain. The complexity of the fish supply also depends on the degree of integration of its participants, horizontally or vertically, according to their relationships and ownership structures across the production process. In reality, there are dissimilarities in supply chains among a diversity of countries and regions that are analogous to socio-economic, environmental characteristics and cultural discrepancies. Dissimilarities in the supply chain can also be found according to fish species, products and harvesting techniques, i.e. industrial production, artisanal production, aquaculture or capture (UNEP 2009). The world fish market suffered considerable modifications in the past years characterized by a continuous process where the companies in the fish value chain try to extent their markets, diminish production costs and look for remunerative returns in an expanding globalized business atmosphere. At the same time this evolution is also based on new
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The fish supply chain production methods and products, outsourcing of production processes and fragmentation (OCDE 2010). In face of the variety of possible supply chains, one can demonstrate that a general structure can be used to represent them, independently of product or location. Thorpe and Bennett (2004) state that the general composition of the fish supply chain can be described as a set of interdependent fishers, agents, processors, distributors and wholesalers/retailers/food services that interact to offer a fish derived product to the consumer and each of these sectors has certain specific characteristics. Since no individual organization along the fish supply chain is isolated, problems faced by one member of the supply chain can impact the entire chain, in special the livelihoods of fishers because fishing is their unique source of income in both developing and developed countries (UNEP 2009, OCDE 2010).
2.2 Iceland and the cod fisheries supply chain Iceland with its 280,000 inhabitants reaches the 13th position in the world’s fishing league with fish catch and processing of fish amounts to 2% of the global fish consumption. Fish make up 67% of Iceland’s total exports, while 25% comprise manufacturing goods, mainly aluminum and fish processing machinery (FAO 1999). Annually 1,7 billion kilograms fish is caught whereas the number underwent an increase of 58% in the last decade. On the other hand the number of fishermen and other workers of the fish industry suffered a decrease. Latest, the fish industry employs 8.7% of Iceland’s total labor force. More and more, the industry is automated and makes use of newest technologies. Each boat has to comply to specific annual quota for fish catch which is controlled (HAMERI AND PALSSON 2010). The importance of the fishing industry can be clarified with the incident at the beginning of the 1990s. In this time the economic growth has suffered a sudden fall which could be explained by the average annual catch reduction by more than 30%. In addition, species with high value, like cod, were especially low. The whole economy was faced with a recession which came to an end by the increase of fish catches. To avoid such catastrophic situation the industry developed a quota system to balance the overall catch and to control the industry. This system became very important as the industry gained in competitiveness. (HAMERI AND PALSSON 2010). Contrary to nowadays, the high value cod has traditionally been the main source of income of the groundfish industry. This fact changed due to clear overfishing in cod fisheries. Approximately, in the 1970s, there were, 200 000 to 300 000 mt of reproductive cod in the 214
Examples for sustainable Supply Chains (Pro Planet) North-East Atlantic, the North Sea and the Baltic, while in comparison in 2003, this number had fallen to below 50 000 mt (GLOBEFISH 2003, OCDE 2010). Groundfish is the second most important species after shrimp and is characterized as a group of species that can be found in the cool waters of the Atlantic and Pacific Oceans (OCDE 2010). The total cod catch in the world has reduced by two thirds in only 30 years. Whereas in 1970, every third white fish caught worldwide was cod, today it is one in ten (EUROFISH 2003). The strong demand for groundfish has raised the fishing and raw material costs and led to relocation to more economically viable fisheries. With that the interest in groundfish aquaculture has expanded (OCDE 2010). Utilization of cod is dependent on the size and texture of the catch. Large cod is used in the production of salted cod and medium size cod utilized to process frozen and fresh cod fillets. Cod products are mainly sold to three markets, Europe, Asia and the US, with the bulk of exports going to the EU and the US. The US cod market is the single most important market for cod with more than 12% of the total export market. Icelandic companies offer a homogenous range of products in all states. These elements mean that the US market has a simple supply chain, focusing on the restaurant and catering business, with a homogenous product. In the EU, cod is sold to both restaurants and the retail sector and many country specific sub-markets exist. This results in a much more fragmented supply chain. (UNEP 2009). The Atlantic cod presents well the overall dynamics of fish catch in terms of continuous high demand and different products that are processed from it. The last 8 years in Europe have demonstrated that the overall export and import activities put pressure on the production numbers, which rose after a short delay. The situation in Iceland has changed considerably during the same period. The cod catch has been steadily declining, while the overall demand in its European market has been increasing all the time. Certainly the fisheries in Iceland would have liked to get catches similar with those in the early 1980s and during the entire of the 1990s (HAMERI AND PALSSON 2010). The Icelandic cod supply chain is in many ways very different from other supply chains, a detailed description of it can be seen in the diagram 1 below. Icelandic companies control practically all the supply chain from harvesting the cod up to its distribution. Also there are as few as two companies involved along the whole supply chain. This results in good traceability and transparency (UNEP 2009).
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Traceability, transparency and communication Diagram 1: Icelandic cod fisheries
Another characteristic of the Icelandic cod supply chain is that all processing of the fish is implemented in Iceland, which is not common. When considering the supply chain of fresh fish fillets, the capacity to optimize added value by supplying markets on a daily basis is fundamental. Thanks to their highly integrated supply chains, Norway and Iceland dominate the European fresh fillet market. The frozen fillet market by contrast is dominated by China which has a very high rate of yield for fish fillets as well as low production costs (UNEP 2009).
3. Methodology The main purpose of this study is to point out specific problems faced by the fish supply chain in the world and in Iceland, an important fish exporter which has the Atlantic cod as one of the main drives of its fishing activities and a country dependent on fish export to sustain its economy. After a description and analysis of the general and specific fish supply chain, we will look into detailed problems affecting the fish industry in order to better comprehend how the Icelandic Group is dealing with them and evaluate if the strategies adopted by the company are adequate and in line with the unsustainable issues presented. Precisely, each difficult or barrier faced by the fish supply chain should have a correspondent policy implemented by the Icelandic Group, and at the same time these strategies should implicate in improvements for the consumer or society and for the company and its trading partners.
4. Traceability, transparency and communication In this section the problems related to lack of traceability in the global fish supply chain and to communication of unsustainable fishing issues to the consumer will be analyzed and described in a general manner. Afterwards, we will compare it with the answers and policies of the Icelandic Group in order to contribute to the solution or alleviation of these sensible points. 216
Examples for sustainable Supply Chains (Pro Planet)
4.1 Unsustainable fishing issues According to Roheim (2008) there is a diversity of causes contributing to the persistence of unreported and unregulated fishing such as inappropriate national laws, insufficient funds and high costs of technology. In addition regional governance is plausible only if individual governments act together what is difficult to be happen while surveillance and enforcement are very expensive and sometimes port state controls and trade measures are insufficient. These factors result not only in over-fishing, they also generate economic and welfare losses to the society. The flow of information with the product across production, processing and distribution stages could enhance and make feasible the enforcement of efficiency along the fish supply chain. Traceability is the appropriate instrument capable of registering the way a product follows from its origin to the consumer and allows a better management of the supply chain and can increase consumers` ethical awareness that can influence purchase decisions. By creating a recorded chain of events and places a product has gone through, traceability is the essential mechanism that produces: a response to legal requirements in terms of food safety, the transmission of information regarding social and environmental aspects of the production and proof that related requirements are fulfilled (UNEP 2009). A chain of custody certification has to begin at the level of the catch, not the landing and be non-forgeable to be effective and able to identify and curb illegal, unreported and unregulated fishing, which requires capital investment in technologies, such as vessel monitoring systems, radio frequency identification, bar code management, DNA analysis and electronic log books (JOHNSON 2008, UNEP 2009) The common lack of traceability in the fish market however make difficult to determine exactly where the fish comes from, what in turn open the possibility to abuses as mentioned before. At the same time, this situation weakens the information credibility associated to the product and makes difficult the reconstruction of way performed by the fish until the plate of the consumer. It may be feasible to recognize the fish species or its safety as a food product by examining the product on the shelves, but the details of its production is lost (UNEP 2009) Traceability along the supply chain and in both directions is the base of the Hazard Analysis and Critical Control Points (HACCP) methodology in the fish and food industry that allows the recognition of critical control points along the chain. The adoption of the HACCP systems in the fish and food industry have been legally enforced by many developed countries, but the lack of traceability leads to failures in the identification of critical control points and 217
Traceability, transparency and communication verification processes resulting in possible withdrawal, recall and refusal of entry of fish products in their markets (DILLON 2004). The HACCP for seafood products deriving from capture fisheries critical control points is based on the following procedure until the product arrive at the processing plant or wholesaler: 1. the identification of the boat, 2. date of capture, 3. location of capture, 4. species identification and net weight, 5. where an agent or fish collector is involved the fish should be labeled with date and time of landing (UNEP 2009). As probably the unique instrument making feasible the transfer of information from one actor of the supply chain to the other in a systematic manner, traceability is a crucial and fundamental prerequisite for sustainable supply chains. An essential factor for a sustainable supply chain is that information related to sustainability issues, socio-economic and environmental, can be available to those involved in a useable fashion. One of the important contributions of ethical labels, for example, is that they have permitted consumers to make informed purchasing decisions (UNEP 2009). In recent years privately initiated approaches are being employed by the seafood industry via management of the chain-of-custody of seafood products, which needs full traceability of the product back to the vessel at capture, such as that of the Marine Stewardship Council (MSC) program for sustainably-managed capture fisheries, and that of the European Fish Processors Association (AIPCE). While the MSC was not designed to avoid illegal, unregulated and unreported fishing (IUU), the chain of custody certification program can offer a better way of managing a supply chain free of illegally seafood products (ROHEIM 2008). The economic stimulus generated by these initiatives can be understood under the concept of corporate social responsibility, i.e. the corporate buyers at the top of the supply chain such as retailers and processors have to protect their reputation and maintain the value of their brand. Therefore, being associated with the purchase of illegally-caught product diminishes the value of their brands and weakens their reputations, what several corporations are trying to prevent (ROHEIM 2008).
4.2 Corporate social responsibility strategy of the Icelandic Group Considering the most sensible and important problems related to sustainability in fisheries pointed out before, the Icelandic Group company will be taken as a concrete example of a responsible business behavior that is establishing a clear, well structured and defined corporate social responsibility policy in order to avoid the depletion of fish stocks and unsustainable practices. The enterprise states that they only utilize fish stocks produced in a 218
Examples for sustainable Supply Chains (Pro Planet) sustainable manner when is possible, i.e. according to adequate fishery management system based on scientific assessment and administered by governmental or intergovernmental bodies in line with the FAO Code of Conduct for Responsible Fisheries (1995) as a solid foundation for their global business. The company also encourages fisheries to acquire a certification from an independent and credible standard based on the FAO Code of Conduct for Responsible Fisheries (1995) by supporting and positively inducing the fisheries they buy from. It supports the development and implementation of the Icelandic Responsible Fishing standard and the Marine Stewardship Council standard in order to achieve certification in the Icelandic fisheries. These standards are complementary and able to indicate that the fisheries which get certification are strongly sustainable. Frequently the enterprise targets determined groups of boats for their best fishing methods and for the manner they look after the catch. At the same time the Icelandic Group act politically in favor of the introduction of plans to maintain fish stocks at levels able of generating maximum yields on a long term basis (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b). In addition the company has encouraged the development and general adoption of certification standards for aquaculture such as Global Gap and the Global Aquaculture Alliance (BAP) farming standards. It also joins the WWF Aquaculture dialogues and is in favor of the establishment of the Aquaculture Stewardship Council. The Icelandic firm has trained auditors in their group that can evaluate fish farming activities and guarantee authenticity and verification of their own standards or a special criteria demand by the customer (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b). The quality inspectors and auditors visit supplier factories, vessels, and farms to verify the specifications for good manufacturing practices. At the same time, they avoid food safety problems, i.e. foreign material and microbiological contamination, and therefore protect the customers, considering that the company requires a uniform high safety and quality standards. Seafood products is best guaranteed by a clean marine environment and good manufacturing practices based on correct sanitation procedures in handling and processing and a thorough understanding of the factors which may generate contamination of the product (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b). The company track wild caught fish back to the catching vessel or identified group of vessels and their landing ports, where it requires legal compliance or certification that recognize the specific catch area. In a similar way, aquaculture products are tracked until the farm site and the records indicate traceable movements and origins back to the stocks. Complementarily, 219
Summary and Conclusion the enterprise factories have invested in computer and labeling systems to secure that all of their fish is completely traceable in the factories (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b). The enterprise only select suppliers that are working in a transparent and responsible way and are able to offer traceability to vessels that have legal permission to fish. It states that its suppliers are completely following the EU and other governments required certification standards. Additionally, it is in favor of a global adoption of certification and its utilization in fish meal and fish oil, restricting the possibilities for unregistered and illegally caught seafood. Moreover the group is not trading with other companies that threatening legally protected species and can provide information about the origin of its fish with the respective farm location or catch method and facilitate informed purchasing decisions of the consumers (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b). The adoption of ecosystem fishery management is strongly recommended by the company in order to avoid throwing overboard dead fish which are under the minimum legal catch size or for which the boat does not possess a quota. All fisheries are encouraged to reduce the catches of unwanted fish based on selective fishing methods and permits their retention and sale to minimize waste. The financial resources resulted from this policy can be allocated in investment funds used to finance fisheries science. Moreover the by-catch is impossible to avoid completely since the some undesirable fish or shellfish can be found swimming close to the targeted fish (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b). The Icelandic group make increasing efforts to minimize all types of waste, such as food or packaging waste and is committed to reuse and recycling of packaging materials. This policy in turn can be summarized in the following points: 1) higher percentage of recycling within the controlled supply chain, 2) increase of recycling by the consumers by simplifying the packaging and making it simpler to recycle, 3) reduction of the packaging weight, 4) higher use of reusable or washable containers between our suppliers and our factories, and 5) higher utilization of biodegradable packaging (ICELANDIC GROUP 2012a, ICELANDIC GROUP 2012b).
5. Summary and Conclusion In this investigation it was possible to understand the causes that are leading the global fish stocks to collapse, fundamentally based on idea of global commons, i.e. fisheries are a unowned natural resource and susceptible of suffering the tragedy of commons. In order to evaluate how the Icelandic Group company, a processor and trader of fish products, are 220
Examples for sustainable Supply Chains (Pro Planet) reacting to sustainable fish problems, we look into the importance of fisheries in the economy of Iceland, describe and analyze the global and local supply chain where it is inserted in. The main difficulties faced by the supply chain management and the possible ways to overcome them are presented and discussed, which in turn were used as reference to interpret and assess the corporate social responsibility policy of the Icelandic Group. It was possible to verify that the company is implementing a great variety of strategies to lead with unsustainable issues and contributing therefore to solve or minimize them. At the same time, it can clear that the Icelandic Group is not only improving their own business, but also influencing the actors of the supply chain that are interacting with it, and in addition to that the company is generating positive effects on the welfare of the society. It is visible that the Icelandic Group has a strong corporate social responsibility policy that correspond to all three dimensions of the sustainability concept designed in the Brundtland Comission (1987), therefore it is possible to affirm that the company differentiate itself from others and can be treated as example to be taken in Iceland and around the world.
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http://cmsdata.iucn.org/downloads/supply_chain_management_roheim.pdf Thorpe, A. and Bennett, E. (2004). Market-Driven International Supply Chains: The Case of Nile Perch from Africa’s Lake Victoria. International Food and Agribusiness Management review, Vol. 7, Issue 4. UNEP
(2009).
The
Role
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Retrieved
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http://www.unep.ch/etb/publications/Fish%20Supply%20Chains/UNEP%20fish%20supply%20chains%2 0report.pdf
223
Personal Notes
Personal Notes
Personal Notes