Problems with Firm-Led Voluntary Sustainability Schemes: The Case of Direct Trade Coffee

Abstract

Abstract:Ensuring sustainable consumption and production is one of the United Nations' Sustainable Development Goals. Sustainable consumption can be supported through regulatory processes. Voluntary private regulatory schemes claiming to contribute to sustainability are a rapidly growing form of regulation. We study one such voluntary sustainability scheme in order to look at the opportunities and challenges this type of regulatory process poses using Abbot and Snidal's regulatory standard-setting framework (2009). Specifically, we examine direct trade voluntary schemes in the coffee industry. To do this, we selected six leading direct trade firms in the US and Scandinavia, analyzed firms' websites in 2015 and 2016 and conducted interviews with four of the firms. We found direct trade as a voluntary scheme was an attempt to market and codify good sourcing practices. US-based founding firms have distanced themselves from the term due to perceived co-optation, which we conceptualize as the failure of industry to self-regulate and argue was enabled by the re-negotiation of standards without the power to enforce or penalize misuse of the term. Firms reacted to co-optation by releasing data to consumers directly; we argue this puts too much responsibility on consumers to monitor and enforce standards. By contrast, Scandinavian firms maintained standards enforced through trademark nationally. Both US and Scandinavian contexts demonstrate a weakness of firm-led agenda-setting for sustainable development in that schemes may be optimized for a particular business concern-in this case quality-rather than to achieve sustainable development goals. This is problematic if schemes are marketed on contribution to the public good when incentives within the scheme are not aligned to produce an optimal result for the public good.

NGOs and the creation of value in supply chains

“…These findings are consistent with sustainability initiatives in the coffee market where large coffee roasters, such as Nestle and Mondelez, have their own sustainability training programs for farmers, while Starbucks, which has a lower market share, partners with Conservation International (Panhuysen & Pierrot, 2014). Interestingly, a small roaster Counter Culture Coffee originally established its own certification scheme, but eventually abandoned it (MacGregor, Ramasar, & Nicholas, 2017), consistent with our results that weaker firms should not pursue internalization. Furthermore, comparing Figures 3b and 3c, we can see that as the supplier's ex ante quality grows the area where the firm benefits from internalization also increases, while the area of collaboration with the NGO is reduced.…”

Sustainable Global Sourcing: A Systematic Literature Review and Bibliometric Analysis

“…1 Journal of Supply Chain Management, 2 Journal of Operations Management, 3 Supply Chain Management: An International Journal, 4 International Journal of Production Economics, 5 Corporate Social Responsibility and Environmental Management, 6 Business Strategy and the Environment, 7 European Management Journal, 8 International Journal of Operations and Production Management, 9 Journal of Business Ethics, 10 Journal of Cleaner Production analysis…”

“…However, firms sourcing globally have also long been accused of not addressing social and environmental concerns sufficiently, e.g., disregarding for environmental regulations, working conditions and corruption [5]. Large multinational companies, e.g., H&M, IKEA, Nestlé, Pfizer and Puma, have begun to proactively integrate both social and environmental sustainability into their corporate strategy, largely due to pressure from consumers [6][7][8]. In the literature, the number of papers concerned with supply chain management (SCM) and social and environmental sustainability, as well as corporate social responsibility (CSR), has increased exponentially [9][10][11][12][13].…”

Analytic Framework to Determine Proximity in Relationship Coffee Models

“…Trust and commitment of both roasters and producers are crucial. MacGregor et al () studied direct trade of coffee in the USA and Scandinavia by looking at the founding direct trade roasters. They found that direct trading started as a tool to improve coffee quality and producers’ income and to establish regular communication.…”

“…Like in other types of AFNs, there is supposedly some form of proximity between chain actors, despite the geographical distance of production and consumption (Vicol et al ). However, over time, the term direct trade has been co‐opted by an increasing number of coffee roasters (MacGregor et al ). The first direct trading companies are currently drawing back from the term because other roasters are extensively using it in their marketing strategy without complying with the initially high moral standards (MacGregor et al ).…”