Corporate investments in supply chain sustainability: Selecting instruments in the agri-food industry

Private investments to address environmental issues are perceived as a powerful engine of sustainability. For the agri-food sector, multiple instruments have been developed to green supply chains. Yet little is known about the underlying process and conditions under which green sourcing concerns lead to the adoption of specific sustainability instruments among agri-food companies. This study: i) offers a synthesis of the most commonly used instruments agri-food companies adopt to promote sustainability in their supply chains; ii) proposes an analytical framework to elucidate how those decisions are made, based on the competitive environment in which firms operate—with respect to location of their raw materials, technologies available to their suppliers, leverage over upstream suppliers, and end-markets’ characteristics; and iii) presents seven case-studies illustrating the decision-making process leading to the adoption of a specific instrument by a particular company. Companies that do not have sustainable technologies available to improve their environmental practices but operate in highly sensitive places are better off taking their operation somewhere else. But companies with available cleaner technologies, effective law enforcement and control over the supply chains, as well as a brand to protect, can capitalize on their environmental efforts by introducing strict standards, such as third-party certifications. Enforcement of social and environmental regulations at countries of origin is a key factor that deters companies form adopting very strict standards, even if they have a brand value to enhance. The multiplication of private labels and initiatives are, in most cases, not driven by a desire to disorient the consumer, but rather by a careful consideration of the complex conditions under which agri-food supply chains operate. With minor adaptations, the framework could be applied to other economic sectors that have environmental impacts, from mining and energy-generating industries, to apparel, and electronics.