Brands go for ethical certification to protect reputation, not maximise profits

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Food manufacturers sign up to traceability schemes like Fairtrade and Certified Sustainable Palm Oil (CSPO) to improve their supply chains and traceability rather than bump up the price of their profits and score marketing points, according to new research conducted in Italy.

EU firms have to adhere to minimum levels of traceability under food laws, but they can also choose to add voluntary information and follow one, or a number of, voluntary certification schemes.

The team from the University of Milan wanted to explore what motivates businesses to go further than mandatory traceability and follow voluntary certification schemes – specifically those pertaining to environmental or social issues.

They surveyed 131 food manufacturers in Italy, the majority of which were small (62%) and medium sized firms (24%). The businesses worked across a number of sectors, including fruit and vegetables, wine, confectionery and processed seafood.

The schemes followed by the companies were both B2C (for example, Fairtrade and Friends of the Sea) and B2B (like CSPO).

The experts found a negative and significant relationship between profitability-related motivations and the level of traceability complexity implemented”.

They suggested this was probably because when firms adopt sustainability certifications to save production costs or in response to a potential marketing opportunity, “their willingness to invest in complex and expensive traceability will not be in line with their main motivations”.

For example, if a brand adopts a sustainability certification in a bid to bump up the price, it’s probably going to focus any investment on market recognition for the certified product rather than costly traceability.

Not for profit

But more often the schemes are used for reasons other than profit. The researchers concluded that: “… confidence-related and supply chain motivations are positively related to the level of traceability complexity”.

In other words, firms prefer to invest in complex traceability in order to maintain consumer trust and protect their market share. Efforts to improve transparency in the palm oil supply chain are a topical example.

In their paper for the journal Food Control, the authors explained: “… when firms implement certifications to foster supply chain efficiency, the traceability that they will implement has a high level of complexity. Indeed, when firms want to reduce unfair practices and opportunistic behaviour of economic agents, they will adopt certifications aimed at efficiently managing these events through complex traceability rules.”

Interestingly, small firms were found to be more likely to go further when it comes to traceability. This, said Stefanella Stranieri and her co-authors, was likely to be a result of their “low bargaining power” in the supply chain. Though certification can be costly, the higher levels of transparency can help protect the reputation of small manufacturers with both retailers and consumers, they noted.

Source: Food Control

First published online May 2017, DOI: 10.1016/j.foodcont.2017.04.047

“Do motivations affect different voluntary traceability schemes? An empirical analysis among food manufacturers.”

Authors: S. Stranieri, A. Cavaliere and A. Banterle

 

 

 

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