handling wicked problems upstream in supply chains a

Handling wicked problems upstream in supply chains – A capabilities assessment framework for multinational corporations

Figure 1: Palm oil operations in Liberia (source: Business & Human Rights Resource Centre, 2019)

Elonie Kooter

94030365010

11 October 2019

MSc Thesis Environmental Policy Group

ENP-80436

Dr. Hilde Toonen

1

.

Acknowledgments

It has been a great journey to write this thesis, but it also marks the end of a few eventful years. Therefore,

first of all, I would like to thank my family and my boyfriend Virgil, who gave me the strength and space

I needed to overcome hurdles and successfully complete these studies. Furthermore, writing this thesis

would not have been possible without the support of my supervisor, Hilde, who gave me a feeling of trust

and the freedom to complete this final step of my studies at the pace that felt right for me. During the

times I was struggling with the development of the framework and placing it in a broader perspective, she

posed even more critical questions to foster my thinking and make me lift this paper to a higher level. I

am also thankful for the valuable lessons I learned from the experts I spoke with during my research.

Getting to know the complexities of the world of sustainable supply chain management inspired me to

continue to work in this field. In addition, I want to mention Ela, who was so kind to correct and provide

extensive feedback on my English. Finally, I want to thank Carly, Laura, Jessica, Yaël, and Judith who

supported me throughout the process and thought along when needed.

Elonie Kooter

Amsterdam, The Netherlands

11 October 2019

2

Executive summary

Many production locations of goods consumed in the Western world have moved to developing countries,

consequently, the environmental and social impacts have been transferred across national borders as well.

Supply chains of multinational corporations (MNCs) have become geographically and institutionally

dispersed, and social and environmental protection can no longer be enforced by a single government.

However, there is an urgent need to halt the negative impacts of production, especially upstream in supply

chains, such as deforestation for the purpose of creating palm oil plantations, child labour in mines, and

dangerous working conditions in factories in the garment industry. A common view is that MNCs can fulfil

an essential role in dealing with these challenges through sustainable supply chain management (SSCM),

and increasingly put pressure on MNCs. As these concerns can erode a company’s legitimacy, MNCs have

become more inclined to take responsibility. But they have also experienced difficulty in doing so, as many

of the challenges they face can be considered to be ‘wicked problems’. Such problems are hard to frame,

much debated and incredibly difficult to solve due to the interdependencies and complex social dynamics.

The theoretical approach of governance capabilities provides a way of studying these wicked problems.

From an internal perspective, this approach looks at the ability of decision makers to observe wicked

problems and take suitable actions, as well as the ability of the governance system to enable such

observing and acting. This study explores the theoretical and methodological possibilities for

operationalizing the capabilities approach for an assessment of MNCs operating in global supply chains. It

investigates the capabilities of MNCs that can contribute to enhancing their ability to handle wicked

problems upstream in their supply chain. In order to actually operationalize the capabilities approach, the

existing literature on supply chain sustainability was reviewed and expert interviews were conducted to

verify these ideas. Based on this, through an iterative process, a selection of relevant descriptors and

indicators was made and an assessment framework was developed. The capabilities included are:

▪ Responsiveness: the ability to observe and respond to pressing issues effectively

▪ Reflexivity: the ability to deal with a variety of possible perspectives on wicked problems

▪ Resilience: the ability to flexibly adapt to unpredictable, changing circumstances

▪ Reorientation: the ability to collaborate in order to unblock stagnations

Given that dealing with wicked problems not only requires action strategies but also observing and enabling

factors, every capability consists of three categories that are mutually reinforcing. In the framework, an

ordinal three-point scale is used that corresponds with the three strategical orientations of MNCs: a

stewardship orientation, an equidistant orientation and an instrumental orientation. In the application of

the framework, the description of the orientation that matches the practices of the companies best

determines the score that is assigned. An example of one of the elements of the framework, namely

reorientation acting, is provided in Table 1 below.

3

Capability Category Descriptor Assessment score

Reorientation acting Stance taken towards other stakeholders within and beyond the own supply chain

Stewardship orientation: The company shows thought leadership by sharing a positive vision and positive lobby, tries to stimulate other companies that lag behind, and actively works together with governments and international organization on legislation. Equidistant orientation: The company actively stimulates defining a sector strategy and has a non-competitive agenda in place. Managers are opportunistic in applying sustainability initiatives with other stakeholders. Instrumental orientation: The company tries to distinguish itself from competitors through its sustainability strategy, and works together with stakeholders within its own supply chain. External ties of managers are used to monitor NGO pressure and other potential sustainability risks.

Table 1: One element of the capabilities assessment framework for MNCs (reorientation acting)

Two test sessions were organized with Verstegen Spices & Sauces B.V. and an agricultural multinational

to test whether the operationalization of the capabilities approach into a theoretical assessment framework

could be applied in practice. In both sessions, the participants were able to apply the framework and

assign a score to nearly all elements. Although the theoretical descriptors and indicators matched their

reality, the process was experienced as rather complex. In future application of the framework, it is

recommended that the process of self-assessment is guided by an expert, and the phrasing in the

framework is simplified by the use of less theoretical terms and examples. More research on elements of

the framework related to structural embedding could benefit and support its further development. The

theoretical translation of the capabilities approach into a capabilities assessment framework for MNCs can

in essence be seen as a first step. Future research should investigate whether the presence of capabilities

leads to more effective tackling of wicked problems and the way lessons learned about internal capabilities

can be turned into actions. The assessment framework in its current design proves valuable, as it gives

MNCs a possibility to detect possible weaknesses and identify opportunities to strengthen their ability to

deal with wicked problems in their supply chain.

4

Table of contents

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

List of figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

List of tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Scientific and social relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Research questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Outline of the thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1. Theoretical foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

1.1 Multinational corporations in global supply chains . . . . . . . . . . . . . . . . . . . . . . . . 14

1.2 Sustainability in global supply chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

1.3 Wicked problems and governance capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

1.4 Governing sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

1.5 Chapter conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2. A capabilities assessment framework for MNCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

2.1 Responsibility and strategic orientations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

2.2 Justification and verification of the assessment framework . . . . . . . . . . . . . . . . . . 28

2.3 Overview of the ‘Capabilities assessment framework for MNCs’ . . . . . . . . . . . . . . . 66


3. Test case studies: Verstegen and an agricultural multinational. . . . . . . . . . . . . . . . . . . . . . . . 71

3.1 Background information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

3.2 Interpretation of scores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73


4. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

4.1 Design of the assessment framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

4.2 Strengths, limitations and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Overview interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

5

List of figures

Figure 1: Palm oil operations in Liberia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . front page

Figure 2: Supply chain management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Figure 3: Supply chain of food production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Figure 4: Stakeholders involved in a supply of an MNC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Figure 5: The triple bottom line of sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Figure 6: Three modes of governance for supply chain sustainability . . . . . . . . . . . . . . . . . . . . . . . . . 22

Figure 7: The position of hybrid organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Figure 8: Illustrative example of negative (-) and positive (+) externalities in the supply chain of an

electronics manufacturer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Figure 9: Overview of the four capabilities included in the assessment framework . . . . . . . . . . . . . . . 28

Figure 10: Icon capability responsiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Figure 11: Overview of stakeholders of multinationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Figure 12: Stakeholder analysis framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Figure 13: Development of strategic direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Figure 14: Materiality analysis Danone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Figure 15: Icon capability reflexivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Figure 16: Adapted overview of stakeholders of multinationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Figure 17: Icon capability resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Figure 18: Palm oil supply chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Figure 19: Icon capability reorientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Figure 20: Framework market transformation ‘who does what and when?’ . . . . . . . . . . . . . . . . . . . . . 61

Figure 21: The five dimensions of collaborative transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Figure 22: Test case session with Verstegen at the office of CEO Michel Driessen . . . . . . . . . . . . . . . . 71

Figure 23: Logo Verstegen Spices & Sauces B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

6

List of tables

Table 1: One element of the capabilities assessment framework for MNCs (reorientation acting) . . . . . 3

Table 2: Example of the design of the capabilities assessment framework for MNCs . . . . . . . . . . . . . . 21

Table 3: Responsiveness observing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Table 4: Responsiveness acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Table 5: Responsiveness enabling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table 6: Reflexivity observing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Table 7: Reflexivity acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Table 8: Reflexivity enabling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Table 9: Resilience observing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Table 10: Resilience acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Table 11: Resilience enabling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Table 12: Reorientation observing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Table 13: Reorientation acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Table 14: Reorientation enabling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Table 15: The capabilities assessment framework for MNCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66-69

Table 16: Capabilities assessment score of Verstegen Spices & Sauces B.V. . . . . . . . . . . . . . . . . . . . . 73

Table 17: Capabilities assessment score of the palm oil supply chain of an agricultural multinational . . 75

Table 18: Set-up of a different scoring system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Table 19: List of conducted interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

7

Introduction

Hundreds of workers that died because they were locked up in a collapsing factory building, farmers that

fell ill because they had been spraying cotton with fertilizers for years without any protection, chemical

pollution of rivers, and soil erosion due to mono-cropping. These are a few examples of the social and

environmental challenges people in developing countries are dealing with, often as part of a production

process in a supply chain. Nowadays these issues are not only the problem of people upstream in a supply

chain; companies that have their production process outsourced to developing companies are increasingly

expected to take responsibility for negative impacts of their production. Despite the large distance between

Western customers and the actual impact of production which makes public debate more difficult

(Boström, Jönsson, Lockie, Mol & Oosterveer, 2015, p.2), citizens demand responsible behaviour from

organizations like corporations (Antonaras, 2019; Epstein, 2018). Also, the demands from governments

(Hack, Kenyon & Wood, 2014, p.47) and non-governmental organizations (NGOs) to take responsibility

for creating sustainable supply chains are increasing. International policies and semi-legal frameworks,

such as the OECD Guidelines on Multinational Enterprises and the United Nations Global Compact,

stimulate the new role companies are expected to take up (Schuster, Lund-Thomsen & Kazmi, 2016).

Traditionally, the existence of a company depended on the successful creation of economic value: a

process in which the value of the input is increased and a product or service is created that has a greater

market value and moves up in the supply chain. It was believed that value was either economic or social.

Nowadays, the long-term survival of a company is dependent on the integration of value creation across

three different dimensions of sustainability: economic, social and environmental (Maas & Liket, 2011, p.3;

Pagell & Shevchenko, 2014, p.45). Moving towards sustainable management, also called corporate social

responsibility (CSR), entails that corporations look at the impact of their activities on the well-being of

individuals, society as a whole, and the natural environment (Antonaras, 2019; Ozanne et al., 2016).

Although it is clear that there is a need for more sustainable actions, it can be a challenge for companies

to simultaneously increase their financial, social and environmental performance. Epstein (2018) states

that: “the challenge has moved from ‘whether’ to ‘how’ to integrate corporate social, environmental, and

economic impacts – corporate sustainability – into day-to-day management decisions when managers at

all levels have significant incentive pressure to increase short-term earnings” (p.19). Research shows the

importance of combining the three different impact domains to consumers, but companies are often still

prioritizing the economic dimension and seeking immediate financial gains from their social and

environmental investments (Ozanne et al., 2016). In relation to this, many researchers argue that investing

in social and environmental aspects will lead to a better financial performance, and the three dimensions

of sustainability can thus be achieved simultaneously (Ozanne et al., 2016). This ‘win-win approach’ is

often used to legitimize sustainability strategies. Carroll and Shabana (2010) take an opposite stance, and

show that it is not possible that the effect of actions taken in the social and environmental domain is

always positive for the financial performance of a company.

8

The picture becomes even more complex if one looks at the way companies operating in global supply

chains try to improve their sustainability performance. This is because most of the problems multinational

corporations (MNCs) are facing exceed beyond the individual level (Andersen & Skjoett-Larsen, 2009,

p.77), and can be considered ‘wicked problems’. This is a term used in the academic literature to refer to

problems that are ill-defined, ambiguous and disputed, and often consists of interdependencies and

complex social dynamics (Termeer, Dewulf, Breeman & Stiller, 2012, p.680). An example of a wicked

problem that challenges MNCs is deforestation. Think for instance of the palm oil industry (see also Figure

1): palm fruit is grown on plantations and processed into crude oil in mills; a company buys palm oil

directly from such a mill and works together with the farmers to ensure that no forest is cut. But around

this forest nine other mills are operating that form a risk for deforestation. Although the company is not

buying any palm oil from these other mills, they cannot just claim that it is not of their concern, as

deforestation continues to take place in the forest next to the mill of their own supplier (S. van Heemskerk,

personal communication, 26 July 2019). Different strategies are thus required and no simple solution is at

hand. But this is just one of the many challenges MNCs are facing in their supply chain.

Besides the wicked problems a company has to handle within its own supply chain, such as deforestation,

creating a sustainable supply chain can be seen as a wicked problem in itself, because there is no blueprint

available for an effective governance model for sustainability. As every company is operating in different

ways, selling different products, buying from different suppliers in different countries, every company has

to deal with the specific characteristics of its own supply chain (Boström et al., 2015, p.6). There are

several MNCs operating in global supply chains, like IKEA, that have successfully implemented CSR

strategies and have made their performance in their supply chain more sustainable over the past years.

But because of the specific characteristics of each supply chain, their strategies cannot just be copied by

other MNCs. With regard to this, Andersen and Skjoett-Larsen (2009) conclude in their study on CSR

practices in global supply chains that “[…] so far only a limited number of multinational corporations ‘walk

the talk’ of CSR in their global supply chains” (p.78). Pagell and Shevchenko (2014) are more pessimistic

and argue that even the supply chains of front-runners are not yet truly sustainable. In their vision “true

sustainability remains an aspiration” (p.45).

Scientific and social relevance

It becomes clear that still a lot of work remains to be done for MNCs in global supply chains and that

change is required. CEO Larry Frank of Black Rock Investment, the largest investment fund in the world,

also calls for responsible behaviour: “Society is demanding that companies, both public and private, serve

a social purpose. To prosper over time, every company must not only deliver financial performance, but

also show how it makes a positive contribution to society” (MaatschapWij, 2019). Yet, there is no

consensus about what a sustainable governance model of companies should look like, let alone what

strategies should be used to achieve sustainable performances in supply chains. Scientists are just

beginning to understand the governance challenges of companies involved in dealing with economic, social

and ecological complexities in global supply chains (Boström et al., 2015).

9

Boström et al. (2015) therefore argue that “a broader social science view on supply chains is necessary if

we are to understand how unsustainable practices (continue to) prevail and how more sustainable ones

could be facilitated” (p.6). One way of contributing to this broader social science view is by looking at the

internal resources of a company that are necessary for sustainable practices. This is not something new.

In the past, Bowen, Cousins, Lamming, and Faruk (2001), among others, have looked at the influence of

supply management capabilities of a firm on its ability to ‘green’ their supply process. De Bakker and Nijhof

(2002) have developed an assessment framework of organization capabilities to define how well

businesses are equipped to address internal and external stakeholder interests. More recently, Epstein

(2018) has developed a corporate sustainability model that looks at what inputs, processes, outputs, and

outcomes are needed to successfully implement a sustainability strategy. Moreover, Nijhof, Schaveling

and Zalesky (2019) have looked at the influence of the strategic orientation of a company on the

emergence of dynamic managerial capabilities. However, these theories are not specifically tailored to

handle wicked problems upstream in supply chains. This requires a different approach, where specific

attention to broader dynamics (Meckenstock, Barbosa‐Póvoa, & Carvalho, 2016) and the interaction with

other stakeholders is needed. Furthermore, these previous studies focus to a large extent either on

management processes, or on accountability to external stakeholders, such as investors.

Termeer et al. (2012) have an interesting new approach, in which they look at capabilities from a

governance point of view, and integrate alternative ways of observing and enabling with action strategies

in order to deal with wicked problems1. In line with this, they define capabilities as “[…] the ability of policy

makers to observe wicked problems and to act accordingly, and the ability of the governance system to

enable such observing and acting” (Termeer et al., 2012, p.683). Whereas most studies focus on the

operational side of dealing with sustainability in the supply chain, this study will follow the capabilities

approach of Termeer et al. (2012) to make sure that not only actions are taken by MNCs, but that

companies also have the ability to properly observe and embed different capabilities in their organization.

The aim of this study is to gain insight into the capabilities that give MNCs the opportunity and freedom

of choice to observe wicked problems in their supply chains and to take responsibility. It challenges

corporations to think differently about their impact. Instead of trying to directly come up with solutions,

companies are invited to look at the way their governance model is designed and what their ability is to

observe wicked problems and to act accordingly. It is relevant to look at what inputs and institutional

mechanisms are required to enable such observing and acting. This research will contribute to a clearer

understanding of the possibilities of MNCs to increase their sustainability performance. A connection will

be made between the internal capabilities of a firm and external factors that will influence its ability to

behave responsibly, not for the sake of creating a competitive advantage, but to concentrate on change

that is sustainable in the long term, for society and the environment at large.

1 The approach of Termeer et al. (2012) will be elaborated upon in the next chapter.

10

Research questions

To create sustainable supply chains, it is necessary to understand how sustainability aspirations of MNCs

can be turned into actual practices. There are many studies and management books on the creation of an

effective CSR governance model, but most of them focus on financial sustainability that can be achieved

by moving towards social and environmental sustainability (e.g. Van Tulder, Van Tilburg, Francken & Da

Rosa, 2012), not on how an actual impact can be made. It is interesting to explore the necessary abilities

of companies to make an impact. This internal focus is important and is translated by Bush, Oosterveer,

Bailey, and Mol (2015) into the question: “What capabilities are required for a firm to deal with

sustainability challenges?” (p.12). Following this internal focus on capabilities, the aim of this thesis is a

theoretical and methodological exploration of the possibilities for operationalizing the capabilities approach

of Termeer et al. (2012), with the intention to develop an assessment framework for MNCs. The main

research question is:

How can the conceptual approach of governance capabilities be operationalized for multinational

corporations, in a way that they can address and enhance their abilities to handle wicked problems

upstream in supply chains?

The main research question can be answered by investigating the following sub-questions:

1. What is the responsibility of an MNC to produce and trade sustainably?

2. What descriptors and indicators, in line with the capabilities approach, are relevant when assessing

the sustainability performance of MNCs in global supply chains?

3. How does a capabilities assessment framework work out for MNCs, represented in this study by

Verstegen Spices & Sauces B.V. and an agricultural multinational?

4. What contributions has the operationalization of the capabilities approach to offer for improving

the governance design of MNCs operating in global supply chains?

The scope of this research includes all MNC that manufacture goods, not service-oriented MNCs. No

restrictions are set to the region or origin of the MNCs or the industry in which the MNC operates. Moreover,

in developing countries, the social and environmental impacts of production are often most severe and a

strong government is lacking to tackle these problems. It is of utmost importance in these countries that

companies take their responsibility (V. van der Linden, personal communication, 20 June 2019). Therefore,

the focus of this research is on the sustainability practices of MNCs upstream in the supply chain and the

impact on the lives of people and the natural environment in producing countries.

Some of the research questions use the concept of sustainability performance while others focus on

handling wicked problems. As will become clear in the theoretical part of the study, the two are closely

related. In order to improve its sustainability performance, a company needs to face wicked problems,

which can be both social and environment-related. When actions to create a more sustainable supply chain

are discussed, the wicked problems a company has to deal with are thus inherently referred to as well.

11

Methodology

A variety of qualitative methods was used for the theoretical and methodological exploration of the

development of a capabilities assessment framework for MNCs. The research was built up in several

stages. In the first stage, the main concepts (global supply chains, sustainable supply chain management,

wicked problems, and governance capabilities) were identified and studied based on the existing literature

in order to build a theoretical foundation for the assessment framework. The same method was used to

answer the first sub-question about the responsibility of companies, which is subsumed in chapter two

and complemented with new information and insights from expert interviews.

The second and most extensive stage of the research was centered around the development of a

capabilities assessment framework for MNCs in order to assess to what extent MNCs have the internal

capacities to deal with wicked problems upstream in their supply chain. A comprehensive study of

academic papers, annual reports of MNCs and policy guidelines was conducted, and served as the basis

for the operationalization of the theoretical capabilities approach of Termeer et al. (2012). The design of

the framework was built upon the capabilities assessment framework developed earlier by Toonen, which

was part of the research on the presence of governance capabilities in voluntary sustainable standards

operating in sustainable global value chains (Toonen, 2018). Following this example, an ordinal scale

consisting of three different orientations (stewardship, equidistant and instrumental) was included in the

framework. This was subsequently complemented with a scoring of one to three points, in order to be

able to come to a final score and estimate an average per category and capability.

Once the initial framework was developed, semi-structured expert interviews were conducted to test the

relevance of the framework and improve the content of the framework based on practical expertise. Four

experts were selected based on relevant publications, recommendations by researchers or other experts

in my network. They represent different backgrounds and perspectives, working for NGOs, consultancy

bureaus or corporations. A test interview was done with Carly Relou, a social impact researcher at Impact

Centre Erasmus, with a threefold aim: (a) to test whether the formulated questions were clear, (b) to test

the relevance of the questions, and (c) to test how much could be discussed within the available time in

order to prioritize particular questions. Adjustments to the interview guides were made based on that.

After that, the following experts were interviewed:

1. Sarah Drost: a consultant at Aidenvironment. Drost has published on global supply chains and has

expertise in supply chain analysis and cross-sector partnerships.

2. Irene Schipper: a senior researcher at Stichting Onderzoek Multinationale Ondernemingen

(SOMO). Schipper researches and analyses productions chains within different sectors and advices

NGOs on screening companies prior to starting partnerships.

3. Victor van der Linden: a consultant at Fair&Sustainable consulting in Ethiopia. Van der Linden

works on supply chain development projects, with a specific focus on partnerships for smallholder

inclusion.

12

4. Marcel Jacobs: he recently started his own business as consultant at Circl8. Jacobs has extensive

experience with supply chain management, gained among others when working as the Director of

supplier sustainability at Philips.

The interviews lasted between one hour and one hour and forty-five minutes and were conducted in

Dutch. The interviews with C. Relou, I. Schipper and M. Jacobs were conducted face-to-face, while S.

Drost and V. van der Linden were interviewed through Skype. All the interviews were recorded and

transcribed directly after conduction. In the interviews, special attention was payed to categories or

capabilities in the framework, developed in this study, that were hard to describe due to knowledge gaps

in the literature. Furthermore, questions about the different capabilities were prioritized based on the

expertise of the different interviewees. For some experts, it was easier to think along with the specific

structure of the framework than for others. Different choices were made based on that as well.

Interpretation of the answers afterwards was very important, as it sometimes occurred that experts gave

an answer to a question about reflexivity, which actually better matched the idea of reorientation. In

addition, it is critical to note that the conduction of expert interviews was an iterative process. Every

interview deepened the insight into the complexity of sustainable supply chains. Suggestions of the experts

were analysed, as they could not directly be copy-pasted into the framework. It was the responsibility of

the researcher to interpret their suggestions, compare them with academic theory and ideas from other

experts, and make sure they would fit into the framework. Improvements were made to the framework

before a new interview was conducted.

In the third and final stage of the study, the framework was validated through a focus group and an

individual workshop with experts from two MNCs, Verstegen Spices & Sauces B.V. (Verstegen hereafter)

and an agricultural company that did not give permission to publish their name in this report (a agricultural

multinational hereafter). These two companies were selected based on recommendations of experts in my

network and my preference for companies in the agri-food sector due to my personal background

knowledge on these specific supply chains. As Verstegen is a relatively small company, it was necessary

to organize another test session with a larger company as well; an individual workshop with an employee

of an agricultural multinational was additionally organised. The focus group with Verstegen took place at

the headquarters in Rotterdam on 19 July 2019 and lasted two hours and fifteen minutes. The participants

of the group were: Michel Driessen (CEO), Marianne van Keep (Director of sustainability), Steven Vogel

(Vendor assurance manager), and Dorianne Wegen (Strategic sourcing spices & herbs). The set-up of the

workshop was as follows: after a short introduction round, the purpose, outcome and process of the

workshop were discussed. The aim of the research and the definition of capabilities were presented, and

the four different capabilities were then explained. The main part of the focus group was applying the

framework. In the end, a short evaluation of the final score and a discussion about possible improvements

took place. An individual workshop with S. van Heemskerk2, Director of sustainability (tropical oils), was

conducted at the headquarters of an agricultural multinational on 26 July 2019 and lasted two hours. A

similar set-up as for the workshop at Verstegen was used, mainly focusing on applying the framework.

2 No permission was given to use the respondents’ real name, Solaine van Heemskerk is a fictitious name.

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The aim of the workshops was to validate the developed assessment framework. By applying the

framework, it was tested if the different capabilities corresponded with the activities of MNCs, and whether

the final score matched with the experienced reality of the participants. Once this last stage of data

gathering was completed, final adjustments to the assessment framework were made and a reflection

upon the framework and recommendations for future research were formulated.

Outline of the thesis

This paper, reporting on the results of the research, consists of five chapters. Chapter one presents the

theoretical foundation of the study, discussing concepts such as global supply chains, wicked problems,

and governance capabilities. The second chapter investigates the first sub-question, namely ‘What is the

responsibility of an MNC to produce and trade sustainably?’, and answers the second sub-question ‘What

descriptors and indicators, in line with the capabilities approach, are relevant when assessing the

sustainability performance of MNCs in global supply chains?’ through an extensive discussion of the

developed capabilities assessment framework for MNCs. The third chapter will evaluate the test case

studies conducted with Verstegen and an agricultural multinational, and answer the third sub-question,

namely ‘How does a capabilities assessment framework work out for MNCs, represented in this study by

Verstegen Spices & Sauces B.V. and an agricultural multinational?’. This is followed by a discussion of the

designed framework, an investigation of the fourth research question ‘What contributions has the

operationalization of the capabilities approach to offer for improving the governance design of MNCs

operating in global supply chains?’ and recommendations for further development, in the fourth chapter.

The concluding chapter is devoted to a synthesis of the key findings, in which the main research question

will be answered, followed by the implications of the study for future research.

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1. Theoretical foundation

In this chapter, the theoretical background of the research will be provided and the key concepts for

understanding sustainable governance by MNCs will be defined. The main theoretical approach that will

be used in this research is that of governance capabilities. Prior to discussing this conceptual approach,

the terms MNC, global supply chains and wicked problems as well as the terminology used for sustainability

in supply chains will be explained. The chapter will close with a discussion of different possible governance

approaches for sustainability in supply chains that will be applied in this research.

1.1 Multinational corporations in global supply chains

An MNC can be defined as an enterprise that processes and/or distributes products or services across

national borders (Rugman & Verbeke, 2004, p.6), but is managed from one country (Business Dictionary,

2019). They are often seen as the key drivers of globalization, as the largest five hundred MNCs in the

world handle half of the trade worldwide (Rugman & Verbeke, 2004). If we look at the supply chain, an

MNC is often seen as the focal company that works together with multiple small and medium scale

enterprises (SMEs). The latter fulfil an essential role by supplying products and services to the buying firm

and distinguish themselves from MNCs in size and the level at which they operate (Morya & Dwivedi, 2009,

p.50). The managing of an MNC is relatively complicated, as:

On the one hand, they must adapt to local circumstances in each country. This calls for

decentralized decision making. On the other hand, they must coordinate their activities in various

parts of the world and stimulate the flow of ideas from one part of their empire to another. This

calls for centralized control. (Hymer, 1982, p.325)

This is certainly the case for MNCs operating in global supply chains, where activities are spatially

dispersed, but require tight coordination and governance decisions across different host countries

(Hernández & Pedersen, 2017, p.143).

If we look more closely at the term global supply chain, one of the first scholars that used the term chain

to describe the different stages of production that shape and contribute to the value of the final product,

was Michael Porter (Bush et al., 2015). The term supply chain has developed from then on and can be

defined as a term that “[…] conceptually covers the entire physical process from obtaining the raw

materials through all process steps until the finished product, directly or indirectly, reaches the end user

as well as the associated information flows” (Tay, Rahman, Aziz & Sidek, 2015, p.893). Figure 2 is a

simplified model of the actions that are required to manage a supply chain. Within this chain there are

reverse and forward flows of information, products and funds.

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Figure 2: Supply chain management (source: Iron systems, 2019)

If the materials that flow within the chain are included, the picture becomes more complicated. Figure 3

illustrates the complexity of the process, showing the input and output in a supply chain of food production.

It also gives a sense of where and which type of environmental impacts occur.

Figure 3: Supply chain of food production (source: Balkau & Sonnemann, 2010, p.48)

Further relevant information is provided in Figure 4, which focuses on the stakeholders that interact in the

supply chain rather than on the management activities or the materials within the chain. The focal firm,

the MNC, is taken as the central player. It becomes clear that an MNC interacts with many different

suppliers (often called multiple tiers) in order to create a product and deals with many different distributors

and retailers before the product actually reaches the consumers. Although it should be noted that the way

a supply chain is organized and the number of different parties involved in the chain vary per industry and

company. This research will specifically focus on the upstream part of the supply chain, and the interaction

of the focal firm (MNC) with suppliers.

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Figure 4: Stakeholders involved in a supply of an MNC (source: Morya & Dwivedi, 2009, p.54). Legend: SS an S stands for

suppliers, MNE for Multinational Enterprise, DTR and D for distributors, R for retailers and C for consumers.

Finally, it is interesting to mention that the terminology used to describe the processes in the supply chain

differs a bit outside the academic literature. Members of the business community adhere to the term

supply chain, but NGOs and government documents sometimes use the term (global) value chain

interchangeably. For example, in a policy paper of the OECD entitled ‘The future of global value chains:

Business as usual or “a new normal”?’ (De Backer & Flaig, 2017) and a document of Oxfam Novib about

the collaboration with Unilever on their value chain (Clay, 2005), the term value chain is used instead of

supply chain. Others, like KPMG, use both terms, value chain as a more inclusive term referring to all

possibilities to add value (e.g. tax benefits) and supply chain as the actual production chain (upstream).

Because the term supply chain is most widely accepted in the academic literature and most suitable for

commodities and commodity markets (Fearne, Martinez & Dent, 2012, p.576), it will be adhered to in this

research. On some occasions, the word global might be added, to emphasize that the supply chain spans

across multiple countries around the world.

1.2 Sustainability in global supply chains

As this research focuses specifically on creating more sustainable supply chains, it is important to define

sustainable development. The best-know definition is from the Brundtland Commission, who stated that:

“sustainable development is development that meets the needs of the present without compromising the

ability of future generations to meet their own needs [sic]” (Manninen & Huiskonen, 2019, p.99). In

relation to this many scientist also refer to the triple bottom line, as described in the introduction, when

discussing sustainability of companies. The idea of the triple bottom line is that the three dimensions of

sustainability, economic, social and environmental, are balanced. At the intersection of these dimensions

long-term economic sustainability can be achieved, while creating positive impact on society and the

natural environment, as illustrated in Figure 5 (Carter & Rogers, 2008, p.365).

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Another frequently used concept in relation to the

discussion of the sustainability of corporations is

Corporate Social Responsibility (CSR). This is a

rather broad term and refers to “a concept

whereby companies integrate social and

environmental concerns in their business

operations and in their interaction with their

stakeholders on a voluntary basis” (Dahlsrud,

2008, p.7). Because of this voluntary basis, a

perception of CSR as a strategy of minimizing harm

is created, instead of a strategy for creating

positive impact. Maas, Relou, Tasmeen, Van

Tulder and Hillen (2018, p.4) describe companies

that have a more pro-active approach towards

sustainability as companies that move beyond

CSR. Furthermore, CSR does not specifically focus

on actions of responsible sourcing. It may also

refer to actions undertaken by a company to reduce CO2 emission, strategies of recycling and upcycling

of materials, or creating a long-lasting design. While these are all important sustainability actions, this

research focuses specifically on the social and environmental impact of the production process, namely

the upstream part of the supply chain. Because of this, it is useful to move away from the term CSR and

investigate a few other concepts that are commonly used in the academic literature to discuss sustainability

in supply chains. These concepts are rather diverse and often used interchangeably, and include concepts

such as green supply chain management, socially responsible supply chain management and sustainable

supply chain management. But also terms with a less direct reference to sustainability, such as global

commodity chains, global value chain analysis, and global production networks. What all of these terms

have in common is that they indicate in some way that global trade is conducted through systems of

governance, in which firms are connected through various sourcing and contracting arrangements

(Andersen & Skjoett-Larsen, 2009). The three most widely used terms will be discussed in order to choose

a concept that suits the purposes of this research best.

The first term is green supply chain management (GSCM) which is specifically used by companies that

focus on improving their environmental performance. Paying attention to environmental impacts is

important, because products have a profound impact on the environment on the different levels of a

supply chain, from production to consumption (Kogg & Mont, 2011, p.154). About 2500 of the largest

corporations worldwide account for twenty percent of global greenhouse gases emissions, of which most

is created in their supply chains (Dubey, et al., 2017b). Kogg and Mont (2011) emphasize that if many

actors, like companies, take responsibility for the environment by choosing raw materials, components or

products based on the environmental impact they have throughout their life cycle, a major difference can

be made (p.154). The term GSCM, however, fails to address social concerns (Rajeev, Pati, Padhi &

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Govindan, 2017) and its focus is only on management. It is therefore necessary to turn to another concept,

which incorporates these social concerns.

In the term sustainable supply chain management (SSCM) the triple bottom line of financial, social and

environmental impact can be traced. Moreover, it reflects the recent trend of companies that recognize

the need to go beyond environmental improvements and start thinking in terms of sustainability

(Guinipero, Hooker & Denslow, 2012, p.259; Sloan, 2010). SSCM can be seen as an extension of the GSCM

approach, integrating social and economic factors along with environmental factors (Dubey et al., 2017b),

focusing on long-term sustainable growth (Dubey, Gunasekaran, Childe, Papadopoulos & Fosso Wamba,

2017a). SSCM derives from the term supply chain management (SCM), became dominant in the research

domain from 2010 onwards and can be defined 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 requirement. (Seuring & Müller, 2008, p.1700)

A third concept that is often used in the discussion of sustainability in supply chains is global value chain

(GVC). It does not directly incorporate sustainability, but it does look at the governance systems in

production. This term is defined by Gibbon, Bair and Ponte (2008) as: “[…] the set of intra-sectoral linkages

between firms and other actors through which this geographical and organization reconfiguration of global

production is taking place” (p.318). This term is theoretically founded on the world-system theory and

evolved from the term global commodity chain (GCC) of Gereffi. While governance in the GCC terminology

was perceived as ‘driving’, divided into the distinct governance systems of a buyer-driven global commodity

chain and a producer-driven global commodity chain, in the GVC approach the focus moved towards

‘governance as coordination’ (Gibbon et al., 2008). Actually, the shift from the term GCC to GVC was rather

incremental and aimed at including a broader scope of chain activities and end products (Bush et al.,

2015), no longer limited to products that had commodity characteristics. In this new understanding,

governance was driven by complexity of information, codification of that particular information and the

capabilities of different actors in the chain to respond to and act upon that information (Bush et al., 2015).

Each of the concepts discussed have a different focus point and view interactions between actors involved

in the production and distribution of products differently. But although the terms SSCM3 and GVC have a

very different theoretical background and originally focused on different questions, they are both ways of

analysing governance in supply chains (Kogg & Mont, 2011, p.160). The term SSCM, on the one hand,

has a unit of analysis on the level of the firm, and implies that there is one buyer that controls the whole

supply chain. In the GVC approach, on the other hand, attention is given to the cooperation and power

dynamics between different actors in the value chain. This becomes clear from the broader scope, focusing

on transnational networks of companies. In the light of the limited control that can be exercised by a focal

3 Kogg & Mont (2012) combine a discussion of the terms SCM and SSCM and sometimes use the terms interchangeably.

19

company and the necessity to collaborate in order to achieve sustainability in supply chains, Kogg and

Mont (2011) suggest to conceptualize supply chains as complex adaptive systems, systems that are

“emerging, self-organising, dynamic and evolving” (p.159). This way, it can be evaluated what the impact

of the actions of a company with limited power is throughout the supply chain, as this may still be

significant (Kogg & Mont, 2011, p.161). In such an approach, the focus is on the interaction of companies

with other parties, and how their actions are able to reach sustainability, although not as a one-size-fits-

all strategy imposed unto the whole supply chain. In line with this, Kogg and Mont (2011) conclude: “One

can better integrate the two perspectives on governance in the supply chain by acknowledging that

responsibility in the supply chain can both be exercised through choice and through inter-organizational

management” (p.162).

Therefore, in this study these different levels of governance represented in the two perspectives will be

used (as explained in section 1.4), but still a choice for a conceptual term should be made. Because the

main unit of analysis is the MNC, and the transnational networks of companies is a secondary focus, the

term sustainable supply chain management (SSCM) will be adhered to in this research. In addition, it has

a more direct reference to sustainability. However, it should be noted that a different understanding of

sustainability is used in this research than in the original description of sustainability in SSCM. As explained,

the term SSCM is based on the triple bottom line concept, but in the original understanding scholars believe

that the overall goal of SSCM is to improve the long-term economic performance of the individual company

and the supply chain as a whole, thus prioritizing one dimension over the other two (Carter & Rogers,

2008, p.368). However, the focus of this research is on the sustainability upstream in the supply chain, or

in other words, the impact of production by MNCs in the lives of people and natural environment in

producing countries. Of course, economic sustainability of a focal firm is crucial for that, but this is seen

more as a means than as an objective on its own. Just as Pagell and Shevchenko (2014) point out: “The

‘does it pay to be sustainable?’ question contains a normative assumption that profits are the ultimate

assessment of supply chain performance and that managers and shareholders are the most important

stakeholders in a supply chain” (p.46). Giving priority to economic sustainability over the other dimensions

of the triple bottom line is not always viable in practice. If such priority was always granted, it would mean

that a company is not able to deal with all negative social and environmental impacts, hence it is not truly

sustainable (ibid.). For this reason, the definition of Pagell and Shevchenko (2014), which incorporates all

three components equally, is used in this research: “[…] SSCM is the designing, organizing, coordinating,

and controlling of supply chains to become truly sustainable with the minimum expectation of a truly

sustainable supply chain being to maintain economic viability, while doing no harm to social or

environmental systems” (p.45). In line with this, “supply chain management is then the specific managerial

actions that are taken to make the supply chain more sustainable with an end goal of creating a truly

sustainable chain” (Pagell & Wu, 2009, p.38). When discussing activities of MNCs to create better

environmental and social circumstances in their supply chain, this will be referred to as sustainability

performance.

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1.3 Wicked problems and governance capabilities

Before discussing the conceptual approach of governance capabilities, it is necessary to come back to the

concept of ‘wicked problems’, of which a few examples were given in the introduction. The characteristic

of a wicked problem is that this type of problem is very hard to understand and frame. This is due to

innumerable causes and the fact that outcomes are uncertain and often affect many stakeholders (Dentoni,

Hospes & Ross, 2012, p.2). Because of their nature, wicked problems are perceived as unsolvable, or in

case they are solved, they likely result in new problems (Head & Alford, 2015). Therefore, it would be

more relevant to look at the ways that actors are handling rather than solving wicked problems.

As explained before, besides the wicked problems such as child labour, deforestation and gender inequality

that companies are facing in their production process, creating a sustainable supply chain can be seen as

a wicked problem in itself (Oorthuizen, Vermaak, Romeu Dalmau & Papaemmanuel, 2018, p.17). Because

of the complex problems within the supply chain, it is challenging to achieve positive impact or reduce

negative impact in the social and environmental domain. There exists no blueprint for an effective

governance model (Boström et al., 2015, p.6). Ideas about what such a model should look like are vague

and disputed, and decisions about particular activities of a company will most likely have effects on other

activities or its surroundings as well. In a way, a company and the supply chain it is operating in, can be

seen as a complex social dynamic itself. This is because the company interacts with many other

stakeholders in the supply chain, thus outcomes become uncertain and it is unclear who will be affected

in what way (Termeer et al., 2012, p.684). Even if all actors in the supply chain recognize the need for

transitioning to sustainability, there is no single entity that can do it on its own (Oorthuizen et al., 2018,

p.17). Meckenstock et al. (2016) provide a very clear example of what the wicked problem of creating a

sustainable supply chain can look like:

Imagine a coffee bar wants to brew and sell ‘sustainable’ coffee to its customers. But how can the

coffee bar make truly sustainable coffee? The check for wicked problems is as follows. First, across

the supply chain there are many stakeholders (coffee farmers, traders, roasters, employees, NGOs

etc.) with widely opposing values regarding sustainability. The farmers look for a long-term source

of income, while the traders mostly value certifiable organic farming practices and the consumer

wants to ‘make a difference’. Second, increasing yields for farmers, for example, leads to higher

incomes but often means a faster degradation of nature. There is no easy win–win. Third, a

certification system, such as Fairtrade, can lead to the exclusion of the poorest farmers, who do

not have the means to participate. Every attempt has involuntary repercussions. Fourth, creating

a supply chain for truly ‘sustainable coffee’ has never been achieved before. This means that, fifth,

there are no clear guidelines to follow for the coffee bar. In conclusion, the coffee bar, like many

other enterprises striving for sustainability, faces a wicked problem. For wicked problems, there

are no optimal or correct solutions – just approaches that are ‘good enough’ for a certain case.

(p.452)

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In order to evaluate the ability of actors to handle wicked problems, Termeer et al. (2012) have developed

a governance capabilities approach. As described before, a governance capability is defined as: “[…] the

ability of policy makers to observe wicked problems and to act accordingly, and the ability of the

governance system to enable such observing and acting” (Termeer et al., 2012, p.683). In this study, it

will be about the ability of decision makers, as it is not a governmental institution. The development of a

governance capabilities framework builds on the assumption that if particular governance capabilities are

present, actors and systems that can draw from them will be better capable of dealing with wicked

problems. With the use of this framework, an evaluation of the processes that are designed to generate

impact is made, which will inform companies about their chances of achieving actual impact. The five

capabilities that are distinguished by Termeer et al. (2012), and Termeer and Dewulf (2014) include:

▪ Reflexivity: the ability to deal with a variety of possible perspectives on wicked problems

▪ Resilience: the ability to flexibly adapt to unpredictable, changing circumstances

▪ Responsiveness: the ability to observe and respond to pressing issues effectively

▪ Revitalization: the ability to unblock stagnations in the policy process and continue innovating

▪ Rescaling: the ability to address spatial or temporal scale mismatches between the problem and

the way it is dealt with

The fifth capability has been added at a later point (Termeer & Dewulf, 2014), yet for all five capabilities

it is important that in assessing actors and systems in dealing with wicked problems the capability includes

the three dimensions of acting, observing and enabling (Termeer et al., 2012, p.682; Termeer & Dewulf,

2014). While most academic literature on wicked problems focuses on action strategies (acting), Termeer

et al. (2012, p.681) argue that these strategies are informed by the perspective of the organization trying

to deal with the problems (observing). In other words, the scope of their action plans is correlated with

the scope of their attention. Furthermore, it is essential to pay attention to the enabling factors (enabling)

of governance systems for dealing with wicked problems. Conventional governance models are often not

receptive to alternative strategies: “[…] actors who try to implement new strategies often encounter

tensions or even contradictions between their ambitions and the existing formal and informal rules and

values of the systems in which they are operating” (Termeer et al., 2012, p.682). A governance system

should include enabling conditions under which employees can effectively handle wicked problems. Thus,

dealing with wicked problems does not only require action strategies but also observing and enabling

factors, and they are perceived by Termeer at al. (2012) as aspects that are mutually reinforcing (p.699).

The different categories of observing, acting, and enabling will form an integral part of the assessment

framework, as shown below in the first column of Table 2. The descriptor will in turn provide a short

description of the specific category of the specific capability, followed by an assessment score divided into

the three categories of stewardship orientation, equidistant orientation and instrumental orientation.

Category Descriptor Assessment score

Table 2: Example of the design of the capabilities assessment framework for MNCs

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Most studies on wicked problems appear in the field of public administration and political studies, and

focus on the way governments deal with them. The governance capabilities framework of Termeer et al.

(2012) was also designed to assess the capabilities of governments. Recently, the framework has been

operationalized for voluntary sustainability standards (Toonen, 2018). In this research, it will be

investigated if and how the governance capabilities can also be operationalized for an assessment of MNCs

operating in global supply chains.

1.4 Governing sustainability

Finally, in order to understand at which level of governance this research will focus, the concepts of SSCM

and governance capabilities will be brought together. The literature on SSCM includes increasingly

practices of cooperation within the supply chain, such as long-term relationships, cooperation along the

supply chain, and supplier development (Beske, 2012, p.373). Collaboration outside the supply chain was

not originally included in the term of SSCM, but the scope is expanded here in line with the suggestion of

Kogg and Mont (2011) to integrate the two perspectives of SSCM and GVC. To understand the difference

in these perspectives, which can be called modes of governance, and how they will be combined, it is

necessary to invoke the theory of Bush et al. (2015) (illustrated in Figure 6) about ‘governing sustainability

in chains’, ‘governing sustainability of chains’, and ‘governing sustainability through chains’, which

corresponds closely to the concepts discussed.

Figure 6: Three modes of governance for supply chain sustainability (source: Bush et al., 2015, p.11). Legend: light grey

arrows entering the chain indicate external governance-related influences over firm actors. Dark grey arrows indicate firm-

related governance influences, both internal and external to the chain.

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‘Sustainability governance in chains’ takes the business, functioning as an actor in the chain that wants to

improve its social and environmental performance, as a focal point. This is grounded in a business

management perspective and analyses the inter- and intra-firm logistics, industry coordination and

industrial environmental management. This perspective is inward looking, as it focuses on improving

practices within the chain, through CSR practices (Bush et al., 2015, p.11-12). The second form of

sustainability governance, ‘governance of chains’, is directly related to Gereffi’s theory of GVC and the five

different governance types he distinguishes. It is about the coordination mechanism through which a lead

firm coordinates chain actors, for example, by demanding particular production standards, knowledge

transfer, or sustainability upgrading (ibid, p.11-13). Finally, ‘governing sustainability through chains’ is not

understood as firm-level CSR system or as inter-firm coordination, but corresponds to what Kogg and Mont

(2011) call ‘networks of governance’. This refers not only to the companies within the supply chain, but

also to a wider set of network actors beyond the immediate supply chain that give advice or practical

assistance to steer sustainable practices in the supply chain (p.162). These actors may include external

auditors, civil society organizations, and governments and collaborate in multi-stakeholder initiatives like

business forums, industry associations or sector-oriented initiatives (Bush et al., 2015, p.13; Kogg & Mont,

2011, p.161-162).

With the use of the capabilities approach, the different strategies for creating sustainability in supply

chains, on firm level, intra-firm level, and in governance networks, will be combined from the point of view

of an individual MNC. In the different capabilities and categories within the framework, various modes of

governance will be utilized, together creating a diverse approach to handle wicked problems. For instance,

resilience will focus mainly on creating sustainability in the supply chain through setting sustainability

requirement and the way they collaborate with public actors, thus corresponding with ‘governance of

chains’. Rescaling and revitalization will most likely relate more to the governance mode of ‘governance

through chains’, by concentrating on involvement of a wider range of actors to solve wicked problems that

exceed the individual supply chain of a company. A fully sustainable supply chain is, however, not assured

by a combination of the different governance modes, but the presence of governance capabilities

(reflecting different governance modes) serves as an indicator of effectiveness. The better the governance

capabilities of a company are developed, the more freedom of choice the actors in the system have to

handle the wicked problem of supply chain sustainability.

1.5 Chapter conclusion

In this chapter, the most important theoretical concepts for answering the research questions have been

discussed. It was shown that the concepts global supply chain, sustainability, SSCM, and governance

capabilities are closely related, and they will become even more intertwined when applied in this study.

These concepts will help to investigate the responsibility of MNCs in the field of sustainability, whereas the

capabilities approach will be operationalized for assessing the performance of MNCs.

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2. A capabilities assessment framework for MNCs

In this chapter, the first sub-question, namely, ‘What is the responsibility of an MNC to produce and trade

sustainably?’ and the second sub-question ‘What descriptors and indicators, in line with the capabilities

approach, are relevant when assessing the sustainability performance of MNCs in global supply chains?’,

will be addressed and answered. First, the responsibility of MNCs and the different orientations that are

used by MNCs to deal with their responsibility will be explored. After this, a discussion of each capability

and the different categories (observing, acting and enabling) will be provided. In order to justify the

choices that have been made to include or exclude particular indicators, academic debates will be referred

to, combined with a discussion of expert views. The chapter will close with an overview of the complete

capabilities assessment framework for MNCs and a short summary of the answers to the sub-questions.

2.1 Responsibility and strategic orientations

With globalization and the extension of chains beyond national borders, environmental and social impacts

are transferred across national borders and supply chains have become geographically and institutionally

dispersed (Boons, Baumann & Hall, 2012, p.140). In the past, the production circumstances of large

companies used to be accepted by the public, because they were taking place close to home where

national laws applied (Van Tulder et al., 2012, p.27). However, with production being moved beyond

borders, social and environmental protection is no longer necessarily enforced (Boström et al., 2015, p.1).

Production locations are often found in developing countries, where western governments cannot dictate

production conditions (Vermeulen & Kok, 2012, p.183). In the late 1970s and 1980s fair trade initiatives

started to emerge in response to this, bypassing mainstream supply chains in order to create a more direct

link between producers and consumers (ibid). More recently, the focus of several commercial companies

has shifted towards more societal value creation (Maas et al., 2018, p.27) and the production of sustainable

products has become more mainstream (Vermeulen & Kok, 2012). In the absence of policies or

enforcement of environmental and social standards in many developing countries, MNCs are the ones that

could (or should) take responsibility (V. van der Linden, personal communication, 20 June 2019). If we

look at the different types of organizations that exist worldwide (see Figure 7), it can be argued that there

is a shift towards the middle, where commercial and societal orientations are combined, which creates an

increase in the number of hybrid organizations (Maas et al., 2018, p.7).

Financial orientation Social and environmental orientation

Small and medium

sized enterprises

For-profit enterprises

Hybrid enterprises Non-profit organizations Family businesses

and cooperatives

Multinationals

Hybridization trend

Figure 7: The position of hybrid organizations (source: adapted from Maas et al., 2018, p.7)

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Many different stakeholders in society hold the view that MNCs can fulfil an essential role in solving social

and environmental problems (especially in developing countries), and that they can have a significant

impact on their surrounding ecosystems (Giunipero, Hooker & Denslow, 2012, p.259) through sustainable

supply chain management (SSCM). Oxfam Novib, for example, states that: “Oxfam believes that the

private sector can be an important engine of development. Companies, when they act responsibly, can

play a vital role in contributing to sustainable development and poverty reduction” (Clay, 2005, p.9). Oxfam

collaborated with Unilever to research the possibilities for poverty reduction in Indonesia through the

supply chain of Unilever. Some authors go as far as to argue that government authority is diminishing and

in response a shift from centralized governance to distributed governance is taking place (Boström et al.,

2015, p.2). Entrepreneurs in the field of fair trade and organic products, and NGOs have been filling, what

Vermeulen and Seuring (2008) call, a ‘regulatory gap’ (p.270). It can be argued that (some) MNCs are

currently also taking their responsibility and become part of this distributed governance system.

Nevertheless, sustainability actions (or CSR) are to a large extent voluntary (Van Tulder et al., 2012, p.29),

based on a prescriptive, ethical approach (Faisal, 2010, p.179), and involve actions beyond what is

required by law (Govindasamy & Suresh, 2017, p.2). Gurzawska (2019) argues that there are different

responsibilities resting with companies, not only the traditional responsibility of creating wealth, but also

the responsible use of their business power, and a responsibility to integrate social demands and follow

ethical norms (p.6). But within the realm of the complexity of management of supply chains it becomes

very difficult to determine who is responsible and what the scope of responsibility should be (ibid., p.7).

It can be hard to determine to what extent companies should be held responsible for the harm that is

done in their supply chain (De Bakker & Nijhof, 2002, p.64) and which harm they should address and in

what way. For example, it can be questioned whether companies can be held responsible for working

conditions in factories of subcontractors in developing countries (Sheehy, 2014, p.625-626). The UN

Guiding principles on business and human rights is the first global standard for preventing and addressing

negative impacts of business activity related to human rights. But because positive obligations are not

included, the responsibility of companies is rather moral than legal, and the actual attribution of harm that

is done by a specific tier is very difficult in complex supply chains (Gurzawska, 2019). For this reason, I.

Schipper, a senior researcher at SOMO, argues that it might be better if managers of large corporations

were personally held responsible for the harm that was inflicted by a company, to eliminate the current

state of corporate impunity (personal communication, 12 June 2019).

Findings from recent studies clearly indicate that companies are increasingly considered responsible, not

only for the negative effects of their own production process, but for the entire life cycles of their products

(Bush et al., 2015, p.12). This is partly due to the increased integration and higher interdependencies in

supply chains. A consequence of these stronger linkages is that what happens upstream in a supply stream

has a more direct effect downstream (Faisal, 2010, p.180). Kogg and Mont (2012, p.155) claim that

companies have a double role to fulfil: transferring signals from consumers to suppliers upstream and

providing transparency about their products to consumers downstream in the supply chain. This

transmission of demands from society to suppliers requires firms to look further upstream than it was

necessary before, from a commercial point of view (Seuring & Müller, 2008, p.1703).

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It can be concluded that the pressure from internal and external stakeholders is profound (Van Tulder et

al., 2012, p.33), and that corporations have become more sensitive to social issues and stakeholder

concerns, as they can erode a firm’s legitimacy (Faisal, 2010, p.179). Therefore, companies feel

increasingly obliged to change their behaviour in order to effectively manage their social, economic and

environmental impacts (Epstein, 2018). Given this increased pressure that companies have to face, it

might be more relevant to look into the ways MNCs try to work on taking responsibility, rather than seeking

consensus about a definition of responsibility. Many authors emphasize the business opportunity of moving

towards sustainable practices (e.g. Nijhof et al., 2019, p.147; Van Tulder et al., 2012, p.38), arguing that

‘high sustainability companies’ outperform ‘low sustainability companies’ in terms of stock market and

accountability performance (Eccles, Ioannou & Serafeim, 2012). Some even argue that sustainability policy

is necessary to guarantee the very existence of a company, as does Patrick Cescau, group chief executive

of Unilever, who emphasizes:

We have come to a point now where this agenda of sustainability and corporate responsibility is

not only central to business strategy but will increasingly become a critical driver of business

growth… how well and how quickly businesses respond to this agenda will determine which

companies succeed and which will fail in the next few decades. (Epstein, 2018, p.21)

In response to the demands from stakeholders for sustainability, firms have expressed their concern that

they find the increased responsibility difficult to cope with (Kogg & Mont, 2012). As explained before, there

is no one-size-fits-all method for wicked problem of sustainable supply chain management. Every company

has a unique starting position with its own motivation, attitude and approach for handling sustainability

issues (Maas et al., 2018, p.8). In the light of this, it is important to recognize that there is a mutual

dependency between business and society, because every business that produces products has an impact

on society in some way and also depends on society to a certain extent for its resources. Different strategic

choices can be made about the interface between business and society. Within the same industry,

companies that face the same issues might use different strategies as they have different perspectives on

potential solutions (De Bakker & Nijhof, 2002, p.67). In this study three different strategic orientations

distinguished by Nijhof et al. (2019) will be used: a stewardship orientation, an equidistant orientation,

and an instrumental orientation. These orientations can be understood as maturity levels, with companies

often starting off with an instrumental orientation and slowly working towards a stewardship orientation.

The instrumental orientation is characterized by a focus on “addressing pressure from stakeholders

(especially shareholders) and on the benefits that sustainability delivers in the way of business

performance” (Nijhof et al., 2019, p.158). In practice, this means that managers would only include

sustainability measures for handling wicked problems when they contribute to the creation of shareholders’

wealth, for example, through cost reduction, creation of a competitive advantage or improved brand

reputation (ibid., p.146). This orientation is also discussed by Maas et al. (2018), where it is referred to

as the tactical approach. Based often on extrinsic motivation, it aims at a competitive advantage in the

short term, minimizing negative impacts to prevent reputation damage, and takes only the interest of a

limited number of stakeholders into account (p.11). This orientation is centered around do-no-harm,

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minimizing the companies’ negative impacts on society and the environment (Faisal, 2010, p.180).

Examples of actions taken in this strategy are reducing chemical pollution or emissions, abolishing child

labour, and complying with international covenants and policies (Maas et al., 2018, p.4). Attention is payed

to sustainability in order to create ‘a license to operate’ and actions are focused on diminishing negative

externalities (KPMG International, 2014), not on creating actual positive impact (Maas et al., 2018, p.149)

or making the supply chain fully sustainable (see Figure 8).

Figure 8: Illustrative example of negative (-) and positive (+) externalities in the supply chain of an electronics manufacturer

(source: Schäfer, 2019, p.44)

The stewardship orientation, on the other hand, focuses on ‘doing good’ and internalizing externalities.

“[…] companies [with such an orientation] are expected to adhere to a broader set of measures because

they aim for a relationship with society that creates positive societal contributions such as observing

universal rights, sustainable development and the best interests of society” (Nijhof et al., 2019, p.148).

Both making profit and creating positive impact for society are borne in mind. This is called the strategic

approach by Maas et al. (2018) and describes companies that aim for long term impact, maximizing

positive externalities and considering the interests of multiple stakeholder groups (p.11). Companies with

such a strategy are aware of the fact that they can achieve even more impact if they do not only implement

sustainability practices in their own company, but also stimulate others to do so, becoming thus a catalyst

of system change (ibid., p.36, p.45). Such an approach is required to effectively handle wicked problems,

as will be explained later on.

A third, and last orientation that is added by Nijhof et al. (2019) is the equidistant orientation and lies in

between a stewardship orientation and an instrumental orientation. Companies with this orientation also

have stewardship characteristics but sustainability actions are not yet fully implemented into their overall

business strategy. For example, a company with an equidistant orientation will aim at as many Sustainable

Development Goals (SDGs) as possible, even when they are not aligned with the strategy or purpose of

the company’s business. Companies with and equidistant orientation tend to outperform those with an

instrumental orientation at the level of sustainability performance, but lag behind companies with a

stewardship orientation (p.159). This means that they do undertake activities to handle wicked problems

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in their supply chain, but are either not very effective in doing so, or do not give enough priority to actually

creating a more sustainable supply chain. These three different orientations are used as categories for the

score assessment within the framework, as will be shown in the next section.

2.2 Justification and verification of the assessment framework

In the capabilities assessment framework, four different capabilities are included (see Figure 9), of which

revitalization has been recoined to reorientation (as will be explained in the discussion chapter). The fifth

capability, rescaling, has been excluded from the framework as its relevance for MNCs could not be well-

argued, which is also addressed and justified in the discussion chapter. In this chapter, the four capabilities

will be discussed. The choices made will be explained and a theoretical justification is provided, in order

to answer the second sub-question: ‘What descriptors and indicators, in line with the capabilities approach,

are relevant when assessing the sustainability performance of MNCs in global supply chains?’. The

corresponding parameters and indicators, called descriptors and assessment score in the final framework,

follow the three categories, observing, acting and enabling, and are illustrated with examples. Each section

on an individual capability concludes with a short reflection on the development of the descriptors.

Figure 9: Overview of the four capabilities included in the assessment framework4

Responsiveness

The first capability, responsiveness, is about dealing effectively with changing demands from society,

including demands for sustainability in particular. The problems that are addressed by civil society

organizations, the government, consumers, or other stakeholders, change continuously. In response to

4 Source of the pictures used in this overview: Flaticon, 2019a; 2019b; 2019c; 2019d.

29

that, an MNC has to take responsibility and respond without making promises that cannot be met. It is

essential that a balance is found between different characteristics. For example, the way an MNC handles

these demands need to be effective, while remaining reliable and fair. Moreover, measures have to be

effective, but at the same time trustworthy (Termeer et al., 2012, p.685). The lack of such responsiveness

creates the risk of losing legitimacy, or in business terms: a risk of serious reputation damage. In order to

be able to deal with demands from stakeholders, these stakeholders and their demands should be

recognized and a system that can identify the resulting risks and opportunities needs to be in place. Only

then can a company effectively respond to them. The focus of this capability is on the interaction between

stakeholders that put pressure on a company and a company responding to it; hence, an icon with two

arrows is used to demonstrate this relation (see Figure 10).

Figure 10: Icon capability responsiveness (source: adapted from Flaticon, 2019a)

Responsiveness – observing


Observing Diversity in external stakeholders, and their demands and interests are recognized

Stewardship orientation: A stakeholder analysis is made to identify the most pressing issues, and organizational responsibilities are actively discussed with external stakeholders. Equidistant orientation: A stakeholder analysis is made to identify the most pressing issues and the company is open to external demands, but does not actively engage with external stakeholders to understand their demands and interests. Instrumental orientation: A limited number of external stakeholders is recognized and the company is not easily available to external stakeholders.

Table 3: Responsiveness observing

An overview of the first element of the capabilities assessment framework for MNCs, responsiveness

observing, is presented in Table 3. This capability is centered around stakeholders. Stakeholders are people

or organizations that have an interest in the activities of a company and together represent the interest

of society. The specific interest of stakeholders and the issues they prioritize differs and can be

contradicting at times. Correspondingly, the power they have and the way they try to assert their power

are different (KPMG, 2019). Figure 11 below shows the main stakeholders of multinational corporations,

the inner circle representing stakeholders that are often close to the company and the outer circle

consisting of all other stakeholders. Pressure from stakeholders can either form a barrier or enabler for

increasing supply chain sustainability. Engaging with these stakeholders is crucial in order to recognize

their demands and avoid reputation damage due to the exerted pressure, but also to identify opportunities.

All different stakeholders have certain expectations of a company: in the case of this capability framework

it is in particular about expectations concerning the sustainability performance of the company. As

30

consumers, NGOs, the media, civil society (Qorri, Mujkić, & Kraslawski, 2018, p.579) and the government

(Fearne et al., 2012, p.577) are often recognized as stakeholders that put pressure on companies, the

focus will be on these external stakeholders specifically (circled in Figure 11).

Figure 11: Overview of stakeholders of multinationals (source: adapted from KPMG, 2019)

First of all, consumers can be identified as a group of stakeholders that can have a profound impact on

companies (Giunipero et al., 2012, p.262), especially when there is a lot of media interest, which reinforces

public awareness and in turn leads to an increased demand for sustainability (Faisal, 2010, p.185). Already

in the early 1990s sourcing practices of large retailers became publicly scrutinized by consumers when it

became known that the working conditions of labourers in developing countries were highly exploitative

(Lund-Thomsen & Lindgreen, 2014). This pressure by consumers has only increased since then, with

consumers in developed countries being increasingly concerned about the social and environmental

consequences of production (Luhmann & Theuvsen, 2016, p.673-674). In a survey among Dutch

consumers in 2017, it was revealed that seventy two percent held the opinion that companies should make

a positive contribution to society and the natural environment. Only twenty-one percent of the respondents

felt that companies lived up to that expectation (Dossier Duurzaam, 2017). Furthermore, with the

emergence of internet and social media, the traceability of products increased, which created an

opportunity for consumers to hold firms better accountable for their production circumstances on the other

side of the world (Van Tulder et al., 2012, p.28). High customer expectations can stimulate MNCs to work

on sustainability in their supply chain. However, when customers have a desire for lower prices or actually

lack concern about sustainable production, it might work out the other way around and form a barrier to

increase sustainability (Tay et al., 2015, p.894). Surveys show that many customers say they care about

the sustainability actions of companies, but often this does not translate into different purchasing decisions

(Faisal, 2010, p.181).

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Secondly, a stakeholder that is commonly considered as the driving force for sustainability is the

government, as they make attempts to bring CSR on the political and business agendas (Hack et al., 2014,

p.47). Government regulations can impel a company to improve their sustainability practices, as these

regulations might affect the cost of the investments and can thus function as an incentive to make these

investments (Faisal, 2010, p.184). Moreover, (the potential) fines and legal cost can motivate them, as

companies will try hard to avoid these costs (Giunipero et al., 2012, p.261). On some occasions,

government regulations concerning sustainability can form a barrier for MNCs, especially if they are costly

to meet (Fearne et al., 2012, p.577). An example of this is the Dutch government that is planning to create

a tax for companies that are emitting large amounts of CO2, on top of existing European regulations. This

is part of their climate action plan, deemed necessary for the sake of achieving a forty-nine percent CO2

emissions reduction in 2030 in comparison to 1990 (NOS, 2019). In response to this, Tata Steel, one of

the world’s largest steel producers, has estimated that this tax will cost them about 600 million to 1.2

billion euro of taxes. If this tax plan is implemented, they will have to close down their industry in the

Netherlands, as energy reduction costs and passing on part of the costs to customers will be insufficient

to defy such a tax increase (BNR Nieuwsradio, 2019). This example shows that it is vital for companies to

actively discuss organizational responsibilities with their stakeholders, such as the government. Sometimes

a positive lobby is needed, for example, to create more regulations that make the chances for companies

to sustainably operate more equal, or to legislate sustainable development by MNCs. In other situations

(inter)national standards can form a barrier to competition (Walker & Jones, 2012, p.23), and negotiation

to eliminate this hurdle might be necessary as well. In both scenarios, it is key that companies are well

aware of the expectations of the government, translated into legislation, and take an active stance in

discussing these with the government.

Thirdly, civil society organizations increasingly demand responsible behaviour from companies in relation

to wicked problems such as deforestation (Hack et al., 2014, p.47). Different methods are used to influence

the corporate reputation of companies in an attempt to move them towards more sustainable behaviour,

such as name-and-shame campaigns and consumer ‘boycotts’ against particular companies (Boström et

al., 2015, p.2; Maas et al., 2018, p.20). The successful name-and-shame campaign of Greenpeace against

Nestlé in 2010 proves that companies are vulnerable to such public actions. In this campaign, a YouTube

video was published in which Greenpeace suggested that Nestlé deforested large areas of land for the

sake of creating palm oil plantations, and was responsible for endangering the existence of orangutans.

Within a few weeks’ time, the video had a million views and Nestlé felt forced to assure they would focus

on sustainable palm oil production in the future (Van Tulder et al., 2012, p.32).

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To identify the different stakeholders just discussed, it is

important that the company makes a stakeholder analysis

in which the power and interest of the different stakeholders

is analysed. As shown in Figure 12, this provides them with

information about how to deal with the different

stakeholders, depending on the level of power and interest.

Identifying and analysing the kind of attention that is

required is the first step, but to actually understand how

stakeholders view the company and what their demands

are, it is necessary to directly engage with them. This stays

to a certain extent in contrast to the essence of MNCs, which

is to isolate themselves from power exerted on them from

the outside. They are often very aware of different

demands, but their management is focused on minimizing

the power or creating a story that reduces it (V. van der

Linden, personal communication, 20 June 2019). Although it might be in their nature to refrain from

stakeholder engagement, in the case of creating a sustainable supply chain, it can provide them with

crucial information about what is expected from them in terms of social and environmental activities

(Oelze, Hoejmose, Habisch & Millington, 2016, p.251). Engagement is especially important when

stakeholders are identified as having a high interest and large power, and thus need to be managed

closely. Often NGOs fall within this category, because they have a strong lobby power (Luhmann &

Theuvsen, 2016, p.688). Stakeholder engagement is thus critical for understanding the expectations of

stakeholders (Oelze et al., 2016, p.250).

Depending on the outcome of the

stakeholder analysis a strategic orientation

can be chosen. Figure 13 is relevant in

relation to this. It shows the different

questions that should be posed concerning

the views of others and company itself.

Responsiveness observing corresponds to

‘Today-out’, and is about answering the

question ‘how does the outside world see

us?’. This could be done, for instance,

through organizing meetings with

stakeholders, in which organizational

responsibilities are discussed (De Bakker &

Nijhof, 2002, p.69). This may sound evident,

but from a study of Oelze et al. (2016) it becomes clear that although most firms acknowledge that

stakeholders are a central driver for responsible supply chain management, few firms actively engage with

their stakeholders (p.251).

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Responsiveness – acting


Acting The extent to which priorities are identified and actions are taken, and attention to controversial issues is given

Stewardship orientation: Pressing issues are addressed in time and new projects are started. Also, a list of priorities is made on a structural basis, and new projects include opportunity-driven projects. In communication, a balanced and honest message is presented, in which attention is also payed to controversial issues. Equidistant orientation: No in time response in case of pressing issues or no adequate measurements taken. A list of priorities is made on which new projects are based, but they are mostly risk-oriented. In communication, there is some but little attention for controversial issues. Instrumental orientation: No in time response in case of pressing issues and no adequate measurements taken. No priority list is made based on a materiality analysis. In communication, there is a tendency to emphasize good new stories and gloss over controversial topics.

Table 4: Responsiveness acting

The category acting of the capability responsiveness goes a step further than observing. It is about what

is done to actively identify risks and opportunities, and what is done with the wicked problems that are

addressed by stakeholders (see Table 4). First of all, a priority list should be made as a basis for choices

of projects that will be started. The more this is done on a structural basis, the better. A materiality analysis

can help with this, as it determines what is most material to the company and its stakeholders. The

outcome of the stakeholder analysis and stakeholder engagement activities serves as the input for this

materiality analysis. As an example, the materiality analysis of Danone is showcased below (Figure 14),

giving a sense of what topics should be given priority by Danone. On their website, they state that “The

core purpose of this materiality analysis is thus to provide guidance for us to better prioritize sustainable

strategic topics, to better meet our stakeholders’ expectations and to better implement commitments and

policies towards a sustainable business and society” (Danone, 2017). A priority list can be made based on

a materiality analysis, nourishing the strategic choices about sustainability related issues. A distinction is

made between the type of projects that are started based on this priority list, namely risk-oriented projects

and opportunity-driven projects.

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Figure 14: Materiality analysis Danone (source: adapted from Danone, 2017)

Risk-oriented projects are also called must-do programs and are focused on minimizing risks (Philips,

2016). For instance, when new child labour legislation is issued, measures should be taken to avoid fines.

In the case of Danone, ‘product safety and quality’ is high on the priority list and comes with numerous

legal responsibilities, and will thus most likely result in a must-do program. ‘Fair relationships and pricing

with farmers and suppliers’ is also on the priority list, and Danone will have to comply with the UN

guidelines on this topic, for example, but it is also a great opportunity to start a differentiator program.

This means launching a project in which they try to go beyond what is expected from them by law and

actively improving the relationship with their farmers and suppliers. Such a project is called an opportunity-

driven project, and shows that a company is willing go an extra mile to make their supply chain more

sustainable, even if the main motivation for such a project is differentiation or responsiveness to its

stakeholders.

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In addition, responsiveness acting includes also clear communication to stakeholders. Especially when a

pressing issue occurs, in time response is crucial to avoid damage to the company’s reputation (Illia,

Zyglidopoulos, Romenti, Rodríguez-Cánova & González del Valle Brena, 2013). What priority should be

given depends on how pressing the issue is. For example, a few years ago, a research of SOMO revealed

that many children were working in the mica5 extraction industry, and Philips was directly named in relation

to this issue. Therefore, mica became an immediate threat to the brand reputation of Philips and quick

response was required (M. Jacobs, personal communication, 27 June 2019). Philips approached Terres

des Hommes who commissioned the research of SOMO. As a result, Philips became part of the Responsible

Mica Initiative and collaborated with Terres des Hommes to start a project against child labour in the

mines in India (Nauta, 2018). Another example is a report on suicide in supply chains, in which Philips was

not specifically mentioned, but was part of the industry that was referred to. In this case, the press release

was a potential pressing issue. The process that was started had a lower priority and they did not have to

respond directly. However, the organization that was explicitly mentioned and represented the industry

was very slow to respond to the report. Therefore, Philips approached other MNCs in the industry and put

pressure on this organization to make sure they would act and prevent the case from exploding (M. Jacobs,

personal communication, 27 June 2019). These two examples demonstrate that the nature of pressing

issues can vary: it may involve an immediate threat to a brand’s reputation because the company is directly

‘named and shamed’, or a potential threat in the near future. This determines how quick one should

respond and what kind of action is required.

In responsiveness to stakeholders it also matters what kind of communication strategy is chosen. “A key

challenge for managers […] is to minimize stakeholder scepticism and communicate CSR achievements

without being accused of greenwashing” (Illia et al., 2013, p.16). A significant element in communication

is that companies should not be afraid to engage with the media and tell their sustainability story. In doing

so, Illia et al. (2013) argue, they must not underestimate the public and not shy away from explaining the

complexities of handling wicked problems in their supply chain. Furthermore, as included in the framework,

it is important that companies do not gloss over controversial issues, but present an honest and balanced

message. It might be tempting to only share good news stories, but every company has concerns and

experience with things that work out differently than expected. These stories should also be shared, while

taking into account the interests of the stakeholders they communicate with (Illia et al., 2013).

5 Mica is the name for a group of silicate minerals. They are characterized by a layered texture and have a few unique physical properties, like being dielectric, flexible, light weighted, insulating and reflective. Mica comes in two forms, scrap and flakes, and is produced all over the world. Due to the unique physical properties, mica is used in the production of a

wide variety of products, ranging from emergency lighting and heating elements in toasters, to mica powder in toothpaste and lipstick (source: Wikipedia).

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Responsiveness – enabling


Enabling The ability to identify potential risk and opportunities

Stewardship orientation: The company has a risk and reputation manager, and sufficient resources and tools available to identify trends and correspondingly potential risks and opportunities. An analysis of this information is made on a very regular (structural) basis and the company is not being surprised. Equidistant orientation: The company has a risk and reputation manager, and sufficient resources and tools available to identify trends and correspondingly potential risks and opportunities. An analysis is made at an ad hoc basis. Instrumental orientation: No sufficient resources, tools or people are available to identify trends and correspondingly potential risks and resources. Awareness is often created due to external stakeholders.

Table 5: Responsiveness enabling

The category enabling of the capability responsiveness is presented in Table 5 and corresponds closely

with the other categories. In order to observe the demands of external stakeholders and identify priorities,

it is necessary to have an organizational structure that enables a company to identify potential risk and

opportunities. Therefore, responsiveness enabling is about securing the ability of responsiveness.

Appropriate procedures for decision making, and operational requirements such as information, finances,

equipment and time, must be facilitated in order to respond in a timely and appropriate manner (De Bakker

& Nijhof, 2002, p.67). If we turn again to Figure 13, responsiveness enabling focuses on ‘tomorrow-out’,

which is about finding out how the world develops, discovering trends and, consequently, identifying

opportunities and threats. This is a prerequisite before a company can ask the question ‘What does this

mean for us in the future?’, which is part of ‘tomorrow-in’. This should be handled in responsiveness acting,

when priorities are identified, a strategic direction is chosen and actions are taken. As such the category

enabling literally enables a company to be able to act.

The presence of a risk and reputation manager, or even a whole department, indicates that there are

people and time available on a structural basis. An example of a tool is the scanning tool of Philips that is

able to analyse public data twenty-four seven. It revealed, for example, a court case that had taken place

against Philips in another part of the world, which the people in the headquarters were not aware of (M.

Jacobs, personal communication, 27 June 2019). If such an analysis is made on a very regular basis, it

will be less likely that companies have to deal with unexpected demands or events. With the use of

sufficient people, resources and tools, companies can identify such risks and opportunities themselves. In

the instrumental orientation no sufficient people, resources and tools are available, and most likely they

will sometimes be surprised. Instead of scanning the data themselves, they are being held accountable by

an NGO or journalists calling them to ask about a particular situation they were not aware of yet (ibid). At

the same time, it should be noted that the number of people who are needed to be able to identify risks

and opportunities depends also on the size of the company.

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Responsiveness – adjustments made

At an earlier stage of the development of the framework the capability responsiveness was very much

centered around communication. But communication with external stakeholder will not be enough for

handling the wicked problem of creating a sustainable supply chain. Instead, communication is mainly

about being accountable to stakeholders and guarantee the continuity of the business by preventing

reputation loss. However, responsiveness is also about legitimacy, and several experts have argued that

communication alone is not enough, but it should come with genuine action (e.g. V. van der Linden,

personal communication, 20 June 2019). Hence, indicators such as the priority list and projects started

due to stakeholder pressure are included. Other indicators, for instance, ‘the level of knowledge about the

company’s sustainability policies’, which were included in earlier versions are left out in the final

framework. This decision was made based on the interview with M. Jacobs, who stated that internal

knowledge about the sustainability strategy is very difficult to measure. Most likely employees will claim

that they are aware of the sustainability strategies of the company, but in practice they will not get much

further than the tag line (personal communication, 27 June 2019).

Furthermore, responsiveness was initially very much oriented on risk management, as demands from

stakeholders can create reputation damage risks. But, as explained by M. Jacobs, expectations from

stakeholders and new jurisdiction can also create an opportunity to go beyond what should be done and

differentiate oneself from competitors (personal communication, 27 June 2019). In the fight for the

creation of a competitive advantage, adopting environmental-friendly practices may turn out to be a

valuable strategy (Giunipero et al., 2012, p.261). Therefore, a distinction between risk-oriented and

opportunity-driven projects was made and included in the framework.

Reflexivity

The capability reflexivity is about dealing with a variety of possible perspectives on wicked problems. Every

stakeholder has a different view on the situation and therefore on the problem, as well as on causes,

effects, priorities and intervention options (Termeer et al., 2012, p.684). “Reflexivity involves addressing

questions to oneself concerning how existing habits, perspectives, assumptions, policies, technologies and

rules may create and reproduce problems” (Börjeson & Boström, 2018, p.233). One might have created a

clear picture on the problem, but once interacting with other stakeholders, the understanding of the

problem can easily get blurred again. It depends on one’s background and (power) position how a problem

is framed and which elements of the problem are highlighted or left behind. Reflexivity is necessary to

appreciate these different perspectives, reconsider one’s own view and avoid a tunnel vision on the

problem and possible solutions (Termeer et al., 2012, p.684, p.686). Because observation of different

perspectives is essential, the glasses are used as a corresponding symbol (see Figure 15).

Figure 15: Icon capability reflexivity (source: Flaticon, 2019b)

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Reflexivity – observing


Observing

The extent to which knowledge providers are recognized, and the access to information about the type and complexity of the problems in the supply chain

Stewardship orientation: Multiple knowledge providers are recognized, including supply chain partners. Management and employees are educated in state-of-the art knowledge about sustainability on a structural basis. Equidistant orientation: Multiple knowledge providers are recognized. Limited knowledge development of dedicated stakeholder groups about sustainability through selective education and knowledge provision. Instrumental orientation: A limited number of knowledge providers is recognized and supply chain partners are not viewed as relevant knowledge provider to include. Only procurement managers are provided with trainings on sustainability, on an ad hoc basis.

Table 6: Reflexivity observing

Observing in the context of reflexivity is about the information that is needed to understand the nature

and the complexity of the problems upstream in the supply chain and whether a company has access to

this type of information (see Table 6). The first element of this category is the awareness that one’s own

perspective is just one among many, and that this influences the interactions between actors dealing with

a particular wicked problem (Termeer et al., 2012, p.687). Interaction with stakeholders creates the

opportunity for awareness. Just like in responsiveness observing, observing in reflexivity is about whether

stakeholders are included, but to avoid confusion these particular stakeholders are called knowledge

providers here. The capability responsiveness pays attention to the power exerted by stakeholders from

outside onto the company and the awareness about stakeholder expectations, while the capability

reflexivity evaluates the extent to which the company involves knowledge providers to gather information.

Relevant knowledge providers for multinationals can be found in the outer circle of Figure 16. Most of

these knowledge providers are dealing with similar problems, but will have other experiences with and

perspectives on the problems and possible solutions. Two other groups of knowledge providers that are

relevant in relation to this capability, but were originally not included in the figure are scientists, and

external agencies such as third-party certification bodies (Oelze et al., 2016, p.249).

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Figure 16: Adapted overview of stakeholders of multinationals (source: adapted from KPMG, 2019)

Supply chain partners are one of the important knowledge providers (V. van der Linden, personal

communication, 20 June 2019), as they are often facing the consequences of the problems the company

is trying to handle. Therefore, a distinction is made on this item between the stewardship orientation and

the other two orientations included in the framework. Also NGOs might be relevant to be included. In a

study among MNCs based in the UK and Germany, Oelze et al. (2016) found that almost all firms consulted

with NGOs to learn from their expertise and improve their sustainability strategy (p.249). Other knowledge

providers that might be included are governments bodies, scientists, external agencies such as certification

bodies (ibid), and competitors. Depending on the orientation, more knowledge providers will be perceived

as relevant and therefore included.

Another element is the level of education of managers and employees, and specifically training on

sustainability in supply chains. This helps being up-to-date on developments in the sector and gives a

better understanding of the problems upstream in the supply chain (M. Jacobs, personal communication,

27 June 2019). It also increases the chances to have or get acquainted with a more scientific view on the

problems and be able to debate about it with other experts. It is thus relevant that companies train their

staff on these matters. The indicators in the assessment score related to this are founded on the paper by

Nijhof et al. (2019), who argue that the education background of managers has a positive influence on

the sustainability performance of a company (p.156).

Managers in the instrumental orientation, on the one hand, are not fond of sustainability trainings because

they feel this is either not needed or they think they already had enough training (Nijhof et al., 2019,

p.157). The trainings are therefore only provided to procurement managers (the ones that directly deal

with sustainability issues) on an ad hoc basis. An example of this is the project that Philips started on mica

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(Nauta, 218). At the start of this project the product categories that included mica were identified and

only procurement managers of these products were trained on the sustainability issues of mica (M. Jacobs,

personal communication, 27 June 2019). Managers with a stewardship orientation, on the other hand,

emphasize the need for education themselves, in order to generate knowledge about sustainability

throughout their organization (Nijhof et al., 2019, p.157). In addition to this, I argue that not only the

educational background of managers is essential, but also the knowledge development of employees, as

they are also dealing with wicked problems and have to be aware of the different possible frames.

Managers with an equidistant orientation do recognize the need for education, but are much more selective

in the type of education or knowledge they deem relevant (Nijhof et al., 2019, p.157). Moreover, not the

whole organization is educated, but only a dedicated stakeholder group within the organization, namely

the ones that have to deal with the particular issue. Next to procurement managers, as already included

in the instrumental orientation, other employees that work together with them to solve the problem, such

as product developers and category managers, are also trained (M. Jacobs, personal communication, 27

June 2019).

Reflexivity – acting


Acting Actions undertaken to engage with knowledge providers and avoid a tunnel vision

Stewardship orientation: Workers have freedom of association. The company organizes dialogue on pressing issues on a structural basis, including direct communication with local stakeholders (e.g. trade unions) and participates in a range of existing platforms. Equidistant orientation: Workers do have freedom of association, but collaboration with knowledge providers to discuss sustainability issues is limited to international NGOs. Participation in discussions in existing platforms happens on ad hoc basis. Instrumental orientation: Collaboration with knowledge providers is very limited, only when pressure is put on a particular issue from the outside. Workers do not have freedom of association. Participation in platforms is done in a reactive manner.

Table 7: Reflexivity acting

As shown in Table 7, acting in relation to reflexivity refers to how room for discussion and negotiation

about frame variety is created, and whether there are strategies developed to overcome (rather than

ignore) the different frames that exist (Toonen, 2018). Strategies to stimulate debate and understand

different frames may vary, depending on the company and the industry it operates in. But there are two

key elements that are a good indicator for acting in terms of reflexivity. First of all, a company can take

an active stance by organizing a dialog with different stakeholder groups. This can be done through

organizing workshops, hearings or consultation proceedings (OECD, 2018, p.49), and can either be done

with multiple stakeholders at the same time, or, for instance, with a selected group of government

representatives or scientists.

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The main difference between the stewardship orientation and the other orientations is that in the

stewardship orientation the company itself takes the initiative to organize such a dialogue. Another

difference is whom the MNC is willing to consult in order to widen their perspective on the wicked problems.

An equidistant orientation is characterized by the fact that the company is willing to collaborate with

knowledge providers, but only provided that they are stakeholders from within their comfort zone that

speak ‘the same language’. As I. Schipper, a senior researcher at SOMO explained, MNCs often prefer to

speak with large international NGOs like Amnesty International and WWF, to show that they take different

perspectives into account (personal communication, 12 June 2019).

While this might be a relevant strategy, engaging with these stakeholders alone is not enough to effectively

handle wicked problems. It is particularly important that MNCs communicate directly with trade unions or

other local organizations that represent workers or farmers. These organizations that are best informed

about the local situation (V. van der Linden, personal communication, 20 June 2019), working conditions

and problems that are occurring on site (I. Schipper, personal communication, 12 June 2019).

Communication might be a struggle sometimes as not all organizations that operate on a local level are

familiar with the international context where MNCs operate in, and may thus figuratively speak a different

language (S. Drost, personal communication, 6 June 2019). However, it can be very fruitful to actually

meet (with) the representatives from local organizations such as trade unions. By getting to know each

other and engaging in a conversation, the different perceptions of reality can be bridged (I. Schipper,

personal communication, 12 June 2019).

In the end, what it comes down to is that a multinational takes the effort to understand the local situation

(I. Schipper, personal communication, 12 June 2019) and take the specific frame of workers in the Global

South into account. While it is clear that workers are a significant stakeholder group for handling wicked

problems, there is a large difference in how well they are organized in various countries (V. van der Linden,

personal communication, 20 June 2019), and whether they have the opportunity to raise their voices. In

a way, it is the opposite of what was discussed in the section on the capability responsiveness about the

pressure of external stakeholders that companies have to deal with. If a company is large enough, the

MNC is the one that is putting pressure on others, especially on governments of countries in the Global

South. For example, companies actively negotiate to get tax benefits or to make sure there are no

minimum wage requirements or to deny the right of freedom to associations of workers (V. van der Linden,

personal communication, 20 June 2019). In the case of operating in such a weak state, the role MNCs

have to play and the need to use their moral compass becomes even more important (ibid.).

Trade unions are a crucial element, as they give workers a sort of countervailing power against the policies

of an MNC. Without these organizations, workers do not have the ability to speak up for themselves (V.

van der Linden, personal communication, 20 June 2019). There exist different types of organizations that

attempt to represent local workers, but it turns out that trade unions are the most vital ones. These

organizations are part of an international solidarity system, which implies that if a local trade union ever

gets in trouble, they can count on the back-up from large international trade unions (I. Schipper, personal

communication, 12 June 2019). This is the main reason why the access to associations such as trade

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unions is often denied to workers. Hence, the freedom of association is a critical indicator for the extent

to which an MNC is open to other perspectives.

Next to creating a dialogue themselves it is useful if companies participate in the existing multi-stakeholder

platforms on a structural basis. They can become a member of such platforms for multiple reasons,

depending on their strategy (M. Jacobs, personal communication, 27 June 2019). This aspect will further

be elaborated upon in the discussion of the capability reorientation. The focus here is on whether

companies are members of the platforms, even if their motivation is only to seek information. This can

still contribute to avoid a tunnel vision, as the company will come in contact with other stakeholders and

their perspectives on the problem, causes, effects and priorities. Boström et al. (2015) refer to it as

reflexive learning, of which reflexivity is a part, and state that “[…] reflexive learning is facilitated when

different actors engage in dialog and cross-fertilize their expertise, experience and framings” (p.6). It is

often about collaboration in these platforms, and it is therefore necessary that one is reflexive about its

own frame, as ignoring frame variety could hinder fruitful collaboration.

Reflexivity – enabling


enabling Intra-organizational collaboration and responsibility for sustainability matters

Stewardship orientation: CEO and top management are directly involved and take responsibility for sustainability in the supply chain. CSR practices are decentralized or cross-departmental functions exist, or in case of centralized CSR practices: close collaboration between purchasing department and CSR department. Equidistant orientation: Decentralized CSR practices/cross-departmental functions or in case of centralized CSR practices: close collaboration between purchasing department and CSR department. Instrumental orientation: CSR department or legal affairs department is mainly responsible for sustainability matters or no staff with responsibility for sustainability is reported.

Table 8: Reflexivity enabling

An enabling factor for the capability reflexivity is the extent of collaboration within the company on

sustainability matters, and the level of responsibility the higher management takes (see Table 8). This

rests on the idea that people from different departments have different perspectives because of their

background, tasks and responsibility in the company. If they collaborate, they have to deal with frame

variety within the company and create a critical stance and debate to come to a solution together. For

example, when there are separate purchasing and CSR departments, and there is no institutionalized

collaboration between these departments, it might happen that different signals and request are given to

suppliers. For instance, one department may demand price cuts and the other higher wages for workers

in supplier factories (Lund-Thomsen & Lindgreen, 2014, p.13). This incoherence in demands leads rather

to worsening the problems in the supply chain than effectively dealing with them. The procurement or

purchasing department is often mentioned as a necessary partner for the CSR department (Börjeson &

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Boström, 2018, p.233), as they know the supply chain well and are responsible for the procurement of

different elements of the end product (I. Schipper, personal communication, 12 June 2019). Besides the

ability to better observe different perspectives and avoid tunnel visions, it can be argued that in general,

cross-functional teamwork is an enabling factor for creating sustainable supply chains (Börjeson &

Boström, 2018, p.233). Oelze et al. (2016) argue that “[…] collaboration among employees of different

departments, who have different skills and different areas of expertise, arguably generate a better

understanding of RSCM [Responsible Supply Chain Management] and ultimately firm’s engagement with

such issues” (p.251). For those reasons, some companies do not create a separate CSR department but

decentralize CSR activities. They give ownership to departments that have an influence on sustainability,

allocate subtasks to different departments and bring people from these different departments with relevant

expertise together for sustainability projects (Luhmann & Theuvsen, 2016, p.684; Maas et al., 2018, p.21).

Maas et al. (2018) see it as a requirement for multiple value creation (on the triple bottom line) that the

sustainability orientation becomes the core business, of which coupling the CSR tasks, or the CSR-

department to these core activities is an essential part (p.147).

Another element that contributes to handling the wicked problem of sustainability in the supply chain is

the responsibility taken by higher management. The higher management is the one that takes the

decisions about trade-offs between economic, environmental and social objectives of the company (Maas

et al., 2018, p.66). If they take responsibility for sustainability matters, it shows their commitment (M.

Jacobs, personal communication, 27 June 2019). I. Schipper states that:

It helps when higher managers take responsibility and consider CSR as part of their duties instead

of delegating it to the legal affairs department. You don’t want it to be an add-on, but you want

the higher management to be directly accountable for these matters and to give sustainable supply

chains top priority by taking responsibility. (personal communication, 12 June 2019)

Also, SPOTT (Sustainability Policy Transparency Toolkit), an organization that tracks transparency and

annually scores tropical forestry and palm oil companies, uses ‘Higher-level position of responsibility for

sustainability’ as an indicator for sustainability policy and leadership. The highest score can be achieved

when people with a high-level position, like board members, directors of sustainability or executive groups

are responsible for sustainability (SPOTT, 2018).

In the instrumental orientation cross-functional collaboration is lacking and the responsibility lies with the

CSR or legal affairs department instead of higher managers taking responsibility. If the corporate legal

affairs department is responsible for sustainability matters, it implies that a company is mostly concerned

about its reputation, as this department is in charge of damage control (I. Schipper, personal

communication, 12 June 2019). Having a CSR department is already better, as they often have the

capacities and knowledge, but without cross-functional collaboration or support from top management

they do not have the means and access to actually make the supply chain sustainable (M. Jacobs, personal

communication, 27 June 2019). In the stewardship orientation, all of these elements are present, including

commitment of the higher management. An indicator of the latter is whether the CEO or higher managers

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have signed the code of conduct. Often the code of conduct serves as a starting point for sustainability

matters, and it has much higher value if it is signed not only by the Chief sustainability officer, but also by

the Chief executive officer or Chief procurement officer (M. Jacobs, personal communication, 27 June

2019).

In general, the support of top management is important for the development of sustainable supply chains

and dealing with wicked problems (Giunipero, 2012, p.263). Therefore, it is essential to include it in the

capabilities framework. It fits best with the capability reflexivity, because before a company becomes open

to other visions on the problem, it is necessary that the top management acknowledges the problems and

the need for sustainability measures themselves. Their values form the basis for the organizational identity

and affect the way decisions about sustainability are made (Manninen & Huiskonen, 2019, p.90). If the

motivation of employees to deal with the wicked problems in the supply chain are not backed-up by higher

management, the chance that the visions of external stakeholders are included and a self-critical stance

is taken to avoid a tunnel vision is rather small. To effectively deal with sustainability issues employees

also need sufficient means and therefore the support of the higher management. If a CEO or other top

managers feel responsible and motivated for sustainability actions in the supply chain, they will be more

supportive and willing to include the visions of others. Finally, it helps if employees already have to deal

with a variety of perspectives on a daily basis within their own organization. This can make them more

receptive to include other views as well.

Reflexivity – adjustments made

Also in the development of this part of the capabilities assessment framework, adjustments have been

made over time, the most fundamental ones being in the category acting. At first, characteristics of thought

leadership were included, because sharing a positive vision and forcing others in the industry to respond

to it in order to bring about substantial change has to do with reflexivity. However, in practice the flow of

information goes the other way around. Reflexivity, entails including the visions of others, to broaden the

horizon and appreciate other perspectives. Thought leadership indeed requires that a company be reflexive

and book success with their vision. But it goes a step further, as it is about the willingness to share the

developed visions and ideas about dealing with wicked problems with others. For that reason, thought

leadership has been included in the capability reorientation.

Furthermore, the indicators of ‘actions undertaken to engage with knowledge providers’ have been made

more concrete. It moved away from indicators such as ‘industry collaboration’ towards indicators such as

‘collaboration with knowledge providers to discuss sustainability issues is limited to international NGOs’.

Special attention is given to trade unions as it became clear from multiple expert interviews that they play

an essential role and can make a valuable contribution to broadening the vision of a company. In the early

development stage of the category enabling only collaboration between employees was included. As a

later stage, commitment of higher management was added as both literature and experts argued that this

was a prerequisite of actual change being made.

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Resilience

The capability resilience is the ability to adapt to changing circumstances and other unpredictable changes

that are inherent to wicked problems, as problems are interconnected and every action in dealing with a

wicked problem can have unpredictable consequences (Termeer et al., 2012, p.684). MNCs operating in

supply chains have to survive in a very complex context, which requires coordinating a system, while being

sensitive and able to adapt to local circumstances at the same time. Even without paying attention to

sustainability this can pose a challenge. One day a solution to a particular wicked problem may be found

and the other day it may turn out to have the opposite effect. In this situation, it is advantageous if a

company has a strong capability of resilience, which entails signalling new opportunities and risks (Candel,

Breeman & Termeer, 2016, p.800) and adapting to changes quickly. In the capability responsiveness, it is

also about opportunities and risks, but in relation to expectations of external stakeholders; here it refers

more directly to wicked problems occurring upstream in the supply chain.

This capability is also related to reflexivity as it is important to evaluate the chosen strategy in order to

learn and make changes if required. Just like Börjeson and Boström (2018) explain: “a reflexive approach

enables companies to deploy capabilities in order to continuously evaluate and organize adaption of the

unforeseen emergent risks and concerns in the context of an uncertain and rapidly changing business

environment” (p.233). If the capability of resilience is deployed, disturbances can be used to increase

knowledge and enhance the adaptation capacity of the company. This will, however, not fully prevent the

disturbances from taking place. Therefore, it is required to have strategies in place that are robust (e.g.

infrastructure), but flexible enough to remain functional under a range of different scenarios. If resilience

with regard to wicked problems in the supply chain is lacking, companies will in the long run be unable to

respond to them effectively. They do require learning and adaptation, as no blueprint for dealing with

them is available.

A bulk of literature describes how risks in supply chains can be managed and how resilience to supply

chain disruptions can be increased. If companies operating in supply chains lack resilience in general, it

might happen that a small disturbance can create a failure to continue operating. In other words, resilience

is crucial for survival (Ambulkar, Blackhurst & Grawe, 2015). This understanding is different from the way

resilience is described above, which focuses more on how a lack of resilience affects people and the

environment upstream in the supply chain. Resilience in this framework is about the ability of companies

to succeed in the condition of disruptions on the level of sustainability. As this capability is about continuous

learning, adaptation and improvements, an upward moving arrow is chosen as an icon (see Figure 17).

Figure 17: Icon capability resilience (source: Flaticon, 2019c)

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Resilience – observing


observing Knowledge acquisition to understand changing circumstances upstream in the supply chain

Stewardship orientation: Collaboration and communication with local NGOs, trade unions or similar parties that function as a translator between local workers and the company. The company systematically works towards a detailed map of the supply chain and their business relationships, and risk assessments are made on a continuous basis. Equidistant orientation: Own research within supply chain to trace the origin of raw materials and understand the conditions upstream in the supply chain. Risk analyses are used to make sustainably responsible choices, without consulting external knowledge holders and only before new operations are started. Instrumental orientation: Very limited knowledge about conditions upstream in the own supply chain and the origin of the raw materials. No extra measures are taken in high-risk countries where the company operates.

Table 9: Resilience observing

Resilience observing is to a certain extent similar to reflexivity observing, but while the latter is focused

on understanding the complexity and the nature of the problem, and broadening one’s horizon, observing

in this capability is centered around recognizing changes and the adaptation capacity of a company. There

are a few elements that are crucial for this and therefore they are part of this descriptor (see Table 9).

First of all, to understand the local situation and changes that appear, it is essential to have a local

representative on the ground. It can be hard for an MNC to understand the local situation at the production

location, therefore collaboration and communication with local parties, such as local NGOs, trade unions,

or business development service providers are essential. This has been acknowledged by various experts,

including S. Drost, who gave an example of a French company that was active in Burkina Faso,

collaborating with a business service provider. This service provider had been working in the particular

area for a long time and was very familiar with the local context, therefore they were able to translate the

expectations of local women and the expectations of the company (personal communication, 6 June,

2019). This translation role was essential as those parties spoke literally and figuratively a different

language. Therefore, it would have been very difficult for the MNC itself to notice and acknowledge any

changes. It seemed that the theory of change of the project did not work out in practice, which was an

eye-opener to the multinational, and gave them the opportunity to make adjustments to their program

(ibid.).

The role of translator can also be taken by NGOs, as they “have deep knowledge of the working conditions

and the cultural specificity” (Kogg & Mont, 2012, p.162), and are thus well equipped to assist companies

in handling wicked environmental and social problems. Also Lund-Thomsen and Lindgreen (2014) state

that “a wider set of actors is necessary to govern the value chain effectively, including local, place-based

NGOs, and trade unions with the necessary expertise to assist lead firms in monitoring work conditions in

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export-oriented industries in developing countries” (p.17). These NGOs are used for sense-making:

understanding local circumstances and being sensitive to the local context and changes that need to be

made accordingly. This helps companies to be better able to respond to wicked problems and in a more

innovative way (Landrum & Ohsowski, 2017, p.141). In addition, collaboration with embassies can

contribute to this sense-making, but much more on a legal and policy level, by increasing the awareness

of what rules should be followed when new operations are started (V. van der Linden, personal

communication, 20 June 2019).

Next to sense-making through communication and collaboration with local partners, it is key that

companies take responsibility for assembling information about their own supply chain. It is about the

willingness of companies to make an effort to truly understand the local context (I. Schipper, personal

communication, 12 June 2019). I. Schipper explained that one of the main problems in creating sustainable

supply chains is that companies are often not fully aware of the workings of their own supply chain. They

do not have a clear idea of what is going on in their supply chain beyond the first tier (Kogg & Mont, 2012,

p.158) and even use this as an excuse when organizations like SOMO hold them accountable for social or

environmental issues. For example, responding with a standard reply such as ‘we take your concern very

seriously and will look into it, but up until now we are not familiar with this problem’ (ibid). This position

is represented in the instrumental orientation.

To score higher on this capability it is critical that companies actively research their supply chain, for

example, through risk analysis, so that they know the conditions upstream in their supply chain. The OECD

guidelines for responsible supply chains also acknowledge the need for research in the supply chain. This

is reflected in step two of the ‘Five-step framework for risk-based due diligence along supply chains’, which

is: ‘Identify, assess and prioritize risks in the supply chain’. To achieve this, the supply chain should be

mapped down as detailed as possible. For instance, when trading palm oil, this requires identifying which

actors are involved, preferably up until the smallholders or plantations on which the palm fruit is grown

(see Figure 18). In turn, ”the extent of information collected on business partners depends on the severity

of risk and on how closely linked to identified risks they are” (OECD/FAO, 2016, p.33).

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Figure 18: Palm oil supply chain (source: Forum Nachhaltiges Palmöl, 2019)

Fundamental in achieving a stewardship orientation is that companies do research in their supply chain on

their own initiative, instead of waiting for watch dog organizations to hold them accountable for problems

that are occurring. It is about creating sensitivity for potential risks and possible problems and awareness

about the need to deal with these problems. Risk assessment before the implementation of new operations

is a starting point for this. Companies should be aware of the context in which their production takes

place, therefore before they start their business, a risk assessment should be made. Every business

decision also comes with a social and environmental responsibility (I. Schipper, personal communication,

12 June 2019). If a company decides to start doing business in a high-risk country, extra measures should

be taken to deal with social and environmental problems. For example, nowadays a lot of garment

companies move their production to Myanmar because of low prices. Given that Myanmar is a fragile state,

where no minimum wages or protection of employees by trade unions or civil society organizations exist,

the companies may want to ask themselves whether it is a wise decision to start production there at all

(ibid.).

There are different tools that can be used to assess risks in the supply chain. For example, Dutch

companies that export, import or want to start producing somewhere can use the ‘MVO risico checker’,

which can be accessed online for free (MVO, 2019). There are also plenty of consultancy bureaus that can

help companies identify risks at country-, industry-, company- or supplier-level, in case knowledge is not

available in the company itself. As risks can also change over time, for example, because of changes in

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the operating environment of a business partner, or start of a new business relationship, risk assessment

should be an ongoing process (OECD, 2016, p.34). This is also one of the elements that differentiates a

company with a stewardship orientation from a company with an equidistant orientation. It is relevant to

notice that risk analyses are related to communication with local NGOs and trade unions, as these parties

can provide relevant information about potential risk. Also sector experts could be a relevant party to

consult because of their expertise in a particular sector, including the knowledge about potential risks (V.

van der Linden, personal communication, 20 June 2019).

Resilience – acting


acting The extent to which a company assesses, evaluates and improves its strategy implementation in relation to their sustainability performance

Stewardship orientation: Focus on capacity building along the entire supply chain, and financial support to suppliers to uphold sustainability standards. Innovative approaches are used, and long-term collaboration with suppliers that provide workers with a long-term contract. Equidistant orientation: In case a code of conduct is used, there is capacity building for compliance, but no financial support. In case external certification is used, a continuous learning system is in place to prevent box-ticking. Instrumental orientation: Compliance with certification or code of conduct used as an indicator for the sustainability performance of the company. Local managers are informed about the code of conduct, but employees are not, or audit is done through self-assessment without verification.

Table 10: Resilience acting

Resilience acting includes many different aspects, mainly because the way companies deal with actions

included in this capability varies widely. But what it comes down to is how companies evaluate and learn,

and adjust their sustainability policy based on this (see Table 10).

A strategy that is used by many companies and widely discussed in academic literature is the use of a

corporate code of conduct: “a document stating a number of social and environmental standards and

principles that a firm’s suppliers are expected to fulfil” (Andersen & Skjoet-Larsen, 2009, p.77). The idea

behind the use of a code of conduct is that a contract with all kinds of social and environmental regulations

is signed with suppliers. In order to check whether practices on the ground are corresponding with the

agreed code of conduct regulations, called compliance, the code should be audited by third parties. This

‘compliance model’ was built on the assumption that if NGOs, trade unions and media pressured

supermarkets and retailers sufficiently, international companies would feel the need to develop corporate

codes of conduct or ethical guidelines, and with these guidelines better working conditions in developing

countries could be enforced. The result of the private social auditing system would in turn be that suppliers

that complied with the code of conduct would be rewarded with long-term trading relationships and more

orders, while non-compliant suppliers would lose customers (Lund-Thomsen & Lindgreen, 2014).

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However, the promise of the ‘compliance paradigm’ turned out different in practice: negative results

include a lack of effective enforcement mechanisms and little improvements being made, or even

worsening the situation for the people it was intended to benefit (Faisal, 2010, p.184). A code of conduct

with stricter standards might be a solution, but a limitation of applying stricter environmental quality

standards, for example, could be that the number of qualified suppliers would decrease (Tay et al., 2015,

p.894; Giunipero et al., 2012 p.262). Moreover, even when a stricter code of conduct is used, other issues

occur: often a description of the consequences of non-compliance is lacking (Pedersen & Andersen, 2006,

p.232), and the ultimate sanction of cutting ties with suppliers in case of non-compliance is hardly ever

used (Lund-Thomsen & Lindgreen, 2014; S. Drost, personal communication, 6 June 2019). S. Drost,

working for a consultancy bureau that uses satellite data to track whether suppliers have deforested or

not, argues that there is often a large discrepancy between what is aimed for on paper and what reality

looks like. This is supported by academic literature on the struggle of companies to effectively implement

or enforce their code of conduct, resulting in a gap between their ethical standards and actual conditions

at suppliers (Andersen & Skjoet-Larsen, 2009, p.77). The few impact studies in literature with a positive

story about the results of the implementation of a code of conduct reported only on the positive impact

on tangible work conditions, while the less tangible issues like freedom of association or the right to

collective bargaining remain largely underreported (Lund-Thomsen & Lindgreen, 2014, p.13).

One could argue, on the one hand, that on some occasions suppliers form the barrier for effective

sustainable supply chain management of MNCs, as companies are held responsible for the working

conditions at suppliers and are to a certain degree dependent on them (Andersen & Skjoett-Larsen, 2009,

p.77). “[…] The transformation of an enterprise into a socially responsible entity is dependent upon its

supply chain partners as it is not the individual organization that competes with the supply chain” (Faisal,

2010, p.181). If suppliers are poorly committed, it might be very difficult for a focal firm to apply their

sustainability philosophy to the whole supply chain (ibid., p.183). On the other hand, it can be argued that

it is the responsibility of MNCs to handle the wicked problems of poor working conditions and child labour,

and thus to support suppliers to live up to their sustainability standards. Another reason for the failure of

effective use of code of conduct could be the discrepancy in the behaviour of MNCs. Often the demand

for compliance with their code of conduct comes with a demand for low prices and quick completion of

their orders. Inherent in the demand for low prices is the difficulty of suppliers to provide their workers

with a minimum wage. The same holds for the demand for seasonal products, which is contradictory to

the regulations in the code of conduct about providing stable employment year-round. In addition, due to

last minute orders or changes from buyers, suppliers feel induced to make their workers work overtime

(Lund-Thomsen & Lindgreen, 2014).

As a consequence of this pressure of MNCs on suppliers for compliance with the code of conduct, suppliers

have developed coping strategies in order to avoid losing customers. One of the strategies that is widely

used is engaging in auditing fraud. Examples of this are workers that are trained to provide ‘correct’

answers (Lund-Thomsen & Lindgreen, 2014), or models that are built to manipulate registration of working

hours, to make sure it fits exactly with what is allowed by the buying firm (M. Jacobs, personal

communication, 27 June 2019). This decreases the credibility of third-party audits, which were already

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lacking transparency because their reports were hardly ever made public (Lund-Thomsen & Lindgreen,

2014). In the case of Philips, until recently, an extensive monitoring and audit system was in place and

short projects were offered to suppliers to make sure they would comply with the code of conduct, and

after three years a re-audit would follow (I. Schipper, personal communication, 12 June 2019). However,

only changing the dates of the audit reports would suffice, as nothing else in the reports was changed (M.

Jacobs, personal communication, 27 June 2019). Because of the sanctions in case of non-compliance,

every supplier would make sure bad working conditions or toxic waste were well hidden and all boxes

were ticked to get a green score (ibid.). As I. Schipper argued, “Philips asked their suppliers to jump on

the table and they did, but once Philips left, they would just jump off again” (personal communication, 12

June 2019). Later on, Philips was able to prove that fifty percent of these suppliers actually had a zero-

tolerance score (M. Jacobs, personal communication, 27 June 2019). Likewise, the collapse of some of the

factory buildings in Bangladesh that had received their compliance certificate with international standards

not long before the tragedy, confirms the doubts about the credibility of audit report (Lund-Thomsen &

Lindgreen, 2014, p.13).

Another element that contributed to this audit fraud is the power imbalance within many supply chains.

Power is unequally distributed, with supermarkets and retailers from developed countries dictating the

quantity, quality and price of products, because they have access to a large pool of suppliers across the

developing world. In this supply chain relationship, suppliers often have few possibilities to influence the

governance of the chain by the lead firms (Lund-Thomsen & Lindgreen, 2014). The actual relationship

between buyers and suppliers in a particular supply chain can differ, based on the level of hierarchy and

complexity in the chain, but in general it can be concluded that it is highly unequal. Through the

introduction of codes of conducts, MNCs have tried to take responsibility for what is happening upstream

in their supply chain. However, the way this is done cannot be described as effective.

In this context, ‘responsibility’ cannot be interpreted as merely looking outside one’s own national

and organizational boundary, formulating norms and standards the content of which reflects only

the conventional norms and virtues of one particular place/region, and then imposing them on

others, with corrective action when non-compliance has been detected. The evidence of failures

following from this vertical and one-sided sustainability and responsibility strategy are convincing.

(Boström et al., 2015, p.6)

As discussed in resilience observing, context sensitivity is very important. But power imbalance from a

buyer’s point of view can also form an obstacle. Often it is assumed in the literature that all buyers are

powerful multinationals that can easily enforce their sustainability standards. In reality, multinationals

never have the total power over suppliers and sub-suppliers and, as discussed before, enforcement is thus

not an easy task (Boström et al., 2015, p.4)

In the instrumental orientation, compliance with the code of conduct is used as an indicator of the

sustainability performance of the company, which comes together with the risks just described. Moreover,

in case of the use of a code of conduct, self-assessment is used as a method to check compliance, which

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makes it even less transparent compared to third-party auditing. In this case managers have to rate

themselves whether they are familiar with the code of conduct. If they say they are, the outcome is a

positive score (I. Schipper, personal communication, 12 June 2019). Given that raw data is much more

reliable, self-assessment could be a relevant tool. However, it requires validation of data and a different

type of relationship, namely one where the aim to collaborate and commitment to improve is creating a

fair and equal relationship and thus the pressure for a hundred percent compliance is lower; otherwise

this paves the way for fraud (M. Jacobs, personal communication, 27 June, 2019). Furthermore, in the

instrumental orientation, existing sustainability standards and rankings are used as a basis for evaluation

and key performance indicators (KPIs), and results are hardly ever analysed to improve the sustainability

performance (Nijhof et al., 2019, p.153, p.155).

The same is done with the use of third-party certification in the instrumental orientation. This is

approached as a box-ticking exercise and companies rely heavily on the results to prove that their

behaviour is sustainable (Oelze et al., 2016, p.250). This is contrary to the equidistant orientation, where

attention is payed to continuous learning, for both the parties certified and the company itself. If

companies take the time to evaluate certification outcomes and do not blindly rely on the compliance rate,

an opportunity to extend their knowledge on how to tackle wicked problems is created (ibid.). The reason

certification is not an indicator of the stewardship orientation is because it also has down-sides, in

particular for smallholder farmers. This group of stakeholders at the very bottom of the supply chain often

does not have the funds to become certified and is therefore excluded (S. Drost, personal communication,

6 June 2019). It would thus be even better if companies with an equidistant orientation had programs in

place to support independent smallholders (SPOTT, 2018). Furthermore, there are many research reports

critical about the effectiveness of third-party certification (e.g. the report issued by SOMO in 2018 entitled

‘Looking good on paper – review of recent research on the impact of sustainability certification on working

conditions on large farms). I. Schipper argues that the methodology is still similar to auditing by companies

themselves: the audits are announced beforehand and employees that are interviewed are often selected

by the management, which indicates that it is not an airtight methodology (personal communication, 12

June 2019).

Instead of using external indicators for proving sustainability, in the equidistant and stewardship

orientation, attention for a different type of relationship with suppliers is crucial. It is part of what Lund-

Thomsen and Lindgreen (2014) call the ‘cooperative policy paradigm’, which is characterized by relational

supply chains in which buyers and suppliers collaborate closely and create a trust-based and long-term

relationship. Suppliers are viewed in a significantly different way in this paradigm: no longer as offenders

that failed to comply with social and environmental standards and potential competitors if they received

functional upgrading, but as suppliers that can upgrade the quality of products and processes when

empowered to comply with sustainability standards (p.16).

This empowerment of suppliers is often called capacity building, and can be considered the first element

of the cooperative approach. Capacity building for compliance can be done through education of suppliers

through trainings, to supplement monitoring and enforcement mechanisms (Boström et al., 2015, p.6). M.

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Jacobs argued that when a company works with suppliers that have a very low sustainability maturity

level, companies need to take them by the hand. They might be capable of measuring salary and working

hours, but are most often not familiar with things such as social impact or health and safety measures

(personal communication, 27 June 2019). “Local factory managers should receive training in human

resources management, product quality, and production processes” (Lund-Thomsen & Lindgreen, 2014,

p.15). Trainings can also be more directed towards workers themselves, for example, through facilitating

trade unions to inform workers about their rights and responsibilities (ibid.; I. Schipper, personal

communication, 12 June 2019). But to actually change the situation on the ground, investments need to

be made. Companies that demand improvement often put the burden of these investments with the

suppliers (I. Schipper, personal commination, 12 June 2019). Therefore, the main difference in capacity

building for compliance between the equidistant and stewardship orientation is that companies in the latter

are also willing to bear the costs of upgrading and support suppliers financially (De Bakker & Nijhof, 2002,

p.69) in order to achieve the necessary improvements on environmental and social standards (Lund-

Thomsen & Lindgreen, 2014, p.18). This does not have to be through providing funds directly to farmers,

but it can also be done through paying for the facilities that are required to bring the suppliers to the level

of standards of a company. With reference to the case of the agricultural multinational, S. van Heemskerk

stated:

You make an assessment with the supplier, where are the gaps? Then you are going to try to close

these gaps. They don’t get necessarily the money themselves, but we will pay money for it, directly

to an implementation partner. (personal communication, 26 July 2019)

Next to trainings and financial support, effective capacity building is characterized by cooperation and

mutual trust. Like Boström et al. (2015) state, “capacity-building cannot be achieved through one-shot

training sessions, but is a long-term, reflexive and committed learning exercise” (p.6). Philips recently

moved away from their auditing system and is now experimenting with a new program, focused on

transparency and collaboration with suppliers (M. Jacobs, personal communication, 27 June 2019; Philips,

2019). According to M. Jacobs, the former Director of supplier sustainability at Philips, trust is key to

creating sustainable supply chains. Instead of receiving manipulated data, companies need access to raw

data and transparency about the actual practices. In exchange for this transparency provided by suppliers,

companies collaborate and take shared responsibility for measures that need to be taken (ibid). Closer

cooperation and more frequent interaction is key to this (Lund-Thomsen & Lindgreen, 2014, p.15). This is

also clearly expressed in the view of a manager of a Swedish outdoor company that has much less power

due to its size, but has the opportunity to face problems with their suppliers directly:

I want them to be able to be honest and call me up and say, well, this colour it did not turn out

well and we have to redo the production. That they don’t ship out something that is not good

because they think they might get away with it – you try to have an understanding relationship.

(…) You have to work on that relationship and you cannot do that while hobbling around thinking

price price price. (Börjeson & Boström, 2018, p.236)

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IKEA has adopted a similar strategy as Philips and tries to combine cost savings with increasing quality,

and environmental and social standards. Instead of demanding all kind of things from its suppliers, such

as environmental and social responsibility, they are now developing solutions together with their suppliers.

“It is a continuous development process aiming to bring suppliers to still higher levels of performance in

cooperation with IKEA” (Andersen & Skjoett-Larsen, 2009, p.78).

Another element of the cooperative approach is building long-term relationships with suppliers, which is

actually a prerequisite for the cooperative stance towards suppliers described above. Consequently, a

company will only be motivated to invest in a supplier if they have committed to a long-term relationship.

In order for this effect to trickle down to workers, it is necessary that suppliers offer their workers long-

term contracts. Only then will the quality of life of these people actually be improved (I. Schipper, personal

communication, 12 June 2019). This applies mainly to workers in factories; in the case of food supply

chains it matters whether a company works with large plantations or with smallholders. Often, workers at

plantations are worst off. They do not have any autonomy because they do not own any land, and are in

most cases hired on a day-to-day basis for a very small income (S. Drost, personal communication, 6 June

2019). In terms of economic development, it is therefore better to work with smallholders than plantations

only (V. van der Linden, personal communication, 20 June 2019). Depending on the commodity it may be

hard for companies to guarantee their supply if they solely work with smallholders. For that reason, a

strategy that is often chosen is to work with plantations and to buy only part of the supply from

smallholders (ibid.).

While this cooperative approach sounds very promising, Lund-Thomsen and Lindgreen (2014) stress that

this approach also has it limits. First of all, the scalability of the approach poses a challenge: “collaboration

might be feasible with a few selected suppliers, engaged in pilot projects; it appears nearly impossible to

replicate such close cooperation across hundreds of suppliers, considering just the logistical challenge”

(p.17). This might be true, as many companies experimenting with this approach start with pilot projects

and have to find a way to scale up this strategy (e.g. Test session Verstegen, personal communication, 19

July 2019). Furthermore, Lund-Thomsen and Lindgreen (2014) argue that within the development of the

new approach very few ‘Southern’ voices have been included, and the existing inequalities might therefore

be reinforced. Although, in economic terms, companies can support suppliers by bearing the cost for

necessary improvements. But it has been five years since the article by Lund-Thomson and Lindgreen was

published, and a lot might have changed since then. New technologies such as blockchain are emerging,

giving the promise of more equal power distribution among supply chain actors. They also have the

potential of increasing transparency and enhancing compliance with social and environmental standards

(Gurzawska, 2019, p.11). As no other, or improved, strategy has been developed or was mentioned by

the experts interviewed for this research, the cooperative approach is included in the stewardship

orientation for resilience acting. Finally, Lund-Thomsen and Lindgreen (2014) question whether the

approach is feasible in the capitalist context, where benefits are not shared and the pyramid-shaped,

unequal production system continues to exist. This is a justified concern and could be dealt with through

the creation of new business models that are more circular and centered around the idea of sharing value

along the chain (M. Jacobs, personal communication, 27 June 2019). The extent to which companies are

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willing to experiment with these types of new business models is discussed in resilience enabling (see

Table 11). Trust, transparency and close collaboration form the basis for the development of such circular

business models.

Resilience – enabling


enabling Alignment of business model with sustainable practices and the belief of managers in company’s long-term value creation

Stewardship orientation: The company experiments and diversifies its business model for the sake of sustainability. Managers believe long-term value creation requires evaluation of all decisions based on core values of the company. Equidistant orientation: Adaptation of business models within business categories or product lines for the sake of sustainability or experiments with business models but no actual adaptation. Managers believe long-term value creation requires focus on materiality of sustainability issues (a limited set of sustainability issues is included). Instrumental orientation: No diversification of the business model for the sake of sustainability. Managers believe long-term value creation is a lot of talk with limited effect on business goals, and therefore the focus is more on business results in the short run.

Table 11: Resilience enabling

The category enabling of the capability resilience focusses on the business model of a company and

whether diversification of this model takes place for the sake of improving the sustainability performance

of the company. In the strive for sustainable supply chains a new generation of business models is

stimulated that focus much more on closed loops, collective value creation, and sharing created value

(Jonker & Faber, 2019, p.163). This stays in contrast with current business models that are often centered

around short product life cycles, and in which inefficient use of raw materials and energy is financially

rewarded (Van Tulder et al., 2012, p.48). The business model of a corporation provides information about

their generic strategy (Van Tulder et al., 2012, p.47-48) and revenue model, which determines the

opportunity to create social and environmental value (Maas et al., 2018, p.54). In general, four business

cases can be distinguished (ibid.):

1. The classic business case: decisions about sustainability are solely motivated by financial revenues;

for example, through cost reduction in the field of energy use or waste.

2. The defensive business case: actions are focused on preventing financial losses; this is done by

reducing negative externalities (‘doing harm’).

3. The strategic business case: social and environmental value creation is an integral part of the

company’s competitiveness in the long run.

4. The social business case: an explicit focus on multiple value creation (triple bottom line); for

example, through introduction of new revenue models or contribution to system transformation.

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The last category of the social business case applies to hybrid organizations (ibid.), or what other scholars

refer to as social enterprises. When this category is reached, the business model of a company is fully

aligned with sustainability. The entire company then focuses on sustainability, including the company’s

brand identity (Giunipero et al., 2012, p.263). An example of a Dutch company that is moving towards the

third business case, a strategic business case, is Eneco Group. This energy provider is looking for new

innovative revenue models in which renewable energy plays an important role (Maas et al., 2018, p.54).

A business model is a structural factor, which is not changed from one day to another; often transition to

a new business model happens in phases and is not without risk. If a company changes its business model

for the sake of sustainability, it shows that a company does not only take actions to make their supply

chain more sustainable, but it is also willing to embed sustainability in their organization. Courage,

leadership and conviction are required for this (ibid.). The adaptation of a different business case is about

implementing sustainability on a structural level and fits therefore well within the category enabling.

Making decisions about sustainability is not easy, as often the benefits of sustainability measures are very

hard to quantify. For example, if a food producing company that imports a lot of palm oil is considering to

start buying palm oil that is produced according to the principles of the Roundtable for Sustainable Palm

Oil, the additional cost will be easy to measure, but the added value is spread out over a much longer

time frame and will be hard to calculate (Van Tulder et al., 2012, p.45-46). Therefore, it matters how

managers think about long-term value creation. It could be argued that the belief of managers in long-

term value creation is a prerequisite for adjusting a business model for the sake of sustainability, as most

sustainability choices only pay off in the long term. In the instrumental orientation managers are focused

on business results, also when looking at the long term, and criticize the use of vague terms (Nijhof et al.,

2019, p.152), such as more qualitative indicators. Managers in the equidistant orientation will most likely

use a materiality analysis to decide which sustainability issues are most relevant to include. Finally,

managers in the stewardship orientation are looking for ways to aligning the core values of the company

with long-term value creation (ibid), which is illustrated by a quote from a manager working in a company

with a stewardship orientation:

Look I mean I think it reflects the main purpose the company has, which is to make sure our

solutions are addressing the needs of society now, within the boundaries of the limitations of the

planet so we don’t compromise future generations or current generations. So that’s kind of what

it points to, right? (Nijhof et al., 2019, p.152)

Although the belief of managers is an important indicator and already gives a hint towards action, it is not

enough as an enabling factor for resilience on its own. In practice, when managers believe in long-term

value creation, it does not necessarily mean that the business model of the company is also aligned with

it. In the test workshops with Verstegen, the employees and CEO argued that managers were convinced

about long-term value creation, but experimentation with business model verification was only done to a

limited extent (Test session Verstegen, personal communication, 19 July 2019). It is interesting to note

that M. Driessen, CEO of Verstegen Spices & Sauces B.V., did not feel the need to change the business

model, because the company could improve a lot with respect to the level of sustainability within the

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boundaries of the current business model. But he did ask himself whether this business model would still

work within ten years from now. For the sake of continuity of the organization they might feel the need

to change it, but not necessarily for the sake of sustainability (ibid.)

It is true that within a particular business model a lot of changes can be made on the level of sustainability.

Dorianne Wegen, Strategic sourcing spices & herbs at Verstegen, argued that they might, for example,

decide, within their current business model of selling products, to switch to only selling organic products.

This would be done for the sake of sustainability and would have a major impact upstream in their supply

chain, but could be done without changing their business model (Test session Verstegen, personal

communication, 19 July 2019). Another possibility would be that companies change their business model

for a particular product line or product category. This is especially feasible for commodities with a less

complex supply chain (M. Jacobs, personal communication, 27 June 2019). Fully adapting the business

model, or limiting the adaption of business models to particular product lines, or only experimenting is

what makes the difference between an equidistant and stewardship orientation within this category. This

difference was also emphasized by S. van Heemskerk, Director of sustainability (tropical oils), at an

agricultural multinational, who argued that their company makes a lot of improvements on sustainability

in particular regions, but believes that if the company really wants to deliver on sustainability, they need

to reinvent their current business model (personal communication, 26 July 2019).

Resilience – adjustments made

Quite a number of adjustments have been made to the different descriptors and assessment scores of

resilience in the course of the development. Through the expert interviews, a lot of new insights were

gained into the difficulties of creating a sustainable supply chain and the possible strategies that can be

used to deal with wicked problems. Based on the interviews, ‘own research in the supply chain and risk

assessments made by the company’ were included. Also, capacity building and the collaboration with trade

unions became more prominent in the framework. The code of conduct had been part of the framework

since the start, as it is an often-adopted strategy and widely discussed in academic literature. However, it

became part of resilience only later, when I realized that the way a code of conduct is used indicates the

chance to gain new insights and adapt, and make use of the opportunity to collaborate. In contrast,

‘involvement of suppliers in the sustainability philosophy’ was left out. This was done because it was very

hard to find concrete indicators of creating such a shared meaning and two of the interviewed experts

indicated that this would be either impossible to create, or impossible to measure. Few changes were

made to the category enabling as differentiation of the business model was a clear enabling factor, verified

by both theory and experts. ‘The belief of managers in the company’s long-term value creation’ was added

based on the literature, as changing a business model is quite radical and the belief of managers can

already give an indication of the willingness to change for the sake of sustainability.

Reorientation

Reorientation is the ability to collaborate in order to unblock stagnations in creating sustainable supply

chains and to contribute to sustainability system change. This is closely related to resilience but plays out

on a different level. While resilience is about the ability of a company to make the right connections to

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better understand the problems and changing circumstances in its own supply chain, reorientation is about

using this knowledge to help others within their industry or beyond to improve their sustainability

performance in order to bring about wider change and solve wicked problems. Reflexivity and resilience

are necessary to gain the knowledge needed to unblock stagnations and bring about transformation.

Additionally, it becomes clear that many of the problems that companies are facing in their supply chain

cannot be solved by an individual firm. Therefore, it is relevant if companies are open for collaboration

with others and make use of, what Kogg and Mont (2011, p.162) call, ‘the network of governance’ in order

to address environmental and social issues in their supply chain. Collaboration and the stance taken

towards other stakeholders is key in this capability. First of all, in order to deal with wicked problems in

the own supply chain effectively, it is relevant to collaborate with multiple stakeholders and approach the

problem on a larger scale. For instance, through participation in landscape approaches companies can

move away from familiar patterns and strategies and continue innovating. Secondly, collaboration is key

to move beyond the own agenda and to bring about system change in the field of sustainability. Most

likely system change is what is required to effectively handle wicked problems, such as poor working

conditions and the lack of a living wage. This requires changing one’s focus or direction away from the

micro level of dealing with issues on a day-to-day basis towards a macro level of handling wicked problems

on a more structural level. Because collaboration with other stakeholders is crucial in this capability, and

a company needs to be aware that it is part of a larger system, a network icon is chosen (see Figure 19).

Figure 19: Icon capability reorientation (source: adapted from Flaticon, 2019d)

Reorientation – observing


observing Contribution to debate within industry and beyond about current approach and solutions

Stewardship orientation: Very actively engaged in business forums, industry platforms/associations and sector-oriented initiatives and new multi-stakeholder initiatives are initiated by the company. Equidistant orientation: Participation in business forums, industry platforms/associations and sector-oriented initiatives on a structural basis. Instrumental orientation: Not a member of business forums, industry platforms/associations and sector-oriented initiatives, or in case of member: lowest level of membership.

Table 12: Reorientation observing

Since the capability reorientation moves beyond the individual company towards solving problems on an

industry or sector level, or bringing about system change, observing is about becoming aware what is

needed to improve strategies for solving wicked problems on this higher level (see Table 12).

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It builds upon the capability reflexivity, because within multi-stakeholder groups everyone brings in their

own perspective. “Multi-stakeholder approaches encourage stakeholder dialogue and ‘social learning’”

(Gurzawska, 2019, p.13). Openness towards these different perspectives and interaction with other

stakeholders to gain knowledge to better handle problems in their supply chain was included in reflexivity.

Reorientation observing works the other way around, looking at the way companies bring in the knowledge

they gained through their own experience and share it with others. “Increasingly, collaboration in the

forms of stakeholder engagement and multi-stakeholder approaches in SCM [supply chain management],

also known as cross-sector social partnerships, is considered as the most effective way to achieve more

responsible and sustainable SCM” (Gurzawska, 2019, p.13).

While it might be argued that it is the responsibility of the government to bring about system change and

drive sustainability in supply chains, MNCs can have a main role as well, as has been argued before. In

the absence of effective laws and regulations on national and international level, private governance

initiatives are emerging.

These private governance mechanisms involve companies, NGOs, and sometimes other actors,

such as governments, academia or unions, networks of companies and industry associations,

epistemic communities and technical experts to tackle societal and environmental challenges

across industries and on a global scale. (Gurzawska, 2019, p.16)

In addition, the Sustainable Trade Initiative (IDH), which is involved in many multi-stakeholder groups,

argues that it is essential to involve those who will be most impacted. Either in the sense that these

stakeholders will have to do most of the work, or in the sense that they have most to gain or lose. Often

these stakeholders are key manufacturers and producers from other parts of the supply chain (Oorthuizen

et al., 2018, p.24). Many different variations of these multi-stakeholder groups exist, ranging from business

forums such as the Responsible Business Alliance, and industry associations such as the International

Textile, Garment and Leather Workers’ Federation, to sector-oriented initiatives such as European

Responsible Minerals (Kogg & Mont, 2012, p.162; M. Jacobs, personal communication, 27 June 2019).

By being a member of these different multi-stakeholder groups, a company can contribute to discovering

what is needed to further improve the whole sector, industry or system. When awareness is created about

the current position in relation to wicked problems, common goals can be set for the future and hurdles

that must be cleared can be defined (Maas et al., 2018, p.22). The level of activity of a company in these

multi-stakeholder groups indicates to what extent a company contributes to the debate about wicked

problems that exceed their own supply chain. In member-based platforms like the Responsible Business

Alliance, mentioned before, different types of membership are possible (M. Jacobs, personal

communication, 27 June 2019). In the stewardship orientation, companies are not only very actively

engaged, but they also act as a founding member of new multi-stakeholder initiatives.

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Reorientation – acting


acting Stance taken towards other stakeholders within and beyond the own supply chain


Table 13: Reorientation acting

The category acting in the capability reorientation is about the stance taken towards other stakeholders,

in particular competitors, the government, NGOs or other stakeholders a company can potentially

collaborate with to bring about transformation (Table 13). As explained at the start of this chapter, many

of the stakeholders that can form a barrier for adopting sustainability practices can also form an enabler,

depending on how they behave. For instance, government regulations can be both stimulating and limiting,

depending on the stance of the government towards sustainability. Simons and Nijhof (Bom, 2018a)

developed a framework for market transformation (see Figure 20) that shows the different phases of this

transformation, and the roles and actions that different parties can play. It shows that stakeholders are

dependent on one another and can only together bring about system change in the field of sustainability.

An example of this is trying to make cotton production more sustainable. IDH argues that in order to reach

this goal, scale is needed. To be more precise, sustainable cotton production should take up twenty percent

of market shares in order to bring about a shift in the market. IKEA was a frontrunner in this but could

not make sustainable cotton mainstream by themselves and therefore reached out to WWF and IDH, who

in turn made sure that other MNCs in the garment industry became involved. The government can also

play a significant role. In this example, it was sufficient that IDH was involved, because they were

supported by the Dutch and Swedish governments, which gave credibility to the initiative (Bom, 2018b,

p.66). Simons (Bom, 2018a) does not believe in a tipping point in market shares and argues that active

management is required to bring about market transformation. “Market incentives should be changed and

framework conditions must be set” (Bom, 2018a, p.6). Only in the fourth and final stage, where

sustainability is legislated by the government, one could speak of market transformation according to

Simons (ibid.). This is in line with the argument of Oorthuizen, Executive director of IDH, who claims that

MNCs and NGOs cannot bring about systemic change without the support of the governments, because

they do not have ‘political legitimacy’ to legislate the sustainable development (Bom, 2018b, p.66). Despite

this, companies can play a crucial role by taking an active stance towards the government and support

them in formulating relevant legislation.

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Figure 20: Framework market transformation ‘who does what and when?’ (source: Bom, 2018a, p.8)

If this active stance is also used towards other stakeholders, such as NGOs and the media, the way it was

done by IKEA, a company shows ‘thought leadership’. This is characterized by a positive vision on

sustainability and setting an example (Maas et al., 2018, p.22; V. van der Linden, personal communication,

20 June 2019). It would even be better if a company actively stimulated other companies that lag behind,

to follow their example. This can, for instance, be done through participation in the multi-stakeholder

groups discussed in reorientation observing. Such initiatives are always dependent on the slowest or worst

member, as they drag the average down. Therefore, it is necessary to put a lot of effort in making the

non-willing willing to raise the level of the initiative and prevent it from becoming fragmented. Obviously,

most impact can be made not by five percent of the companies that become frontrunners, but by getting

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eighty percent of the companies a level up in their sustainability performance (M. Jacobs, personal

communication, 27 June 2019).

Depending on the industry a company is operating in, companies might be on different maturity levels.

Those that achieve a higher maturity level will ask themselves the question “Where does it makes sense

to compete and where does it make sense to cooperate?” (Bom, 2018a, p.11). But this dependency on

other parties within and beyond the supply chain does not mean that the actions of a firm are totally

controlled by the structure. Through becoming aware of the possible stages in maturity and using different

orientations, companies also have their own agency to influence the process of market transformation and

make their own performance, and that of others, more sustainable. Depending on their orientation

different choices are made. In the instrumental orientation, companies are more focused on competing

and they will look for ways to use their sustainability strategy to differentiate themselves from competitors

(ibid), which will make it very hard to handle wicked problems. In turn, the way managers use their

external ties is closely related to responsiveness, as they focus on monitoring pressure from the outside,

mainly focusing on risk. Alternatively, companies with an equidistant or stewardship orientations value

collaboration much higher. “[…] Manager in stewardship organizations feel that they have an advantage

in involving external stakeholders because they can convince them to contribute to a common goal” (Nijhof

et al., 2019, p.155). In companies with an equidistant orientation, showing thought leadership is still

missing and managers hesitate to impose their ideas about sustainability on other stakeholders (ibid.)

Reorientation – enabling


enabling The willingness and ability to contribute to multi-stakeholder collaboration

Stewardship orientation: The company has a wide network to bring people from different stakeholder groups together; funds and other resources are provided to multi-stakeholder groups, own operations are opened up for testing prototypes, and financial support is arranged for new products or processing approaches. Equidistant orientation: The company has a wide network to bring people from different stakeholder groups together and funds or other resources are provided to multi-stakeholder groups. Instrumental orientation: Either the company has not the right network to bring people from different stakeholder groups together, or in case they do have a wide network, no funds or other resources are provided to multi-stakeholder groups.

Table 14: Reorientation enabling

Reorientation enabling is also focused on the collaboration with other stakeholders to achieve sustainability

goals, in particular about the support that is given to make collaboration initiatives successful (see Table

14). Often the word cross-sectoral is used to indicate the collaboration between different stakeholders in

society. Many authors recognize the need for collaboration in handling wicked problems in supply chains.

Van Tulder (2016), for example, states that: “These problems are wicked because they are cross-sectoral,

meaning governments, communities and companies are all part of the problem and they all need to be

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part of the solution […]” (p.5). Because different stakeholders collaborate in such partnerships or groups,

they are often called multi-stakeholder partnerships, which can be defined as “voluntary, collaborative

arrangements between actors from two or more domains of society, i.e. state, market and/or civil society,

which have an institutionalized, yet non-hierarchical structure and strive for a sustainability goal” (Drost,

Van Wijk & Mandefro, 2012, p.4).

There are several enabling factors that facilitate effective collaboration with other stakeholders and that

contribute to the creation of multi-stakeholder groups. Relevant here are the five dimensions of creating

coalitions that were recently published by IDH in a book entitled Collaborative transformation – The art of

making international trade more sustainable (Bom, 2018b). They include: a relation dimension, a discursive

dimension, an institutional dimension, a reflexive dimension, and an implementing dimension (Figure 21).

Figure 21: The five dimensions of collaborative transformation (source: IDH, 2019)

The first dimension is about building coalitions (Oorthuizen et al., 2018) and about creating a space where

people are going to get together around a specific issue. In order to build an efficient coalition, it is

necessary to bring the right people together (Van Tulder, 2016, p.6). From the point of view of an MNC,

it is thus relevant to have a broad network of contacts, in order to be able to bring relevant stakeholders

from different groups together (S. van Heemskerk, personal communication, 26 July 2019). In addition,

in a precompetitive environment, it is useful to have an independent partner that can function as a

mediator; a role IDH took in the discussed example of IKEA and the creation of the Better Cotton Initiative

(Bom, 2018b, p.64). The mediator or convener can bring all the different stakeholders with different

interest and perspectives together, and build trust between the coalition members. “Negotiations are often

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needed to ensure that the steps to be taken will benefit all those involved – not necessarily to the same

extent, but at least enough to elicit everyone’s support” (Oorthuizen et al., 2018, p.25). In relation to this,

S. van Heemskerk explained that a company rather chooses this mediator themselves, which requires a

broad network (personal communication, 26 July 2019).

The second (discursive) and fourth (reflective) dimensions are about the creation of a common vision and

learning in order to identify possible needs for adjustments of the chosen strategy. This is a logical follow

up from the first dimension, as this is largely determined by the people that are joining the coalition.

Oorthuizen et al. (2018) argue that:

[…] the people who launch effective coalitions usually have given the challenges they face quite a

bit of thought. They have been involved in and learned from past initiatives, understand the

landscape they are operating in, and have ideas about new pathways for change. (p.22)

These dimensions are very much related to the capabilities reflexivity and resilience, and therefore not

included in the assessment score of reorientation again. The third (institutional) dimension is about

supporting collaborations with structure and has and additional value here. To get things moving, it is

necessary to create institutional arrangements within the coalition. “Given their non-institutional character,

cross-cutting coalitions are not self-sustaining. They require active convening to keep them alive and

kicking” (Oorthuizen et al., 2018, p.26). The question remains: who pays for it? (Bom, 2018b, p.65).

Companies can contribute by providing funds or other resources such as staff or know-how that are

required (Oorthuizen et al., 2018, p.36), and show in this way their commitment to the initiative (S. van

Heemskerk, personal communication, 26 July 2019).

Finally, the fifth (implementation) dimension is about making changes tangible throughout the supply

chain. At the field level, it is shown that transformation is possible when there are successful prototypes

of new production and processing approaches. At the supply chain level, this is shown through an

increased demand for newly developed sustainable products, and at the business level, corporate practices

need to become aligned with the sustainability practices (Oorthuizen et al., 2018, p.48). “When coalition

partners enable and coordinate shifts at all four levels, they deliver real change towards sustainability”

(ibid.). Two main actions can be identified that companies can take to enable the fifth dimension. First of

all, they can open up their own supply chains for testing prototypes of new products and processing

approaches (S. van Heemskerk, personal communication, 26 July 2019). Prototypes are often easy to

finance as they are small projects, yet carefully designed and with room for experimentation. Successful

prototypes can function as an example and have the potential to scale-up. Prototypes distinguish

themselves from pilots through testing in ‘real life’ instead of ideal circumstances, which makes them

easier to duplicate (Oorthuizen et al., 2018, p.49). Secondly, it is the task of companies to create supply

chain integration, which means creating a demand or ensuring an adequate return on their transition

through sustainability, for example, through involving customers and getting financial support (Oorthuizen

et al., 2018, p.50; S. van Heemskerk, personal communication, 26 July 2019), as in the case of business

to business (B2B) customers.

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Reorientation – adjustments made

This capability underwent most changes in the course of the study. At first, it was named revitalization,

but the meaning and substance started to shift gradually. The justification for the renaming of this

capability can be found in the discussion chapter. Especially observing was difficult as the capability is

about collaboration and taking a system perspective, while the unit of analysis is still the individual

cooperation. The choice about the current descriptor was made based on the expert interview with M.

Jacobs, and subsequently aligned with terms used in the literature. All categories were at first much more

centered around collaboration and change within the own supply chain of a company. Later on, based on

the findings and growing insight, a higher level of transformation was included as well. Fundamental

changes were made to the enabling category based on the insights from the test session with S. van

Heemskerk. Up until then reorientation enabling was focused on innovation within the own company and

the way companies dealt with lack of experience or doubts about their actions. In contrast with the other

two categories, this was very much internally focused, built on the assumption that when innovation is

stimulated inside the company and people are open about their doubts in order to generate new ideas,

the chance will be bigger that they will take a leadership role on a higher level as well. The indicators were

based on the paper by Nijhof et al. (2019) and discussed with one of the experts. However, they needed

some further verification as the causality between the improvement in sustainability practice of a single

company and the chance of ‘thought leadership’ was not yet backed up by scientific literature. S. van

Heemskerk criticized the assumption about the relation between innovation within the own company and

taking a leadership position, and argued that from her experience there are other elements that function

as enabling factors for successful multi-stakeholder groups and collaborations. Her statements were

supported by more recent literature, and based on this a new assessment score was developed.

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2.3 Overview of the ‘Capabilities assessment framework for MNCs’

Capability Category Descriptor Assessment score

1. Responsiveness

observing Diversity in external stakeholders, and their demands and interests are recognized

Stewardship orientation: A stakeholder analysis is made to identify the most pressing issues, and organizational responsibilities are actively discussed with external stakeholders. Equidistant orientation: A stakeholder analysis is made to identify the most pressing issues and the company is open to external demands, but does not actively engage with external stakeholders to understand their demands and interests. Instrumental orientation: A limited number of external stakeholders is recognized and the company is not easily available to external stakeholders.

acting The extent to which priorities are identified and actions are taken, and attention to controversial issues is given

Stewardship orientation: Pressing issues are addressed in time and new projects are started. Also, a list of priorities is made on a structural basis, and new projects include opportunity-driven projects. In communication, a balanced and honest message is presented, in which attention is also payed to controversial issues. Equidistant orientation: No in time response in case of pressing issues or no adequate measurements taken. A list of priorities is made on which new projects are based, but they are mostly risk-oriented. In communication, there is some but little attention for controversial issues. Instrumental orientation: No in time response in case of pressing issues and no adequate measurements taken. No priority list is made based on a materiality analysis. In communication, there is a tendency to emphasize good new stories and gloss over controversial topics.

enabling The ability to identify potential risk and opportunities

Stewardship orientation: The company has a risk and reputation manager, and sufficient resources and tools available to identify trends and correspondingly potential risks and opportunities. An analysis of this information is made on a very regular (structural) basis and the company is not being surprised. Equidistant orientation: The company has a risk and reputation manager, and sufficient resources and tools available to identify trends and correspondingly potential risks and opportunities. An analysis is made at an ad hoc basis.

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Instrumental orientation: No sufficient resources, tools or people are available to identify trends and correspondingly potential risks and resources. Awareness is often created due to external stakeholders.

2. Reflexivity

Observing

The extent to which knowledge providers are recognized, and the access to information about the type and complexity of the problems in the supply chain

Stewardship orientation: Multiple knowledge providers are recognized, including supply chain partners. Management and employees are educated in state-of-the art knowledge about sustainability on a structural basis. Equidistant orientation: Multiple knowledge providers are recognized. Limited knowledge development of dedicated stakeholder groups about sustainability through selective education and knowledge provision. Instrumental orientation: A limited number of knowledge providers is recognized and supply chain partners are not viewed as relevant knowledge provider to include. Only procurement managers are provided with trainings on sustainability, on an ad hoc basis.

acting Actions undertaken to engage with knowledge providers and avoid a tunnel vision

Stewardship orientation: Workers have freedom of association. The company organizes dialogue on pressing issues on a structural basis, including direct communication with local stakeholders (e.g. trade unions) and participates in a range of existing platforms. Equidistant orientation: Workers do have freedom of association, but collaboration with knowledge providers to discuss sustainability issues is limited to international NGOs. Participation in discussions in existing platforms happens on ad hoc basis. Instrumental orientation: Collaboration with knowledge providers is very limited, only when pressure is put on a particular issue from the outside. Workers do not have freedom of association. Participation in platforms is done in a reactive manner.

enabling Intra-organizational collaboration and responsibility for sustainability matters

Stewardship orientation: CEO and top management are directly involved and take responsibility for sustainability in the supply chain. CSR practices are decentralized or cross-departmental functions exist, or in case of centralized CSR practices: close collaboration between purchasing department and CSR department. Equidistant orientation: Decentralized CSR practices/cross-departmental functions or in case of centralized CSR practices: close collaboration between purchasing department and CSR department. Instrumental orientation: CSR department or legal affairs department is mainly responsible for sustainability matters or no staff with responsibility for sustainability is reported.

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3. Resilience

observing Knowledge acquisition to understand changing circumstances upstream in the supply chain

Stewardship orientation: Collaboration and communication with local NGOs, trade unions or similar parties that function as a translator between local workers and the company. The company systematically works towards a detailed map of the supply chain and their business relationships, and risk assessments are made on a continuous basis. Equidistant orientation: Own research within supply chain to trace the origin of raw materials and understand the conditions upstream in the supply chain. Risk analyses are used to make sustainably responsible choices, without consulting external knowledge holders and only before new operations are started. Instrumental orientation: Very limited knowledge about conditions upstream in the own supply chain and the origin of the raw materials. No extra measures are taken in high-risk countries where the company operates.

acting The extent to which a company assesses, evaluates and improves its strategy implementation in relation to their sustainability performance

Stewardship orientation: Focus on capacity building along the entire supply chain, and financial support to suppliers to uphold sustainability standards. Innovative approaches are used, and long-term collaboration with suppliers that provide workers with a long-term contract. Equidistant orientation: In case a code of conduct is used, there is capacity building for compliance, but no financial support. In case external certification is used, a continuous learning system is in place to prevent box-ticking. Instrumental orientation: Compliance with certification or code of conduct used as an indicator for the sustainability performance of the company. Local managers are informed about the code of conduct, but employees are not, or audit is done through self-assessment without verification.

enabling Alignment of business model with sustainable practices and the belief of managers in company’s long-term value creation

Stewardship orientation: The company experiments and diversifies its business model for the sake of sustainability. Managers believe long-term value creation requires evaluation of all decisions based on core values of the company. Equidistant orientation: Adaptation of business models within business categories or product lines for the sake of sustainability or experiments with business models but no actual adaptation. Managers believe long-term value creation requires focus on materiality of sustainability issues (a limited set of sustainability issues is included). Instrumental orientation: No diversification of the business model for the sake of sustainability. Managers believe long-term value creation is a lot of talk with limited effect on business goals, and therefore the focus is more on business results in the short run.

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4. Reorientation

observing Contribution to debate within industry and beyond about current approach and solutions

Stewardship orientation: Very actively engaged in business forums, industry platforms/associations and sector-oriented initiatives and new multi-stakeholder initiatives are initiated by the company. Equidistant orientation: Participation in business forums, industry platforms/associations and sector-oriented initiatives on a structural basis. Instrumental orientation: Not a member of business forums, industry platforms/associations and sector-oriented initiatives, or in case of member: lowest level of membership.

acting Stance taken towards other stakeholders within and beyond the own supply chain


enabling The willingness and ability to contribute to multi-stakeholder collaboration

Stewardship orientation: The company has a wide network to bring people from different stakeholder groups together; funds and other resources are provided to multi-stakeholder groups, own operations are opened up for testing prototypes, and financial support is arranged for new products or processing approaches. Equidistant orientation: The company has a wide network to bring people from different stakeholder groups together and funds or other resources are provided to multi-stakeholder groups. Instrumental orientation: Either the company has not the right network to bring people from different stakeholder groups together, or in case they do have a wide network, no funds or other resources are provided to multi-stakeholder groups.

Table 15: The capabilities assessment framework for MNCs

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To come back to the first sub-question ‘What is the responsibility of an MNC to produce and trade

sustainably?’, it became clear in this chapter that it is not possible to arrive at a definition of the

responsibility of MNCs, since positive legal obligations are lacking. While this legal responsibility of MNCs

for their impact in the supply chain might be limited, their ethical responsibility is perceived differently by

stakeholders in society. Consumers, the media, NGOs, and governments are increasingly putting pressure

on MNCs to make their performance in supply chains more sustainable. It is therefore more relevant to

look at the way companies deal with the responsibility for wicked problems in their supply chain. Three

different strategic orientations, the stewardship, equidistant and instrumental orientation, were

distinguished, representing the potential stance that a company may take towards sustainability. The

second sub-question ‘What descriptors and indicators, in line with the capabilities approach, are relevant

when assessing the sustainability performance of MNCs in global supply chains?’ was answered in the

overview of the developed capabilities assessment framework for MNCs (Table 15), supplemented with an

extensive justification about the relevance of the chosen descriptors and indicators. This is essential for

moving to the next chapter in which the practical implications of the framework will be discussed.

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3. Test case studies: Verstegen and an agricultural multinational

In this chapter, the third sub-question ‘How does a capabilities assessment framework work out for MNCs,

represented in this study by Verstegen Spices & Sauces B.V. and an agricultural multinational?’ will be

answered. First, some background information on Verstegen and the agricultural multinational will be

provided. After that, the outcome of the test sessions and an interpretation of the assessment scores will

be provided.

Figure 22: Test case session with Verstegen at the office of CEO Michel Driessen. From

left to right: Elonie Kooter, Marianne van Keep, Dorianne Wegen, and Steven Vogel

3.1 Background information

Verstegen Spices & Sauces B.V.

Verstegen is a non-stock listed family business, operating since 1886, employing 450 employees. As

implied in the name, the company sells spices and sauces, ranging from traditional spices such as nutmeg

to spice blends for fish, liquid spice blends such as ‘Latin smoky bell pepper’, and sauces like satay sauce

(Verstegen, 2019b). They are sourcing from countries all around the world, Indonesia being one of the

most important export countries. In total, they work with about two hundred different suppliers (M. van

Keep, personal communication, 15 July 2019). Since 2008, they have been actively working on

sustainability, which involves, among others, cooperating with smallholder farmers, using agro forestry

methods, and experimenting with blockchain. Verstegen is also motivated to collaborate with others to

handle wicked problems in line with their sustainability mission. This is attained, for example, by

developing the Sustainable Spice Initiative, in which they work together with forty other members all

around the world (Duurzaam-ondernemen, 2018; Verstegen, 2019a). Some of the main issues they are

currently facing in making their supply chain more sustainable are living wages, child labour, biodiversity

and the environment in general (M. van Keep, personal communication, 15 July 2019).

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Figure 23: Logo Verstegen Spices & Sauces B.V (source: Verstegen, 2019b)

An agricultural multinational

The agricultural company that does not want to be mentioned by name is a large MNC with about 150.000

employees, working all around the world. It is a family-owned private company that delivers all kind of

different products, ranging from food to industrial products and service to customers worldwide. Because

this agricultural multinational trades so many different products, the decision was made to focus on the

palm oil supply chain during the workshop. Some background information on this supply chain was

provided beforehand:

Sixty percent of the palm fruits grow on large scale plantation, while forty percent grows at

smallholder plantations in tropical countries in South-East Asia and Latin-America. Large

plantations deliver fruit directly to the mill, while smallholders may sell them to a network of

middlemen that will ultimately sell the fruits to the agricultural multinational. The mills will produce

crude oil that would be exported to destination countries for the refining process. After refining

and further processing, the refined oil is sold on to the customers of the agricultural company.

(adjusted from S. van Heemskerk, personal communication, 22 July 2019)

The actions of the agricultural multinational related to sustainability in the palm oil supply chains focus on

increasing transparency, improving stakeholder engagement, verifying whether progress is made, and

supporting the industry to make a sustainable transformation. The challenges they are currently facing in

making their palm oil supply chain more sustainable are: deforestation, biodiversity loss, violation of

workers and community rights, and balancing nature conservation and economic development (S. van

Heemskerk, personal communication, 22 July 2019).

3.2 Interpretation of scores

Verstegen Spices & Sauces B.V.

The assessment score of Verstegen can be found in Table 16 below.6 Some components of the assessment

score will be discussed in more detail in order to give an impression of how the workshop was conducted,

and some general conclusions will be drawn.

6 It should be noted that once the test sessions were completed, a few alternations have been made to the framework. On that account, some of the scores might be different if the framework were to be applied again.

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Average

Observing 3 2 3 3 2.75

Acting 2 3 2 1 2

Enabling 1 3 2 1 1.75

Average 2 2.67 2.33 1.67 2.17

Table 16: Capabilities assessment score of Verstegen Spices & Sauces B.V. (source: Test session Verstegen, personal

communication, 19 July 2019)

First of all, it is interesting to note that especially on the sections where Verstegen scored three points,

the focus group members easily agreed. For instance, in scoring reflexivity enabling, they all directly

agreed that they have a stewardship orientation. Among others, they used the argument that the CEO

himself was participating in the workshop, which showed that he is directly involved in sustainability

matters. In the case of resilience observing, they also quickly agreed on their orientation. They did

consider ‘working towards a detailed map of the supply chain and collaboration with translators’ an

adequate description of their approach. For every project started in their supply chain, they work together

with NGOs, such as ICCO and Fairfood, because they acknowledge and appreciate the expertise in the

local situation such parties have, and the credibility they can give to their work. As far as the scoring part

on risk assessments is concerned, they admitted that it worked out somewhat differently for them than

described in the assessment score. The company has been sourcing its products from the same regions

for over 130 years, which has allowed them to get familiarized with the problems in those regions (Test

session Verstegen, personal communication, 19 July 2019). Interestingly, they argued that risk analyses

were less relevant, implying that these were not done, but still felt they should score three points.

Some other sections awakened much more discussion among the focus group members, such as scoring

reorientation acting.7 The member that spoke up first felt they nearly met the stewardship orientation, as

they stimulate others through participation in the IMVO covenant, and because the government consults

them in case of questions concerning sustainable spices. But two other members also considered the

description of the equidistant orientation of ‘managers being opportunistic in applying sustainability

initiatives with other stakeholders’ as adequate, because they only collaborate in initiatives that fall within

their focus area. The CEO held a very different opinion and argued that they were having an instrumental

orientation. He could not imagine that any company could have a non-competitive agenda (which is part

of the score description of the equidistant orientation) and argued that a stewardship orientation could

not be reached as long as there is a money system, in which creating shareholder value is essential. The

other participants agreed that the stewardship orientation went quite far in terms of collaboration, but

7 At the time of the workshop with Verstegen, reorientation was still named revitalization, but the content did not change

since then.

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they also recognized the need to collaborate on the sector level, as problems such as child labour that

they have to deal with exceed their own supply chain. After some more explanation, some participants

recognized the ‘Framework market transformation ‘who does what and when?’ of Simons and Nijhof (Bom,

2018a, p.8) (see Figure 20), which constituted the basis for the assessment scores of reorientation acting

in the capabilities framework, and agreed that there are different stages of transformation. The employees

tried to convince the CEO that collaboration can work out for the good, especially when the government

takes responsibility and sets a new norm. However, the CEO stuck with his idea of granting only one point

for this particular section. The others were willing to go lower on the scale and agreed on one and a half

point in the end (Test session Verstegen, personal communication, 19 July 2019). However, for the sake

of sticking with the three-point scale and clarity, one point is assigned in Table 16.

Another section the participants had difficulty to score was reflexivity observing, but due to the content,

not so much because they disagreed. In this section, two different parameters ‘the extent to which

knowledge providers are recognized’ and ‘the access to information about the type and complexity of the

problems in the supply chain’ are scored together. For the part about recognition of knowledge providers,

they found their profile corresponded with the stewardship orientation and thus wanted to assign three

points. But trainings on sustainability are not provided to any employees or managers within the

organization. Four times every year, a sustainability lunch is organized in which employees can take part

voluntarily to receive an update about sustainability projects Verstegen is currently working on. Therefore,

they agreed that they have an instrumental orientation for this part of the assessment score. In relation

to this, they found it hard to imagine that there were actually companies that would train all their

employees and managers on sustainability, but it did make them think about it (Test session Verstegen,

personal communication, 19 July 2019). In the score overview a two points score was used to be able to

calculate an average score.

If we look at the overall score, it is interesting to see that Verstegen scores differently along the different

categories, with a highest average for the category observing and the lowest average for the category

enabling. A reason for this could be that they are very eager to learn and willing to improve their

sustainability level, which will most likely have a positive influence on their ability to observe along the

different capabilities. It must be noted, however, that they only started working on sustainability 10 years

ago and are a relatively small organization, without having the resources and people yet to embed the

capabilities into their governance system. This is, for example, reflected in the score of responsiveness

enabling, showing an instrumental orientation. It is interesting to see that in this section different aspects

were emphasized by different employees. One of them emphasised that they experienced very little

pressure from external stakeholders, exemplified by the fact that they have only received two emails from

consumers with sustainability related questions in the past twenty years (Test session Verstegen, personal

communication, 19 July 2019). With this she seemed to imply that very few resources, tools and people

are needed to identify risk and opportunities. While another employee argued that there are perhaps

enough people available, but they currently use their time for other purposes (ibid.). In combination with

the fact that they had no concrete examples of tools and resources available for this purpose, an

instrumental orientation was assigned. This is not necessarily a disadvantage, since they are experiencing

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hardly any pressure from external stakeholders. However, as their business is growing, and the attention

for sustainability matters is increasingly gaining prominence, it may be needed to embed this capability

better in the future.

An agricultural multinational

The outcome of the application of the framework in the individual workshop with Maria Lavialle-Piot from

an agricultural multinational can be found in Table 17.8 This score is not representing the agricultural

multinational as a whole, as it is specifically applied to the palm oil supply chain. It might be the case that

the capabilities are less developed for supply chains of other commodities of the agricultural multinational.

The enabling category will most likely receive the same score, as it involves more about structural factors

in the organization.

Average

Observing 3 2 3 3 2.88

Acting 3 3 3 3 3

Enabling 3 3 2 ? ?

Average 3 2.67 2.66 ? ?

Table 17: Capabilities assessment score of the palm oil supply chain of the agricultural multinational (source: S. van

Heemskerk, personal communication, 26 July 2019)

What is most striking if we look at Table 17 above, is that the agricultural multinational scores very high

on almost all components of the framework. An average score could not be calculated, as one item

(reorientation enabling9) was not scored. S. van Heemskerk did not agree on the content of this section

and was unable to score it. On account of this, the content of this component was reconsidered afterwards

and later on changed (as explained in the section Reorientation – adjustments made). The participant felt

that the overall score matched the current state of sustainability practices of the agricultural multinational

in the palm oil supply chain. She observed that it is quite a high score and explained that the score would

have been very different a few years ago, since the agricultural multinational shows an accelerating curve

in the past five years concerning sustainability, partly due to the change of CEO (S. van Heemskerk,

personal communication, 26 July 2019).

8 For some sections, S. van Heemskerk found it hard to choose between two different orientations. For the sake of clarity

and in order to be able to calculate an average, one orientation was chosen and corresponding points assigned.

9 At the time of the individual workshop with S. van Heemskerk at the agricultural multinational, the capability reorientation was still named revitalization.

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The lowest scores were achieved for the section reflexivity observing and resilience enabling. The latter is

described as “alignment of business model with sustainable practices and the belief of managers in

company’s long-term value creation”. As this is a more structural component, it was reflected upon from

the point of view of the agricultural multinational as an organization, not only from the perspective of the

sustainability department. S. van Heemskerk argued that it does depend on which part of the organization

you look at, because many managers believe in the long term-value of management of sustainability

issues, but also many find it really complex (personal communication, 26 July 2019). This could imply that

they are not always acting in line with long-term value creation. With regard to the component of alignment

of the business model, she stated:

I truly believe that if you want to do sustainability, you need to reinvent your business model, but

today we continue working with the current business model. So, there are improvements being

made in certain regions, but I think we need to do much more if we really want to be able to

deliver on this. (S. van Heemskerk, personal communication, 26 July 2019)

Currently, the agricultural multinational’s business model is still centered around trading, which often

means never seeing the actual product they initially bought (ibid.). Because they do not know the exact

origin of their products, they try to transform production processes in entire countries by working together

with many other stakeholders. An example is Indonesia, where they would like to make sure that all palm

oil that is sourced from Indonesia becomes sustainable in the future. This is in line with the conviction of

Oorthuizen, Executive director of IDH, that in the future what will matter will be sustainable landscapes

instead of certificates, where companies buy from particular regions that are identified as sustainable

production regions (Bom, 2018b). S. van Heemskerk adds to this that “It is a more holistic approach, it

takes more time, more stakeholders, and how successful you are, is another debate in itself” (personal

communication, 26 July 2019).

On most sections, S. van Heemskerk easily recognized the agricultural multinational in the stewardship

orientation and clearly explained why this was the case. For example, responsiveness acting, was scored

with three points because the different criteria included were all met. In relation to the priority list S. van

Heemskerk explained that her team has a five-year strategy plan and new action plans are developed

every year accordingly, to deliver on their commitments. The overall commitment is to transform markets

and it clearly shows that the agricultural multinational goes beyond risk-oriented projects. An example of

an opportunity driven project is the landscape program for sustainable palm oil they have set up in

Indonesia, because they acknowledged they cannot fight deforestation by themselves. Therefore, they

attempt to work on a more holistic level with all stakeholders. In particular, they try to get the government

involved and make it a public-private initiative. This is essential because, as S. van Heemskerk concluded:

“at the end of the day you want the protection of forest to be embedded into the legislation, you want the

government to be able to enforce it at the level of market expectation” (personal communication, 26 July

2019). With regard to the aspect of communication, she emphasised the need for identifying challenges,

in order not be targeted by NGOs and to manage expectations, since resolving sustainability issues is

rather complicated. However, it should be mentioned that this communication strategy applies specifically

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to the palm oil team and not to the agricultural multinational in general. Such an approach does not directly

follow from the information that can be found on the website of the agricultural multinational, where

issues and actions taken are described, but challenges are hardly mentioned. In relation to this, S. van

Heemskerk mentioned is no unanimity in the company regarding the information strategy for the website,

and the current state of section of the website on palm oil is the outcome of many internal discussions.

This confirms the impression that creating an honest and balanced message is not an easy task, and

therefore fits well with a company with a stewardship orientation.


In order to answer the third sub-question ‘How does a capabilities assessment framework work out for

MNCs, illustrated by the cases of Verstegen Spices & Sauces B.V. and an agricultural multinational?’, the

scores of both test case sessions have been discussed and exemplified by parts of the dialogues of the

test session. A few conclusions can be drawn from the test sessions. First of all, it can be concluded that

the individual scores of the sections in the framework together created an overall image in which the

participants recognize the company. Secondly, the cross-cutting ability of observing, acting and enabling

turned out relevant as the divisions in these three categories gave the opportunity to compare not only

the capabilities but also the categories. This is especially interesting in the case of Verstegen, because the

difference in scoring in the sections was most striking along the categories, scoring rather high on

observing and lower on acting and enabling. In relation to the first point, it is relevant to mention that the

terminology of the observing, acting and enabling was not used during the session, but explained once all

the scores were assigned. After the explanation of the different categories, the participants felt that the

difference in scores reflected the actual situation in the company with regard to their ability to handle

wicked problems. Thirdly, it became clear that people outside the academic world are well able to

understand the conceptual approach of the governance capabilities in the framework and the

consequences of these capabilities for the ability of a company to handle wicked problems. The idea behind

each capability was well understood and did not need much clarification next to a general description.

There was, however, a difference in the ability of participants to actually apply the framework. This will

be further discussed in the next chapter. Fourthly, it turned out that the three-point scale did not fully

work out as expected, since participants felt like scoring half points on some occasions (which will be

further discussed in the next chapter as well). Fifthly, there was a difference in the way the framework

was applied in the two sessions due to the set-up, which showed that different applications are possible

in practice. A more extensive discussion on these conclusions and the consequences for the design and

the usage of the framework will be provided in the discussion chapter.

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4. Discussion

In this final chapter, the design of the assessment framework is discussed, including a justification for the

capabilities that are included and the scoring system that is used. After that, the fourth sub-question ‘What

contributions has the operationalization of the capabilities approach to offer for improving the governance

design of MNCs operating in global supply chains?’ will be answered through a reflection on the conclusions

drawn from the test sessions discussed in the former chapter. Based on this information, the strengths of

the framework, potential limitations of the study, recommendations for improvement and suggestions for

further research, will be presented.

4.1 Design of the assessment framework

Capabilities included

In the capabilities approach of Termeer et al. (2012), initially four different capabilities were included

(reflexivity, resilience, responsiveness and revitalization). Later on, a fifth capability was added, scale-

sensitivity, which was renamed rescaling by Candel et al. (2016, p.794). Because the assessment

framework in this research is based on the theoretical approach of Termeer et al., all five capabilities were

included in the first set-up of the framework. The subsequent extensive literature review resulted in a few

adjustments to the framework. To start with, the changes that were made to rescaling. This capability is

described as the ability of an organization to address spatial or temporal scale mismatches between the

problem and the way it is dealt with (Candel et al., 2016). This capability worked out differently for MNCs

than the government bodies it was designed for, and was therefore excluded from the framework. A

multinational company is by definition an organization that spans across different nations and always has

to deal with a spatial scale ranging from local to global. This component is partly covered by resilience,

which includes indicators about the collaboration with local organizations and support to supply chain

partners upstream, in order to adapt to local circumstances. In addition, having an eye for the different

perspectives of all actors dealing with wicked problems is included in the capability reflexivity.

Furthermore, as explained in the theoretical orientation, the literature on sustainable supply chain

management (SSCM) includes increasingly practices of cooperation within the supply chain as well (Beske,

2012, p.373). This emerging emphasis on cooperation was supported by the academic literature review

conducted in this study, and has therefore been included in the assessment framework in several ways.

For instance, the shift from the compliance paradigm towards the cooperation paradigm (Lund-Thomsen

& Lindgreen, 2014) has been discussed, and indicators related to cooperation along the supply chain and

supplier development have been included in the capability resilience.

Moreover, fundamental changes were made to the capability revitalization, which was initially about the

ability to unblock stagnations in the policy process and to continue innovating. As government bodies are

bureaucratic organizations, there is the risk of regressing to familiar patterns and strategies. Revitalization

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was inward oriented and focused on recognizing counterproductive patterns and taking away deadlocks

in the process (Termeer et al., 2012). MNCs, on the other hand, are operating in a highly competitive

environment, where they constantly have to innovate in order to survive. The risk of ‘more of the same’

solutions does therefore not apply. However, if we look at the way companies deal with the wicked problem

of creating a sustainable supply chain, this is a potential risk. As wicked problems are complex and handling

them is not the main focus of most MNCs. They may, for example, continue to focus on the compliance

level with the code of conduct, even though this turned out to be an ineffective method for increasing the

level of sustainability of suppliers (Lund-Thomsen & Lindgreen, 2014). But, instead of looking at the

internal interactions between people and trying to unblock stagnations on a micro level, as in the original

interpretation of revitalization, it is much more relevant to look at a higher level, as these problems exceed

the own supply chain of companies.

For this reason, the capability revitalization was changed to reorientation, which is closely related to the

other capabilities, but distinguishes itself through the contribution a company makes to a wider network

of organizations that are dealing with the same wicked problems. This is in line with the suggestion of

Kogg and Mont (2011), as discussed in the theoretical foundation, to conceptualize supply chains as

complex adaptive systems in which it is essential for a company to interact with other parties in order to

reach sustainability. This view of Kogg and Mont (2011) was integrated into the application of the concept

of SSCM, and collaboration outside the supply chain was therefore crucial to include in the framework.

Reorientation is not about a company getting information and help from other stakeholders to solve its

own problems, but it goes beyond the problems in one single supply chain and also pays attention to the

way market transformation can be achieved. This new capability includes the ability to deal with scalability

difficulties as well, as most wicked problems cannot be handled by an individual MNC alone. The inclusion

of the capability reorientation represents the potential driving force of MNCs in multi-stakeholder initiatives.

These initiatives often have a longer timespan than individual projects of a company, and move the

responsibility to a broader range of stakeholders, decoupling the problems from the level of the MNC.

Moreover, it is relevant to come back to the different governance modes of Bush et al. (2015) that have

been discussed in the theoretical foundation chapter, and have been combined in the assessment

framework with the use of the capabilities approach. The modes have been interwoven into the different

capabilities. For example, responsiveness relates closely to ‘governance in chains’, as most of the actions

taken are driven by pressure from external stakeholders. However, because the capabilities approach

moves beyond action strategies and also pays attention to the ability of companies to observe problems

and enable observing and acting, the capability responsiveness goes beyond ‘governance in chains’.

Horizontal relations with external stakeholders are also included, although the aim is still to upgrade the

company’s’ position in the supply chain. This shows that also in the ‘governance in chains’ external forces

have an influence, and interaction with the parties that exert pressure may be required to effectively deal

with them. In turn, the governance mode of ‘governance of chains’ can be traced in the capability

resilience, which is still mainly internally focused on the supply chain, but creates possibilities to upgrade

the entire supply chain. In the stewardship orientation, this upgrading of the supply chain is even

prioritized over the aim of efficiency and minimizing reputation loss, for the sake of sustainability. Actors

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such as public partners are also included in this governance mode. Finally, reorientation provides an

example of what Bush et al. (2015) call ‘governance through chains’. Supply chains are still viewed from

the perspective of the company in the assessment framework, but seen as part of a bigger environment

in which horizontal relations in multi-stakeholder initiatives play an essential role. It can, however, be

argued that the integration of values from external stakeholders into the approach of the company is

interwoven in the other capabilities as well, and ‘governance through chains’ thus is closely interconnected

with the other governance modes. This study and the developed assessment framework demonstrate that

different sustainability governance modes are closely linked and can support each other.

Furthermore, a particular order is applied to the capabilities, based on the idea that the capabilities in the

framework build up in the level of difficulty to a certain extent. The framework starts off with

responsiveness, which is essential to the survival of the company itself. For example, if the media is

accusing a company of greenwashing and they are not handling this issue effectively, the very existence

of the company can be endangered (Illia et al., 2013). While this accountability is important, it does not

provide much information about the ability of a company to deal with wicked problems. Therefore, in line

with the suggestion of Pagell and Shevchenko (2014, p.46), the focus of this capability was shifted away

from the view that shareholders are the most important stakeholders in the supply chain. The actions

taken in relation to expectations of other stakeholders, next to shareholders, were included and function

as the first indicator of dealing with wicked problems. The next capability in the framework is reflexivity,

which is already more difficult to develop, because it involves the activities undertaken to include different

perspectives on the wicked problems. To score high on this capability, it is required that companies also

include the views of stakeholders that are impacted the most, look beyond what they already know and

provide trainings to employees in order to understand the complexity of the problems they are dealing

with. Resilience goes even further and is about being able to observe changes, learn and make adaptations

based on that, which can be implemented through diversification of the business model. Reorientation is

the final capability, not because it is most difficult, but because the other capabilities are needed to be

able to show thought leadership, which is scored in this capability. It is literally about reorienting, away

from the individual perspective toward a more collective approach. Companies should then share their

expertise and gained experience with others, set an example, and most importantly, collaborate in order

to be able to even better handle wicked problems in the future. This is why it would be unlikely that a

company will score high on reorientation while scoring low on the other three capabilities.

Finally, it should be mentioned that there is a very tight relation between the capabilities. They are all

interlinked, but take a slightly different approach and highlight a different aspect of dealing with wicked

problems. It is useful to make a distinction between the different capabilities, because it gives MNCs a

framework to look at their way of handling wicked problems. As it incorporates all kinds of different

aspects, it is a rather holistic approach, but since a clear distinction is made between the capabilities, it

becomes concrete enough to discover and discuss these different aspects individually. In turn, “dealing

with a particular wicked problem does not necessarily require all capabilities to be manifest to the same

extent” (Candel et al., 2016, p.794). Given that MNCs deal with a variety of wicked problems, the different

capabilities should be considered as tools and mechanisms that can be developed and embedded in the

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organization in order to give employees a range of possible understandings and freedom of action to

handle these wicked problems (ibid.).

Scoring system

In the design stage of the framework several scoring systems have been considered before deciding on

the use of an ordinal three-point scale, based on the scale employed in the framework developed by

Toonen (2018). It is, however, relevant to explain why this decision was made. In the first design of the

framework, multiple columns were included, as shown in Table 18.

Capability Category Descriptor Indicators Assessment score

Table 18: Set-up of a different scoring system

In this design, the descriptor would provide a short description of what that particular section was about,

the indicators would specify the content and the assessment score would quantify which indicators needed

to be met in order to achieve a particular score. However, these three categories made it very difficult to

diversify between the categories. Therefore, the indicators column was removed. Also, the idea of having

to meet particular indicators was altered, because the order of the particular indicators was hard to

determine, and it would run the risk that it could not be applied correctly. For example, if most of the

indicators in the assessment score of a particular section are met, but not in the particular order of the

orientation, it would be hard to determine which score to assign. A way this could be solved is to score

each indicator separately and then take the average of all of them to come to a final score per descriptor.

However, when testing this option, it turned out rather inefficient and difficult to make a fair distribution

among the different descriptors, because for some only two different indicators were found, while for

others ten different indicators, and all these indicators did not have the same weight.

For these reasons, the variant of an ordinal scale with a general descriptor and a score assessment with

three scoring options and descriptions with different maturity levels was preferred and used in the

framework. On some occasions, several indicators were combined in these descriptors in order to prevent

one thing being used to generalize for a whole category, and in order to stick to the three categories of

observing, acting and enabling that turned out to be relevant for MNCs as well. The combination of

different indicators in one description and corresponding assessment scores turned out to create difficulty

in practice. For some of the elements in which this was done, participants of the test session felt like

assigning different scores to the indicators. For instance, employees of Verstegen found it hard to score

reflexivity observing, as they argued that they deserved one and three points on the two elements of that

section accordingly. They felt it was not fair to only receive one point as a score. This was especially the

case for descriptors in which two indicators were combined that were perceived as not closely related.

The indicators were, however, combined because of the category (of observing, acting and enabling) in

which they both fit. A solution would be to include indicators that match better together, but for some

elements I was unable to find these in the literature. Another option would be to exclude one of the

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indicators, and a descriptor including one indicator would be remaining. However, from a design point of

view, there are several reasons to apply it the way I have done. To stick with the same example, reflexivity

observing is about the extent to which knowledge providers are recognized, and the access to information

about the type and complexity of the problems in the supply chain. If only one of them were assessed,

the category observing would become quite narrow for this capability. The ability of a company to observe

the existence of different views would then be justified by only one indicator. In order to create a reliable

assessment, two indicators are combined rather than basing the whole element on one indicator. In

addition, this is necessary in order to create similar weight to all of the three categories of observing,

acting and enabling of each capability. It should, for instance, not be much easier to score high on

observing than on acting and enabling.

Furthermore, in the ordinal three-point scale names or numbers could be given to the different scores.

Names were favoured to give companies a sense of their position or attitude, and because they are more

outspoken and concrete than numbers. A division into three categories named reactive, active and pro-

active, used by Van Tulder et al. (2012) and Maas et al. (2018), was considered. However, while these

are relevant categories to determine the orientation of a company in general, they are less accurate when

referring to specific indicators related to sustainability. For example, companies described in the study of

Nijhof et al. (2019) as companies that mainly focus on sustainability in relation to business outcome, thus

having a low maturity level, were found to have leaders that in general had very pro-active initiatives in

the company concerning sustainability (p.158). Furthermore, given that the category enabling consists of

more structural factors, it would be hard to apply this division of reactive, active and pro-active, which

means that different type of scoring systems had to be used per category. In the final design, the scoring

system of Nijhof et al. (2019), based on a recent study of stock-listed MNCs, was used in the framework,

including three different orientations: the instrumental orientation, the equidistant orientation, and the

stewardship orientation. As explained in the methodology section, a scoring of one to three points,

corresponding with these three orientations, was added in a later stage. This was done before the

workshops to prevent having to use too many theoretical terms, and gave the opportunity to come to a

score and estimate an average per category and per capability. This is relevant for getting a clear overview

of capabilities or categories that are highly developed, and capabilities or categories that could be improved

in the future.

The orientations are applied in such a way that all MNCs operating in global supply chains can be scored,

including companies that hardly work on their sustainability performance. As a consequence of this, the

step size between the three different assessment scores is larger than if only MNCs that are rather active

on improving their sustainability performance had been included as the target group of the assessment

framework. MNCs that are motivated to improve their sustainability performance but still have a low

maturity level are perceived as a relevant target group as well, and can therefore also be scored in the

current design of the framework. However, due to the chosen three-point scale corresponding with the

three orientations of Nijhof et al. (2019), the step size between the orientations is rather big in some

elements of the framework. This was not always possible to avoid, due to the large difference between

the three orientations. Because of the large step size in some elements, participants of the test sessions

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sometimes felt like scoring half points. During the evaluation at the end of the session with Verstegen,

some of the participants argued that they would prefer a four or even five-point scale, so that the score

assessment description would better match their current performance. Other participants disagreed and

appreciated the division into three categories, as they felt the descriptions were very distinctive this way

and forced them to make a choice (Test session Verstegen, personal communication, 19 July 2019). In

line with the argumentation of the latter participants, the decision was made to stick with the chosen

three-point scale. In this way, users of the framework are forced to make a choice, and in the case of self-

assessment it does not matter much if they want to apply a score with half points, as will become clear in

the discussion of the possible type of applications of the framework.

4.2 Strengths, limitations and recommendations

In this section, the importance of this study will be discussed and the strengths of the framework described

in relation to the fourth sub-question. In addition, possible limitations related to the content and the

application of the framework will be elaborated on, and its consequences for the conclusion of the study

discussed. In line with this, recommendations concerning the application of the framework and suggestions

for further research will be provided.

Content of the assessment framework

First of all, it is relevant to mention that the idea of developing a framework that is applicable for all MNCs

operating in a supply chain and manufacturing goods appeared to work out well. Although the applicability

of the framework to different industries was not tested in the workshops, as both companies are operating

in the agro-food sector, it was still verified with the help of the experts experienced with MNCs in different

sectors. However, a potential limitation of developing such a single overall framework is that the

descriptions are phrased in rather general terms (De Bakker & Nijhof, 2002, p.73). On account of this,

many companies will be able to recognize their profiles in the framework, but some companies might feel

it is not specific enough. This limitation was not supported by the two test sessions, as participants felt

that the descriptions and assessment scores were specific enough. Still, in future research, it could be

considered to make the framework more specific and match it with specific business characteristics of

companies working in a particular industry. This has been done, for example, with the general OECD due

diligence guidelines, which resulted in a five-step framework for minerals supply chains (OECD, 2019).

Another way of differentiation would be the size or the structure of the business, as according to the

experts, the sustainability performance might be different for smaller companies (S. van Heemskerk,

personal communication, 26 July 2019) or family owned businesses as compared to stock-listed companies

(V. van der Linden, personal communication, 20 June 2019), and therefore more relevant. Despite this,

the framework as it is designed now has its value in that it gives companies a possibility to detect potential

weaknesses and identify opportunities to strengthen their ability to deal with wicked problems.

Furthermore, with respect to the content of the framework it is worth mentioning that a potential limitation

might be that not every section of the framework is equally well theoretically underpinned. For some

topics, much more literature was available, which made it easier to create a broad theoretical basis. In

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particular, it was difficult to find relevant academic literature for the category enabling, as most scholarly

attention on sustainability in supply chains goes to acting strategies of companies. In these components

for which finding relevant theoretical underpinning was difficult, an attempt was made at filling the gaps

by information gathering in expert interviews. In the case of the capability reorientation enabling

suggestions were made by S. van Heemskerk in the test session (personal communication, 26 July 2019),

and new academic literature was found based on this. Through an iterative process in which conversations

with experts and the literature informed each other, the development of the category enabling was still

ensured. Further research on more structural embedding of internal capabilities, such as the ‘business

model diversification for the sake of sustainability’, could benefit and support the further development of

the framework.

In addition to this, the focus of this study was mainly on the impact made by MNCs in the lives of people

and the environment in production countries, thus mainly on the social and environmental dimension of

the triple bottom line. The concept of sustainability translated into the triple bottom line was combined in

this study with the concept of SSCM, following the view of Pagell and Shevchenko (2014) on sustainability.

They argue that the three different dimensions of the triple bottom line deserve equal priority, or on some

occasions, priority to social and environmental dimensions in the short term is even required for the sake

of sustainability, while creating a balance with the economic dimension in the long run. This study took a

closer look at the capabilities of a company and focused on the social and environmental dimensions of

sustainability. Aiming at sustainability not for the sake of seeking financial gains like many companies do

(Ozanne et al., 2016), but to be better able to handle wicked problems. In line with the definition of SSCM

of Pagell and Shevchenko (2014), this is done in such a way that economic viability is maintained.

However, no particular attention was payed to the economic dimension of sustainability in this study.

There are naturally many different ways of achieving a balance between the three dimensions. Further

research and experience from actual practices should indicate how this could be done best with respect

to handling wicked problems.

A strength of the framework is that the participants of both test sessions were able to apply the framework

and scored almost all elements, which shows that the content of the framework corresponded with the

reality of the participants. However, in the application of the framework it tuned out that the terminology

used in the framework leaves room for improvement. As this study was a theoretical and methodological

exploration, the choice was made to use descriptions and terms that correspond with the theories it is

founded on. The interviews with experts and on-going theoretical insights necessitated alterations and

adjustments to the framework. Many aspects were clarified in the discussions, leading to the development

of a more refined version of the framework. However, the background, perceptions and experiences of

academics naturally differ from that of members in the business community. Not surprisingly, the

participants of the test sessions considered the framework, and in particular the vocabulary used as rather

complex. In relation to this, it is relevant to note that there was a clear difference between the ability of

different participants to understand the elements of the framework and apply it. The difference was

particularly visible between the employees from Verstegen and S. van Heemskerk from an agricultural

multinational. This is most likely due to the difference in the maturity level of sustainability for both

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companies, the agricultural multinational scoring higher than Verstegen on most components. S. van

Heemskerk recognized many of the concepts and descriptions used, as she and her team were in most

cases already taking such actions and if not, have been aware of the challenges and possibilities for

improvement. Employees of Verstegen had more often different interpretations of particular concepts and

had sometimes difficulty imagining how the stewardship orientation would work out in practice. This refers

especially to those employees that have not had a chance to deal with sustainability matters in the supply

chain on a daily basis. This finding does have a consequence for the application of the framework, as will

become clear in the next section.

Concerning the terminology of the framework, it can be argued that it would be impossible to create a

framework in which the terminology used is understood by everyone and does not generate any

discussion. The discussion evoked by the use of particular terms, such as business model, can also nourish

the discussion about the ability and performance of the company related to sustainability. However, for

the sake of easier application of the framework, a few adjustments were made directly after the test

session. In case multiple terms or descriptions with the same theoretical meaning were available, the one

that better matched the terminology used by members of the business community was favoured. A

suggestion for further improvement would be to create a Dutch translation of the framework for Dutch

MNCs. Furthermore, the readability could be increased by simplifying the language used in the descriptors

and assessment scores, for example, by using fewer theoretical terms and shorter sentences, or using

examples in order to illustrate the relevant concepts or ideas (S. van Heemskerk, personal communication,

26 July 2019; Test session Verstegen, personal communication, 19 July 2019).

Application of the assessment framework

For an evaluation of the application of the assessment framework it is necessary to turn to the test session

with Verstegen and the agricultural multinational again. The main aim of these sessions was to verify the

content of the framework, but it was also interesting to explore how the framework would be used in

practice. It turned out in the sessions that because of the different workshop designs, the function of the

framework also differed. The test sessions with Verstegen had a focus group set-up, and the framework

was used as a deliberation tool. The main focus was on discussion of the different elements, discovering

whether a common view could be reached. This was done through self-assessment of the company by

the participants, accompanied by the researcher. Given that four people with diverse functions in the

company participated, the assessment gave a rather broad insight into the way sustainability is embedded

in the organization. In contrast, the individual workshop at the agricultural multinational gave a less

complete picture of the company, as only one employee participated and did the self-assessment. As a

consequence, there was no discussion and the focus was more on justification for the particular scores.

Another possibility for usage of the framework in which the focus is also more on justification, is an

application of the framework in which a consultant does the assessment and present it to the company

afterwards. Next to that, V. van der Linden suggested that NGOs might find is useful in assessing

companies before they decide to collaborate with a particular MNC (personal communication, 20 June

2019). They could potentially apply the framework through research on policy documents and interviews,

86

and use it to assess whether a company is a suitable partner to work with. Overall, it can be concluded

that in practice it became clear that there are different types of application possible for the capabilities

assessment framework for MNCs. The development and theoretical translation of the capabilities approach

into the framework was just the first step. Further research should investigate the most relevant

application form. Depending on the type of application, the framework can get a different function.

In my opinion, the function of the framework which will contribute most to the ability of companies to

handle wicked problems and improve their governance design is that of the deliberation tool. While internal

usage by NGOs could be interesting, the framework is not developed as a bench marking tool, or as a tool

to hold companies accountable for their actions. It is valuable in that it can give MNCs insight in the

potential internal weaknesses and offer suggestions for improvements in handling wicked problems. The

type of application that works best with the function of deliberation tool is self-assessment with multiple

employees, which can stimulate sufficient discussion. As explained before, in such a context, it is not a

hindrance to the evaluation if the employees want to score half points, as the discussion is the most

important part of the application process. Given that self-assessment turned out to be quite complicated

for employees that do not have much knowledge about wicked problems in supply chains, it would be

recommended that users include employees (or managers) that work on the sustainability performance of

the company on a daily basis.

However, a possible limitation of self-assessment is that it is subjective and depends very much on the

position of the users in the organization that is assessed. It could, for example, have been the case that

the participants of the test session in this study wanted to provide a rather positive picture of their

company, or in the case of Verstegen, that employees felt uncomfortable to speak freely in the presence

of the CEO of their company. As a result, the score achieved in the application of the assessment

framework may not be a fair representation of reality. But, since the framework is for internal use, it is to

the benefit of the company if the users take a critical stance towards their company and are honest in

applying the framework, contributing thereby to improving its performance. In addition, if a company has

the tendency to show off with achievements and hide difficulties, they will most likely not be motivated to

improve their ability to handle wicked problems and thus unlikely to use the framework. But with regard

to stimulating employees to take a critical stance and detect possibilities for improvement, the guidance

of an independent person, such as a consultant, or a scientist, would be welcome. It is recommended that

an independent person guides the process and poses critical questions in order to achieve the most results.

Implications and importance of the study

The capabilities assessment framework for MNCs developed in this study is aimed at MNCs that are

motivated to tackle wicked problems in their supply chain and are searching for ways to turn their

sustainability aspirations into actual practises. There exist plenty of frameworks that measure the outcome

of the actions of MNCs that function as a bench marking tool for customers, such as the Sustainable Cotton

Initiative. Earlier studies already found that the strategic orientation of a company has an influence on the

emergence of dynamic managerial capabilities (Nijhof et al. 2019), that embedding CSR in the entire

organisation is required for practising CSR in supply chains (Andersen & Skjoett-Larsen, 2009), and which

87

organization capabilities are required to address internal and external stakeholder interest (Bakker &

Nijhof, 2002). But these studies did not look specifically at wicked problems upstream in supply chains,

and do not answer the question “What capabilities are required for a firm to deal with sustainability

challenges?” (Bush et al., 2015, p.12). This study contributed to filling this research gap by operationalizing

a new conceptual approach, of Termeer et al. (2012) that is used to look at wicked problems. Rather than

taking a managerial perspective and focus on action strategies or the accountability to shareholders, this

approach revealed the abilities that are required to properly observe wicked problems and also embed

particular capabilities in the organisation.

Whether a truly sustainable supply chain is achieved in turn depends on several crucial factors, including

cooperation and close interaction between different stakeholders (Bakker & Nijhof, 2002, p.63). In line

with the developed framework of Simons and Nijhof (see Figure 20), this study showed that NGOs, other

watch dog organisations and governments still have a very important task to do in stimulating MNCs that

lag behind on sustainability to take actions (Bom, 2018a). Only together with these stakeholders, actual

transformation that is required to handle wicked problems can be achieved. But, it has been argued that

companies can also take their responsibility through actions of supply chain management, which was

defined in line with the concept of SSCM as “[…] specific managerial actions that are taken to make the

supply chain more sustainable with an end goal of creating a truly sustainable chain” (Pagell & Wu, 2009,

p.38). The decision about managerial actions for creating a sustainable supply chain lay within the reach

of MNCs themselves and, among others, they are assessed in the framework. Whether these managerial

actions are actually taken is, however, not guaranteed by a high score in the capabilities assessment

framework for MNCs.

In line with the definition of governance capabilities of Termeer et al. (2012), the capabilities approach is

about the ability of people in a particular structure to take actions in relation to wicked problems, which

means it is not an evaluation of the actions that have been taken. Therefore, the score from the framework

does not provide any information about the actual performance of a company concerning sustainability.

This falls outside the scope of this study and is not what the framework was aimed at. However, in future

research, it would be interesting to look at the connection between the presence of capabilities and the

actual ability of companies to deal with wicked problems. In addition, it would be relevant to study whether

the insight into the possibilities for improvement of capabilities, gained through the application of the

framework, leads to an improved score on the capabilities in time. Or in more concrete terms, follow-up

research can focus on the way the lessons learned from the application of the capabilities assessment

framework can be translated in actions. Employees at Verstegen stated that they have been seeking ways

to improve their performance, but still have difficulty to develop an unambiguous strategy. The assessment

framework offered them the ‘thinking structure’ they were looking for and may be an inspiration for

possible actions that could be taken in the future (Test session Verstegen, personal communication, 19

July 2019). In relation to this, they admitted that they would need assistance in coupling the outcome of

the capabilities assessment framework with a concrete action plan (ibid.). Future research could take the

view of the company, rather than academic theory, as a starting point, and investigate what is required

to make a change in the capabilities of a company.

88

5. Conclusion

As the supply chains of MNCs have become geographically and institutionally dispersed, environmental

and social impact are transferred across national borders as well (Boons et al., 2012, p.140). and the

consequences of production can no longer be protected by a single government (Boström et al., 2015,

p.1). The impacts of production and the related challenges play out along the lines of the triple bottom

line, which includes an economic, social, and environmental dimension (Maas & Liket, 2011). The findings

of this study clearly indicate that balancing the three dimensions of the triple bottom line for the sake of

sustainability is of utmost importance and should be made a priority for companies whose ambition is to

exert positive influence on society and the natural environment (Pagell & Shevchenko, 2014). As stated

before, “society is demanding that companies, both public and private, serve a social purpose. To prosper

over time, every company must not only deliver financial performance, but also show how it makes a

positive contribution to society” (MaatschapWij, 2019). If companies do not address wicked problems

properly and do not start taking responsibility for the consequences of their production, practices such as

deforestation, soil erosion, and exploitation of children will continue to have devastating effects on the

lives of people and the environment upstream in the supply chain. But diminishing these negative impacts

or preferably creating a positive impact, is not an easy task. Every supply chain has its own characteristics

and companies thus need to find solutions suiting their specific situation. In addition, inherent to wicked

problems is their complexity: they are hard to understand because of innumerable causes and uncertain

outcomes (Dentoni, Hospes & Ross, 2012, p.2), and are perceived as unsolvable (Head & Alford, 2015).

The capabilities approach turned out to be valuable for assessing what measures companies could take to

enhance their ability to deal with the wicked problems in their supply chain.

If we turn back to the example of the wicked problems involved in producing truly sustainable coffee,

discussed in chapter one, it becomes clear that the different capabilities deployed in the assessment

framework can contribute to tackling the different aspects of wicked problems. The first aspect of a wicked

problem is that there are many different stakeholders involved, all with their own perspectives, values and

priorities (Meckenstock et al., 2016, p.452). In the case of coffee production these stakeholders include,

among others, coffee farmers, traders, roasters, governments, NGOs, and consumers. As mentioned

earlier, the issues these stakeholders prioritize differ and can be contradicting at times (KPMG, 2019). A

coffee farmer, for instance, will be interested in earning a living wage with his production, while traders

are concerned about getting a good price for their products (Meckenstock et al., 2016, p.452). The

capabilities responsiveness is closely related to this aspect, as it involves the extent to which the demands

and interests of these different stakeholders are recognized, and what actions are taken in this respect. If

this capability is well developed, a company actively engages with its stakeholders and is able to recognize

possible opportunities and risks, which can facilitate dealing with these contradicting demands. The second

aspect that characterizes a wicked problem is the complexity of the causes (ibid.). Child labour in the

production of coffee, for instance, is not only caused by low wages of coffee farmers, but also has to do

with structural poverty, family size, and lack of awareness about the rights of children and laws regarding

89

child labour (Kifle, Getahun & Beyene, 2005, p.28-31). In order to alleviate this problem, companies should

be ready to engage with knowledge providers, especially upstream in the supply chain, with a view to

better understanding a particular wicked problem and developing more adequate measures. These

elements are included in the capability reflexivity in the assessment framework. The third aspect of a

wicked problem is that the consequences of an attempt to address the problem are unclear (Meckenstock

et al., 2016, p.452). No easy win-win situation is possible in coffee production. For instance, increasing

yields for farmers leads to higher incomes, but often results in faster degradation of the land as well.

“Every attempt has involuntary repercussions” (ibid.). The capability resilience relates to this difficulty and

ensures that companies evaluate their chosen strategy, for example, through risk analyses and

collaboration with local stakeholders to interpret their findings. In the case of coffee production, a company

could collaborate with a local NGO on providing technical and financial support to farmers, in order to

stimulate the use of organic fertilizers and agroforestry methods in their coffee fields. The fourth and fifth

aspect, namely the fact that the challenge has no precedent and the uncertainty about which strategy to

pursue are in the coffee case demonstrated in that truly sustainable coffee has never been produced

before and thus there are no clear guidelines that can be followed (ibid.). This cannot be resolved in an

easy way, but the capability reorientation can be of value in relation to these aspects. Experimentation

and collaboration are most likely required to speed up the process of finding a suitable approach, and a

company can contribute to this by, among others, mounting a positive lobby and bringing different

stakeholder groups together. In the case of coffee production, this can be achieved, for example, through

active participation in the Global Coffee Platform, which is a multi-stakeholder initiative committed to

developing a common framework for sustainability performance (Global Coffee Platform, 2019).

This does not directly mean that the difficulties related to a wicked problem can be easily overcome with

the capabilities. But an assessment of internal capabilities connected to these different aspects helps a

company to identify opportunities for improvement, and consequently helps them adopt an approach for

wicked problems that, in the words of Meckenstock et al. (2016, p.452) is perceived as ‘good enough’. In

relation to the main research question of this study ‘How can the conceptual approach of governance

capabilities be operationalized for multinational corporations, in a way that they can address and enhance

their abilities to handle wicked problems upstream in supply chains?’’, it can be concluded that it is

theoretically and methodologically feasible to operationalize the capabilities approach of Termeer et al.

(2012) into an assessment framework for MNCs. The framework presented in Table 15 is central to this

thesis in that it demonstrates how the existing research on strategies and organizational structures for

supply chain sustainability can be translated into the different categories of the capabilities. However,

further development of the framework could be supported by more research on the elements of the

framework related to structural embedding. Future research should also investigate the best way to move

from the outcome of the application of the assessment framework to effective actions by MNCs. Concerning

the application of the framework, it became clear that multiple application forms are possible. The

application of the framework as a deliberation tool, in which the process of self-assessment is guided by

an expert, would be recommended based on this study. Furthermore, it would benefit the users of the

framework if the phrasing of the definitions and descriptions of the framework was simplified in the future,

by the use of less theoretical terms and more examples.

90

In conclusion, this study offers a novel perspective on dealing with wicked problems, when compared to

the existing theories on relevant action strategies for MNCs, as it integrates ways of observing and enabling

with action strategies. As a consequence, it invites researchers to focus on different aspects that may

contribute to sustainable supply chain management. The innovativeness of this study lies in the fact that

existing theories on action strategies and organizational structures for effectively handling wicked

problems are deployed into the different capabilities, and subsequently combined into an inclusive

assessment framework. Such an integrative approach is worthwhile and can be effective, as it is not

sufficient to rely on a single capability to handle wicked problems: several governance capabilities, and

thus theories on wicked problems, must be used jointly in order to make a more substantial contribution

to handle wicked problems (Termeer et al., 2012, p.684). In addition, the assessment framework

developed in this study is of value to companies, as it challenges them to think differently about their

sustainability policy and actions. It provides a possibility for MNCs to detect potential weaknesses and

identify opportunities to strengthen their ability to deal with wicked problems in their supply chain.

91

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Overview interviews

Name Organization Date Details

Carly Relou Impact Centre Erasmus 3 June 2019 Test interview face-to-face

Sarah Drost Aidenvironment 6 June 2019 Interview Skype

Irene Schipper SOMO 12 June 2019 Interview face-to-face

Victor van der Linden Fair&Sustainable consulting 20 June 2019 Interview Skype

Marcel Jacobs Circl8 27 June 2019 Interview face-to-face

Michel Driessen

Marianne van Keep

Steven Vogel

Dorianne Wegen

Verstegen Spices & Sauces B.V. 19 July 2019 Focus group test session

Solaine van

Heemskerk10 An agricultural multinational

26 July 2019 Individual test session

Table 19: List of conducted interviews

10 No permission was given to use the respondents’ real name, Solaine van Heemskerk is a fictitious name.

handling wicked problems upstream in supply chains a

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