Confidential

The Greening of Home Brands

A comparison of the CSR policies of four European Retailers and the influence of these policies on the procurement process of their joint sourcing alliance

CONFIDENTIAL

Elke W.A.M. Huisman, 5958016 January 2011

Master Thesis Business Studies University of Amsterdam- Faculty of Economics and Business Supervisor UvA: dhr. dr. M.L. van der Veen Second supervisor UvA: dhr. dr. J.M. Pinkse

The Greening of Home Brands – Elke W.A.M. Huisman

ACKNOWLEDGEMENTS

I would like to thank AMS for giving me the opportunity to conduct my master thesis research within their company. In particular from the Fresh & Frozen Team I would like to thank; Magnus Bergendahl, Rémy Medina, Petri Mikkelä and Magdalena Asthana for supporting me directly or indirectly with my thesis.

Furthermore, I would like to express my gratitude to Ms. Hertzberger of Albert Heijn, Ms. Martins Ramalho of Jerónimo Martins, Mr. Päällysaho of Kesko and Mr. Züblin of Migros for participating in the interviews. The interviews have been an important contribution to this thesis.

Besides, I would to thank Mr. van der Veen for supervising my thesis. For the suggestions he gave during this process, which helped to evolve this thesis.

Elke Huisman Amsterdam, January 2011

The Greening of Home Brands – Elke W.A.M. Huisman ABSTRACT Corporate Social Responsibility (CSR) has been gaining momentum across the business community within the last decade; furthermore the topic is seen increasingly high on boardroom agendas (Jones et al., 2005a). At AMS Sourcing, a company that is sourcing for an alliance of retailers, some major changes were in sight. Albert Heijn, one of the co-founders of AMS, decided that by January 2015 the supply chain of all its private label products should be sustainable and responsible. AMS is purchasing a vast majority of Albert Heijn’s private label products and therefore this decision could have significant influence on the way AMS has to source in the future. However aside from Albert Heijn, AMS has nine other partners, which all have different CSR policies and guidelines. This thesis presents an outline of AMS’ partners adopting and managing CSR. Four European retailers; Albert Heijn, Kesko, Migros and Jerónimo Martins have been exhaustively examined through interviews, participant observation and desk research. Desk research is based on information published by retailers, like Annual and CSR reports, in addition to what has been published about the retailers in several media like newspapers and retail magazines. This study discusses the partners’ view on CSR and highlights practices that the partners have adopted or are currently adopting. Differences and commonalities between the partners are assessed and influence of these CSR policies on AMS is estimated. Results show that the procurement process of AMS is influenced by the CSR policies of the partners because the CSR policies differ thanks to different situations in the home market. Due to influences of home country competitive position, home country stakeholder demands and the company’s ethical motivation, a CSR policy is set up and specific standards or certificates are required. In the past the CSR policies of the partners influenced AMS to a lesser extent because often certificates were required for a niche product group. In the future the different CSR policies have a stronger influence on AMS as standards and certificates will be required for all private label products. The larger the differences between partners, the more difficult it is for AMS to join volumes and to create synergies. A solution is to set up a list of common minimum requirements which allows AMS to pool volumes again. This list should be expanded gradually, so that overtime more and more environmental and social responsible products can be sourced together and at possibly lower prices than today.

Please see Appendix A for the list of abbreviations.

The Greening of Home Brands – Elke W.A.M. Huisman TABLE OF CONTENTS

1. INTRODUCTION ...... 6 1.1 The increasing role of social and environmental responsiveness ...... 6 1.2 Ten European Retailers in one Sourcing Alliance ...... 7 1.3 Problem definition ...... 9 1.4 Contribution ...... 10 1.5 Structure ...... 11

2. CONTEXT OF STUDY - AMS ...... 12

3. THEORECTICAL FRAMEWORK ...... 14 3.1 Introduction...... 14 3.2 Why CSR plays are role in business...... 15 3.3 The role of CSR in retail management ...... 20 3.4 The role of CSR when sourcing goods in the food retail industry ...... 27 3.5 Differences in CSR policy ...... 29 3.6 Overview and conceptual model ...... 34

4. METHODOLOGY ...... 38 4.1 Introduction...... 38 4.2 Research ...... 38 4.3 Case selection ...... 39 4.4 Data collection ...... 40 4.5 Data analysis ...... 43

5. CROSS-CASES ANALYSIS OF CSR POLICY OF 4 PARTNERS...... 44 5.1 Introduction...... 44 5.2 General description of CSR of the four partners ...... 44 5.3 Commonalities and differences in PSR policies of the four partners ...... 48 5.3.1 Environmental issues at product level and transportation requirements to supplier ...... 48 5.3.2 Product safety food & non-food (Marketplace) ...... 50 5.3.3 Nutrition & Health (Marketplace) ...... 52 5.3.4 Sustainable Trade & Social Compliance (Marketplace) ...... 54 5.3.5 Local sourcing (Marketplace) ...... 57 5.3.6. Conclusion PSR policies of the partners ...... 58 5.4 Influence of elements; corporate strategy, market position, stakeholders and motivation...... 59 5.4.1 CSR reporting ...... 59 5.4.2 Attitude towards environmental and social pressures ...... 68 5.4.3 Conclusion influence of four elements ...... 76 5.5 Results cross-case analysis of CSR policy of four partners ...... 78

6. INFLUENCE ON AMS ...... 83 6.1 Introduction...... 83 6.2 Influence of the CSR policies on sourcing of AMS ...... 83 6.3 Conclusion ...... 86

CONCLUSION...... 87

REFERENCE LIST ...... 94

APPENDICES

The Greening of Home Brands – Elke W.A.M. Huisman FIGURES AND TABLES Figure 1: Conceptual model 8 Figure 2: Outline theoretical framework 14 Figure 3: Model of Steger adapted from Gago and Antolín (2004) 31 Figure 4: Enlarged conceptual model 37 Figure 5: CSR/PSR part of the enlarged conceptual model 48 Figure 6: Strategy part of the enlarged conceptual model 59 Figure 7: Influence PSR policy on AMS in enlarged conceptual model 83 Figure 8: Sourcing Process AMS 84

Table 1: CSR dimensions in past research 17 Table 2: Motivations for CSR 19 Table 3: CSR dimensions retail in past research 23 Table 4: Motivations for CSR general vs. retail literature 26 Table 5: Dimensions of CSR mentioned in literature 29 Table 6: PSR Profiles 37 Table 7: Retailer data sources used 41 Table 8: Primary data sources used in case study 42 Table 9: Commonalities and differences in food safety certificates 51 Table 10: Commonalities and differences in certificates regarding sustainable 56 trade & social compliance Table 11: Characterization reporting of partners according to model Kolk (2010) 59 Table 12: CSR mentioned in Corporate Strategy in year of publishing 1 st CSR report 60 Table 13: Attitude partners towards the environment according to model Steger (1993) 68 Table 14: CSR mentioned in Corporate Strategy in 2009 69 Table 15: Summary of influence of strategy elements on the four partners CSR policy 77 Table 16: Refined PSR Profiles 82

The Greening of Home Brands – Elke W.A.M. Huisman 1. INTRODUCTION

1.1 The increasing role of social and environmental responsiveness “Corporate Social Responsiveness is what companies do in order to be socially responsible. It is how companies and their managers respond to the diverse expectations that different stakeholders may have of a given company” (Black, 2006, p. 26). Nowadays Corporate Social Responsibility (CSR) is playing an increasing role in top management decisions; a growing number of companies are giving priority to not only economic, but environmental and social goals as well (Jones et al., 2007). The main reasons for this can vary among companies; however more and more analyses are published on corporate ethics, which causes that both consumers and governmental organizations are increasingly focusing their attention on CSR practices (Maloni & Brown, 2006). CSR has become important in the perception of the consumer (Ipsos MORI, 2003) and therefore it has become valuable for all consumer-oriented firms. Today’s conscious, educated consumers pay not only attention to new products; also they want more information about the companies that produce these products, the labor conditions under which the products are made, the impact of the production on the environment and about the economic growth of the local communities along the companies’ supply chains (Strong, 1996; Shaw & Clarke, 1999; Harrison et al., 2005). The food industry, in particular, faces many significant risks from public criticism of CSR issues in the supply chain and has unique CSR applications including animal welfare, biotechnology, environment, fair trade, health and safety, and labor and human rights (Maloni & Brown, 2006). Wal-Mart is an example of a business who is promoting CSR in their supply relations; it improved the environmental performance at 30.000 Chinese factories that supply Wal-Mart and is building a purchasing system that rewards suppliers with environmentally preferable products (Walmart, 2010). Another example is McDonald’s, who raised the price per pound of tomatoes by a penny to support an increase in wages for the migrant workers who harvest them. This extra penny on the 15 million tomatoes McDonald’s buys annually nearly doubles the pay received by workers (McDonald’s, 2010). Markley and Davis (2007) explain the case of ChemNutra, which illustrates what happens in companies that lack to control their supply chain; ChemNutra is an US importer of ingredients for food, animal feed and pharmaceuticals. A Chinese supplier of ChemNutra was found to be using contaminated products in the production of their pet foods. This caused everything from seizures to death in over 12,000 animals in the USA and disappointed various stakeholders of more than 40 different brands of pet food (Markley & Davis, 2007). When ChemNutra had placed a higher 6

The Greening of Home Brands – Elke W.A.M. Huisman priority on supplier quality and control, the financial and social backlash that it was facing now would most probably be less (Markley & Davis, 2007).

According to Werther and Chandler (2011), five identifiable trends make that CSR, as an element of strategy, is becoming increasingly relevant for businesses today. It seems that these trends will to continue and grow in importance throughout the 21rst century (Werther & Chandler, 2011). The trend of ‘growing affluence’ on a global basis will continue to push CSR up the agenda of businesses worldwide because consumers can afford to choose the products they buy and demand more from the companies who produce those products. Firms that operate in wealthy societies will face therefore a higher burden to show they are socially responsible (Werther & Chandler, 2011). The second trend is ‘ecological sustainability’; there is a growing concern for environment. The increasing prices for raw materials are evidence that Earth has ecological limits. Consequently, firms that are perceived to be uninterested in their environmental responsibilities are likely to be criticized and penalized (Werther & Chandler, 2011). Corporations are operating more and more in a global business environment. Globalization has enhanced the potential to gain from efficiencies from production abroad; also the potential to be exposed to global audience is enhanced when a firm fails to meet needs and expectations of local community (Werther & Chandler, 2011). The fourth trend is ‘free flow of information’. As influence of global media is growing, any CSR blunders by companies are brought rapidly and often immediately to the attention of the worldwide public (Werther & Chandler, 2011). It seems that consumers are becoming more aware of ethical behaviors and want to balance personal and social benefits. Alongside this, these consumers are buying more and more private label products, which will be discussed in next section.

1.2 Ten European Retailers in one Sourcing Alliance Like in other industries, in the retail industry there is a growing interest in the topic of CSR (Jones et al., 2007). Alongside the increased attention to CSR there is a growing popularity of private label products as consumers become more price-sensitive and retailers more powerful. The private label products are for the retailers a way to serve the low-end market. Besides this, the popularity of private labels has grown because of the increase in quality of private label brand and because the retailers are advancing the marketing for their own brands as it is a point of differentiation from their competitors (Jusko, 2005).

The Greening of Home Brands – Elke W.A.M. Huisman AMS is a sourcing organization for private label products for an alliance of European retailers. Overall private label products are purchased at the lowest price possible, as the difference between selling and buying price is profit for the retailer. AMS does currently the sourcing of private label products for ten retailers. The volumes are pooled together which gives AMS significant power to negotiate for the lowest price possible. The partners of AMS, the retailers, are having more and more attempts to become sustainable. As an example Albert Heijn made a clear statement in December 2009 that all its private label products should be produced in a sustainable and responsible way by January 2015 (Ahold, 2010). This means AMS should buy all Albert Heijn’s private label products according to Ahold’s policy and guidelines with regard to CSR. Also the other partners of AMS have an extensive CSR program, and accordingly to the trend of increased intention to CSR, their sustainability practices will most probably advance as well. The theoretical framework will outline that CSR policies can differ among firms due to various reasons and influences. Based on these expectations, I developed the following conceptual model, see figure 1.

CSR policy retailer A

CSR policy Sourcing process retailer B AMS

CSR policy retailer Z

Figure 1: Conceptual Model

The different CSR policies of the partners of AMS might have influence on the sourcing process of AMS. Therefore lines are drawn from the CSR policy of the retailers to the sourcing process. A dotted line is used as it is not sure if and how and why the sourcing process is influenced. Furthermore is expected that the CSR policy of the retailer/partner is affected by various influences, represented by the smaller circles. The influences will be addressed in the theoretical framework.

The Greening of Home Brands – Elke W.A.M. Huisman If, for example, retailer A, is coping with demanding customers or strict environmental regulations this could result in a situation where the retailer decided to have a more extensive CSR policy. This influences the extent to which Trade Managers of AMS are demanding for sustainable products or specific certificates from suppliers. When retailer B is not demanding the same, it becomes harder to pool together volumes. This could weaken the extent to which Trade Managers could successfully source private label products at the lowest price possible. Thus, the extent to which the CSR policies of the various retailers differ from each other or are comparable could impact the way AMS sources, either in a positive or negative way. A more operational framework for the research will be outlined based on insights presented in the theoretical framework.

1.3 Prob lem definition Central Research Question Home brands are a way for retailers to serve the low-end market, in order to get the lowest price possible for each retailer; AMS aims to create synergies and pools volumes together. There is a growing popularity of private label products as consumers become more price- sensitive (Jusko, 2005). On the other hand, the trend of ‘Growing affluence’ on a global basis pushes CSR up the agenda of businesses worldwide because consumers can afford to choose the products they buy and demand more from the companies who produce those products (Werther & Chandler, 2011). Combining these two trends, this thesis focuses on the greening of home brands of different European retailers. The aim of this master thesis is to explore how and why the manner in which CSR is implemented by the partners influences the sourcing process of AMS. Different points of view regarding CSR could be challenging for AMS to incorporate this in its sourcing process. Furthermore can AMS add value when the policies are different? Related to the goal, the following central research question is defined; “Why and how is the procurement process of AMS influenced by the CSR policies of its partners?”

Sub-questions In order to answer the central question posted in this thesis, six sub-questions are set up: 1. What does CSR encompass? What are characteristics and motivations for CSR? 2. What does CSR encompass in retail management? What are characteristics and motivations of CSR are specific in retail management? 3. How can the role of CSR when sourcing goods be described and which characteristics of CSR are specific to sourcing?

The Greening of Home Brands – Elke W.A.M. Huisman 4. How can differences in CSR policies be explained? 5. What are the commonalities and differences between the CSR policies of AMS’ partners and why are there differences? Can these be explained by differences in corporate strategy, influence of stakeholders, in position in the market or motivation? 6. Why do the various CSR policies have influence on AMS sourcing process?

The first four sub-questions will be explored in the theoretical framework. Based on the theoretical framework, the subsequent questions focus on the commonalities and differences between the partners and the influence on AMS. This will be explored with use of primary and secondary data. The methodology section will elaborate on this.

Delimitations of the study This thesis will discuss how AMS is influenced by the different CSR policies. AMS has ten partners dispersed all over Europe, when each of them is included in the research the scope of the study becomes too large. Therefore the decision has been made to focus on four partners, which all have been present at the “Sustainable Trade & Product Integrity Workshop” (ST&PIW) on May 25 th 2010. This meeting was the first attempt of the AMS partners to discuss the topic CSR together and provided me access to the different partners. Albert Heijn (Netherlands), Kesko (Finland), Migros (Switzerland) and Jerónimo Martins (Portugal) are included in this research. Although Jerónimo Martins has business in Poland, this research will focus on their Portuguese business; Pingo Dolce, Feira Nova and Recheio. With regard to Kesko, this research only focuses on Kesko Food. In the analysis of Albert Heijn, I tried to place focus on Albert Heijn’s activities regarding CSR. In case reference is made to the overall policy of Ahold, this is mentioned.

1.4 Contribution Although CSR has become a common theme for European retailers, most CSR models in retail literature are generally prescriptive; firms are told how to respond or what to do when facing changes and challenges in their industry. Analytical models to analyze the current position of the retailer in relation to CSR or the path towards that position are not provided. This research will provide a comparison of the CSR policies of four large European retailers. Insight is given in the strategic process and motivations of these retailers to act more responsible and sustainable. Furthermore this research will provide insights in how the different CSR policies have influence on a joint sourcing alliance. Theoretical insight is given

The Greening of Home Brands – Elke W.A.M. Huisman on how to compare different CSR policies. The practical relevance of this research is that it will help AMS, the case company, to see the impact of the increased attention to CSR on the current sourcing process. Besides this an overview will be provided with commonalities and differences which can be directly used in buyers meetings.

1.5 Structure My conceptual model has been introduced in this section of the thesis. Furthermore the central research question has been formulated and six sub-questions have been presented in order to help answer the central research question, The next chapter of this thesis is the context of the study. In this chapter a description is given about the case company AMS. First some historical information is given and AMS’s position in the market is discussed; next the activities of AMS are highlighted. The third chapter is the theoretical framework. This chapter is build based on the research questions drafted in the first chapter. The framework will start with general literature on the topic CSR. Next, a more narrowed down view is given on CSR in the retail business, this is because the partners of AMS are active in this industry. The third paragraph will discuss the topic sustainable sourcing. AMS sources private label products for its partners all over Europe, the USA and Asia. In the future more and more CSR practices need to be incorporate in AMS’ sourcing process; therefore literature on CSR related to sourcing is reviewed. The fourth chapter encompasses the methodology and will outline the manner in which the research for this thesis has been conducted. Secondary data research, the interview and participatory observation will be discussed as well as the steps taken to assure validity and reliability of the research. The fifth chapter will present the results of the cross-analysis. The four partners which were included in the research will be dealt with separately. Following this, the partners will be compared with each other. An overview of the results is given at the end of the chapter. The sixth chapter will describe why the sourcing of AMS is influences by the different CSR policies of the partners. The conclusion is the final section of this thesis. First the sub-questions will be discussed. Using this knowledge, the central research question will be answered. Finally, a reflection will be presented in which the scope of this thesis will be explored and the possibilities for further research will be provided.

The Greening of Home Brands – Elke W.A.M. Huisman 2. CONTEXT OF STUDY - AMS

This chapter provides some necessary background information on the joint sourcing organization of the four case companies, AMS. A briefing is given on its history, goals and purpose.

A sourcing alliance AMS is a European sourcing organization for an alliance of European retailers and buys Private Label food and non-food items on behalf of its members. AMS stands for Associated Marketing Service and was founded in 1987 in Switzerland to “create synergy in commodity buying”. Since 1987 AMS has been initiating, managing, and coordinating joint sourcing activities for its members, Europe’s top supermarket groups. Economies of scale are created by pooling expertise and volumes of the retailers (AMS, 2010). In 2006 relocation to a new headquarters at Schiphol Amsterdam followed and since then the group has grown significantly with currently ten shareholder partners. These ten partners are; Ahold NV. (Netherlands), Dansk Supermarked Gruppen (Denmark), ICA AB (Sweden), Jeronimo Martins & Filhos SA/ Uniarme (Portugal), Kesko Food Ltd. (Finland ), Migros (Switzerland), WM Morrison Supermarkets plc. (United Kingdom), Esselunga (Italy), Delhaize (Belgium), Système U (France). In addition, Brooker, Elomas and Hagar are EURO SHOPPER™ distributors. As one of the ‘big five’ European sourcing groups (alongside Alidis, BIIGS, Coopernice and EMD), AMS is the parent company of EURO SHOPPER™ discount brand (ESM, 2010a). By sourcing commodities on a European/ Global scale, AMS delivers its partners the best possible quality at the lowest price therefore the bottom line of retailers will be improved as shoppers are given greater value for money. AMS provides buying and marketing services in three core areas; private label sourcing, EURO SHOPPER™ and synergy agreements (AMS, 2010). Around 10 per cent of AMS business is focused on the sourcing of the EURO SHOPPER™ range, and the remainder is spent on other private label ranges from premium label, to the economy label, to the discount range. The combined retail sales of AMS, as a sourcing organization for an alliance of European food retailers, were over 2008 € 100 billion.

The Greening of Home Brands – Elke W.A.M. Huisman Private Label & EURO SHOPPER™ Regarding private label, the decision in what areas to introduce new products is taken by AMS’ partners. Each partner is responsible for its own operations, like private label development and logistics. Private label and marketing strategy, including entry-level price are developed by the individual retailers themselves. AMS only sources the products. AMS sources through a very fixed six step sourcing process which starts with a buyer’s meeting. During this meeting the partners come to AMS to discuss which items are to be sourced, which suppliers to invite and where and how specifications and packaging can be harmonized. Then through a web-based tendering procedure, AMS invites suppliers to tender for contracts in many different product categories (AMS, 2010). After the quotes of the suppliers, negotiations are started with these and after that step number six is reached in which contracts are signed. The same tendering process counts for EURO SHOPPER™. As said, EURO SHOPPER™ is a discount brand developed and marketed exclusively by AMS. EURO SHOPPER™ products generated retail sales of € 500 million (2008) for its members. The product is sold in 16 European countries, including the Netherlands, Sweden, Italy and UK. EURO SHOPPER™ strives to be a ‘low price–good quality’ discount brand instead of the 'low price-low quality' C-brands sometimes found in other supermarkets (AMS, 2010). The no-nonsense EURO SHOPPER™ brand design keeps packaging costs to a minimum, and the standard product specifications significantly reduce the time-to-market of all product categories (AMS, 2010). The EURO SHOPPER™ discount range consists of two categories; national and international products. AMS is mainly focusing on commodity items that make up the bulk of the EURO SHOPPER™ range; however each member has the freedom to source local EURO SHOPPER™ products for its home market. These products can be suggested to other partners or can be locally sourced by the partner itself, like Albert Heijn does with Dutch products like chocolate hail or ‘speculaas’ (ginger biscuits).

To summarize; AMS is owned by ten partners and tries to look for synergies among them in product groups. Because of these synergies, products can be bought in very large volumes and therefore at the lowest price possible. AMS does the negotiation for the partners with suppliers. AMS allows its members to enjoy the benefits of volume synergy, realizing best purchase prices and improving profitability. As fierce competition forces retail prices down, survival depends on effective cost-cutting strategies; therefore AMS continually aims to negotiate with suppliers the lowest price for all its members. Furthermore The EURO SHOPPER™ discount brand is an integral part of the service AMS provides for its members.

The Greening of Home Brands – Elke W.A.M. Huisman 3. THEORECTICAL FRAMEWORK

3.1 Introduction This thesis is focused on the CSR policies of four partners of AMS, along with how and why these policies could influence the procurement process of their joint sourcing alliance. In order to explore this, first general literature is needed on CSR to outline the concept, to find a suitable definition, to get an idea about CSR practices and to get insight in the motivations to be environmentally and socially responsible. Furthermore, it is reasonable that not all companies pursue the same CSR policy; therefore literature is needed that gives explanation why these differences exist. The first section covers these topics from a general CSR point of view, not designated to a specific industry yet, because it is plausible that general social and environmental issues occur in the food industry as well. CSR in the food retail industry will be discussed in section 3.3 as the four case companies are active in this industry. Before moving to the dimensions of CSR in the food retail industry, first it is interesting to assess which issues currently play a role in this industry and to get inside in the supply chain. It is reasonable that, as each industry has specific characteristics, there CSR in Business (Increased attention to CSR, dimensions CSR, are industry specific CSR dimensions and/or motivations CSR, differences in CSR policy) motivations. Therefore this section narrows down to CSR in the Food Retail Industry (Issues in food retail industry, role of the retailer, dimensions CSR, CSR literature in the food retail industry, so that during motivations CSR) the research these dimensions and motivations can be CSR & puchasing (Dimensions recognized. specific to purchasing) The next section the focus lies on purchasing. The retailers have a CSR policy with more general and industry-specific CSR dimensions; however AMS is Figure 2: Outline theoretical framework responsible for the sourcing of various private-label products. Therefore this section will narrow down to dimensions related to purchasing, as this Master thesis looks CSR in relation to sourcing or purchasing. In literature this is called Purchasing Social Responsibility. The outline of the theoretical framework is presented in figure 2. The final section will give a brief overview of the theoretical framework. In addition to this, the conceptual model will be presented which is enlarged by insights gained in this chapter.

The Greening of Home Brands – Elke W.A.M. Huisman 3.2 Why CSR plays are role in business. Increased attention to CSR CSR has been transformed from an irrelevant and ‘frowned-upon’ idea to one of the most widely accepted concepts in business world during approximately the last twenty years (Lee, 2008). This growth in attention for CSR is reflected in annual reports. Where in 1977, less than half of the Fortune 500 firms even mentioned CSR in their annual reports. By the end of 1990’s, almost 90 percent of Fortune 500 firms incorporated CSR as an essential element in their organizational goal, and actively promoted their CSR activities in annual reports (Carroll, 1999; Lee, 2008). That CSR has been incorporated to a greater extent in annual reports is not surprising as CSR has influence on all aspects of a company’s operations and is therefore important and relevant in business. Werther and Chandler (2011) explain this by expressing that increasingly consumers want to buy products from companies they trust, suppliers only want to set business partnerships with companies they have confidence in, employees prefer to work at companies they respect and investors support companies they recognize as being socially responsible. Besides that non-profit organizations and NGOs choose to work together with companies to find solutions for common goals. CSR is increasingly crucial to success as it gives companies a mission and strategy around which various principles can be organized. Companies that will be most likely to succeed in today’s rapidly developing global environment are those can balance the often conflicting interests of multiple stakeholders (Werther & Chandler, 2011).

CSR defined There is no universally agreed definition of CSR (Panapanaan et al., 2003) and Frankental (2001) has clarified that “CSR is a vague and intangible term which can mean anything to anybody, and therefore is effectively without meaning” (p. 20). The concept of Carroll (1999) is mainly used as a foundation in much CSR research as it provides a comprehensive concept of CSR (e.g. Snider et al., 2003; Carter, 2005; Marcus & Anderson, 2006; Maloni & Brown, 2006; Lattemann et al., 2007; Gupta & Pirsch, 2008; Galbreath, 2008). Carroll’s (1999) pyramid model outlines four corporate responsibilities, which are bases on each other; economic responsibility to be profitable; legal responsibility to follow the law; ethical responsibility; and philanthropic responsibility to support diverse social, educational, environmental and cultural objectives. This pyramid model highlights mostly the responsibilities on the side of the stakeholder. More recent definitions of CSR include responsibilities on both the stakeholder’s side and the society side. The World Business

The Greening of Home Brands – Elke W.A.M. Huisman Council for Sustainable Development defines CSR as the commitment of a business to support sustainable economic development, cooperating with employees, their families, the local community and society to enhance their quality of life (WBCSD, 2010). Werther and Chandler (2011) define CSR as; “a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions” (p. 5). This definition of CSR will be used in this research as apart from the relationship between the corporation and the society, also the impact of CSR is raised. On this wise CSR recognizes society in its widest sense and involves on various levels all stakeholders that have a continuous interest in the operations of the organization. Besides this CSR connects the objectives and routines of a business with social values and the welfare of the society that are impacted by the business. Above suggests that businesses are recognized as an elemental part of society and have the capability to make a positive contribution to social goals and aims (Jones et al., 2005b). At the same time the organization is involved with different stakeholder groups; these can range from consumers, employees, suppliers and regulating authorities to local communities (Panapanaan et al., 2003; Campbell, 2007; Dahlsrud, 2008; Werther & Chandler, 2011). A firm must make tradeoffs between the different and sometimes competing interests of stakeholders. Stakeholder groups are more and more incorporated within the organization’s strategic perspective to avoid losing societal legitimacy (Whitehouse, 2006; Galbreath, 2008; Werther & Chandler, 2011). Werther and Chandler (2011) advocate that CSR provides a framework that assists firms in taking into account all these decisions and adjusting the internal strategic planning process in order to maximize long-term viability of the firm. Different scholars have attempted to generalize the elements that characterize CSR. Generally speaking CSR includes the broad themes environmental impact, ethics, worker rights and philanthropic contributions & community involvement. CommDev, The Oil, Gas and Mining Sustainable Community Development Fund, also includes ‘supplier relations and monitoring’ as a dimension of CSR (CommDev, 2010). Sen and Bhattacharya (2001), who have reviewed CSR actions of 600 companies based in different industries, found two additional categories that companies commonly referred to as their CSR activities, namely ‘non-domestic operations’ and ‘product’. Campbell (2007) is summing up a list of aspects of socially responsible behavior and mentions product and suppliers treatment as well. Table 1 (presented on page 17) gives an overview of CSR dimensions mentioned in the literature.

The Greening of Home Brands – Elke W.A.M. Huisman

Table 1: CSR dimensions in past research CSR responsibility Past research findings in general CSR and corporate ethic literature Environment Environmental impact Murphy and Poist (2002); Carter and Jennings (2002, 2004); Carter (2005); CommDev (2010); Werther and Chandler (2011) Environment Sen and Bhattacharya (2001); Frankental (2001); Lattemann et al. (2007); Campbell (2007); Dahlsrud (2008) Workplace Worker rights Carter (2005); WBCSD (2010); CommDev(2010) Employees Frankental (2001); Lattemann et al. (2007); Dahlsrud (2008) Employee support Sen and Bhattacharya (2001) Workplace safety / conditions Carter and Jennings (2002, 2004); Carter (2005); Campbell (2007) Community Community involvement Carter (2005); CommDev (2010) Community support Sen and Bhattacharya (2001); Campbell (2007) Society Frankental (2001); Lattemann et al. (2007); Dahlsrud (2008); Werther and Chandler (2011) Philanthropic contributions Carroll (1991); Carter and Jennings (2002, 2004); Carter (2005); Campbell (2007) Ethics Human rights Frankental (2001); Carter and Jennings (2002, 2004); CommDev (2010) Diversity (gender & racial) Sen and Bhattacharya (2001); Murphy and Poist (2002); Carter and Jennings (2002, 2004); Carter (2005) Ethics Carroll (1991); Lattemann et al. (2007); Campbell (2007); Dahlsrud (2008); Werther and Chandler (2011) Miscellaneous Non-domestic operations Sen and Bhattacharya (2001) Supplier relations and monitoring Campbell (2007); Dahlsrud (2008); CommDev (2010) Product / product design Sen and Bhattacharya (2001); Campbell (2007) Customers Dahlsrud (2008)

Dahlsrud (2008), who studied 37 definitions of CSR, argues that on a conceptual level, definitions of CSR show nothing new; business has always been concerned with stakeholders and has environmental and economic impacts. Table 1 gives a quite similar illustration; the same dimensions are mentioned over the years. On an operational level CSR does face changes as globalization changes the context in which business is operating at an increasingly rapid pace (Dahlsrud, 2008; Werther & Chandler, 2011). New stakeholders and different national legislations put new expectations on business, and change how economic, environmental and social impacts should be optimally balanced in decision making (Dahlsrud, 2008). So globalization brings retailers new challenges on an operational level, which could have effect on the balance between economic, environmental and social impacts.

The Greening of Home Brands – Elke W.A.M. Huisman Motivations for CSR The previous paragraph highlights the different dimensions of CSR. This paragraph on the other hand pays attention to why organizations are getting involved in these CSR practices. Organizations have different motivations of getting involved in CSR, and these motivations often represent advantages that CSR could give the organization. According to Snider et al. (2003) corporate social reporting is a way of self-presentation and impression management done by companies to guarantee various stakeholders will be pleased with their public behaviors. Although economical perspectives are often left out in CSR analysis (Lattemann, et al., 2007), acting in a social responsible way can therefore for self-interest of firms as well. The relation between CSR and financial performance is investigated (Orlitzky et al., 2003; Besley & Ghatak, 2007) and results show that social performance is positively correlated with financial performance and vice versa (Orlitzky et al., 2003). Furthermore reputation can be seen as a mediator for the relationship of corporate social responsibility and financial performance (Orlitzky et al., 2003) or as a premium for good behavior which can lead to higher profits (Besley & Ghatak, 2007). In other words the performance of a company on a social field can be linked with the performance on a financial point of view, mainly because of reputation. Also marketing, publicity, and innovation are covered in literature as motivations for CSR (e.g. Maignan et al., 2002; Anselmsson & Johansson, 2006; Lattemann et al., 2007). Besides this CSR is a tool to increase the organizational commitment of employees to the firm. Especially when the firm focuses on issues that are of much concern to employees, the members of the organization may appreciate the firm’s efforts and feel proud to work for such a caring organization (Maignan et al., 2002). This means that when the firm accurately communicates CSR initiatives internally it can create strong affinity between the employees and the firm based on the common concerns and values. Again others indicate that CSR can be a reaction to threats to transaction costs, brand, and competitive positioning (Spar & La Mure, 2003). When a stream of outside criticism or demand is faced, cost and benefits are calculated, weighting the benefits of compliance with the expected costs involved. But when public protest is likely to change consumer preference, CSR practices are incorporated to protect the firm’s brand. Sometimes capitulation in certain cases may bring competitive reward like BP (British Petroleum) who voluntarily reduced its emissions of greenhouse gases to appease global warming concerns of environmentalists (Spar & La Mure, 2003). Furthermore the level of competition within an industry can be a

The Greening of Home Brands – Elke W.A.M. Huisman market force that creates stimulus to engage in CSR (McWilliams et al, 2006; Lyon & Maxwell, 2008). Another motivation to engage in CSR is pressure from third parties. Research of Ernst & Young in 2002 showed that there are five key drivers that increased focus on CSR namely; greater awareness of stakeholders in CSR issues, pressures from direct stakeholders, pressures from investors, pressures from peers, and an increased sense in social responsibility of the company itself (as cited in Jones et al., 2005a). The PriceWaterhouseCoopers (2002) Sustainability Report summarizes the ten most important reasons why managers adopt sustainable business practices. This report gives apart from the motives mentioned above other reasons why companies adopt sustainable business practices. Interesting is that main motivations are mostly on a non-financial basis, like reputation (90%), competitive advantage (75%), industry trends (62%), CEO/board commitment (58%) and customer demand (57%). Cost savings (73%) is the only financial motivation that is mentioned in the top 3 of managerial reasons to adopt CSR (see Appendix B). Table 2 gives an overview of the various motivations mentioned in literature. This table will be used when assessing the motivations of the four partners.

Table 2: Motivations for CSR CSR motivation Past research findings in general CSR and corporate ethic literature Self-presentation and impression management Snider et al. (2003) Economical-financial perspectives Miles and Covin (2000); PriceWaterhouseCoopers (2002); Orlitzky et al. (2003); Van de Ven and Graafland (2006); Lattermann et al. (2007) Reputation Miles and Covin (2000); PriceWaterhouseCoopers (2002); Orlitzky et al. (2003) Brand / brand loyalty Spar and La Mure (2003) Customer demand PriceWaterhouseCoopers (2002) Marketing – Publicity Maignan et al. (2002); Van de Ven and Graafland (2006) Innovation Maignan et al. (2002) Industry trends PriceWaterhouseCoopers (2002) Increase employee commitment Maignan et al. (2002); Van de Ven and Graafland (2006); McWilliams et al. (2006); Lyon and Maxwell (2008) Competitive position Miles and Covin (2000); PriceWaterhouseCoopers (2002); Spar and La Mure (2003); McWilliams et al. (2006); Lyon and Maxwell (2008) Transaction costs PriceWaterhouseCoopers (2002); Spar and La Mure (2003) Pressure from stakeholders & investors PriceWaterhouseCoopers (2002); Ernst & Young as cited in Jones et al. (2005a) Increased sense in social responsibility of company PriceWaterhouseCoopers (2002); Ernst & Young as itself/ CEO/Board commitment cited in Jones et al. (2005a)

The Greening of Home Brands – Elke W.A.M. Huisman Based on this first section of the theoretical framework one can conclude that a lot of different CSR dimensions are mentioned in literature. Some mentioned more often by various scholars than others. These different dimensions can be roughly subdivided in four themes; environmental impact, ethics, workplaces and community. Furthermore based on this framework can be concluded that there are a lot of different motivations to act responsible. As the four cases are active in the food retail industry it is interesting to see if these motivations are the same and/ or if dimensions can be added or maybe removed. Therefore next paragraph will be designated to the food retail industry. The definition used for CSR in this thesis research is; “CSR is a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions” (Werther & Chandler, 2011, p. 5).

3.3 The role of CSR in retail management This paragraph will describe the role of the retailer in CSR. Retailers have traditionally been seen simply as distributors of merchandise, adding little value for both customers and/or suppliers (Lai et al., 2010). However nowadays they play a significant role in various aspects of the value chain like offering more service and a broader range of products to consumers, setting product standards and promoting products (Lai et al., 2010). This paragraph will discuss that role of the retailer in the supply chain and the specific dimensions and motivations for CSR in retail.

Sustainability issues in the food retail industry CSR is gaining a lot of importance in the food industry because of the labor intensive nature of food supply chains and because of the type of product, as animal and plant based consumables are needed for existence (Maloni & Brown, 2006). This industry, its products and production processes have deep impact on the environment. Most of its products are basic products we use every day like dairy products which have quick turnovers from the shelves of the retailers and are relatively low-cost and low-consideration purchases. Especially in such homogeneous industries, where competitors have access to the same raw materials and suppliers, sources to gain competitive advantage were getting narrower and more difficult to acquire (Barney, 1991). In order to attempt lower costs food companies implemented for example more intensified animal farming (Zuzworsky as cited in Maloni & Brown, 2006) or suppliers are pressured by large retail grocery stores to (continuously) lower their price, which

The Greening of Home Brands – Elke W.A.M. Huisman leads to a breaking point in which suppliers are no longer able to produce in consent labor and environmental regulations (Cleeland et al. as cited in Lobel, 2006). An increasing group of consumers is having emotional problems with the way in which our food is produced; a general interest has grown in supply chain CSR issues (Emmelhainz & Adams, 1999).

The retailer, channel leader in the supply chain According to Markley and Davis (2007) the possibility to excel lies in the development of a sustainable organization and more importantly a sustainable supply chain. The supply chain of the food industry is known by its quite complex structure, a lot of parties are involved and sometimes intermediaries are skipped (Maloni & Brown, 2006). See Appendix C. CSR practices can be incorporated on various links in the supply chain, which could make controlling for a sustainable supply chain difficult (Musso & Risso, 2006). Retailers are in charge of various activities in the supply chain and are often channel leaders; therefore they are likely more capable to adopt active positions in leading international supply chains to pursue a CSR approach (Musso & Risso, 2006). To their opinion large retailers have a major role in administering sustainable development of the production and distribution processes of their products. This is for several reasons; large retailers are controllers and guarantors of the entire value chain, particularly for their private label products, which have direct influence on the corporate image of the retailer. Another reason mentioned is that retailers are most of the time the first who receive requests from consumers for more ethical and responsible methods in managing products. At the same they can take an active role in addressing consumer behavior in how they control ethical and social issues (Musso & Risso, 2006; Lai et al., 2010). As a consequence retailers are often becoming the center of value accumulation and filters for information flow in the supply chain, therefore retailers tend to have more power than producers (Musso & Risso, 2006). Due to this powerful role, retailers are expected to reduce environmental damage and are pushed by regulatory forces, customer expectations and community groups to improve their value chains (Lai et al., 2010).

Dimensions of CSR specific to Retail Jones et al. (2005a) compared CSR reports of the top ten retailers in the UK under four principal headings; Environment, Workplace, Community and Marketplace. Amongst the top ten retailers it appears that environmental issues were the most commonly reported on CSR programs. In table 3 the different headings are subdivided in specific dimensions. The four

The Greening of Home Brands – Elke W.A.M. Huisman headings proposed by Jones et al. (2005a) will be used to discuss further dimensions of CSR specific to the retail industry. To procurement and product a lot of attention is paid in retail literature, therefore this research will take into account a new heading, ‘Marketplace’. Where in general CSR literature ‘Ethics’ was mentioned as a special theme, in retail CSR literature this is embraced in ‘Workplace’ and ‘Marketplace’. Although not mentioned by Jones et al. (2005a), innovation is brought up as a substantial topic present in the food retail industry (Markley & Davis, 2007; MVO, 2010; Lai et al., 2010). Apart from the innovation itself, MVO (2010) argues that the communication about product innovations can be considered as an important responsibility as well. Anselmsson and Johansson (2006), who conducted research to CSR and the positioning of national and retailer brands, include ‘non-domestic operations’ to the list of common CSR dimensions in the retail industry. The non-domestic operations concern “the universal human right to childhood and education, as well as economic conditions in terms of prices that reflect quality” (Kolk as cited in Anselmsson & Johansson, 2006). Heasman (2008) examined food industry CSR reports shows an additional area that can be outlined on CSR agenda; meeting legal requirements and financial probity. While Lai et al. (2010) found in different business articles that Green Retailing ranges from green procurement, green product design, green store design, green transportation, green packaging, green technology investment, energy and water conversation, to waste reduction. Interesting is that these authors divide the various dimensions of CSR in internal improvement based CSR, which are minimizing emissions, effluents and water in internal operations, and external coordination based CSR, which are coordinating with stakeholders to minimize life- cycle cost of products (Lai et al., 2010). Table 3 (presented on page 23) gives an overview of CSR dimensions which are covered in literature with regard to the retail industry.

The Greening of Home Brands – Elke W.A.M. Huisman

Table 3: CSR dimensions retail in past research CSR responsibility Past research findings in Retail CSR and corporate ethic literature Environment Energy consumption & emissions Jones et al. (2005a); Maloni and Brown (2006); MVO (2010); Lai et al. (2010) Raw material usage Jones et al. (2005a) Water conservation Jones et al. (2005a); Maloni and Brown (2006); Lai et al. (2010) Waste reduction Jones et al. (2005a); Maloni and Brown (2006); Markley and Davis (2007); MVO (2010); Lai et al. (2010) Volume of packaging Jones et al. (2005a); Markley and Davis (2007); MVO (2010); Lai et al. (2010) Product design Markley and Davis (2007); Lai et al. (2010) Recycling Jones et al. (2005a); Maloni and Brown (2006); Markley and Davis (2007) Store design Lai et al. (2010) Genetically modified foods / biotech Jones et al. (2005a); Maloni and Brown (2006) Use of chemicals / pollution control Jones et al. (2005a); Anselmsson and Johansson (2006); Markley and Davis (2007) Logistics Maloni and Brown (2006); Markley and Davis (2007); MVO (2010); Lai et al. (2010) Inventory management Markley and Davis (2007) Environment (in general) Anselmsson and Johansson (2006); Heasman (2008) Workplace Remuneration & benefits Jones et al. (2005a); Maloni and Brown (2006) Training & development Jones et al. (2005a); Maloni and Brown (2006) Equality Jones et al. (2005a); Maloni and Brown (2006); Markley and Davis (2007) Diversity Jones et al. (2005a); Anselmsson and Johansson (2006); Markley and Davis (2007); MVO (2010) Health & safety Jones et al. (2005a); Maloni and Brown (2006); MVO (2010) Recruitment & retirement Jones et al. (2005a) Work-life balance Jones et al. (2005a) Working conditions Maloni and Brown (2006); Heasman (2008); MVO (2010) Employee support Anselmsson and Johansson (2006) Community Charitable donations Jones et al. (2005a) Community involvement & support Anselmsson and Johansson (2006); Maloni and Brown (2006); Markley and Davis (2007); Heasman (2008); Philanthropic activities Markley and Davis (2007); Heasman (2008) Marketplace Ethical trading / fair trade Jones et al. (2005a); Maloni and Brown (2006) (Sustainable) procurement Maloni and Brown (2006); MVO (2010); Lai et al. (2010) Sourcing local and regional foodstuffs Jones et al. (2005a) Food / product safety Jones et al. (2005a); Anselmsson and Johansson (2006); Maloni and Brown (2006) Animal welfare Jones et al. (2005a); Anselmsson and Johansson (2006); Maloni and Brown (2006) Nutrition &Health MVO (2010); Anselmsson and Johansson (2006); Maloni and Brown (2006); Heasman (2008); Supply chain relationships Maloni and Brown (2006); Heasman (2008) Non-domestic operations Anselmsson and Johansson (2006) Miscellaneous Innovation & investment Markley and Davis (2007); MVO (2010); Lai et al. (2010) Communication MVO (2010); Cause-related marketing Markley and Davis (2007) Meeting legal requirements & Heasman (2008) financial probity

The Greening of Home Brands – Elke W.A.M. Huisman Motivations for CSR in retail management The motivations of companies to act environmentally and socially responsible were summed up in table 2 (presented on page 19). This list involves general motivations which could play a role in retail firms and can therefore be used in this research. However some features of the retail industry should be covered to get a complete view on motivations of retailers. The retailer’s choice to act more environmentally conscious is significantly influenced by consumer’s preferences and demands for environmentally friendly merchandise (Piacentini et al., 2000; Musso & Risso, 2006; Lai et al., 2010). A complex combination of products, services, stores and consumer experiences are offered to the customer, which means that social and environmental issues are not related to products and corporate image only (Musso & Risso, 2006). Buying products is for consumers more then only purchase experience, there is a direct relationship between the retailer and the consumer, and therefore store loyalty can be more effective than brand loyalty (Musso & Risso, 2006). To maintain competitive, CSR is necessary as in the eyes of the consumer the social responsibility of the retailer is closely linked to its business activity. Piacentini et al. (2000) found in their research that customer pressures are a very important motivator of retailers for CSR. CSR activities are more and more communicated within retail. Besides that, like in other industries, negative information concerning CSR issues tends to outweigh positive information when consumers making decisions on what products to buy (Amine, 1996; Sen & Bhattacharya, 2001), which might mean that consumers who are informed about unethical policies and activities could ban brands or companies that take part in such activities. Besides the important role of the customer in retail, the second main motivator is profitability, economic gains (Piacentini, et al., 2000). Jones et al. (2005a) found that the underlying argument for offering detailed and comprehensive CSR reports is that these retailers believe that ‘long term economic viability’ is in the interests of all stakeholders. Furthermore they believe that when they integrate CSR into their businesses they are better able to provide long term growth and financial security for their stakeholders and will be able to maintain or improve their market position (Jones et al., 2005a). Parallel with the increased attention to CSR in the food industry, there is a growth in private labels, because there are higher retail margins on private label, to negotiate leverage with national brand manufacturers and to increase consumer store loyalty (Ailawadi et al., 2008). Private labels are ‘brands sold under names owned and promoted by retailers’; furthermore their shares of the grocery market are growing in almost all European markets (ACNielsen as cited in Anselmsson & Johansson, 2006, p. 836). The increased importance to

The Greening of Home Brands – Elke W.A.M. Huisman ethical and social issues influenced some retailers to broaden their assortment with private- label fair trade products. De Jong of Albert Heijn states that ‘Puur & Eerlijk’, the private label brand of Albert Heijn focused on sustainability, is mostly a strategic move to get advantage on competitors (NRC Next, 2009 December). This advantage is for competitors difficult to achieve as it is firstly difficult to copy this concept, furthermore the supermarkets do not have enough revenue to make it interesting for suppliers to deliver to their private label (NRC Next, 2009 December). This is substantiated in literature, Tetrault Sirsly and Lamertz (2008) found that a CSR initiative can lead to sustainable first-mover advantage; therefore it must be central to the firm’s mission, provide firm-specific benefits, and be made visible to external audiences. Finally, CSR allows retailers to achieve quickly and efficiently market differentiation (Piacentini et al., 2000) and enhanced word-of-mouth and reduction in marketing investments; customer and worker loyalty and the inclusion in indexes such as the Dow Jones Sustainability Index (Musso & Risso, 2006).

Table 4 (presented on page 26) will summarize the motivations for CSR mentioned in retail literature. From this table can be noticed that most motivations, covered in general CSR literature, are confirmed by CSR literature specific to retail as well. Some extra motivations are added at the bottom. An important motivation to act environmentally and socially responsible is that it enhances the reputation of the retailer, which could act as a moderator for financial performance and customer loyalty (Nguyen & Leblanc, 2001).

The Greening of Home Brands – Elke W.A.M. Huisman

Table 4: Motivations for CSR general vs. retail literature CSR motivation Past research findings in general CSR Past research findings in retail CSR and corporate ethic literature and corporate ethic literature Self-presentation and Snider et al. (2003) Jones et al. (2005a); impression management Economical-financial Miles and Covin (2000); Piacentini et al. (2000); Jones et al. perspectives PriceWaterhouseCoopers (2002); Orlitzky (2005a) et al. (2003); Van de Ven and Graafland (2006); Lattemann et al. (2007); Tetrault Sirsly and Lamertz (2008) Reputation Miles and Covin (2000); Lee et al. (2009) PriceWaterhouseCoopers (2002); Orlitzky et al. (2003); Tetrault Sirsly and Lamertz (2008) Brand / brand loyalty Spar and La Mure (2003) Musso and Risso (2006) Customer demand PriceWaterhouseCoopers (2002) Piacentini et al. (2000); Musso and Risso (2006); Lai et al. (2010) Marketing - Publicity Maignan et al. (2002); Van de Ven and Musso and Risso (2006) Graafland (2006); Innovation Maignan et al. (2002) Industry trends PriceWaterhouseCoopers (2002) Increase employee Maignan et al. (2002); Van de Ven and Musso and Risso (2006) commitment / loyalty Graafland (2006); McWilliams et al. (2006); Lyon and Maxwell (2008) Competitive / market Miles and Covin (2000); Jones et al. (2005a) position PriceWaterhouseCoopers (2002); Spar and La Mure (2003); McWilliams et al. (2006); Lyon and Maxwell (2008) Transaction costs Price WaterhouseCoopers (2002); Spar Jones et al. (2005a) and La Mure (2003) Pressure from PriceWaterhouseCoopers (2002); Ernst & Piacentini et al. (2000) stakeholders & investors Young as cited in Jones et al. (2005a)Tetrault Sirsly and Lamertz (2007) Increased sense in social PriceWaterhouseCoopers (2002); Ernst & responsibility of Young as cited in Jones et al. (2005a) company itself/ CEO/Board commitment Customer loyalty Piacentini et al. (2000); Musso and Risso (2006) Store loyalty Musso and Risso (2006) Inclusion in Musso and Risso (2006) sustainability indexes Market differentiation Piacentini et al. (2000)

The CSR dimensions and motivations specific to the retail industry that have been discussed in this section will be used in the research to the CSR policy of four partners of AMS. This section provided a more specific description of the concepts than the general findings in section 3.2. As AMS is responsible for the purchasing of various private label products of the four partners, next section will zoom in on the combination of purchasing and CSR.

The Greening of Home Brands – Elke W.A.M. Huisman 3.4 The role of CSR when sourcing goods in the food retail industry Business leaders are increasingly recognizing the importance of CSR at firm level, however according to Maignan et al. (2002) some are still not certain about the implications of this for the purchasing function. Even when the relevance of CSR is acknowledged, many purchasing managers do not familiar with how to include social issues into purchasing decisions in a systematic and concrete way (Maignan et al., 2002). According to Maignan et al. (2002) are purchasing managers mainly used to deal with efficiency and governance issues during their interactions with suppliers, but have not much experience with broader social demands. Purchasing has a major function in the overall logistic system of a firm as it includes supplier selection and supplier relationships, product design and selection, obtainment of transportation and logistics services by third-parties, and inventory management (Carter & Jennings, 2004). Because purchasing is at the beginning of the value chain, environmental efforts of a firm will probably not be successful without combining the company's environmental goals with purchasing activities (Walton et al., 1998). The involvement of CSR in the purchasing function has been defined as Purchasing Social Responsibility. PSR is the “strong desire of the purchasing organization to maintain a long-term relationship with suppliers” (Carter & Jennings, 2002, p. 39). PSR has similar characteristics as CSR; the difference however lies in the interaction of the purchasing manager with a broad variety of stakeholders, including buyers, suppliers, contractors and the community (Carter & Jennings, 2002). So the purchasing manager connects the internal functions of the firm with the external stakeholders, including suppliers (Cavinato, 1992). This means that these managers are in the position to influence the firm’s involvement in socially responsible activities and that purchasing has influence on how the company is viewed by others. In the retail food industry trust and reputation in the chain are substantial determinants that influence the relationship between buyers and suppliers and the performance of the chain (Carter & Jennings, 2002; Marcus & Anderson, 2006). Besides that, PSR activities of firms like plant visits, supplier audits, and supplier training, could be seen indirectly as supplier development (Krausse et al., 1998). Existing research shows that improved supplier capability performance, like improved quality processes and manufacturing process capabilities, can be a result of supplier development efforts (Easton as cited in Carter, 2005). Also Carter (2005) suggests PSR has no effect on supplier performance directly, but it increases organizational learning which sequentially improves supplier performance, and ultimately reduces costs. CSR procedures are developed in supply chain management by adopting environmental and ethic codes and standards when selecting and coordinating suppliers (Musso & Risso, 2006).

The Greening of Home Brands – Elke W.A.M. Huisman However this is not that easy to implement, often a reorganization of the retailer’s sourcing offices is needed concerning supplier-selection criteria. Difficulties in coordination and costs will increase when suppliers are international and from less developed countries.

Dimensions of PSR Categories within the CSR literature include impact on environment, philanthropic contributions and community involvement, workplace diversity and working conditions and safety. Quite similarly, PSR literature has examined such individual activities like environmental purchasing (Maignan, 2002; Carter & Jennings, 2002; Roberts, 2003), sourcing from minority business enterprises (Maignan, 2002; Carter & Jennings 2002-2004; Carter, 2005; Salam, 2009), working conditions and human right issues at supplier plants (Maignan, 2002; Carter & Jennings, 2002-2004; Carter, 2005; Jones et al., 2005b; Salam, 2009) and sourcing local and regional foodstuffs (Jones et al., 2005b). Table 5 (presented on page 29) gives a total overview of all dimensions that are covered in CSR, retail CSR and PSR literature. The sourcing of food within the global marketplace frequently offers significant variety and attractive supply prices, also has led to increasing public concerns about working conditions, rates of remuneration, child labor, and health and safety (Jones et al., 2005b). Although the issue of ethical trading is recognized by the food retailers, it remains complex because of the distances involved and because of different political regimes and regulations. The dimensions of PSR appear to reflect those of CSR, however quite some activities mentioned are unique to sourcing (Salam, 2009). In order to source sustainable, one should take the PSR dimensions into account which are presented in table 5.

This section emphases the importance of the purchasing function within organizations. As purchasing is at the beginning of the value chain, environmental efforts of a firm will probably not be successful without combining the company's environmental goals with purchasing activities (Walton et al., 1998). The involvement of CSR in the purchasing function is called Purchasing Social Responsibility. The dimensions of PSR are quite similar to CSR dimensions; however one can see there is an emphasis on environment and marketplace. This most probably these dimensions are connected to the purchasing function itself. Therefore the fields Workplace and Community are not included in the research as this does not have much to do with sourcing and trading.

Table 5: Dimensions of CSR mentioned in literature CSR responsibility Past research findings in general CSR and Past research findings in Retail CSR and corporate Past research findings in PSR literature corporate ethic literature ethic literature Environment Environmental impact CommDev (2010); Sen and Bhattacharya (2001); Jones et al. (2005a); MVO; Anselmsson and Johansson Walton et al. (1998); Carter et al. (2000); Maignan (2002); Murphy and Poist (2002); Carter and Jennings (2002, (2006) ; Heasman (2008); Lai et al. (2010) Carter and Jennings (2002; 2004); Carter (2005) 2004); Carter (2005); Lattemann et al. (2007) Product / product design Sen and Bhattacharya (2001) Jones et al. (2005a); Anselmsson and Johansson (2006); Carter and Jennings (2002; 2004); Markley and Davis (2007); Lai et al. (2010); Green innovation / technology MVO; Lai et al. (2010) Maignan (2002) investment Energy consumption and emissions Jones et al. (2005a); Maloni and Brown (2006); MVO (2010); Lai et al. (2010); Raw material usage Jones et al. (2005a); Water conservation Jones et al. (2005a); Maloni and Brown (2006); Lai et al. (2010); Waste reduction Jones et al. (2005a); Maloni and Brown (2006); Markley Carter et al. (2000); Carter and Jennings (2002); and Davis (2007); MVO (2010); Lai et al. (2010); Volume of packaging Jones et al. (2005a); Markley and Davis (2007); MVO Carter et al. (2000); Carter and Jennings (2002); (2010); Lai et al. (2010); Recycling Jones et al. (2005a); Maloni and Brown (2006); Markley Carter et al. (2000); Carter and Jennings (2002); and Davis (2007); Store design Lai et al. (2010); Genetically modified foods / Jones et al. (2005a); Maloni and Brown (2006); biotechnology Use of chemicals / pollution control Jones et al. (2005a); Anselmsson and Johansson (2006); Markley and Davis (2007); Logistics Maloni & Brown (2006); Markley and Davis (2007); Carter et al. (2000); MVO (2010); Lai et al. (2010); Inventory management Markley and Davis (2007); Workplace Diversity (gender & racial) Sen and Bhattacharya (2001); Murphy and Poist Jones et al. (2005a); MVO; Anselmsson and Johansson (2002); Carter and Jennings (2002, 2004); Carter (2006); Markley and Davis (2007); MVO (2010); (2005) Worker rights / employee support / CommDev (2010); WBCSD; Sen and Bhattacharya Jones et al. (2005a); MVO 1; Anselmsson and Johansson remuneration (2001); Carter (2005); Lattemann et al. (2007) (2006); Maloni and Brown (2006); Heasman (2008) Working conditions Carter and Jennings (2002, 2004); Carter (2005) Jones et al. (2005a); Maloni and Brown (2006); Heasman (2008); MVO (2010); Human rights CommDev(2010) 2; Carter and Jennings (2002, 2004); Equality Jones et al. (2005a); Maloni and Brown (2006); Markley & Davis (2007); Health & safety Jones et al. (2005a); Maloni and Brown (2006); MVO (2010);

1 MVO;‘Product board MVO’ (Margarines, Fats and Oils) 2 CommDev; The Oil, Gas and Mining Sustainable Community Development Fund The Greening of Home Brands – Elke W.A.M. Huisman

Training & development Jones et al. (2005a); Maloni and Brown (2006); Recruitment & retirement Jones et al. (2005a); Work-life balance Jones et al. (2005a); Community Society Lattemann et al. (2007) Jones et al. (2005a); Philanthropic activities Carroll (1991); Carter and Jennings (2002, 2004); Jones et al. (2005a); Markley and Davis (2007); Heasman Carter and Jennings (2002; 2004); Carter (2005) Carter (2005) (2008) Charitable donations (locally & Jones et al. (2005a); Carter and Jennings (2002) nationally) Community involvement/ support CommDev (2010); Sen and Bhattacharya (2001); Jones et al. (2005a); Anselmsson and Johansson (2006); Carter (2005) Maloni and Brown (2006); Markley and Davis (2007); Heasman (2008); Marketplace Ethical trading / fair trade Jones et al. (2005a); Maloni and Brown (2006); Carter and Jennings (2002; 2004); Roberts (2003); Salam (2009) (Sustainable) procurement Maloni and Brown (2006); MVO (2010); Lai et al. Maignan (2002); Carter and Jennings (2002); Roberts (2010); (2003) Sourcing local and regional Jones et al. (2005a); Maignan (2002); foodstuffs Food / product safety Jones et al. (2005a); Anselmsson and Johansson (2006); Carter and Jennings (2002; 2004); Carter (2005); Jones et al. Maloni and Brown (2006); (2005b) Animal welfare Jones et al. (2005a); Anselmsson and Johansson (2006); Jones et al. (2005b) Maloni and Brown (2006); Nutrition and Health MVO (2010); Anselmsson and Johansson (2006); Maloni and Brown (2006); Heasman (2008); Supply chain / supplier relationships CommDev (2010) Maloni and Brown (2006); Heasman (2008); Carter et al. (2000); Maignan (2002); Carter and Jennings and monitoring (2002; 2004); Roberts (2003); Carter (2005) Non-domestic operations Sen and Bhattacharya (2001) Anselmsson and Johansson (2006) Minority/women-owned purchasing Maignan (2002); Carter and Jennings (2002; 2004); Carter (diversity) (2005); Salam (2009) Sourcing local and regional food Jones et al. (2005b) stufs Working conditions & safety at Maignan (2002); Carter and Jennings (2002; 2004); Carter supplier plant (2005); Jones et al. (2005b) Human / worker rights at supplier Maignan (2002); Carter and Jennings (2002; 2004); Carter plant (2005); Jones et al. (2005b); Salam (2009) Child labor Maignan (2002); Carter and Jennings (2002); Jones et al. (2005b) Miscellaneous Meeting legal requirements and Heasman (2008) financial probity Communication MVO Maignan (2002); Ethics Lattemann et al. (2007); Carroll (1991) Jones et al. (2005a); Carter and Jennings (2004); Jones et al. (2005b) Cause-related marketing Markley & Davis (2007);

3.5 Differences in CSR policy Previous paragraphs emphasized various CSR dimensions/actions and various motivations and advantages of responsible behavior for organizations. The different motivations determine a significant part of dissimilarities in CSR policy between companies. However it is wise to examine the Resource Based View (RBV) as well, because this theory eminently explains differences between organizations. A review of literature with regard to differences in CSR policies will be useful for the cross-case analysis between the four partners of AMS.

In their response to environmental issues, firms have followed distinctive pathways over the years. In order to get a better understanding of these pathways, various classifications have been developed by scholars to characterize and organize these business responses (Pinkse, 2006). According to Pinkse (2006) “classifications provide a clear outline of differences between firms with regard to their attitude and response towards environmental issues and form a good starting point for exploring and characterizing business responses to global climate change” (p. 29). Gago and Antolín (2004) present various typologies regarding the environmental positioning of firms, including a model of Steger (see figure 3). The model of Steger can be used to shape the response of companies to environmental pressures. The development of a firm’s policies towards environmental issues can be tracked. The first phase of the model represents a company with a resistant attitude to environmental pressures, the indifferent strategy (Kemp & Arundel, 1998). At the second stage a company has a reactive approach to perceived environmental threats. In this stage minor changes to products and processes are made, it is a defensive strategy (Kemp & Arundel, 1998). The third phase represents the offensive strategy; in this stage the environment is seen as an opportunity instead of a threat. The company starts focusing on new product developments, though without major technological change and on new types of processes/ products that will gain medium-term competitive advantage (Kemp & Arundel, 1998). The last phase represents the innovative strategy; which means more radical changes in product design or the production process (Pinkse, 2006). The model of Steger will be used when analyzing the four cases.

Figure 3: Model of Steger adapted from Gago and Antolín (2004). The Greening of Home Brands – Elke W.A.M. Huisman Kolk (2010) on the other hand characterizes firms based on their pattern of CSR reporting by studying the trajectories of the firm’s sustainability reporting over a period of nine years. Kolk (2010) found five patterns that emphasize differences between multinational organizations; consistent reporters, late adopters, laggards, inconsistent reporters, and consistent non-reporters. The ‘consistent reporters’ published a CSR report in 1999, 2002 and 2005. The ‘late adopters’ started later and did not publish a CSR report in 1999, but adopted the practice later. The ‘laggards’ did not publish a CSR report in 1999 and 2002, but had one in 2005. The ‘inconsistent reporters’ did not follow a pattern and published occasionally. Finally the ‘consistent non-reporters’ did not report in any of the three data points (Kolk, 2010). This subdivision will be used when analyzing the reports of the four partners. However it must be remarked that this subdivision only includes the reporting frequency, it is not based on CSR activities. Kolk (2010) argues that sector and country differences seem to be important to the decision whether to report on CSR or not. As all four partners are active in the same sector, the food retail industry, sector differences are negligible. Country differences on the other hand could play a role in these cases. The existence of country differences with regard to CSR is appointed by Steger (2000). According to him CSR can differ across nations and this is especially visible in the ‘North-South Divide’ within the European Union. His research showed that there are differences between French and Spanish companies on one hand and German companies on the other hand; these are due to different priorities in environmental protection, both in degree and issues, and different corporate cultures (Steger, 2000). For example in Spain two main environmental problems as perceived by the public are forest fires and water scarcity (Steger, 2000).

The classifications of Steger (adapted from Gago & Antolín, 2004) and Kolk (2010) will be used in this research. However with regard to the use of classifications Pinkse (2006) mentions that “classifications present relatively general attitudes and competitive postures towards environmental issues, but fail to identify how environmental strategies are implemented” (p.66). The Resource-Based View (RBV) can be used to explain differences between environmental policies or strategies among companies. The RBV focuses to a great extent on the interaction of a firm’s business and natural environment. Within the RBV, a firm is seen as “unique bundle of resources and capabilities that is developed over time as the firm interacts with all its stakeholders” (Branco & Rodrigues, 2006, p.117). These resources and capabilities are heterogeneous and imperfectly mobile across countries (Wernerfelt 1984; Barney, 1991) and can result in competitive advantages for firms that have superior resources

The Greening of Home Brands – Elke W.A.M. Huisman and capabilities (McWilliams et al., 2006) . More specifically resources and capabilities must meet four conditions in order to constitute a source of sustainable competitive advantage, namely they must be valuable, rare, inimitable and non-substitutable (Barney, 1991). When the RBV is applied to CSR, this leads to the question if CSR can be used to achieve sustainable competitive advantage. According to Reinhardt (1998) firms that engage in CSR-based strategy can only sustain a good return if it could prevent competitors from imitating its strategy. In competitive markets it is not probable that a firm can keep competitors from imitating a CSR-based strategy, which means that competitive advantage from CSR activities and practices will be temporary. Also this implies that competing firms might be pushed to imitate CSR activities/practices in order to gain competitive parity. So can these activities be seen as responsible or simply strategic (McWilliams et al., 2006). Gallego- Álvarez et al. (2010) state that in order to obtain advantages from the CSR strategy, firms should increase their investments in CSR significantly compared to their competitors, so that competitors are unable to imitate them. This could lead to appreciation of different stakeholders, like customers, employees and communities, for the behavior of a sustainable company compared to remaining companies, which can create added value for the company (Gallego-Álvarez et al., 2010). McWilliams and Siegel (2001) argue that determining the ‘ideal’ level of CSR, via a cost-benefit analysis, is the way the firm meets the demands of relevant stakeholders, from the ones who demand CSR (consumers, employees, community) and those that ‘own’ the firm (shareholders). There are CSR resources and outputs a firm can create a level of CSR by incorporating CSR attributes in its products like pesticide-free fruit or by using CSR-related resources in its production process like organic fertilizers (McWilliams & Siegel, 2001). In order to maximize profit, a firm should offer exactly that level of CSR for which the higher revenue from the increased demand equals the higher costs of using resources to provide CSR (McWilliams & Siegel, 2001). Product differentiation can be used to create new demand or to ask a premium price for an existing product.

So companies take different approaches towards the environment. The RBV theory could give a possible explanation why companies start CSR practices (Branco & Rodrigues, 2006). From the literature above can be deduced that there are two factors that influences how a company responds to environmental and social issues. One factor acknowledges how a firm responds to competitive implications towards environmental and social issues (McWilliams & Siegel, 2001; Gallego-Álvarez et al., 2010). CSR activities can be seen as responsible or simply strategic; in the latter case through different actions advantages can be obtained compared to

The Greening of Home Brands – Elke W.A.M. Huisman competitors. The other factor gives account to the attitude towards environmental and social issues, like if the firm considers the issues as an opportunity or threat (Kemp & Arundel, 1998; Pinkse, 2006). So when looking to CSR from a RBV perspective the focus lies on the competitive implications of the firm’s CSR strategy.

3.6 Overview and conceptual model The theoretical framework has explored various dimensions of CSR, some more general, others more specific to the food retail industry or to purchasing. Furthermore motivations of businesses to act socially or environmentally responsible are presented. Besides, the theoretical framework gives an explanation why CSR policies differ among companies. A short overview of these concepts will be outlined, after which my initial conceptual model will supplemented with the insights gained in the theoretical framework. First, the increased attention to CSR has been discussed. CSR is currently the most widely accepted concept in business and has influence on all aspects of the business. Furthermore multiple stakeholders, like customers, suppliers, employees, investors and NGOs, pay attention to the business’ CSR attitude. The CSR definition used in this thesis is adapted from Werther and Chandler (2011); “CSR is a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions” (p. 5). The CSR practices can be subdivided under four headings, namely environmental impact, ethics, workplaces and community. Furthermore this section discusses various motivations and/or advantages of CSR. The next section dealt with CSR in the food retail industry. According to the literature CSR is gaining a lot of importance in this industry due to the labor intensive nature of food supply chains and because of the type of product (Maloni & Brown, 2006). The retailer has often a channel leader role in the supply chain and can adopt active positions in leading international supply chains to pursue a CSR approach. As retailers have a powerful role, they are expected to reduce environmental damage and are pushed by regulatory forces, customer expectations and community groups to improve their value chains (Lai et al., 2010). CSR dimensions common in the food retail industry can be subdivided in four categories, which slightly differ from general CSR literature; environment, workplace, community, and marketplace. Dimensions of marketplace play a substantial role in the food retail as they encompass matters like sustainable and ethical procurement, food safety and local sourcing.

The Greening of Home Brands – Elke W.A.M. Huisman The following section is specified to purchasing. The purchasing function is of major importance as it is at the beginning of the value chain and environmental efforts of a firm will probably not be successful without combining the company’s environmental goals with purchasing activities (Walton et al., 1998). The involvement of CSR in the purchasing function is called Purchasing Social Responsibility (Carter & Jennings, 2002). Although PSR is quite similar to CSR, the difference lies in the interaction of the purchasing manager with a broader variety of stakeholders (Carter & Jennings, 2002). Although the motivations in the previous sections explain a significant part of the differences in CSR policies, additional RBV literature is needed to give a more profound explanation. Section 3.4 explained the differences in CSR attitude with use of the model of Steger (adapted from Gago & Antolín, 2004) and the characterizations of Kolk (2010) give an impression of the trajectories in sustainability reporting by organizations. Based on literature of the RBV differences in CSR strategies can be explained. The competitive implication the strategy or policy has for the organization is of major importance and this determines the extent to which a company acts socially or environmentally responsible.

The insights gained in the theoretical framework have been integrated into an enlarged conceptual model (figure 4, presented on page 37). In the theoretical framework the CSR policy of a retail organization can be subdivided in four themes; environment, marketplace, workplace and community. From the CSR policy of a retail organization, the PSR policy can be extracted. Therefore an arrow is drawn from CSR policy to PSR policy. The PSR policy involves activities in relation to the environment and marketplace, which can be connected to the purchasing function of the organization. The CSR policy is influenced by the strategy of the organization, which involves the corporate strategy, the competitive position, the motivation to be responsible and pressures and demands from stakeholders. Corporate strategy; the corporate strategy is concerned with “the overall purpose and scope of an organization and how value will be added to the different parts (business units) of the organization” (Johnson et al., 2008, p. 7). Common knowledge would suggest that organizations, mentioning CSR related topics or the importance of CSR more often in their corporate strategy, are keener in or more occupied with CSR policies. The magnitude to which being responsible is incorporated with the firm’s corporate strategy could influence whether CSR initiatives are undertaken and the extent. Therefore the extent to which CSR is mentioned in the strategy section of the Annual Report will be measured in the analysis section. This is done by counting the following CSR related terms; ‘Corporate Social

The Greening of Home Brands – Elke W.A.M. Huisman Responsibility’, ‘corporate responsibility’, ‘responsible’ ‘sustainability’, ‘sustainable’, ‘ecological’, ‘social’, ‘community’ and ‘society’. Competitive position; differences in CSR policy can be explained by the RBV literature. As mentioned before when the RBV is applied to CSR, this leads to the question if CSR can be used to achieve sustainable competitive advantage. In order to obtain advantages from the CSR strategy, firms should increase their investments in CSR significantly compared to their competitors, so that competitors are unable to imitate them (Gallego-Álvarez et al., 2010). This means that the level of competition within an industry can be a market force that creates stimulus to engage in CSR (McWilliams et al, 2006; Lyon & Maxwell, 2008). Besides Jones et al. (2005a) mention that CSR is a way for retailers to maintain or improve their market position. The market position or competitive position could have influence on its CSR policy as the retailer aims to outperform competitors. Stakeholders; businesses are an elemental part of society (Jones et al., 2005b) and are involved with different stakeholder groups that can range from consumers, employees, suppliers and regulating authorities to local communities (Panapanaan et al., 2003; Campbell, 2007; Dahlsrud, 2008; Werther & Chandler, 2011). In order to avoid losing societal legitimacy stakeholder groups are more and more incorporated within the organization’s strategic perspective (Whitehouse, 2006; Galbreath, 2008; Werther & Chandler, 2011). This means that pressures or demands from stakeholders could have influence on the CSR policy of a company as it wants to maintain its legitimacy. This thesis research will take into account consumers, NGOs and employees. Within the retail industry the consumer has significant influence on the retailer’s choice to act more environmentally responsible (Piacentini et al., 2000; Musso & Risso, 2006; Lai et al., 2010). Furthermore NGOs will be incorporated, last year various actions of NGOs led to product changes or product stops of organizations (see Appendix D for examples). Employees will be taken into account in this research as they have to be confident with the policy of their organization, otherwise they choose to work for another organization that meets their ethical beliefs. Motivation; based on the theoretical framework a list of motivations is created that drive retailers to CSR. Based on this list, I assume that organizations not all have the same motivations to get involved in CSR, but that these motivations differ.

The Greening of Home Brands – Elke W.A.M. Huisman The PSR policy embraces the current and future activities with regard to purchasing and responsiveness. This has influence on AMS as it functions as a procurement-arm of the retailer; therefore an arrow is drawn from PSR policy to the sourcing process of AMS. Figure 4 illustrates the enlarged conceptual model.

Strategy - Corporate strategy - Competitive position - Stakeholders (Customer, Employees, NGO's) - Ethical motivation

CSR policy - Environment PSR policy - Marketplace - Environment - Workplace - Marketplace - Community

AMS

Figure 4: Enlarged Conceptual Model

Based on the theoretical framework an assumption is made for two profiles; companies with a comprehensive CSR policy and companies with a less comprehensive/ incomprehensive CSR policy. These profiles are presented in table 6. This research will reveal if, based on the four cases, this assumption is correct, partly correct or not correct at all.

Table 6: PSR Profiles Incomprehensive CSR policy àPSR policy A comprehensive CSR policy à PSR policy Smaller players in the market Market leaders Direct competition not advanced on CSR Direct competitors are advanced & active on CSR NGOs demand is low and not much pressure is put Lot of pressure & demands of NGOs Customers are not concerned with environmental & Economic advantages – seen as opportunity social issues Customers value the environment and are concerned Employees do not value environmental & social issues with social issues Reporting: laggards, inconsistent reporters & Employees appreciate firm’s environmental & social consistent non-reporters efforts Attitude: indifferent & defensive Reporting: consistent-reporters & late adopters Attitude: innovative & offensive

The Greening of Home Brands – Elke W.A.M. Huisman 4. METHODOLOGY

4.1 Introduction This chapter encompasses the methodology and will outline how the research for this thesis has been conducted. First, general information is given about the research. Section 4.3 will discuss the case selection and section 4.4 the data collection methods. Finally section 4.5 will explain how the obtained data will be analyzed.

4.2 Research In this thesis explorative research is conducted to the CSR policies of four European retailers and their joint sourcing alliance, AMS. An internship of seven months at AMS provided me the opportunities to describe four cases, namely four partners; Albert Heijn (Netherlands), Kesko (Finland), Migros (Switzerland) and Jerónimo Martins (Portugal). These four partners have significant share in the food retail in Europe. Through the use of qualitative research, insight could be obtained in the attitudes, behavior, motivations, concerns, value systems and culture of the four partners (QSR International, 2010), which would not be obtained by quantitative research, i.e. survey, to that extent. Throughout internship I had intensive interaction with the four Heads of CSR, traders of AMS, suppliers and NGOs over a period of seven months. This provided the perfect set up for doing this extensive qualitative research not available to many others. Apart from concrete interview appointments and observations during meetings, workshops and specific projects, the daily work activities provided me more and more knowledge about the partners, their home countries and CSR practices. This case study presents an outline of four partners of AMS adopting and managing CSR. Yin (2009) defines a case study as “an empirical inquiry that investigates a contemporary phenomenon within its real life context using multiple sources of evidence” (p. 18). For this research case studies are an appropriate method as it generates a holistic view of a certain phenomenon or event, namely CSR at each partner, furthermore a complete picture can provided due to the use of many sources of evidence (Baharein Mohd Noor, 2008). Not the entire retail organizations are studied, instead this research focuses on the elements described in the enlarged conceptual model, namely the retailer’s CSR policy and practices, its motivations, its competitive position, its corporate strategy and the pressure or demands of stakeholders.

The Greening of Home Brands – Elke W.A.M. Huisman 4.3 Case selection This explorative research aims to find as many different motives and CSR policies of different retail chains. Therefore partners were chosen from different locations in Europe. As Steger (2000) mentions CSR differences across nations are especially visible in the ‘North-South Divide’ within the European Union. This is because of different priorities in environmental protection, both in degree and issues, different corporate cultures (Steger, 2000) and different opinions of NGOs and other stakeholders (Kong et al., 2002). It is interesting to assess how and why retailers have different views on topics like sustainability, ecology and ethics, while moving from Northern to Southern Europe. According to Eisenhardt (1989), the selection of cases is an important aspect of building theory from case studies because such research relies on theoretical sampling, which has the goal to choose cases which are likely to replicate or extend the emergent theory (Eisenhardt, 1989). Therefore the decision is made to select four retailers, who have a number one or two position in their market and who all currently have a CSR policy and who are willing to work together within AMS on CSR as they attended the ‘Sustainable Trade & Product Integrity Workshop’ May 2010. This workshop was about sharing knowledge and practices on CSR and about possible collaborations between partners. In this research Albert Heijn is included as it is the AMS partner of my country of origin, The Netherlands; furthermore it made a clear statement regarding CSR. Kesko, AMS’ Finish partner, is examined it is active in the Scandinavian market which differs considerably from the rest of Europe. AMS’ Swiss partner Migros is discussed as it is a non-European Union country and active in a protected market which means that retailers are not free to source whatever they want (Bezençon & Blili, 2009). Jerónimo Martins will be discussed as it is the partner is located in Portugal, which means it has the most southern location in Europe compared to other partners.

Unit of analysis This study contains four single cases therefore the study has used a multiple-case design. Multiple-case designs should follow a replication; which means that each case should be carefully selected in order to predict similar results or to predict contrasting results but for predicted reasons, respectively this is defined by Yin (2009) as ‘literal replication’ and ‘literal theoretical replication’. The theoretical framework in Chapter 3 therefore provides conditions under which a particular phenomenon is likely or not likely to be found (Yin, 2009).

The Greening of Home Brands – Elke W.A.M. Huisman Within this multiple-case study the individual cases are holistic as a single unit of analysis is used. Yin (2009) points out that the unit of analysis is each individual person that is studied; in each situation an individual person is the case. In this study independent CSR managers of each retail organization are studied, this means that the unit of analysis is the CSR manager. In the single case studies, specifically the purchasing activities and the activities towards the environment of the partner are studied.

4.4 Data collection The data collection of each case study is structured in three phases. First extensive desk research was performed based on information published by retailers, in addition to what has been published about the retailers in several media like newspapers and retail magazines. This phase was conducted to get insight in the elements ‘corporate strategy’, ‘competitive position’ and in the ‘CSR policy’ of the enlarged conceptual model. The second phase consists of the interviews with CSR managers and observations during meetings, this provided additional insight in the elements ‘motivation’ and ‘stakeholders’ of the enlarged conceptual model. Phase three compares discrepancies between information gathered in phase one and two. By integrating documentation, interviews and participant observations an extensive representation can be given about the partners and their underlying reasons and motives for CSR. Furthermore it will ensure rigor and reliability of data.

Phase 1: Desk research – document study In phase 1 extensive desk research was performed on CSR information published in Annual reports, CSR reports and webpages of the partner. In order to document the path each partner took, primarily data was collected for the period 2004-2009. Besides these general data sources, the internship at AMS provides me access to various meetings, workshops and the Extranet of AMS. My Trade Director, who was aware of the various meetings and workshop that were organized at AMS, informed me each time when there was a meeting related to my topic and made sure I got access. From all meetings I took minutes and afterwards I highlighted all useful information. Furthermore I received from colleagues documents with regard to current terms of trade of the partners and CSR documents of suppliers. Table 7 (presented on page 41) gives an overview of the information sources that have been used to collect the statements of the retailers on their own CSR approach. Initially I chose to check the CSR or Annual reports available from 1998. However it turned out that not all information was available, therefore the reports from 2004 onwards have been chosen as

The Greening of Home Brands – Elke W.A.M. Huisman reference points. These reports have been analyzed forward from earlier to more recent versions, as this allows for tracking back the changes that have taken place over time. All indicators have been studied on three aspects; what is the process or policy described, what is the intention or motivation of the partner and what are the results (if available)?

Table 7: Retailer data sources used CSR Annual Websites Other information Reports Reports Ahold/ 1998- 2002- www.ah.nl *Bewust & Betrokken – ondernemen in de Albert Heijn 2009 2009 www.ahold.com samenleveing, 2007, 2008, 2009. *Presentation ‘Strategy for selling sustainable and safe products’, March 11 2010 *Terms of Trade Ahold/ICA 2009 Kesko 2000- 1998- www.kesko.fi *Finish Grocery Trade 2008-2009 2009 2009 www.pirkka.fi *Pirkka Magazine October 2010 Migros 2002, 2007- www.migros.ch *ESM Magazine Sustainability Migros July 2004, 2009 www.kulturprozent.ch 2010 2005* *Migros Magazin *BSCI-info for Migros-partner, August 2009 2006- *Migros regulations for pre-packed foods, 2009 December 2009 Jerónimo X 2004- www.jeronimomartins. *Market information Portuguese Retail & Martins 2009 com consumers received from JMR *= only available in German language

Apart from information sources of the retailer, a media analysis was undertaken for each retailer over the same period. The Business Source Premier Database full-text queries were ran on the name of the partner and the keyword ‘sustainability’ or ‘corporate social responsibility’ or ‘CSR’. The papers that showed up were consulted to check for comments on the 4 partners and the way they were perceived to handle CSR and/or sustainability challenges. Furthermore texts published on webpages of industry associations, NGOs and newspapers are consulted.

Phase 2: Interviews & participant observation The second phase consisted of conducting interviews with persons who are involved in setting CSR policies, the CSR managers of the four partners. These were contacted after the Sustainable Trade & Product Integrity Workshop on May 25 th 2010. As I have met the interviewees already during this workshop in personal, this made later contact moments easier. The interviews with partners of AMS were semi-structured; two were conducted face to face and two by telephone. The semi-structured interview method allowed some flexibility in the order of questions depending on the flow of the conversation; furthermore it gave the

The Greening of Home Brands – Elke W.A.M. Huisman opportunity to probe answers, where more explanation or details are needed (Baharein Mohd Noor, 2008). Prior to the interviews the semi-structured outline of the interview was sent to the contact persons as it helped to structure the interviews. All interviews were tape-recorded and transcribed for analysis, in order to process all information correctly. During the explorative interview, the focus will lie on the why and how part. Seven main themes are set up, which are subdivided in smaller themes. Please see Appendix E for the interview. In order to prevent social desirability bias, the questions were about the topics in general, instead of actions on an individual level.

My work as a Trade Assistant within AMS gave me the possibility to gather information and perspectives from observations during various meetings and projects. With descriptive observation I concentrated on observing the physical setting at AMS, the key participants and their activities, particular events and the sequence of those (Saunders et al., 2007). Table 8 represents an overview of the primary data sources used in this research.

Table 8: Primary data sources used in case study Interview Workshops attended (& Observation moments minutes taken) (apart from daily work) Ahold/ Ms. S. Hertzberger, *Sustainable Trade & Product *Frozen fish project Albert Heijn Vice President Quality integrity workshop, May 25 th *Ice cream supplier visits Assurance & Product 2010. Belgium & Germany Integrity, Albert Heijn *UTZ certified workshop, *PLMA (fair) visit with AH July 14 th 2010. buyer *Palm oil workshop August 30 th 2010 Kesko Mr. S. Päällysaho, Trade Sustainable Trade & Product *Sustainable tuna project Director Kesko & Mr. T. integrity workshop, May 25 th * Frozen fish project Jäske, Manager 2010. Environmental Affairs, Kesko Ibid. additional e-mail interactions Migros Mr. J. Züblin, Head of Sustainable Trade & Product *Frozen fish project Standard and Social integrity workshop, May 25 th *Smoked Salmon project Compliance, Migros 2010. Jerónimo Ms. M. Martins Ramalho, Sustainable Trade & Product *Frozen fish project Martins Corporate Strategy & integrity workshop, May 25 th Development Director, 2010. Jerónimo Martins Ibid. additional e-mail interactions

The Greening of Home Brands – Elke W.A.M. Huisman All information from interviews, observations and minutes from meetings are placed under the category based upon the literature study; environment, marketplace, stakeholders etc. This technique is called ‘template analysis’, in which a list of categories represents the themes revealed from the data that have been collected (Saunders et al., 2007). In this way data is analyzed in a structured way. As information is collected from multiple sources, the aim is to back up the same fact or phenomenon and to ensure validity of findings (Saunders et al., 2007).

Phase 3 - Discrepancies During phase three contraries, that had emerged while comparing the interview transcripts, observations and minutes from meetings and the data previous studied, were researched. To resolve the discrepancies, retailer’s information sources and external information was reviewed with regard to the contrary data. This phase served as a validation of the findings obtained from the interviews. According to Pentland (1999) this helps to arrive to the ‘true story’ of the case study with regard to description of practices and their relationships. By making use of data triangulation the lack of rigor, when systematic procedures are not followed or uncertain evidence is used which will influence the direction of the findings and conclusions, and reliability will be overcome (Yin, 2009).

4.5 Data analysis As mentioned above, the first step was a content analysis of different information sources of the partners. In this way the position of the company could be derived with regard to the key variables presented in the theoretical framework. This data was supplemented with information from interviews and observations. All interviews were recorded and transcribed for analysis. In order to analyze the data, codes were defined which represent the key variables. Various documents and the transcriptions from the interviews were examined and a code was given to interesting information. In this way the information collected was systematically organized.

The Greening of Home Brands – Elke W.A.M. Huisman 5. CROSS-CASES ANALYSIS OF CSR POLICY OF 4 PARTNERS

5.1 Introduction This chapter will provide a cross-case analysis of the four cases, the four partners of AMS. The enlarged conceptual model functions as a guide for this cross-case analysis. The four separate cases are described in Appendix F (Ahold), Appendix G (Kesko), Appendix H (Migros) and Appendix I (Jerónimo Martins). Based on work of Jones et al. (2005a) the CSR reports, interviews, observations and minutes were compared on the dimensions ‘Environment’ and ‘Marketplace’, as these two headings have direct impact on the sourcing by AMS. Furthermore the cases describe the motivations of the case company for implementing CSR practices and their view upon their most important stakeholders. Along the position of the case company in its home market is described and results deriving from the case company’s CSR policy are discussed. Based on these four extensive case descriptions, it is possible to cross-analyze the four firms, as mentioned, based on the enlarged conceptual model. The cross-case analysis will start with a general description of CSR of the four partners. The next section, 5.3, will compare the PSR practices, or in other words practices with regard to environmental and marketplace. Commonalities and differences will be examined, which will be especially valuable for AMS. Section 5.4 will relate four influential elements to the partner’s CSR attitude and reporting. In the final section combines the findings of section 5.3 and the insights gained in section 5.4 and will give the results of the cross-case analysis.

5.2 General description of CSR of the four partners Albert Heijn/ Ahold Albert Heijn is founded in 1887 and is the oldest supermarket chain in the Netherlands. Albert Heijn has in the Netherlands about 750 stores and 4600 private label articles under five categories (Albert Heijn, 2010). In 1995 Ahold was judged for not publishing enough on its claimed leading position in for instance recycling (Van Tulder et al., 2009). In 1998 the company published its first CSR report. Before that time environmental issues were included in the general Annual Report. In the first CSR report quality choices, efficiency and care were the main topics and underlying actions were given (Ahold CSR, 1998). After the first CSR report in 1998, every two years a new CSR report was published. Some of Ahold’s CSR publications are somewhat superficial, but a reason can be that Ahold had to recover from a major financial and reputational set-back in the beginning of the 21rst century. From 2007

The Greening of Home Brands – Elke W.A.M. Huisman onwards the CSR report was published every year, at the same time as the annual report. New priorities were food safety, consumer health and social and environmental issues (Ahold CSR, 2004). In 2007 Ahold CSR activities felt under four categories Healthy Living, Sustainable trade, Climate action and Community engagement. Above a roof is situated, which are the customers. The temple is supported by a basis, the employees (Ahold CSR, 2007). Furthermore a CSR Coordination Committee was set up to guide Ahold’s CSR strategy. The CSR reports from 2007 onwards differ from the previous ones as they are more specific on CSR practices of the individual retailers. Where the previous reports gave more a general outline of Ahold’s CSR policy with some best practices mentioned, from 2007 onwards on each CSR topic actions of the individual retailers were mentioned. In December 2009 Albert Heijn stated that by January 2015 all private label products must be sustainable and/or responsible (AH B&B, 2009).

Kesko Kesko was formed when four regional wholesaling companies were merged in October 1940. Kesko Food is a strong operator in the Finnish grocery trade. Kesko Food manages more than 1,000 K-food stores under 5 store concepts (Kesko, 2010). As the group consists of independent retailers, Kesko Food’s main functions include the centralized purchasing of products, selection management, logistics, and the development of chain concepts and the store site network. These chain operations ensure the efficiency and competitiveness of business (Kesko, 2010). For more than 20 years, Kesko Food has a private label range, called Pirkka. At the moment there are 1800 Pirkka products, of which nearly 30 Pirkka Fair-trade products and more than 40 Pirkka Organic products. Although Kesko’s first CSR report was published in 2000, in 1998 it already made some efforts relating CSR in supplier relations to internal alignment. Among personnel an ethical assessment was made of the implementation of the value 'responsibility and honest working methods'. This provided a basis for the ethical code, which was going to connect the corporate values and the operations of the employees (Van Tulder et al., 2009). For 1997- 1999 Kesko has published three separate environmental reports in addition to the annual reports (CSR report Kesko, 2000). As said since 2000, Kesko is annually reporting on its corporate responsibility. Kesko is doing that in accordance with the Global Reporting Initiative (GRI) recommendation and describes on ten principles its progress (Kesko CSR, 2009). Kesko’s current CSR policy is build up in four clusters; economic responsibility, human resources responsibility, environmental responsibility and responsible purchasing and

The Greening of Home Brands – Elke W.A.M. Huisman sales (Kesko CSR, 2009). Key issues in environmental responsibility are impact on climate change, energy and water consumption, transportation and return logistics, waste, use of materials and environmental risks, damage and incidents. With regard to responsible purchasing and sales Kesko sees as key issues; product safety, healthy way of life and eating habits, working conditions and terms in the purchasing chain, product stands and statements (Kesko CSR, 2009).

Migros Migros was founded in 1925 in Zürich by Gottlieb Duttweiler. By 1941 the owner decided to give the business to his customers by transforming everything from his privately owned enterprises into regional cooperatives (Migros, 2010). Today Migros has almost two million Cooperative Members (Migros CSR, 2006) and the cooperatives are led by the Federation of Migros Cooperatives (Migros, 2010). Furthermore Migros has 15 industrial companies which are active mainly in the food sector and is as a result country’s largest food manufacturer (Migros CSR, 2006). Therefore a great majority of Migros’ range of processed foods and in its near-food segment consists of its own-brand products; of which many are manufactured in Switzerland (Migros CSR, 2006). Migros has an extensive range of traditional Migros brands, besides that it has a low-prices M-Budget line since 1996 and a premium segment ‘Sélection’ since 2004 (Migros CSR, 2006). Migros published its first sustainability report in 2002. The report described the journey of five Migros products from producer to consumer (Migros CSR, 2002). From 2004 onwards Migros started publishing every year a CSR report according to GRI standard. The report of 2004 communicates on many environmental and social agreements and principles which comply with Migros, like FSC, BSCI, MSC, Max Havelaar, RSPO etc. Furthermore its environmental impact is measured and compared with previous years on emissions, energy use, waste etc. When comparing the CSR reports over the years one can encounter that Migros puts a lot of value to environmental and social agreements and principles. Where already agreements and principles are set up, Migros complies with them, if there is no standard yet, Migros contacts NGOs to set up such standard. Migros’ sustainability policy is focused sustainable consumption, ecology and the cultural percentage (Migros CSR, 2009). Sustainable consumption is subdivided in sustainable labels, procurement guidelines, animal welfare, product safety, nutrition, overfishing and climate-friendly products (Migros CSR, 2009). Migros includes in ecology; energy consumption, photovoltaics, eco-drive, environmental-friendly transport, customer traffic, and recycle (Migros CSR, 2009).

The Greening of Home Brands – Elke W.A.M. Huisman Jerónimo Martins In 1792 Jerónimo Martins opens his first store in Portugal. More than two centuries later the Jerónimo Martins Group operates three different formats in Portugal, having a prominent position in Food Retail under the brands Pingo Doce, 334 supermarkets, Feira Nova, 9 hypermarkets, and Recheio, 33 cash & carry stores (JMR AR, 2009). In the 1990’s Jerónimo Martins started it private label range, as first Portuguese retailer, and has currently 2400 product references, of which 44 organic and around 250 in the perishables area (Jerónimo Martins AR, 2007; 2009). For years there was an informal way of handling social activities, but at some point this was not sufficient anymore and structure and strategy was needed (M. Martins Ramalho, 2010, September 8). In July 2004 awareness was raised on social responsibility in internal meetings (Jerónimo Martins AR, 2004) and from that time onwards Jerónimo Martins reported in its Annual Report on sustainability as well. Jerónimo Martins considers three variables when defining objectives, strategies and policies regarding CSR; Profit, People and Planet (Jerónimo Martins AR, 2004). In the Annual Report of 2008 the business activities of the Group are subdivided in six broad categories; Consumers, Employees, Suppliers, Food Safety, Environmental Management, and Patronage (Jerónimo Martins AR, 2008). A strategy has been formulated for social community support, however currently Jerónimo Martins is deciding how to measure the impact of these social programs in order to communicate it (M. Martins Ramalho, 2010, September 8). When reading the Annual report the lack of measurements can be noticed; statements on projects are made, but not how far Jerónimo Martins are with achieving targets. According to Ms. Martins Ramalho, the Soares dos Santos family, who owns Jerónimo Martins, is very sensitive to social/community issues (M. Martins Ramalho, 2010, September 8). This can be concluded from the Annual Reports as well, as most CSR activities are focused on the community and not the environment or marketplace.

The Greening of Home Brands – Elke W.A.M. Huisman 5.3 Commonalities and differences in PSR policies of the four partners This section will cover the ‘CSR/PSR’ part of the enlarged conceptual model (see figure 5). Appendices F-I describe CSR dimensions environment and marketplace extensively, this section will shortly describe most important elements with regard to purchasing (PSR). After the description of the policies, the differences and commonalities between the partners will be mentioned.

CSR policy - Environment PSR policy - Marketplace - Environment - Workplace - Marketplace - Community

Figure 5: CSR/PSR part of the enlarged conceptual model

5.3.1 Environmental issues at product level and transportation requirements to supplier Albert Heijn is conducting studies into the full life cycle analyses of various private label products and compares its findings with suppliers, who are asked to provide plans to reduce the carbon footprint of particular products (Ahold CSR, 2009). Furthermore Ahold joined in 2010 a Sustainability Consortium on developing strategies and tools to assess the sustainability impact of products (Ahold CSR, 2009). Albert Heijn is currently deciding which standards to apply for environmental issues on product level, like climate change, use of land, use of water and biodiversity. Responsibility of climate and CO2 issues will be put at the supplier. In order to prevent quality food turning into waste, Albert Heijn began a waste prevention initiative in 2008 (Ahold CSR, 2009). In 2000-2002, Kesko Food participated in the life-cycle assessment survey to produce data on the environmental impacts of selected products. In 2002 Kesko aimed for packaging standardization, the use of environmentally sound materials and a reduction in the amount of materials used in Finnish producer associations and international standardization- organizations. In 2002, a packaging seminar was arranged for private label manufacturers and development needs of packaging from both logistical as environmental starting points were discussed (Kesko CSR, 2002). Kesko’s house brand products (Pirkka, EURO SHOPPER ™, Rico) are GMO-free and no other GMO products supplied by Kesko Food (Kesko CSR, 2006-2008). Furthermore Kesko has set up criteria which are part of the environmental diploma to independent suppliers. Companies that do not satisfy the criteria are ‘red light suppliers’ and are delisted from all Kesko’s warehouses (ST&PIW, 2010, May 25).

The Greening of Home Brands – Elke W.A.M. Huisman Migros has been committed to environmental protection for the last decades. For example since 1975 it has kept consumption statistics from the M-Industrial companies, the Cooperatives and their shops (Migros CSR, 2006). In 2004, Migros contributed to the start-up funding of the Nogal biodiversity projects, a long-term nature conservation project in Costa Rica, a country rich in plants and animals species. “Migros aims to close material cycles as far as possible and to design products and packaging so that they can be disposed of in an environmentally friendly manner” (Migros CSR, 2006, p. 43). Therefore reusable containers are used instead of cardboard boxes in logistics, where it is ecologically practical (Migros CSR, 2006). In 2005 Migros decided to no longer accept genetically modified feed for imported meat and poultry and in 2007 Migros reports that it does not sell, in principle, any genetically modified foods that are subject to declaration (Migros CSR, 2005; 2007). The Code of Conduct developed by Jerónimo Martins in 2003 includes guidelines on environment protection (Jerónimo Martins AR, 2009). Jerónimo Martins uses a system of reusable plastic boxes in the Fruit & Vegetables, Meat, Dairy, Fish and Bakery sections (Jerónimo Martins AR, 2004; 2008). Besides, various partnerships have been developed with suppliers to reduce the number of packing components and their weight (Jerónimo Martins AR, 2008). The private label products of Jerónimo Martins and those of the manufacturing area do, in principle, not contain GMO’s. In case there is no other alternative available, consumers are alerted to the fact by providing information on the package in accordance with European Union regulations (Jerónimo Martins AR, 2004).

When comparing the environmental efforts of the four partners on product level, the following can be concluded; Albert Heijn is still in the phase of deciding which standards to apply for environmental issues on product level, like climate change, use of land, use of water and biodiversity. The standards Albert Heijn is looking for should be certifiable by third parties. However it is clear that the responsibility of for example climate and CO2 issues will be put at the supplier. Besides that Albert Heijn started later with putting attention to packaging and life cycle analyses of products than Kesko. When reading the CSR reports of Kesko it is noteworthy that Kesko puts a lot of attention to the environment and is to a lesser extent involved in marketplace practices. For suppliers Kesko has already set up criteria which are part of the environmental diploma. Companies that do not satisfy the criteria are ‘red light suppliers’ and are delisted from all Kesko’s warehouses (ST&PIW, 2010, May 25). However as Kesko is owned by individual retailers it is possible that these will still use the ‘red light suppliers’, which is a weakness. CSR practices really need to be ‘sold’ to these

The Greening of Home Brands – Elke W.A.M. Huisman retailers (ST&PIW, 2010, May 25). A substantial difference with the other partners is that Migros has a highly integrated industry; it is the largest food producer and food processor from Switzerland. This means that 90 percent of the products sold at Migros are own brand (J. Züblin, 2010, September 16). Migros has been committed to environmental protection for the last decades and has kept consumption statistics from the M-Industrial companies, the Cooperatives and their shops since 1975. It started with energy conservation, and since then further issues have been frequently taken up (Migros CSR, 2006). The reason that Migros started relatively early with keeping consumption statistics could be because of the highly integrated industry and when owning such a large part of the industry energy conservation could lead to huge savings. The Code of Conduct developed by Jerónimo Martins in 2003 includes guidelines on environment protection (Jerónimo Martins AR, 2009). No concrete guidelines for suppliers are mentioned in the Annual Report. All four partners work on reducing the packaging of their products; this is motivated by the environment, but also because it reduces costs for the partner itself.

5.3.2 Product safety food & non-food (Marketplace) According to the CSR report of 1998 food safety is top priority at Ahold. Therefore throughout the whole company Ahold has food safety experts supervised by the Food Safety Steering Committee (Ahold CSR, 2002). HACCP (Ahold CSR, 1998), EurepG.A.P./ GlobalG.A.P. and GFSI (Ahold CSR, 2002) are used to keep food safety in control. In 2002 Albert Heijn was involved in developing the EurepG.A.P.-standard and chaired the Global Food Safety Initiative (GFSI) organization (Ahold CSR, 2002). Suppliers are supported by Ahold in making improvements, therefore the ‘Ahold Model Food Safety Program’ is set up, in which suppliers have to self-evaluate their performance against the program. With regard to product safety, Ahold has implemented the British Retail Consortium (BRC) Consumer Products certification for private label suppliers of higher risk non-food products (Ahold CSR, 2007). Kesko’s (Pirkka) Product Research unit ensures the quality of groceries and speciality goods and complied with the ISO9000 standard in 2002 and with the ISO 17025 accreditation in 2009. In 2009 the Pirkka Product Research unit was the only laboratory in Finland responsible for quality assurance for the trading sector’s own brands. Since the end of 2004 producers of imported fruit and vegetables need to obtain the EurepG.A.P.-certification. In 2009 most, 96.5%, of Kesko’s import suppliers of fruit and vegetables have GlobalG.A.P. certificate. Furthermore Finnish suppliers of vegetables must belong to the Finnish

The Greening of Home Brands – Elke W.A.M. Huisman Horticultural Products Society, for ‘good production practices for growers’, to be entitled to use the society’s seed leaf symbol (Kesko CSR, 2007). Furthermore Kesko requires the BRC and IFS certification and in Finland only salmonella free products are allowed (ST&PIW, 2010, May 25). Since 2002 Migros is reporting EurepG.A.P., all suppliers of fruit, vegetables, flowers and plants had to commit to this standard. In 2005, a start was made by putting Swiss-G.A.P. into effect for Swiss production (Migros CSR, 2006). By the end of 2010 at the latest all farms that supply products to Migros must meet this standard (Migros CSR, 2008). For suppliers of processed food Migros requires the GFSI certification to guarantee food safety since 2003. Besides, in order to assure food safety Migros used HACCP and ISO principles and standards in the food industry (Migros CSR, 2006). Since 2004 Migros is reporting on the Swiss Quality Testing Services (SQTS) which test new products according to risks involved and retests them on a random basis (Migros CSR, 2004). In 2004 JMR started with two projects regarding food safety and quality; HACCP for stores and ISO 9001:2000 for its own factories. Furthermore in 2004 several suppliers were audited based on the main requirements of GFSI. Besides this suppliers are audited in accordance with standards, based on internationally recognized requirements of CIES, BRC, EFIS and EurepG.A.P. (Jerónimo Martins AR, 2008). The Supplier Assessment and Selection Manual describes the assessment and selection procedures and outlines how the audit reports are to be presented and how food safety rules are to be registered and complied with (Jerónimo Martins AR, 2005). In 2004 Jerónimo Martins started using the EAN (European Article Number) system (Jerónimo Martins AR, 2004).

Based on above various commonalities and differences can be noticed in certification with regard to food safety, these are summarized in Table 9. Table 9: Commonalities and differences in food safety certificates Certificates Ahold NL Kesko Food Migros Jerónimo Martins Food safety GFSI X X X IFS X EurepG.A.P. X X X X GlobalG.A.P. X X X SwissG.A.P X HACCP X X X X ISO 22000 X X (in 2010) BRC X X X Salmonella free X poultry

The Greening of Home Brands – Elke W.A.M. Huisman With regard to food safety there are quite some commonalities between the partners, however just in three cases all four partners require the same certificate. The year the partners started requiring the specific certificates differ a lot; Albert Heijn and Migros are in a precursor position. Three partners require GFSI, Kesko on the other hand requires equivalent IFS. IFS combines food safety and quality in one tool (IFS, 2010). All partners required EurepG.A.P., however Ahold, Kesko and Migros ask suppliers to comply with GlobalG.A.P., the successor of EurepG.A.P., while Jerónimo Martins still requires compliance with EurepG.A.P. HACCP is required by all four partners. Non-food safety certificate, BRC, is only required by 3 of the four partners. However, overall all partners require compliance with a product safety standard (GFSI or IFS), good agricultural practices (EurepG.A.P./ GlobalG.A.P./ SwissG.A.P.) and three of the partners focus on non-food product safety (BRC) as well. Therefore can be concluded that based on food safety the four partners are quite in line.

5.3.3 Nutrition & Health (Marketplace) In 1990 Albert Heijn started with the ‘Earth & Values’ program. This program has accomplished that pesticides used in cultivation of fruits and vegetables were reduced significantly and that animal welfare improvements in pork farming were improved. In 1998 Albert Heijn has set up a private label ‘AH Biologisch’, these organic farming products do not use artificial fertilizers or chemical pesticides for crop protection. Albert Heijn introduced ‘Healthy Choice Clover’ on its corporate brands in 2005. The symbol helps customers identify food low in saturated fat, sugar and salt, and high in fiber. In 2009 this clover was replaced to two clovers; healthy choice & responsible choice (Ahold CSR, 2009). In May 2009 Albert Heijn replaced ‘AH Biologisch’ with a new private label ‘Puur & Eerlijk’ (Pure & Honest), which covers biological, fair trade, sustainable fishery, free-range meat and ecological products (Ahold CSR, 2009). Kesko started in 2004 with including nutritional values on the packaging of house brand products, although this was not always required by law yet (Kesko CSR, 2004). In 2007, Kesko introduced the Guideline Daily Amounts (GDA) labeling to the Pirkka range and reduced the amount of salt in six and the amount of fat in four Pirkka products (Kesko CSR, 2007). Since 2008, fat, salt and sugar have been systematically reduced from the products whenever this has been possible and reasonable (Kesko CSR, 2009). In 2002, Kesko Food had 445 organic products and 215 products with environmental labeling. At the end of 2009, Kesko Food had approximately 850 organic products and products with environmental

The Greening of Home Brands – Elke W.A.M. Huisman labeling in its selection, 41 of these were Pirkka Organic products and 73 were Pirkka products with the ‘Swan label’ (Kesko CSR, 2009). From 1970 onwards Migros started focusing on providing healthy food, which are free of chemical residuals (Elzen et al., 2004). At that time it started the ‘M-Sano-programme’, a new kind of agriculture with standards quite different from industrialized agriculture in order to reduce chemical use, “to integrate ecological criteria into the whole agri-food chain and to provide the customer with high-quality, healthy food” (Elzen et al., 2004, p. 103). In 2006 Migros took action on trans-fatty acids; the level had to be below 2% for all M-Industrial products and for products from outside suppliers (Migros CSR, 2006; Migros Regulations for Pre-packed foods, 2009 December). Furthermore Migros has two product lines, ‘Actilife’ and reduced-calorie ‘Léger’, to allow consumers to have a balanced diet and 58 products the ‘aha!’ quality label of the Swiss Centre for Allergy, Skin and Asthma (Migros CSR, 2009). By the end of 2011 all prepackaged Migros foods will be labeled with additional nutritive data, like energy, sugar, fat, saturated fatty acids and portion of salt (Migros CSR, 2009). In 2007 Jerónimo Martins launched a range of organic Perishables in 2007 and a Private Brand of organic products with 44 references in the meat, bread, fruit and vegetables area (Jerónimo Martins AR, 2007). In 2008 Jerónimo Martins included information on the Daily Recommended Doses (DRDs) and nutritional information in the labeling of Private Brand products. Furthermore Pingo Doce started a program in 2008 to continuously improve their nutritional profile of its private label; gradually the amount of salt, sugar and fat (trans-fatty acids) in its products will be reduced; furthermore any potentially allergy-causing coloring will be totally removed. Jerónimo Martins plans to develop ranges of food for consumers with cholesterol problems, soya drinks (for lactose-intolerant consumers) and products for diabetics and those with high blood pressure (Jerónimo Martins AR, 2008).

Above the efforts of the partners on nutrition and health are described. Currently all four partners are active on reducing salt, sugar and fat (trans-fatty acids) in its private label products. This has to do with the rising trend of healthy living that is present in all four of the countries. Furthermore all four partners have an organic private label range; compared to the other three partners Jerónimo Martins started quite late (2007) with launching its organic assortment. The other three partners launched it years before, like Albert Heijn in 1998.

The Greening of Home Brands – Elke W.A.M. Huisman 5.3.4 Sustainable Trade & Social Compliance (Marketplace) In 2005 Albert Heijn started collaborating with Marine Stewardship Council (MSC), and from 2007 onwards MSC certified products were sold. Albert Heijn has 25 private label MSC- certified products in its assortment (Ahold CSR, 2009). Furthermore the sale of eel will gradually phase out in 2010 (Ahold CSR, 2009). Besides, Ahold participates in the Aquaculture Stewardship Council (ASC). Regarding animal welfare Albert Heijn uses the ‘Better Life star-system’. From 2008 onwards Albert Heijn pays attention to the castration of piglets and by mid-2011 Albert Heijn strives to have only responsible pork meat (Trouw, 2010, November 25). Furthermore in 2009 Albert Heijn bought its organic meat product range in line with the three-star Better Life hallmark (Ahold CSR, 2009). With respect to critical commodities, Ahold participates in the Roundtables for Responsible Palm Oil (RSPO) and Responsible Soy (RTRS). In 2008 Albert Heijn committed to only use sustainable palm oil in its private label products by 2015 (Ahold CSR, 2009). Regarding cacao, another critical commodity, Ahold has raised in 2002 UTZ Kapeh organization for sustainable coffee and eventually all of the private label coffee was being UTZ certified. In 2006 Albert Heijn and Ahold Coffee Company launched with Solidarid a new coffee brand: Café OK. Albert Heijn’s ‘Puur & Eerlijk’ private brand had in 2009 67 fair trade products. At the end of 2009 Albert Heijn decided that by January 2015 all mainstream private label products must be sourced in a responsible way. With respect to social compliance, Ahold is member of the Business Social Compliance Initiative (BSCI) since 2005. 'Ahold Sustainable Business Development' (ASBD) aims to support African suppliers to meet several production and quality standards (Van Tulder et al., 2009). With regard to above mentioned risky and sensitive ingredients and products, Albert Heijn made an important decision in August 2010; to focus only on ingredients when more than 5% of that ingredient is present in the product (S. Hertzberger, 2010, August 20). For example when more than 5% of soy is in the product, then Albert Heijn starts focusing on the sustainability of soy in that product. If necessary this percentage can be moved up or down in the future. So far a lot of attention is given to sustainable products as a whole, like ‘Puur & Eerlijk’, however this is a niche; biological, fair-trade etc. Albert Heijn is now busy with main-stream preservation and has as a goal to have all private label sustainable and/or responsible by 2015 (S. Hertzberger, 2010, August 20). In 2004 Kesko joined the WWF program for protecting the Baltic Sea and species of EURO SHOPPER™ fish fingers was changed from Baltic Sea cod to Barents Sea cod in 2006 (Kesko CSR, 2006). The sustainability of fish caught in neighboring areas is evaluated with help of WWF Finland's Fish Guide and suppliers are delisted that are not on in this guide

The Greening of Home Brands – Elke W.A.M. Huisman (ST&PIW, 2010, May 25). Regarding fish from distant areas, Kesko Food relies on the website of the Marine Conservation Society of the UK. Kesko’s ‘fish and shellfish statement’ guides both Kesko Food's and K-food stores' own purchasing to secure responsible fishing and cultivation of fish (Kesko CSR, 2009). With respect to animal welfare all private label eggs have been produced either in free-range cage systems, organic poultry houses or enriched cages since 2008 (Kesko CSR, 2009). In 2007 Kesko decided to set up a steering committee for responsible buying. With regard to critical commodities, Kesko’s private label suppliers are not (yet) obliged to use sustainable palm oil in their production, Kesko Horeca’s palm oil manufacturer follows the principles of RSPO (Kesko CSR, 2007). Since April 2007 Kesko uses UTZ certified coffee beans for its private label coffee. In the spring of 2000, Kesko suggested to all importers operating in Finland to formulate ethical principles for imports (from developing countries). Quality control had been carried out in compliance with the SA 8000 (Social Accountability) standard since 2000. In 2005 Kesko became a member of BSCI and since then the SA8000 standard has been complemented with BSCI audits (Kesko CSR, 2009). Since 2001 Kesko has Fair-trade products in its assortment and since 2005 private label fair-trade products. At the end of 2009 Kesko’s Pirkka brand had 28 private label fair-trade products. Since April 2009 Migros offers, as first retailer in Switzerland, MSC fresh fish at its shops and it has removed more products from overfished stocks. In 2006 most Migros’ toilet and household paper products changed to Forest Stewardship Council (FSC) quality without increasing its price. Furthermore Migros provides aid for organic cotton (Migros CSR, 2006). Migros is committed to animal-friendly production, both for animals under protection of a label program (TerraSuisse) or those who are not (Migros CSR, 2009). In 2008 Migros decided that from mid-2009 latest castration of male piglets should be carried out only under anesthesia (Migros CSR, 2009). Working with the WWF Switzerland, Migros has drawn up the world’s first set of criteria for sustainable palm oil production in 2001 (Migros CSR, 2006). In 2004 Migros had a central role in setting up the RSPO. In 2009 6'500 tons of palm oil, which sustainable cultivation was assured through the purchase of Greenpalm certificates, were processed at Migros (Migros CSR, 2009). Migros and the WWF have created a network for sustainable use of soy cultivation and in June 2010 Migros joined the RTRS (Migros, 2010). In 1997 Migros drew up a Code of Conduct placing suppliers under an obligation to observe social working conditions, these rules were later adopted into the BSCI (Migros CSR, 2009). Since 2003 non-food suppliers and since 2005 food suppliers as well have to comply with BSCI. As Migros is focusing now on direct sourcing from the Far East, it has two offices

The Greening of Home Brands – Elke W.A.M. Huisman in Hong-Kong and Shanghai who are currently focused on non-food (ST&PIW, 2010, May 25). Migros is co-initiator/founding member of International Social Compliance Verification (ISCOM) in 2004 and Global Social Compliance Program (GSCP) in 2006, two organizations focused on social compliance. Migros has an online tool for benchmarking social standards, for environmental systems and standards for management (Migros CSR, 2006). Due the attack of Greenpeace in 2008, Jerónimo Martins switched to sustainable fish and seafood. Autochthonous breeds are protected by selling only certified beef, ‘Mertolenga’, ‘Barrosã’ and ‘Alentejana’ (Jerónimo Martins AR, 2008). Jerónimo Martins instituted a Code of Conduct for its suppliers in 2003. Furthermore an Ethical Committee was established to ensure independently disclosure of and compliance with the Code of Conduct (Jerónimo Martins AR, 2005). The Annual Report of 2009 mentions that Jerónimo Martins carries out fair negotiations according with ethical principles and guidelines that reflect the cost structure of each partner. Long-term supplier relationships and partnerships are valued by Jerónimo Martins (M. Martins Ramalho, 2010, September 8).

Based on above various commonalities and differences can be noticed in certification with regard to sustainable procurement and social compliance, these are summarized in Table 10.

Table 10: Commonalities and differences in certificates regarding sustainable trade & social compliance Certificates Ahold NL Kesko Food Migros Jerónimo Martins Sustainable trade and social compliance MSC X X X X ASC X RSPO/CSPO X (x) X RTRS X X UTZ Kapeh X X BSCI (Non-Food) X X X BSCI (Food) X SA 8000 X ISCOM X GSCP X X X FSC X X Fair Trade/ Max X X X Havelaar

Compared to other Dutch retailers, Albert Heijn started just recently the collaboration with WWF to improve sustainability of its fish assortment (Van Tulder et al., 2009). However compared to Jerónimo Martins and Migros, Albert Heijn is more front-running. Albert Heijn made a very clear statement to have its mainstream private label products all sustainable and responsible by 2015. This does not include a niche, this concerns all private label products.

The Greening of Home Brands – Elke W.A.M. Huisman According to Van Tulder et al. (2009) Kesko has been the first Scandinavian company to publish its compliance to the international Social Accountability SA8000 standard. However so far, compliance with SA8000 or BSCI is not yet a prerequisite for supplying Kesko and just a fraction of the suppliers have been audited yet. It is surprising however that the report of 2007 is the only report that discusses sustainable palm oil. However during the Sustainable Trade and Product Integrity Workshop in May 2010 it became clear that Kesko was the first partner of AMS who added three CSPO products (Certified Sustainable Palm Oil) to the AMS tender (ST&PIW, 2010, May 25). Migros is the only partner who requires BSCI for Food, in the future Migros wants to implement BSCI for fresh food as well (ST&PIW, 2010, May 25). Migros included extensive requirements on packaging in supplier agreements; however it has, like the other partners, no BSCI for packaging itself yet (ST&PIW, 2010, May 25). Migros is very proactive; it contacts NGOs in developing for example a list of minimum environmental and social criteria for its palm oil products. Furthermore it has been a founding member of various initiatives, like RSPO, BSCI and GSCP. Concluded can be from above that Jerónimo Martins, on the other hand, is not really advanced with regard to sustainable trade and social compliance yet.

5.3.5 Local sourcing (Marketplace) Albert Heijn has no specific local sourcing policies or initiatives because the Dutch consumer does not belief Dutch products are superior. At Kesko on the other hand the proportion of domestic purchases in K-food stores accounted for 90% in Finland in 2004. According to Kesko “Buying from local producers and suppliers is part of Kesko’s social responsibility. When products are sourced locally, it’s easier to know where they come from, and provides employment for local people as well” (Kesko CSR, 2007, p. 21). In 2009 more than 70% of Kesko’s purchases come from suppliers operating in Finland (Kesko CSR, 2009). Whenever possible, Kesko has Pirkka products manufactured in Finland; all Pirkka milk and soft drinks are made in Finland (Kesko CSR, 2009). In 1999 Migros launched the program ‘From the Region. For the Region’. This product line supports local agriculture and promotes at the same time small businesses which focus on traditional manufacturing methods and specialties. A cooperation between Migros and IP-Suisse which resulted in the TerraSuisse label, which stands for sustainably produced Swiss foods (Migros CSR, 2009). ‘From the Region. For the Region’ and TerraSuise had in 2009 the largest sales amount (Migros CSR, 2009).

The Greening of Home Brands – Elke W.A.M. Huisman Jerónimo Martins reports in 2004 that whenever possible it uses ‘Integrated Protection products’ like the ‘Alcobaça’ apple and the ‘Rocha’ pear. Furthermore small regional suppliers are provided full technical support to diagnose Food Safety systems and environmental conditions (Jerónimo Martins AR, 2004). In May 2008 Pingo Doce launched the Program ‘Mediterranean Flavors’, a program to promote simple and accessible Mediterranean recipes (Jerónimo Martins AR, 2008).

It is surprising that in Finland, Switzerland and Portugal a lot of local products are sold and special programs are set up to promote these local products to the customer, while in the Netherlands this is not the case. In Finland the independent K-retailers have, in addition to Kesko’s basic assortment, many local suppliers for bread, meat, processed meat, vegetables, potatoes, flour, juices, jam and dried spices (Kesko CSR, 2004). Furthermore the benefits of choosing Finnish products in encouraging employment are proclaimed by Kesko. In Switzerland approximately 99% of all products are sourced domestically. A reason for this is that the Swiss market is protected; there is no free movement of goods between Switzerland and the EU, there are customs duties and contingents and Swiss has made restrictions on trade. Therefore the part that Migros buys from the open market is limited. Furthermore the Swiss consumer values local and regional sourcing a lot (J. Züblin, 2010, September 16). This can be concluded from the popularity of the ‘From the Region. For the Region’ program. Jerónimo Martins prefers to choose local suppliers in Portugal in order to boost economic growth in the regions where it operates (Jerónimo Martins AR, 2009). Therefore local sourcing is advanced during current financial crisis as well (M. Martins Ramalho, 2010, September 8).

5.3.6. Conclusion PSR policies of the partners Based on the findings in this section and in the individual case descriptions presented in Appendices F till I, the following can be concluded; Ahold’s CSR topics has changed over the years; where the report of 1998 was focused on quality, efficiency and care, the report of 2004 was more focused on food safety, consumer health and social and environmental issues. From 2007 onwards the focus lies more on social and environmental issues. Regarding food safety Ahold has made major steps since 1998. All suppliers are certified, food safety is much better secured. Kesko is elaborating more extensively on its environmental practices in the CSR reports than on practices related to marketplace. Besides, Kesko has been rewarded for its

The Greening of Home Brands – Elke W.A.M. Huisman environmental policy; it has won various awards for sustainable development, like Eco- efficiency in the Dow Jones Assessment. In addition to its extensive environmental policy, Kesko has high demands for suppliers with regard to sustainable trade and social compliance. This can be concluded from the amount of certificates that is required. Compared to the other partners, Migros pays significantly more attention to social compliance. This can be concluded from the fact that Migros has been founding member of various social compliance standards. Its environmental impact is measured since 1975. Jerónimo Martins pays little attention to sustainable trade and social compliance. It pays more attention to food safety and to environmental practices like waste reduction and lowering energy and water usage.

5.4 Influence of elements; corporate strategy, market position, stakeholders and motivation. Previous section discussed the practices of each partner regarding CSR. Various commonalities and differences emerged. This section will try to explore the reason of the commonalities and differences between the four partners. Insights in the partners’ corporate strategy, competitive position, stakeholders and ethical motivation will be used to explain differences in CSR reporting and attitude towards environmental pressures. This section will cover the strategy part of the enlarged conceptual model (see figure 6).

Strategy - Corporate strategy - Competitive position - Stakeholders (Customer, Employees, NGO's) - Ethical motivation

Figure 6: Strategy part of the enlarged conceptual model

5.4.1 CSR reporting

Table 11: Characterization reporting of partners with use of model of Kolk (2010) Kolk (2010) Consistent Late Laggards Inconsistent Consistent non- Reporters Adopters Reporters reporters CSR report in 1999, 2002, -, 2002, 2005 -, -, 2005 No pattern -, -, - 2005 Ahold X Kesko X Migros X Jerónimo Martins X

The Greening of Home Brands – Elke W.A.M. Huisman According to the characterization of Kolk (2010), Ahold, Kesko and Migros are late adopters and Jerónimo Martins is a laggard, see table 11 (presented on page 59). However as Ahold published its first CSR report in 1998, Ahold should belong to the group of the consistent reporters, as it is not a late adapter as it published already before 1999. Since 2000, Kesko is annually reporting on its corporate responsibility according to GRI standard, however for 1997-1999 Kesko has published three separate environmental reports in addition to the annual reports. Migros published a first sustainability report in 2002; however this (only) described the journey of five Migros products from producer to consumer. From 2004 onwards Migros started publishing CSR reports. Therefore a cross is put in the late adopter’s cell, but close to laggard cell. Jerónimo Martins published its first CSR chapter in its Annual Report in 2004 and therefore it can be seen as a laggard. According to Kolk (2010) country differences could play a role why organization started reporting earlier/later, inconsistent or not at all. These will be taken into account when an explanation is sought at the four strategy aspects which are mentioned in figure 6.

Corporate Strategy Common knowledge would suggest that organizations, mentioning CSR related topics or the importance of CSR more often in their corporate strategy, are keener in or more occupied with CSR policies. Therefore the extent to which CSR is mentioned in the strategy section of the Annual Report. The Annual Report has been assessed of the year that the partner published its first CSR report. In case that report is not available, the Annual Report is reviewed closest to the year the first CSR report was published. This is done by counting the following CSR related terms; ‘Corporate Social Responsibility’, ‘corporate responsibility’, ‘responsible’, ‘honest’, ‘sustainability’, ‘sustainable’, ‘ecological’, ‘climate’, ‘social’, ‘community’ and ‘society’, ‘environment’, ‘ethical’. The results are presented in table 12.

Table 12: CSR mentioned in Corporate Strategy in year of publishing 1 st CSR report Ahold Kesko Migros Jerónimo Martins Year first CSR report published 1998 1997 2002 2004 Annual report reviewed 2002* 1998 2007** 2004 No. of counted terms 0x 10x - 6x * First Annual Report available for Ahold **First Annual Report available for Migros. This Annual Report will not be considered as the time span between the first publication of the CSR report and the first Annual Report is too large.

Based on table 12 it is hard to say if corporate strategy influenced the retailers to publish on CSR. First of all there is a large gap between the last Annual Report available and the first

The Greening of Home Brands – Elke W.A.M. Huisman CSR report published for both Ahold and Migros. Because of this large gap or time span, a profound relation between the number of times CSR is mentioned in the corporate strategy in the first year of CSR reporting and the initiative to start reporting on CSR, cannot be made. Furthermore Ahold’s Annual Report of 2002 was the rewritten version, which was published after its internal crisis in 2003. A reason that this report does not mention CSR as at that point in time, the focus was on providing correct financial statements for fiscal 2002 as net earnings and earnings per share were significantly lower than previously mentioned (Ahold AR, 2002). The number of counted terms for Kesko and Jerónimo Martins do make sense, as the time span is small, however comparing them together does not make sense because there is a large difference in the first year both companies started publishing on CSR. As Lee (2008) mentioned there is a growth in attention for CSR is reflected in annual reports. Therefore it is probable that in 2004 CSR was more widely accepted than in 1997, which makes the number of counted terms incomparable.

Competitive position Albert Heijn is market leader in the Dutch supermarket industry. With a market share of 32 percent is Albert Heijn for 1/3 of the Dutch population the closest supermarket nearby (Infonu, 2010, April 6). The three biggest retailers in the Netherlands, Albert Heijn, C1000, and Jumbo have together a market share of 56 percent. In the Dutch market Albert Heijn is seen as a pioneer, with innovative product ideas and marketing. Various retailers or producers copy the ideas of Albert Heijn, for example in 1997 Ahold Coffee Company founded with Guatemalan coffee producers the UTZ Certification, which stands for responsible produced coffee (Ahold Coffee Company, 2010). Since 2004 Douwe Egberts, Sara Lee, is purchasing UTZ certified coffee beans as well. Albert Heijn has 52 percent of the total turnover on biological products in the Netherlands (NRC Next, 2009, December 22). Ahold/Albert Heijn started reporting in 1998 and published in the subsequent years CSR reports. Albert Heijn’s competitors C1000 and Jumbo do not publish CSR reports; C1000 mentions its current practices on the website and Jumbo offers a brochure on CSR on its website but this is regarding current practices and no concrete measurements are reported. This means there is a big difference in reporting between Albert Heijn and its two competitors, which could hardly only be explained by the market position of Albert Heijn. At the time Ahold published its first CSR report, 1998, Ahold had a strong market position in the USA via its five supermarket- organizations. At that moment Ahold had more than 1000 supermarkets in the USA (Ahold Press Release, 1999 March 9). According to Matten and Moon (2004) CSR is a concept

The Greening of Home Brands – Elke W.A.M. Huisman embedded in American capitalism which is transferred to Europe. The concept entered the agendas of European businesses much later than those of the USA (Matten & Moon, 2004). This is consistent with the trend Werther and Chandler (2011) describe, according to them globalization has enhanced the potential to be exposed to global audience when a firm fails to meet needs and expectations of local community. A reason that Ahold and therefore Albert Heijn started reporting in 1998 could be that the US stakeholders expected a report on CSR as it was more common in the USA. Albert Heijn can be seen as a consistent reporter but this could be influences by the activities of Ahold in the USA. The Finnish grocery market is, compared to most other European grocery markets, relatively small as a result of the small population size and the rather moderate level of food consumption expenditure (Paavola et al. cited in Swoboda et al., 2009). In addition to being quite concentrated, the competitive situation of the Finnish retail market has traditionally been quite stable and closed and is furthermore characterized by regional competition due to low population density (Paavola et al. cited in Swoboda et al., 2009). However last few years the competitive situation among leading retailers has changed significantly, as the K-Group (Kesko) has lost a part of its market share, while the S-Group (Coop) has won a greater part of the market and has been market leader since 2005 (Paavola et al. cited in Swoboda et al., 2009). According to the Finnish Grocery Trade report (PTY) 2008-2009 is the market share among Finnish retailers divided as follows; S-Group 41%, K-Group 33.9%, Suomen Lähikauppa 11.9%, others (including Lidl 4.7%) 13.1%. As responsibility is part of competitiveness; it is used in the competition for investors, personnel and customers (S. Päällysaho, 2010, October 6). Therefore Kesko is actively following the situation in the market and competitors as Kesko’s target is to be a forerunner in this area. Kesko can be seen as a consistent reporter, at the time the first CSR report were published Kesko was market leader in the retail industry. Although Lidl entered the Finnish market in 2002, international competition has traditionally been rather scarce in the Finnish retailing market. Kesko on the other hand reports in 2000 that “globalization will accelerate the concentration of companies, foreign investments and competition over national borders. Inter-state co-operation in the preparation of international regulations will advance slowly, increasing pressure for responsible self-regulation by companies” (Kesko CSR, 2000, p. 8). This is part of Kesko’s vision on key factors of CSR. Kesko started reporting on CSR as it identified an internationalization trend within the Finnish retail market. As Kesko aims to be a pioneer and a leader, it seeks to actively monitor and foresee changed in society and adapts if needed. Apart from this, the Scandinavians in general are strong in CSR performance. According to

The Greening of Home Brands – Elke W.A.M. Huisman Strand (2009) when you monitor various CSR indices, like Dow Jones Sustainability Index, FTSE4Good, an excessive amount of Scandinavian companies are at the top. According to Strand (2010) this is because of the Scandinavian cultural DNA of business leaders to encourage ‘feminine’ activities of collaboration, participation and modesty. In Switzerland there is a duopoly; there are two main players in the retail market (J. Züblin, 2010, September 16). Migros is market leader in Switzerland; every day 1.4 million customers visit the Group’s supermarkets and specialty stores. Migros has a market share of 20.4 percent in 2009 (Migros, 2010). Coop Switzerland is the second largest player in the market. The market has become tighter as international retailers like Carrefour (France) and Rewe (Germany) have entered the well-paid Swiss market as well as hard discount chains Denner, Aldi and Lidl. The nature of the Swiss market could have an influence on CSR. The Swiss market is protected; there is no free movement of goods between Switzerland and the EU, there are customs duties and contingents and Swiss has made restrictions on trade (Van Tulder et al., 2009). This means that Migros is not free to source whatever it wants and the part that Migros buys from the open market is limited. According to Van Tulder et al. (2009) the closed nature of the Swiss economy and therefore retail market contributes to more positive preconditions for CSR than for countries with an open economy and rougher competition. In more open economies consumers tend to be less CSR minded than in more closed economies (Van Tulder et al., 2009). While many European supermarkets began committing themselves to environmental practices in the past few years, in Switzerland, environmental best-practices have been institutionalized for decades (ESM, 2010b). “Migros always has been in a leading position regarding sustainability and taking responsibility” (J. Züblin, 2010, September 16). Because it is triggered by an innovation and reputation perspective as Migros wants to be known as leader on sustainability and responsibility (J. Züblin, 2010, September 16). The model of Kolk (2010) defines Migros as a late adopter, or even close to a laggard, but this is only based on its reporting. As environmental practices have already been institutionalized for decades in Switzerland, the need to specifically report on it could have been lower. This could have been a reason that Migros started reporting in 2002/2004, later compared to Albert Heijn and Kesko. Several changes have occurred in the Portuguese retail market over the 10 years due to changes in regulation and legislation. There was a huge increase in store openings between 2004 and 2008. Currently growth is slowing down and the market is not increasing anymore in volume, but in value (M. Martins Ramalho, 2010, September 8). Jerónimo Martins is the second player in the Portuguese market, with a market share of 17 % Jerónimo Martins has

The Greening of Home Brands – Elke W.A.M. Huisman three main competitors; the Sonae Group, market leader with 21% share, the Dia Group and Lidl. However there are many international players active in Portugal, who follow international strategies on CSR and are already quite advanced. As Jerónimo Martins has a very strong reputation in Portugal, it had to follow the international players as reputation with regard to CSR is seen important (M. Martins Ramalho, 2010, September 8). Traditionally Jerónimo Martins is low-profile in its communication, however due to the existence of international players in the Portuguese market who are reporting on CSR, Jerónimo Martins followed the example and started reporting in 2004.

Stakeholders In 1995 Ahold was judged for not publishing enough on its claimed leading position in for instance recycling (Van Tulder et al., 2009). This could have influenced that Ahold published its first CSR report in 1998. Before that time environmental issues were included in the general Annual Report, but according to its stakeholders this was apparently not enough. Ms. Hertzberger mentions that NGOs attack Albert Heijn, as it is the largest chain, in order to gain a lot of publicity. Albert Heijn is a target for the ‘enemies’, the NGOs, which brings risks and therefore Albert Heijn wants to be in a precursor’s position (S. Hertzberger, 2010, August 20). The Dutch consumer on the other hand expects that supermarkets have already been taking care of issues concerning product safety and sustainable trade (S. Hertzberger, 2010, August 20). Especially regarding product safety, this is not questioned as the consumer assumes all products are safe (S. Hertzberger, 2010, August 20). Lately there has been a lot of publicity about the environment, which has increased the willingness of Dutch consumers to buy environmental-friendly products (Laposte Export Solutions, The Netherlands, 2010). According to Ms. Hertzberger reputation of Albert Heijn in the eyes of the employees is very important; people should like to work at Albert Heijn, it needs to be attractive to employees (S. Hertzberger, 2010, August 20). Therefore Albert Heijn’s 100.0000 employees are being kept up to date on sustainability with the staff magazine ‘de AH’. So Albert Heijn reports on CSR mainly for NGOs in order to not be attacked. However reputation among consumers is very important to Albert Heijn, “customers must be able to shop at Albert Heijn without being ashamed, that it is too expensive or being ashamed as they treat e.g. animals bad” (S. Hertzberger, 2010, August 20). The same counts for employees, people should like to work at Albert Heijn. It can be concluded that stakeholders play a significant role for Albert Heijn/Ahold in being sustainable and responsible and for reporting on it.

The Greening of Home Brands – Elke W.A.M. Huisman According to Kesko’s first CSR report “investors - and governments in particular - will have greater interests in the ethical dimensions of corporate operations as indicators of performance improve” (Kesko CSR, 2000, p. 8). This means that the decision to start reporting on CSR is influenced by its stakeholders. Kesko is collaborating with a number of institutions, governmental- , non-governmental organizations and business community, to develop solutions and contribute to societal issues. By interacting with stakeholders on a regular, systematic, and measurable basis a feeling is given to stakeholder groups that Kesko meets their expectations (Kesko CSR, 2006). However according to Van Tulder et al. (2009) civic organizations and other NGOs are in Finland overall not as critical as in other European countries; opinions are made clear, but they are not aggressive. Kesko sees its customers as the key stakeholder group. The aim is a satisfied customer. Successful customer encounters every time are a prerequisite of overall success and are ensured through favorable prices (S. Päällysaho, 2010, October 6). Traditionally the Finnish consumer behavior is mostly affected by quality, safety and the origin of the product (Laposte Export Solutions, Finland, 2010). Kesko recognized responsibility as a part of competitiveness; it is a tool in the competition for personnel. A tool for commitment, job satisfaction of current employees and attractiveness to other trading sector professionals and students is important. Stakeholders play definitely a role for CSR. The reporting itself is more addressed to investors, governmental- and nongovernmental organizations. As the customer values quality, safety and a Finnish origin of the product, the CSR practices are to satisfy the customer and these are communicated by for example the Pirkka magazine. The NGOs did not pressure Kesko to report on CSR, Kesko recognized the globalization and expected that governments ‘will have greater interests’ in ethical dimensions. Besides this, Kesko believes that without effective communication nor Kesko’s suppliers, nor the independent K-retailers, nor the customers, can leverage the responsibility to the Kesko Food’s operations itself (S. Päällysaho, 2010, October 6). Migros is of the opinion that people in Switzerland are still very much aware of quality (Migros CSR, 2006). However it recognizes that ‘even’ in Switzerland, price competition is constantly growing in intensity. Therefore many consumers are paying more attention to the discount label when they shop (Migros CSR, 2006; J. Züblin, 2010, September 16). Furthermore Migros notices a danger of sustainability being pushed into the background when it comes to specific purchasing decisions. This could mean that less committed competitors are attaining the economic rewards, even while sustainability is an important issue in the media. To counteract this trend Migros is communicating, as clearly as possible, the added value of its products for all interest groups –particularly for its customers

The Greening of Home Brands – Elke W.A.M. Huisman (Migros CSR, 2006). Furthermore the mindset of the employees of Migros is that they are entitled to do something (J. Züblin, 2010, September 16). Sustainability is everywhere in the organization, it is a basic mind set of the workers as well (J. Züblin, 2010, September 16). NGOs play a certain role in deciding on which CSR practices to focus, but Migros is in a dialogue with them and various programs have been set up together. So instead of suffering from attacks of NGOs, Migros is continuously in dialogue with them to be a pioneer with regard to sustainability and responsibility. By including most important interest groups in the decision making processes, Migros increases the loyalty of Cooperative Members and creates goodwill among its customers (Migros CSR, 2006). Reporting is one of the ways to keep stakeholders informed. Jerónimo Martins started adding a CSR section in its Annual Reports since 2004. The Annual Reports are mostly written for the financial market, and because their interest in CSR was low, a CSR part was not included before (M. Martins Ramalho, 2010, September 8). Since Jerónimo Martins was not involved in many CSR practices, media and the community requested Jerónimo Martins to report on CSR (M. Martins Ramalho, 2010, September 8). This made Jerónimo Martins decide to include CSR in the Annual Report. The purchasing behavior of Portuguese consumers is mainly determined by advertising and for food mostly by price (M. Martins Ramalho, 2010, September 8). Environmental aspects have still a subordinate place; however among young people it is becoming more popular as they are more open to awareness campaigns in the press (Laposte Export Solutions Portugal, 2010). Among Portuguese consumers there is a widespread lack of knowledge about organic products, therefore good communication and promotion programs are needed to enhance the demand for such products (Rosa et al., 2009). Furthermore there is a strong correlation between family income and level of consumption of organic [milk] products, where households with a higher income consume more organic [milk] products (Rosa et al., 2009). The employees value social community practices on local level as the retailers are very close connected to local people. The Soares dos Santos family, who owns Jerónimo Martins, is very sensitive to social issues (M. Martins Ramalho, 2010, September 8). There has always been an informal way of handling social activities, employees did require a more formal way of handling those. As environmental aspects have still a subordinate place in the eyes of the consumer, they did not request a formal way of communicating about CSR as well. Furthermore the financial market in Portugal is not aiming for CSR yet, so NGOs and the media most probably triggered Jerónimo Martins to publish about its CSR activities. This corresponds to the trend of ‘growing affluence’ which Werther and Chandler (2011) describe;

The Greening of Home Brands – Elke W.A.M. Huisman CSR will be pushed up on the agenda of businesses worldwide because consumers can afford to choose the products they buy and demand more from the companies who produce those products. Furthermore, firms that operate in wealthy societies will face therefore a higher burden to show they are socially responsible (Werther & Chandler, 2011). This can explain the difference between the Netherlands and Portugal; compared to the Netherlands the Portuguese consumer demands less from retail companies, as it is less able to afford for example ecological products.

Ethical Motivation Albert Heijn’s main reason to focus on ‘product and sustainability’ and to report on it is to reduce the risk-prejudice. This is regarding attacks of NGOs and the reputation among customers and employees. However CSR can offer opportunities in the eyes of Albert Heijn as well. Creating a more transparent supply chain, and reduce costs by eliminating links. Nevertheless the opportunity-side of CSR is probably not the reason Albert Heijn choses to report of CSR, that is more triggered by prevention of risks. The CSR report 2009 mentions six drivers of Kesko for having a responsible operation. First of all responsibility is part of competitiveness, it is a tool in the competition for investors, personnel and customers. Secondly in addition to financial indicators, stakeholder groups evaluate the company's operations in terms of other indicators as well. Additionally responsibility is about better leadership aimed at a good working community, and at environmental efficiency contributing to cost-efficiency. Good performance in environmental and social responsibility improves financial results and respectively, good financial results enable environmental and social responsibility to be developed further. Responsibility improves the corporate image, if the company is seen as a forerunner. Lastly, responsibility is about managing reputation risks, which ensures a steady development in sales, profitability and share value (Kesko CSR, 2009; S. Päällysaho, October 6 th 2010). These motives have been mostly the same over the years (S. Päällysaho, 2010, October 6). According to Mr. Päällysaho (2010, October 6) the most important motive is that responsibility is part of competitiveness; however I belief all drivers mentioned above have in one way or the other something to do with the competitiveness of the firm. Migros is active on CSR because of a traditional basic mindset, to commit to the community and environment, which is present in the organization and which reflects the altruism of the founder of Migros. Besides the basic mindset which is present throughout the whole organization, there is clear commitment of the management. By achieving more in all

The Greening of Home Brands – Elke W.A.M. Huisman areas of sustainable development, also Migros aims to achieve better results in external assessments, like ratings and product tests. Migros believes that this ultimately will raise the value of the Migros brand (Migros CSR, 2006). Commitment from management and aiming for better results in external assessments could be reasons that Migros reports on CSR. This is recognized in literature; CSR enhanced word-of-mouth and reduction in marketing investments; customer and worker loyalty and the inclusion in indexes such as the Dow Jones Sustainability Index (Musso & Risso, 2006). The main motivation for commitment to CSR practices is managing the corporate expectations, as these expectations are very high (M. Martins Ramalho, 2010, September 8). Furthermore a second motivation is that Jerónimo Martins wants to eliminate risks. Third main motivation is that Jerónimo Martins wants to explore market opportunities. Besides that not only corporate reputation, also brand reputation (Pingo Doce) is very important (M. Martins Ramalho, 2010, September 8). “Everything has to make sense business wise” (M. Martins Ramalho, 2010, September 8). So Jerónimo Martins started most probably in 2004 with reporting on CSR in order to manage corporate expectations and in order to eliminate risk. That CSR can provide market opportunities probably did not trigger Jerónimo Martins to report on CSR, as opportunities can be exploited without reporting specifically on it.

5.4.2 Attitude towards environmental and social pressures

Table 13: Attitude partners towards the environment according to model Steger Steger (1993) Environmental risks Low High Small Indifferent Jerónimo Martins Defensive Albert Heijn

Market Big Offensive Kesko Innovator Migros opportunities (Albert Heijn)

According to the characterization of Steger (adapted from Gago & Antolín, 2004) the four partners have a different attitude towards environmental pressures, see table 13. Albert Heijn can be characterized as ‘Defensive’ because it mainly sees itself as a target for NGOs, however increasingly the environment is seen as an opportunity; therefore Albert Heijn is placed in between brackets in the ‘Offensive’ cell as well. Kesko mainly sees the opportunities that being sustainable and responsible provides. It sees responsibility as a part of competitiveness. Migros is clearly an ‘Innovator’; radical changes are made in product design or the production process. Migros clearly believes in ‘investments for the future’, with an expensive solar energy system on the roof of its buildings as an example. Furthermore commitment to the community and environment is a basic mindset, so the environment is not

The Greening of Home Brands – Elke W.A.M. Huisman seen as a threat. Jerónimo Martins can be characterized as ‘Indifferent’. The company has mainly a resistant attitude to environmental pressures, in some cases it is defensive and has minor product changes. However the difference with Albert Heijn is significantly, therefore Jerónimo Martins has not been placed in the ‘Defensive’ cell.

Corporate strategy Common knowledge would suggest that organizations, mentioning CSR related topics or the importance of CSR more often in their corporate strategy, are keener in or more occupied with CSR policies. The Annual Reports of 2009 have assessed to see the current embeddedness of CSR in the corporate strategy. The same CSR related terms have been counted as in section 5.4.1. The results are presented in table 14.

Table 14: CSR mentioned in Corporate Strategy in 2009 Ahold Kesko Migros Jerónimo Martins Annual report reviewed 2009 2009 2009 2009 No. of counted terms 23x 17x 14x 11x

Based on table 14 it seems that CSR plays a role in the corporate strategy of the partner. However the times CSR terms are included in the corporate strategy do not explain the attitude of the partner. The other way around, explaining the number of CSR related terms based on the attitude of the partner, could make sense, however such explanation will be based on guesses. For example, Albert Heijn mentioned 23 CSR related terms in its corporate strategy; this could be because of its defensive attitude, in order to be favorably received by stakeholders. Migros mentions (just) 14 CSR related terms, a guess for the reason could be that as responsibility is a mindset throughout the whole company, Migros does not specifically mention the terms a lot as it is common sense for the company. However, as said, these are just guesses. Based on this analysis, no concrete answer can be formulated on whether corporate strategy influences the retailer’s current CSR attitude.

Competitive position Albert Heijn’s attitude is has both signs of defensive as of offensive. At the moment Albert Heijn is more offensive, but this has not always been the case. In 2003 the accounting scandals of Ahold’s subsidiary US Foodservice came to light (Smit, 2006). From this Ahold experienced harsh reputational and financial damage, which forced the company to reposition, so to rethink its strategy (Ahold, 2010). Ahold focused on its financial and purchasing strategy, by lowering the prices the distance with competitors became smaller and step by step

The Greening of Home Brands – Elke W.A.M. Huisman customers were returning to Albert Heijn (Ahold, 2010). This has most probably kept Ahold from following a more active CSR approach, and CSR was mostly seen as a threat something that could cause Albert Heijn again reputational damage. However lately a more offensive attitude can be recognized at Albert Heijn; Albert Heijn recognizes the opportunities that can be gained from CSR. Furthermore in the Dutch market there is competition on CSR, to be more specific on scarce raw materials and even more on sustainable raw materials (S. Hertzberger, 2010, August 20). Sustainable raw materials are very scarce and the retailers are fighting to get those, e.g. UTZ certified cocoa, all retailers want to have their chocolate letters of UTZ certified cocoa, but this cocoa is very scarce (S. Hertzberger, 2010, August 20). Albert Heijn does not like successes of competitors, like of Jumbo, Plus and Lidl who are increasing their attention to CSR as well. Therefore Albert Heijn always tries to be one step in front of them and aims to be in a pioneering position with innovative product ideas; “‘product and sustainability’ offers market opportunities, when being the first in the market and exploiting that opportunity” (S. Hertzberger, 2010, August 20). Kesko has an offensive attitude with regard to environmental pressures. Kesko clearly sees the environment as an opportunity. According to Mr. Päällysaho (2010, October 6) Kesko has three main motivations for acting responsible, first of all to maintain or improve its competitive advantage, second of all it is driven by various risks which need to be diminished and thirdly because there are opportunities in the market of which Kesko can take advantage. The most important motive is that responsibility is part of competitiveness; it is used in the competition for investors, personnel and customers (S. Päällysaho, 2010, October 6). Therefore Kesko is actively following the situation in the market and competitors as Kesko’s target is to be a forerunner in this area. Finland’s membership of the European Union in 1995 resulted in changes in regulation; however it took till 2002 before the first foreign-owned grocery retailer, the German hard discounter Lidl, entered the market (Paavola et al. in Swoboda et al., 2009). Before Lidl, the Finnish retailers before competing primarily with product range, ease of buying, shop environment and customer loyalty systems, furthermore there were only fairly small price differences (Niilola et al. in Swoboda et al., 2009). Lidl forced the domestic market leaders to review their prices, particularly in regions that Lidl had entered (Swoboda et al., 2009). According to Paavola et al. is Kesko trying to differentiate itself from competitors by emphasizing corporate responsibility, food ideas and recipes, local entrepreneurs and private labels in communication and marketing (in Swoboda et al., 2009). This corresponds to the research of Piacentini et al. (2000) and Jusko (2005); CSR allows retailers to achieve quickly and efficiently market differentiation. This means that Kesko sees

The Greening of Home Brands – Elke W.A.M. Huisman CSR as an opportunity to differentiate itself from competitors. As issues within CSR are reviewed continuously, the areas on which the emphasis and efforts are put on have been adapted according to the changes in Kesko’s operating circumstances (S. Päällysaho, 2010, October 6). Therefore Kesko can be characterized as offensive. Migros can be characterized as an ‘Innovator’. Migros wants to remain the best in class with regard to sustainability, this means investing and innovating (J. Züblin, 2010, September 16). Furthermore Migros believes sustainability can open up new possibilities as well, like improvement of its competitive position through energy conservation to cut its operating costs (Migros CSR, 2006). Although Migros aims to be the best in close and tries to improve its competitive position through CSR practices, Migros has an ‘Open Source’ policy; it does not want to keep good practices for itself (J. Züblin, 2010, September 16). Competitors can participate in Migros’ projects as well and even access is given to knowledge. This is because within Migros these sustainability projects are seen as public interest. Migros is a public company, owned by the people (J. Züblin, 2010, September 16). As a Cooperative, Migros is committed to stakeholder value; the added value Migros creates benefits its customers, its employees and society (Migros, CSR, 2006). An example of open sourcing is GSCP; all thirty partners agreed to source open, all documents are open and everybody can join. However commitment from partners is expected and has to be fulfilled (J. Züblin, 2010, September 16). The competitive position of Migros has some influence on the attitude of Migros towards the environment; as Migros aims to be the best in class with regard to CSR and as Migros tries to improve its position by cutting costs through energy conservation. Jerónimo Martins attitude can be defined as ‘Indifferent’. For Jerónimo Martins “everything has to make sense business wise” (M. Martins Ramalho, 2010, September 8), therefore a lot of CSR practices integrate environmental and economic issues. Jerónimo Martins keeps on being economic and business driven and then looks where factors of the environment can play a role (M. Martins Ramalho, 2010, September 8). Therefore Jerónimo Martins has a quite resistant attitude to environmental pressures. It wants to make sure that it does not get unfocussed, furthermore Jerónimo Martins aims to add value with what is already inside the company (M. Martins Ramalho, 2010, September 8). A reason for the indifferent attitude could be that CSR is a relatively recent concept in the Portuguese business world (Jerónimo Martins, AR 2004). This could mean that the concept is relatively new for direct competitors and as competition is not advanced on CSR, this does not push Jerónimo Martins to rapidly focus more on CSR. Jerónimo Martins keeps an eye on competitors with regard to CSR practices, this is because “if you are too early in the market with an

The Greening of Home Brands – Elke W.A.M. Huisman innovation, you could just kill the innovation as consumers are not yet ready for it and they are asking themselves why other retailers in the market are not doing the same” (M. Martins Ramalho, 2010, September 8). However due to the existence of many international players, with advanced international strategies on CSR, in Portugal, Jerónimo Martins is triggered to become more active on CSR as well (M. Martins Ramalho, 2010, September 8). So competitors definitely have influence on Jerónimo Martin’s CSR policy and practices, and as a result on its ‘Indifferent’ attitude.

Stakeholders The influence of stakeholders on Albert Heijn can explain the defensive and offensive attitude regarding the environment. The defensive attitude derives from the pressure of NGOs; the NGOs are a threat and Albert Heijn sees itself as a target for NGOs, which brings risks, and these risks need to be prevented with having a precursor’s position in the market so that NGOs have less reason to pay attention to Albert Heijn (S. Hertzberger, 2010, August 20). This is consistent with the trend Werther and Chandler (2011) describe; that any CSR blunders by companies are brought rapidly and often immediately to the attention of the worldwide public, as the influence of global media is growing. Albert Heijn tries to avoid such situations. With regard to the mainstream preservation of the private label assortment, at the end of 2010 all important NGOs will be invited for a stakeholder meeting in whom Ahold will explain its approach of ‘product and sustainability’ (S. Hertzberger, 2010, August 20). The offensive attitude is derived from the opportunities Albert Heijn sees regarding the environment in combination with the customer. For example, due to a lot of publicity about the environment, the willingness of Dutch consumers to buy environmental-friendly products has increased (Laposte Export Solutions, The Netherlands, 2010). However there was still consumer confusion about all the different sustainability labels. Albert Heijn saw this as an opportunity and introduced ‘Puur & Eerlijk’, which covers all labels which makes it easier for consumers to buy sustainable products (Trouw, 2009, October 30). Also because of the media, the health-aspects have increased a lot over the past years (S. Hertzberger, 2010, August 20). Therefore Albert Heijn introduced two clovers; a healthy choice and a responsible choice clover to help customers identify food low in saturated fat, sugar and salt, and high in fiber (Ahold CSR, 2008). As the Dutch consumer has very limited willingness to pay more for organic or fair-trade products, Albert Heijn decided not to focus only on that niche, but to have a mainstream preservation of the whole private label assortment; which means that about 4600 products will be sustainable or responsible by 2015. These are three

The Greening of Home Brands – Elke W.A.M. Huisman examples which show that Albert Heijn sees opportunities in the market with regard to the environment and acts upon that as Albert Heijn aims to be the preferred supermarket for families, singles and seniors. Additionally, Kesko’s offensive attitude can be explained by the influence of stakeholders. As in Finland civic organizations and other NGOs are overall not as critical as in other European countries (Van Tulder et al., 2009), they do not form a threat for Kesko. This can have influence on the fact that Kesko sees CSR as an opportunity to achieve competitive advantage. According to Strand (2010) the Scandinavians consider a conflict best solved through negotiation and compromise. As a consequence Scandinavian companies have established trusting partnerships with governmental- and nongovernmental organizations and even competitors to discuss common environmental and social and challenges (Strand, 2010). Furthermore according to Kesko the Finnish consumer interest in corporate responsibility is continuing to increase, despite the fact that purchasing decisions are strongly based on price. Traditionally the Finnish consumer behavior is mostly affected by quality, safety and the origin of the product (Laposte Export Solutions, Finland, 2010). Responsibility is seen as embracing high-quality products, the maintenance of services, good human resources policies and wellbeing at work, high standards of environmental protection, promotion of equality, and improving the working conditions of employees in manufacturing operations (Kesko CSR, 2009; S. Päällysaho, October 6th 2010). So there is an overlap of what the Finnish consumer traditionally values and what responsibility embraces. Although purchasing decisions are strongly based on price and sustainability is not (yet) the main reason behind that decision, Kesko recognizes its key role in supporting sustainable production and consumption by offering sustainable alternatives. Kesko’s offensive attitude can be explained by the weak pressure from NGOs and the traditionally value customers place to the environment. Migros innovative attitude can be explained by the impact of its stakeholders. As a Cooperative, Migros is committed to stakeholder value; the added value Migros creates benefits its customers, its employees and society (Migros, CSR, 2006). Migros strives always to ‘give something back’ to the community, in this way Migros differs from other supermarkets. As the spokesperson of Migros, Martina Bosshard, explains in ESM (2010a); “The idea, for us, is to be a pioneer”. This high investment process will mean on the medium- term profitability, at least not directly, but on the longer-term sustainability for the company. The ‘M-Way’ project is another example of being a pioneer. With this project Migros hopes to shape people’s perceptions of electric vehicles and make them willing to try it (ESM,

The Greening of Home Brands – Elke W.A.M. Huisman 2010b). Migros is giving people the bigger picture of issues they have not appointed themselves yet. NGOs play a certain role in deciding on which CSR practices to focus, but Migros is in a dialogue with them and various programs have been set up together. Working with the WWF Switzerland, Migros has drawn up the world’s first set of criteria for sustainable palm oil production, and has been producing margarine from sustainable palm oil since 2001 (Migros CSR, 2006). At that time Migros contacted WWF to assist them in developing a list of minimum environmental and social criteria for its palm oil products. In 2004 Migros had a central role in setting up RSPO. By including most important interest groups in the decision making processes, Migros increases the loyalty of Cooperative Members and creates goodwill among its customers (Migros CSR, 2006). Migros is not afraid to undertake radical changes in the production process, like setting up criteria for sustainable palm oil, or in the production design, like introducing an electrical car to customers. “Migros is an example of a retailer in which green practice is the norm, and the group continuously strives to take sustainability to the next level, by engaging the customer head-on with its environmental proposition”(ESM, 2010b, p. 30). At Jerónimo Martins, ‘everything has to make sense business wise’ and a lot of CSR practices are driven from an economic perspective. This is quite comparable to the participation of the consumer itself on protecting the environment, which is mainly by saving electricity and water (Paço and Raposo, 2009). These concerns are more closely connected to economic drivers than with environmental consciousness (Paço and Raposo, 2009). Overall Jerónimo Martins has an ‘Indifferent’ attitude, however due some requests of NGOs and consumers and some product changes had to be carried out in order to not damage its reputation. Customers have influence on Jerónimo Martins CSR practices in a way that customers emailed Jerónimo Martins about packaging optimization in order to reduce waste and Jerónimo Martins acted upon that (M. Martins Ramalho, 2010, September 8). In August, 2008, Greenpeace abandoned all the main Portuguese supermarket chains since none had a sustainable fish buying policy (Greenpeace, 2009 May). Pingo Doce and Feira Nova achieved the worst results in the ranking and Jerónimo Martins was awarded with the Fishbone prize, which represents the future of marine life if this attitude does not change (Greenpeace, 2009 May). Due to this action of Greenpeace Jerónimo Martins switched to sustainable fish and seafood. MSC was no priority for Jerónimo Martins as most fish sold is obtained by local sourcing (M. Martins Ramalho, 2010, September 8). According to Ms. Martins Ramalho there are no sustainability issues regarding Portuguese fish, the issues arise from species like Cod and Salmon from South Africa and Scandinavia. As there is in Portugal a very high

The Greening of Home Brands – Elke W.A.M. Huisman consumption of local species, sustainability of fish was never a priority for Jerónimo Martins. However due to attacks of Greenpeace Jerónimo Martins started focusing on MSC (M. Martins Ramalho, 2010, September 8). This can be linked to literature of Werther and Chandler (2011), who suggests that there is a growing concern for environment. Consequently, firms that are perceived to be uninterested in their environmental responsibilities are likely to be criticized and penalized (Werther & Chandler, 2011). Jerónimo Martins has a rather reactive stance; a cause could be that both its customers and its employees are not actively asking for CSR. This is consistent with literature in the theoretical framework; the retailer’s choice to act more environmentally conscious is significantly influenced by consumer’s preferences and demands for environmentally friendly merchandise (Piacentini et al., 2000; Musso & Risso, 2006; Lai et al., 2010). So when these preferences and demands are low, the retailer feels less pressure to act more environmentally conscious. The Portuguese consumer itself is protecting the environment from an economic perspective. The employee strongly values social community practices on local level. Jerónimo Martins invests in the social community because it beliefs that all what it does for the community will be good in the end for the business itself (M. Martins Ramalho, 2010, September 8). However an ‘Indifferent’ attitude with regard to environmental and social compliance practices makes the company vulnerable for attacks from NGOs.

Ethical Motivation Apart from the risk-prejudice and the opportunities CSR offers to Albert Heijn, also reputation can influence the attitude towards environmental pressures. This is twofold; reputation among consumers and/or among current and future employees. According to Ms. Hertzberger in “today’s world you cannot proceed without paying attention to sustainability. All employees are also consumers, and these have children who have to live on this earth as well, apart from the consumers” (S. Hertzberger, 2010, August 20). Although the consumer is not asking actively for sustainability, it does expect that Ahold takes care of it (S. Hertzberger, 2010, August 20). Therefore Albert Heijn pays a lot of attention to ‘product and sustainability’, so that consumers and own employees can shop with confidence at Albert Heijn. Furthermore a requirement for ‘product and sustainability’ is a transparent supply chain. A transparent chain is the start for cost reductions as it could lead to elimination of links; this is seen as an opportunity by Albert Heijn.

The Greening of Home Brands – Elke W.A.M. Huisman The characterization of Kesko as ‘Offensive’ can be explained by its underlying CSR motivation. The main motivation is to improve its competitive advantage; therefore Kesko actively seeks for opportunities within the field of CSR. Besides, Migros ‘Innovative’ attitude towards the environment is derived from its underlying motivation for CSR. Migros is active on CSR because of a traditional basic mindset, to commit to the community and environment, which is present in the organization and reflects the altruism of the founder of Migros. Besides this Migros clearly believes in ‘investments for the future’, an example is the ‘M-Sano-program’ in 1970. Migros wanted to support and enhance organic farming; however at that time there were just a small number of organic farmers who could not provide Migros’ quantities of food. Therefore Migros decided to develop itself a new kind of agriculture and hired agricultural experts to set up standards for the so-called ‘M-Sano-programme’ (Elzen et al., 2004). Migros took responsibility for the whole agri-food chain; the standards set were quite different from industrialized agriculture and were to reduce chemical use, “to integrate ecological criteria into the whole agri-food chain and to provide the customer with high-quality, healthy food” (Elzen et al., 2004, p. 103). Migros is aware of its pioneering environmental strategy and is hoping, through its involvement in AMS and other multi-retailer discussion panels, to set standards for others to follow in terms of sustainability and the ‘green’ agenda (ESM, 2010b). Jerónimo Martins main motivation for commitment to CSR practices is to managing the corporate expectations, as reputation is very important. Furthermore risks need to be eliminated and finally Jerónimo Martins wants to explore market opportunities (M. Martins Ramalho, 2010, September 8). For Jerónimo Martins “everything has to make sense business wise” (M. Martins Ramalho, 2010, September 8), therefore a lot of CSR practices integrate environmental and economic issues. Jerónimo Martins keeps on being economic and business driven and then looks where factors of the environment can play a role (M. Martins Ramalho, 2010, September 8). This motivation for CSR and the attitude towards environmental pressures can be seen as ‘Indifferent’. The market opportunities that Jerónimo Martins aims to explore cannot be retrieved from its current activities and in the Annual Reports.

5.4.3 Conclusion influence of four elements This section (5.4) tried to explore what the influence is of the partners’ corporate strategy, competitive position, stakeholders and ethical motivation on its CSR policy. Based on the findings can be concluded that the three elements have influence on the CSR policy of the partners. The influence of corporate strategy on the CSR policy is hard to establish. The

The Greening of Home Brands – Elke W.A.M. Huisman extent of influence the other three elements have differs per partner; for example at Migros its ethical motivation plays a stronger role to commit to CSR than its competitive position. At Kesko the competitive position is of major importance, which plays a stronger role in the CSR decision making then for example its stakeholders. Albert Heijn on the other hand the stakeholders are of major importance and besides that its competitive position. These two aspects are the main motivators for CSR as well. At Jerónimo Martins CSR has to make sense business wise and it aims to add value with what is already inside the company (M. Martins Ramalho, 2010, September 8). Jerónimo Martins does not want to get unfocused; its corporate strategy plays a major role in deciding on which CSR practices to focus on. Table 15 gives a summary of the influence of the four elements on the CSR policy of the partner. Table 15: Summary of influence of strategy elements on the four partner’s CSR/PSR policy Albert Heijn/Ahold Kesko Migros Jerónimo Martins CSR reporting Consistent Reporters Consistent Reporters Late Adopters Laggards Corp. strategy 0x CSR terms 10x CSR terms - 6x CSR terms Competitive Strong market Kesko was market CSR institutionalized Existence of position position in USA, US leader. Actively for decades in Swiss international players stakeholders expect following the market & Migros not active in market with CSR CSR report and competitors as internationally, no policies, therefore Kesko’s target is to be need to publish started publishing a forerunner in CSR Stakeholders Judged for not Started reporting as Communicating on Media and the publishing enough, investors/governments the added value of its community requested pressure will have greater products, to Jerónimo Martins to stakeholders. interests in the ethical counteract trend that report on CSR, no Reputation in the dimensions. sustainability being requests from eyes of customers Responsibility is tool pushed into the customers, employees and employees is in the competition for background when it or financial market seen as very investors, personnel comes to purchasing important and customers decisions Ethical Reporting because Responsibility is part Basic mindset & Manage corporate motivation of prevention of of competitiveness better results in expectations & to risks external assessments eliminate risks CSR attitude Defensive/Offensive Offensive Innovative Indifferent Corp. strategy 23x CSR terms 17x CSR terms 14x CSR terms 11x CSR terms Competitive CSR offers market CSR as an Be best in class with Direct competition position opportunities, when opportunity to regard to not advanced in CSR, being the first in the differentiate itself sustainability, Jerónimo Martins market and from competitors therefore investing does not want to be exploiting that and innovating in too early with opportunity CSR innovation in market Stakeholders Target for NGOs is No pressure of NGOs As a Cooperative Both customer and threat. Regarding & overlap traditional Migros is committed employee are not consumer demand values of Finnish to stakeholder value. actively asking for opportunities are consumer with No pressure of CSR. Due to pressure seen. responsibility NGOs, but in NGOs changes are dialogue made to avoid reputational damage Ethical Reputation among Actively seeking for Traditional basic Managing corporate motivation consumers and/or opportunities within mindset and believe expectations, among current and the field of CSR, to in ‘investments for elimination of risk future employees improve competitive the future’ and exploration of advantage market opportunities

The Greening of Home Brands – Elke W.A.M. Huisman 5.5 Results cross-case analysis of CSR policy of four partners Section 5.3 discussed the practices of each partner regarding CSR. Various commonalities and differences emerged. Section 5.4 tried to explore the influence of four elements on the partners CSR policy; corporate strategy, competitive position, stakeholders and ethical motivation. This section tries to combine the findings of section 5.3 and the insights gained in section 5.4.

Three of the four partners indicated that international competition influenced their CSR. For Jerónimo Martins this involved international retailers with more advanced CSR policies . For Kesko and Migros this involved the entrance of international discounters in the market, which triggered Kesko and Migros to differentiate from these competitors by emphasizing on CSR. For Albert Heijn this plays a smaller role; however it is not fond of successes of competitors, neither of international discounters. On the other hand, Albert Heijn itself is part of an international retail organization, Ahold, who is active in the USA. According to Matten and Moon (2004), CSR entered the agendas of American business much earlier than those of European businesses (Matten & Moon, 2004). The finding that international competition influences the partner’s CSR is in line with thoughts of the RBV, as in this theory the company and its competitors are central and how (sustained) competitive advantages can be obtained over these competitors. Three of the four partners indicated that stakeholders played a major role in the decision to start reporting on CSR. Albert Heijn is mainly influenced by outside pressures, primarily from NGOs. As the success of Ahold/ Albert Heijn became larger, more attention was received from NGOs. In order to prevent actions Ahold is moving to more sustainable products. “When the NGOs did not pressured that much, the change would probably have been slower” (ST&PIW, 2010, May 25). Kesko main reason to start reporting was that it expected that investors/governments were going to have greater interests in the ethical dimensions of corporations. Kesko was at that time market leader in Finland and its corporate image was and is highly valued. A direct reason for Jerónimo Martins to start reporting on CSR is that the media and the community requested it. Migros started reporting in order to prevent that less committed competitors (often discounters) were attaining economic rewards. Therefore the added value of its products particularly for its customers was communicated, to counteract the trend that sustainability being pushed into the background when it comes to specific purchasing decisions. This is consistent with Gallego-Álvarez et al. (2010), who mention that investment in CSR could lead to appreciation of different stakeholders, like

The Greening of Home Brands – Elke W.A.M. Huisman customers, employees and communities, for the behavior of a sustainable company compared to remaining companies, which can create added value for the company. Two of the four partners have a more collaborative relation with stakeholders , in particular NGOs, while the other two feel more pressure from NGOs . Migros and Kesko are active in relatively small markets with a quite closed nature, besides that the both have collaborative relationships with NGOs. At Migros this collaborative relationships could be explained by the retailer’s own basic mindset; sustainability is a public interest. At Kesko this can be explained by the Scandinavian cultural DNA of business leaders, which encourages ‘feminine’ activities of collaboration, participation and modesty (Strand, 2010 May 18). Furthermore according to Van Tulder et al. (2009) a closed nature of the economy and/ or retail market contributes to more positive preconditions for CSR than for countries with an open economy and rougher competition. In more open economies consumers tend to be less CSR minded than in more closed economies (Van Tulder et al., 2009). Albert Heijn and Jerónimo Martins are active in more open economies with relatively rougher competition, and consumers who are less CSR minded than in Finland and Switzerland. Competitive advantage from CSR activities for Albert Heijn will probably be more temporary, competitors will imitate. An example of this is ‘Puur & Eerlijk’; Albert Heijn was the first retailer in the Netherlands to come up with a whole private label line on sustainable, responsible and/ or ecological products. Emté copied the concept and called it ‘Heerlijk & Eerlijk’. As Werther and Chandler (2011) explain; in competitive markets it is not probable that a firm can keep competitors from imitating a CSR-based strategy, which means that competitive advantage from CSR activities and practices will be temporary. This is in line with the RBV theory; only a good return or competitive advantage can be sustained if a firm could prevent competitors from imitating its strategy (Reinhardt, 1998). Two of the four partners are more advanced on the environmental field than the other two. Kesko presents clear targets on environmental impact and has set up an environmental diploma for suppliers. “In the Scandinavian countries, the consumer relates the product more to the environment; issues like biodiversity and reforestation. The focus on sustainability is the Scandinavian countries much higher than for example in the Netherlands” (S. Hertzberger, 2010, August 20). Migros has kept consumption statistics from the M-Industrial companies, the Cooperatives and their shops since 1975, which initially started with energy conservation (Migros CSR, 2006). Albert Heijn is still in the phase of deciding which standards to apply for environmental issues on product level, like climate change, use of land, use of water and biodiversity. A reason that Albert Heijn relatively late with measuring

The Greening of Home Brands – Elke W.A.M. Huisman environmental impact and setting guidelines could be that Albert Heijn and Ahold had to recover from a major financial and reputational set-back in the beginning of the 21rst century. From 2004 onwards Albert Heijn started focusing on food safety and consumer health. This influences directly the consumer and it could have been a way to win consumers back. The Dutch consumer relates climate change hardly to the products itself (S. Hertzberger, 2010, August 20). Now Albert Heijn and Ahold have been recovered from the crisis, resources can be invested in new priorities like social and environmental issues, which have been the focus since 2007. Jerónimo Martins developed a Code of Conduct in 2003; according to its Annual Report of 2009 this Code includes guidelines on environment protection as well. However Jerónimo Martins does pay relatively less attention to the environment; practices that are mentioned are conservation of water, reduce amount of waste and energy use. These concerns are more closely connected to economic drivers than with environmental consciousness (Paço and Raposo, 2009). This could be explained from the fact that ‘everything has to make sense business wise’. Jerónimo Martins keeps on being economic and business driven and then look for factors on environment where they can play a role (M. Martins Ramalho, 2010, September 8). Jerónimo Martins is now at a point that it developing a CSR strategy that should be integrated with the business strategy and priorities, after this stage, targets can be set and results be communicated (M. Martins Ramalho, 2010, September 8). It seems that so far environmental issues have not been a priority for Jerónimo Martins as environmental aspects still have a subordinate place among consumers (Laposte Export Solutions Portugal, 2010). Food safety is important in the eyes of the consumer and the owner of Jerónimo Martins is very sensitive to social issues (M. Martins Ramalho, 2010, September 8). So Jerónimo Martins is less advanced on an environmental field, as the environment has probably not been a priority last years, but food safety and social issues. Three of the partners are requiring various certificates regarding sustainable trade and social compliance . One partner requires one certificate. Two of the three partners take more often initiative to set up a standard or are member. Albert Heijn requires many certificates, furthermore Ahold is an active member and in criteria development groups of round tables and other programs (ASC, RSPO, RTRS and BSCI). Besides this Ahold has set up UTZ Kapeh and the Café Oke brand with Solidaridad. The reason of this can be explained from Albert Heijn’s defensive and offensive attitude. Albert Heijn aims to be in a precursor’s position in the market so that NGOs have less reason to pay attention to Albert Heijn (S. Hertzberger, 2010, August 20). Furthermore Albert Heijn wants to be in a pioneering position with innovative product ideas; “‘product and sustainability’ offers market opportunities,

The Greening of Home Brands – Elke W.A.M. Huisman when being the first in the market and exploiting that opportunity” (S. Hertzberger, 2010, August 20). This can explain why Albert Heijn/ Ahold is an active member in various programs and development groups. On the other hand Kesko requires similar certificates as Albert Heijn and Migros; however it is less involved in the setup of such standards. Kesko is more actively following the situation in the market and competitors, and includes after establishment of a standard it in its own CSR policy. A reason for this could be that NGOs and other civic organizations are overall not as critical as in other European countries (Van Tulder et al., 2009). These organizations are not perceived as a threat, so there is less pressure. Compared to the other three partners Migros is very proactive in setting up sustainable trade and social compliance standards and being a founding member (RSPO, BSCI, GSCP, ISCOM, WWF Wood Group Switzerland). The motive for this can be found in the traditional basic mindset within Migros to commit to the community and environment, which is present in the organization and reflects the altruism of the founder of Migros. Furthermore Migros wants to remain the best in class with regard to sustainability, this means investing and innovating (J. Züblin, 2010, September 16). Therefore Migros is constantly considering where it can improve and where “the world can be improved” (J. Züblin, 2010, September 16). This has led to the set-up of RSPO, the principles of BSCI or the M-Sano-program. This is consistent with thoughts of the RBV, Gallego-Álvarez et al. (2010) state that in order to obtain advantages from the CSR strategy, firms should increase their investments in CSR significantly compared to their competitors, so that competitors are unable to imitate them. Jerónimo Martins pays little attention to sustainable trade and social compliance. It only requires MSC. Jerónimo Martins pays more attention to food safety and to environmental practices like waste reduction and lowering energy and water usage. The little attention to sustainable trade and social compliance can be explained by the idea that Jerónimo Martins keeps on being economic and business driven and then look for factors on environment where they can play a role (M. Martins Ramalho, 2010, September 8). The environmental practices mentioned above can aid from an economical perspective, however with sustainable trade and social compliance this is not the case.

This research confirms the findings of Dahlsrud (2008) that on a conceptual level CSR shows nothing new; business has always been concerned with stakeholders and has environmental and economic impacts. However on an operational level CSR does face changes as the context in which the business operates is different or has changed due to globalization. The partners all have been considering their competitive position, stakeholder demands, corporate

The Greening of Home Brands – Elke W.A.M. Huisman strategy and ethics. However on an operational level, there are differences between the partners because for example the demand and influence of stakeholders is different, because of a different attitude of direct competitors or because of a different nature of the economy.

Based on insights from the theoretical framework, a prospect was made on incomprehensive and comprehensive CSR policies. Based on this research a refined prospect could be made, this is presented in table 16. The initial prospect is used, add-ons based on this research are written in italics and no correct elements will be indicated with a strikethrough . Table 16: Refined PSR Profiles Incomprehensive CSR policy àààPSR policy A more comprehensive CSR policy àààPSR policy Smaller players in the market Market leaders Direct competition not advanced on CSR Direct (international) competitors are advanced & No existence of discounters in the market active on CSR or are successful NGOs demand is low and not much pressure is put Existence of discounters in the market When financial market and investors do not require Lot of pressure & demands of NGOs CSR yet Collaborative relation with NGOs Customers are not concerned with environmental & Economic advantages – seen as opportunity social issues Customers value the environment and are concerned Consumer does not related product to environment with social issues Employees do not value environmental & social issues Consumer relates product to the environment Attitude: Indifferent Employees appreciate firm’s environmental & social When company does not aim to be early innovator efforts Reporting: laggards, inconsistent reporters & Attitude: Innovative, Offensive, Defensive consistent non-reporters Reporting: consistent-reporters & late adopters Being mainly economic and business driven Being environmentally & socially conscious Commitment from board/ founder

As the four partners had all a number one or two position in their market, the market position of the partner is crossed in table 16 as this research does not explain this. Furthermore collaborative relation with NGOs is added to the table, as apart from NGOs that pressure a lot (Netherlands) or those that pressure to a lesser extent (Portugal), a collaborative relation can lead to a comprehensive CSR policy as in together we will improve the world (Switzerland). When the consumer relates specifically the product to the environment, it will question the impact of the product on the environment. I expect that this leads to a more comprehensive CSR policy as the retailer need to be able to answer the consumer’s questions and keep the consumer satisfied. Companies with an innovative, offensive or defensive attitude towards the environment can all have a comprehensive CSR policy, however their underlying reasons differ. Companies with an indifferent attitude have a less extensive CSR policy. Companies that are mainly economic and business driven have a less comprehensive CSR policy than companies who are environmentally and socially conscious. Furthermore commitment of the board or the founder results in a more comprehensive CSR policy, like Migros or Jerónimo Martins with regard to its community support.

The Greening of Home Brands – Elke W.A.M. Huisman 6. INFLUENCE ON AMS

6.1 Introduction After knowing the commonalities, differences and the reasons for these, the influence on AMS will be examined. Throughout the research it became clear that this influence is not as clear-cut as previously expected. As mentioned in chapter five the partners have different CSR policies and different attitudes towards environmental and social pressures. Initially I expected a kind of power play between strong partners, for example larger partners or partners who are active within AMS for a longer period. I assumed that partners that are more active on CSR would push other partners. The Sustainable Trade & Product Integrity Workshop on May 25 th 2010 turned out to be different; the workshop was not about decision making yet, there was no politics, it was a first attempt to hear about each other’s CSR policies. This chapter aims to find an answer to the following question; ‘ Why do the various CSR policies have influence on AMS sourcing process?’ This represents the last part of the enlarged conceptual model, which is illustrated in figure 7.

PSR policy - Environment - Marketplace

AMS

Figure 7: Influence PSR policy on AMS in enlarged conceptual model

6.2 Influence of the CSR policies on sourcing of AMS In Chapter 2 a description is given of AMS. AMS is the sourcing organization for private label products of the four partners. The volumes are pooled together which gives AMS significant power to negotiate for the lowest price possible. The partners of AMS, the retailers, are having more and more attempts to become sustainable. Chapter 5 shows that the four partners have already an extensive CSR policy and that there are differences in the certificates that are required. There is a difference between niche product groups and main stream private label products. Niche product groups, like ‘Puur & Eerlijk’, ‘From the Region. For the Region.’, Fair trade, require various certifications to show that the products are environmentally and/or socially responsible. These product groups are widely described in the CSR reports; however they are mostly sourced by purchasing department of the partners.

The Greening of Home Brands – Elke W.A.M. Huisman What is new compared to the current situation is that the partners are talking about mainstream preservation of the private label assortment and this specifically influences AMS. Because purchasing is at the beginning of the value chain, the environmental efforts of the partner will probably not be successful without combining the company's environmental goals with purchasing activities (Walton et al., 1998).

The reason why the sourcing process of AMS is influenced by the different CSR policies and motivations is that it is AMS’ role to “create synergy in commodity buying” (AMS, 2010). Economies of scale are created by pooling expertise and volumes of the retailers and the best possible quality at the lowest price is delivered to the partners (AMS, 2010). Currently there is a grey area as the partners are setting their CSR strategy and reflecting this into standards. As strategies and standards for main stream private label products are not set yet, it is difficult to explore synergies and joined volumes. According to Ms. Martins the way of working does not change due to CSR. The role of a buying group is to explore synergies and not to develop product categories. This means that the role of AMS starts after each partner has set its strategy and has reflected that into standard (M. Martins Ramalho, 2010, September 8). Please see figure 8 for the sourcing procedure of AMS.

Analysis of prices & Contract Contract Buyers Meeting RFI RFQ Negotiations quality Creation Monitoring results

Strategy elements play a role

Certificate requirements play a role

Figure 8: Sourcing Process AMS

Figure 8 reflects the current sourcing procedure of AMS. Furthermore the balloons point out where CSR plays a role. With respect to this procedure, in order to explore synergies and joined volumes, it is very important that each partner provides AMS very clearly and specifically their wishes and requirements with regard to sourcing. This should be communicated during the buyers meeting. The strategy elements will play a role during the buyers meeting. The competitive position, stakeholders and ethical motivation of the partner play a role in deciding what product to buy, which requirements to ask for, etc. During these meetings commonalities and differences come to light based on references in the home

The Greening of Home Brands – Elke W.A.M. Huisman country. Therefore it is of great importance that the ‘why’ and ‘how’ is explained to AMS Trade Managers. In order to source well the requirements and the explanation are needed (S. Hertzberger, 2010, August 20). In order to source products that meet the sustainability and responsibility criteria that the partner sets, these criteria must be communicated clearly and via the RFI (Request For Information). However, a lot of different criteria make it harder to pool volumes. This means that the CSR policies of the partners influence the sourcing process of AMS in a way that due to different requirements it is more difficult to pool volumes. This has influence on the price level of the products. Furthermore as standards are not yet set by some partners, the criteria in the RFI are much more volatile. This can result in shorter contract periods or changes in specifications, which could lead to higher prices.

Currently on food safety the commonalities are highest, so here a minimum standard can be created. According to Mr. Züblin (2010, September 16) at this point in time, it is important to define minimum standards and requirements that the partners want to apply as a whole to AMS. At the moment AMS applies the standards of every company, but there is no full policy on quality management, on food safety or on social compliance (J. Züblin, 2010, September 16). There is no common approach for main stream private label yet and therefore it is for AMS a challenge to pool volume. Therefore the partners should come together soon and to define what minimum standards to apply. This will increase the efficiency of AMS as a pool of suppliers is created that have these minimum standards and fulfill the requirements. This avoids situations during contract negotiations where it appears that the supplier does not have the certificates or that certificates are expired. Besides, when more partners support the CSR requirements, larger volumes and therefore revenue can be assured to suppliers which will make suppliers keener to switch to production in an environmentally and socially responsible way. Suppliers are not always willing to change production processes partly or totally for one retailer or get specific certificates because one single retailer required these. When all partners support the minimum requirements, suppliers will make sure they meet the requirements because then instead of losing one potential customer, they will lose ten. Furthermore, less advanced partners can gain immediately when being part of the CSR discussion as they do not have to start from scratch but start directly with most valid discussion points (S. Päällysaho, 2010, October 6). Mr. Züblin (2010, September 16) mentions that an IT solution is needed to track the certification processes of suppliers. Migros is already using such system; it presents the certifications of the supplier, how far they are in the process of getting a certificate, if they

The Greening of Home Brands – Elke W.A.M. Huisman signed the code of conduct. Besides this, the auditing process is incorporated in this system as well (J. Züblin, 2010, September 16). Such system could be valuable for AMS, as it allows AMS to do reporting, by region or by scope, and to track the certification processes of suppliers.

6.3 Conclusion From above can be concluded that the situation is not as straightforward as initially assumed. First of all it seems that the process of aligning CSR policies is very slow. During the seven month period of participatory observation, no second meeting was scheduled between the Heads of CSR of the various partners or decisions have been made regarding a common policy. Furthermore the influence of the CSR policies turned out to be more complicated. Partners can be proactive on CSR, but on different accents; Kesko has a more proactive stance towards environmental CSR practices, while Albert Heijn takes more initiatives to set up standards regarding sustainable trade and social compliance. So partners can be active on CSR, their attitude can differ, also the accent (the various marketplace and environment dimensions) that receives most attention could differ. CSR can be realized in various ways, however in order to create large volumes, the partners have to agree. As the partners are still working on their priorities and reflecting that into standards, at the moment AMS is in a more difficult position to find synergies. As soon as it is more clear which standards need to be applied, there are opportunities for AMS. On the other hand the fact that some partners are already advanced on some fields, could lead to difficulties in creating uniformity. For example with regard to food safety Kesko is the only partner who requires IFS, while the other partners GFSI. Therefore a minimum standard need to be created for AMS, which involves a common part of requirements. This common part of requirements and therefore the minimum standards should evolve over time. Apart from that low-cost producing conflicts with CSR (Emmelhainz & Adams, 1999; Cleeland et al. as cited in Lobel, 2006; Maloni & Brown, 2006), based on this analysis can be concluded that volume conflicts with CSR as well.

The Greening of Home Brands – Elke W.A.M. Huisman CONCLUSION

The research of this thesis aimed to explore how and why the manner in which CSR practices are implemented by the partners influences the sourcing process of AMS. To assess and explore this relationship, I have constructed the following central research question:

“Why and how is the procurement process of AMS influenced by the CSR policies of its partners?”

The CSR policy of the partner is influenced by four factors according to the enlarged conceptual model on page 37. These factors are the corporate strategy of the partner, their competitive position, main stakeholders and the ethical motivation of the partner to be responsible. To establish the exact relationship between the CSR policies of the partners and AMS, I compared the policies of four European retailers: Ahold, Kesko, Migros and Jerónimo Martins. Extensive desk research, interviews with CSR managers and participant observation have been conducted and gained insight into the four factors and their influence on the CSR policy of four European retailers. The CSR policy affects the PSR policy which in turn influences the sourcing process of AMS.

In order to answer the central question posted in this thesis, six sub-questions are set up: 1. What does CSR encompass? What are characteristics and motivations for CSR? 2. What does CSR encompass in the food retail business? What are characteristics and motivations of CSR are specific to the food retail businesses? 3. How can the role of CSR when sourcing goods be described and which characteristics of CSR are specific to sourcing? 4. How can differences in CSR policies be explained? 5. What are the commonalities and differences between the CSR policies of AMS’ partners and why are there differences? Can these be explained by differences in corporate strategy, influence of stakeholders, in position in the market or motivation? 6. Why do the various CSR policies have influence on AMS sourcing process?

These six research questions will be answered, after which the central research question will be addressed. The first research question has been dealt with in the theoretical framework. 87

The Greening of Home Brands – Elke W.A.M. Huisman Based on insights of Werther and Chandler (2011), CSR encompasses “a view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions” (p. 5). This means that businesses are recognized as a basic part of society and have the capability to make a positive contribution to social goals and aims (Jones et al., 2005b). At the same time the organization is involved with different stakeholder groups; these can range from consumers, employees, suppliers and regulating authorities to local communities (Panapanaan et al., 2003; Campbell, 2007; Dahlsrud, 2008; Werther & Chandler, 2011). The theoretical framework distinguishes four broad categories of CSR responsibilities, namely towards the environment, the workplace, the community, and to conduct business ethically. There is no universally agreed definition of CSR (Panapanaan et al., 2003). Frankental (2001) has clarified that “CSR is a vague and intangible term which can mean anything to anybody, and therefore is effectively without meaning” (p. 20). Because there is no clear-cut description and CSR is continuously redefined, it is hard to specify what CSR precisely embodies. Motivations for CSR can vary from innovative to economic-driven perspectives. CSR can be used as a tool to increase employee commitment or to increase reputation, marketing and/or publicity in general (Maignan et al., 2002; Anselmsson & Johansson, 2006; Lattemann et al., 2007). Furthermore, the level of competition and the pressure of third parties can be strong forces that create CSR engagement (Jones et al., 2005a; McWilliams et al, 2006; Lyon & Maxwell, 2008). Also the second research question was answered in the theoretical framework. CSR has gained a lot of importance in the food industry because of the labor intensive nature of food supply chains and the production processes of its products have deep impact on the environment (Maloni & Brown, 2006). According to Jones et al. (2005a), in the retail industry, CSR encompasses the following broad categories of CSR responsibilities; ‘Environment’, ‘Workplace’, ‘Community’ and ‘Marketplace’. ‘Marketplace’ encompasses matters like sustainable and ethical procurement, food and product safety, and local sourcing (Jones et al., 2005a). Apart from the general CSR motivations, consumer’s demands for environmentally friendly merchandise strongly influence the retailer’s choice to act more environmentally conscious (Piacentini et al., 2000; Musso & Risso, 2006; Lai et al., 2010). The purchasing function is of major importance because it is at the beginning of the value chain and environmental efforts of a firm will probably not be successful without combining the company’s environmental goals with purchasing activities (Walton et al.,

The Greening of Home Brands – Elke W.A.M. Huisman 1998). Based on the theoretical framework, I concluded that PSR responsibilities fall mainly in the categories environment and marketplace. The fourth research question is the last question which can be answered with use of the theoretical framework. Apart from a company’s ethical motivation, differences in CSR policies can be explained by two factors that influence how a company responds to environmental and social issues. One acknowledges how a firm responds to competitive implications towards environmental and social issues (McWilliams & Siegel, 2001; Gallego- Álvarez et al., 2010). CSR activities can be seen as responsible or simply strategic; in the latter case through different actions advantages can be obtained compared to competitors. The other factor gives account to the attitude towards environmental and social issues, like if the firm considers the issues as an opportunity or threat (Kemp & Arundel, 1998; Pinkse, 2006). Based on the interview, the secondary data research and the participatory observations, I observed that Ahold is a consistent reporter and has both a defensive and offensive attitude towards environmental pressures. Also Kesko is a consistent reporter but has an offensive attitude. Migros is a late adopter and has an innovative attitude and Jerónimo Matins is seen as a laggard with regard to reporting and has an indifferent attitude. The topics that have been elaborated on in the CSR reports differ per partner. Ahold’s CSR topics have changed over the years; from a focus on quality and efficiency, to food safety and consumer health, to social and environmental issues. On the other hand, Kesko elaborates more extensively on environmental practices than on marketplace practices and Migros pays a lot of attention to both the environment and social matters. Compared to the other partners, Migros pays significantly more attention to social compliance. Jerónimo Martins pays little attention to sustainable trade and social compliance. Jerónimo Martins concentrates more on food safety and to environmental practices with economic leverage like waste reduction and lowering energy and water usage. The reasons for these differences can be explained by the elements competitive position, stakeholders and ethical motivation. I observed that the competitive position of the partner influences their CSR policy in various ways. First of all, when being active in more countries, needs and expectations of those different local communities need to be met; this leads to a more comprehensive CSR policy. Besides this, international competition in the home market pushes companies to enhance their CSR efforts. The entrance of discounters increases the differentiation on CSR while the entrance of large international players, often with good CSR policies, encourages companies to become more active as well. Also I observed that companies are triggered by CSR successes of competitors because they strive to be in a

The Greening of Home Brands – Elke W.A.M. Huisman pioneering position and be best in class. Besides this, CSR is used in the competition for investors, personnel and customers, and to cut its operating costs. Furthermore, competition can influence the CSR policy in a way that companies become reactive in order to avoid being too early with an innovation. The nature of the economy influences CSR policies with more positive preconditions for CSR in closed economies. Financial and reputational crises within a firm lead to priorities other than CSR. Besides competitive position, the stakeholders of the partner can influence the CSR policy. In order to avoid attacks from NGOs, partners take a precursor’s position. Also, collaborative relations with NGOs and business communities can lead to development of solutions and contributions to social issues. As consumers expect that issues like food safety have been taken care of, the partner has to tackle those issues and when customers demand for environment-friendly products, the retailer acts upon that. In countries where consumers (traditionally) value the environment and/or the community, more elaborative CSR practices are observed in that field. Furthermore, I observed that the partners of AMS want to be attractive and trustworthy to employees, and that therefore CSR is undertaken. Especially when sustainability is a basic mindset of employees, a lot of attention is paid to CSR. When environmental aspects have a subordinate place among consumers and employees, like in Portugal, less attention is paid to CSR by the partner. Also the financial market and investors influence the CSR policy of a partner; when these instances do not require communication about CSR, this gets a subordinate place within the organization. Apart from competitive position and stakeholders, additional ethical motivations of the partners are observed. An example is the traditional mindset which is present in the organization of one of the partners and reflects the altruism of the founder. Besides, when companies are mainly business and economic-driven, CSR practices are expected to make sense business wise as well. The element corporate strategy does not provide a sound explanation for the partner’s CSR attitude or the initiative to start publishing on CSR. The last sub question can be explained with use of the interviews and participatory observation. AMS is influenced by the CSR policies of the four partners because currently standards and requirements are set up, not only for niche product groups, also for mainstream private label products. The process of the partners to decide which standards and certificates to require from suppliers takes time; for example policies need to make sense business wise and demand of various stakeholders need to be balanced. This is a long process; the process of developing a common policy for AMS is an even longer and slower process. Besides this, the development of a common policy or minimum requirements turned out to be more complicated than initially expected. The main reason for this is that CSR can be realized in

The Greening of Home Brands – Elke W.A.M. Huisman various ways; there is not one single right way. The accents, where the partners currently placed most attention, differ. Besides this, the partners have not decided (completely) which strategies and standards to apply for mainstream private label. Furthermore, it appears that some partners are already more advanced in certain fields than other partners, with set requirements and criteria, which lead to difficulties in creating uniformity. Because standards are not yet set for mainstream private label and/or because they differ, it is difficult for AMS to fulfill its role of creating synergies and joined volumes.

Based on the answers of the six research questions, the central research question can be answered. In line with the definition of CSR, the four partners of AMS recognize their role in the society along with their impact on the environment and have been taken the responsibility to set goals besides profit maximization. The analysis shows that various stakeholders have been taken the responsibility to hold the partners of AMS accountable for their actions. Four broad categories of CSR are distinguished in retail management, and the attention the partner gives to each of these categories can be explained by influences of home country competitive position, home country stakeholder demands and the company’s ethical motivation. This means that being corporate socially responsible can be realized in different ways; attention can be put on different accents and the motivation can be different due to competitive position, stakeholders or own ethics. AMS is a sourcing alliance for retailers in different European countries and these have set different CSR policies due to different situations/ influences in their home market. When comparing these CSR/PSR policies it appeared that there are substantial differences in the standards and certificates that are required by the individual retailers. This is not a new phenomenon. However in the past this influenced AMS to a lesser extent as some of these certificates were only required for a niche product group, which AMS did not source or sourced separately from mainstream products. In the future these criteria are required for mainstream private label products; Albert Heijn announced that all private label products need to be sourced sustainable and responsible by January 2015. Therefore AMS will be much more involved in sustainable and responsible sourcing as its function is to source mainstream private label products for its partners. However, in order to be able to join volumes, synergies need to be created in CSR requirements. AMS can add value by setting up a list of minimum requirements that are desired by preferably all partners. Then by pooling volumes again, environmentally and socially products could be sourced at lower prices; these prices will probably be lower than those of individual competitors in each of the partner’s home countries, which give the partners competitive advantage. Furthermore,

The Greening of Home Brands – Elke W.A.M. Huisman when more partners support the CSR requirements, larger volumes and therefore revenue can be assured to suppliers which will make suppliers keener to switch to production in an environmentally and socially responsible way. This research shows that apart from the widely recognized antagonism between low-cost producing and CSR, also volume conflicts with CSR. From both supplier and AMS side.

Reflection This reflection will review the research conducted for this thesis and provide suggestions for future research. The initial research plan has changed over the time period of this case study. At the beginning the focus lied on how CSR could be combined with AMS low-cost strategy or how AMS was integrating CSR in its food system. However throughout the internship it became clear that not AMS is implementing CSR in its strategy or food system, but the partners. Knowing this, the focus shifted to CSR on partner-level and how and why this influences AMS. This is an advantage of case studies; it enables you to experience that certain assumptions are different and gives you the chance to adapt your research. In addition to this, I assumed that corporate strategy would have an influence on the partner’s CSR policy. As corporate strategy involves the purpose and scope of an organization (Johnson et al., 2008), I suggested based on common knowledge that the more often CSR was mentioned in the partner’s corporate strategy, the more involved the partner was in CSR. However it appeared that it was difficult to make that relation between corporate strategy and the CSR policy or attitude. This is a limitation of this research. A more appropriate way was to consult existing literature on CSR and corporate strategy and see how various scholars have measured the involvement of CSR in corporate strategy. Therefore in order to validate or reject the element corporate strategy as an influential factor on the CSR policies, further research of this theoretical concept is required. When analyzing the findings of the four case studies, it has not always been easy to make a clear distinction between the four elements and to appoint a specific finding to a single element. Some findings were for example relevant to both stakeholders as ethical motivation category. Therefore the interpretation of the data could be influenced by subjectivity of the researcher. Further conceptualization of the four elements is needed to avoid such grey areas. The research conducted has other limitations as well. A main limitation of this thesis research is that it involves case studies; therefore these findings cannot be generalized as the enlarged conceptual model was only tested on those four companies. This means the

The Greening of Home Brands – Elke W.A.M. Huisman identified factors that influence CSR might only be specific to those four companies and/or to the retail industry. Therefore no generalizations can be made for other companies in for example the same country. Furthermore only Heads of CSR have been interviewed. If interviews would have been conducted among various Trade Managers of AMS, these could have provided more insights in the way AMS perceives the implementation of the CSR policies in the sourcing process. In this research these insights have been gained via informal conversations and observation, however interviews could have further explored the influence on AMS. As indicated before, proposals for additional research can be provided. As existing research on CSR in the retail industry often focuses on niches and limited research is conducted to the mainstream preservation of home brand (low-cost) products, it is interesting to study that more in-depth. This study conducted research to the mainstream preservation of private label assortments in four different countries, future research could focus on one large retailer in specific or on various retailers in one country. In this way a more specialist view could be provided on that process and country-specific factors could be omitted. This process of mainstream preservation is very interesting as retailers have to decide which guidelines to apply for all private label products and therefore this decision making process has huge influence. Furthermore, this thesis has focused on the elements competitive position, stakeholders and ethical motivation, which have proven to outline differences in CSR policies of companies. However there are many more factors that could have influence on the CSR policy of a company and therefore could lead to differences between companies. These case studies did not take into account national legalization, furthermore various stakeholders have not been considered as investors or suppliers. A follow-up research could consider the influence of these factors as well on the CSR policy of a company.

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDICES

Appendix A: List of abbreviations Appendix B: Reasons for CSR Appendix C: Food Supply Chain Appendix D: Examples NGO actions on FMCG sector Appendix E: Interview questions Appendix F: Case Ahold Appendix G: Case Kesko Appendix H: Case Migros Appendix I: Case Jerónimo Martins

The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX A: LIST OF ABREVIATIONS AMS: Associated Marketing Service. AMS is a sourcing organization for private label products for an alliance of European retailers. ASC: Aquaculture Stewardship Council BRC: British Retail Consortium. Consumer Products certification for private label suppliers of higher risk non-food products BSCI: Business Social Compliance Initiative. BSCI aims to improve their social compliance in the global supply chain. CEO: Chief Executive Officer. CIES: Comité International d’Entreprises à Succursales. International Committee of Food Retail Chains CSR: Corporate Social Responsibility. DRD: Daily Recommended Doses EAN: European Article Number system EFIS: European Federation of Immunological Societies. EMD: European Marketing Distribution. Sourcing organization European retailers. ESM: European Supermarket Magazine. ETI: Ethical Trade Initiative. EurepG.A.P: European Good Agriculture Practices. A standard for good agricultural practices in Europe. This standard is designed to assure product safety, reduced agrochemical use, environmental protection and labor safety. FSC: Forest Stewardship Council. Organization who promotes responsible management of the world’s forests (http://www.fsc.org/about-fsc.html) GDA: Guideline Daily Amounts GFSI: Global Food Safety Initiative. Global non-profit organization which aims to improve food safety management systems in order to ensure confidence in the delivery of food to consumers (GFSI, 2010). GlobalG.A.P: Global Good Agriculture Practices. A key reference for Good Agriculture Practices in the global market place, the successor of EurepG.A.P. GMO: Genetically Modified Organism GRI: Global Reporting Initiative. GSCP: Global Social Compliance Program. GSCP is a platform for building best practices in labor standards in supply chain. HACCP: Hygiene and Food Safety Certification.

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The Greening of Home Brands – Elke W.A.M. Huisman IFS: International Featured Standard. The standard has been developed to inspect the competence of food producers in food safety and in quality. ISCOM: International Social Compliance Verification. ISCOM is a Swiss NGO established in 2004 by Max Havelaar and welfare organizations. ISO9000: International Organization for Standardization. These standards relate to quality management systems. MSC: Marine Stewardship Council. The MSC label guarantees sustainability, which means that fish stocks may not be overfished and must be given time to recover. MVO: MVO Nederland, Organization for CSR in the Netherlands. NGO: Non-Governmental Organization. PL: Private Label. A private label is a retailer’s corporate brand. PSR: Purchasing Social Responsibility. The involvement of CSR in the purchasing function of an organization. PTY: Finnish Grocery Trade RBV: Resource Based View. A business management tool used to determine the strategic resources available to a company. RFI: Request for Information. Part of the sourcing process of AMS where AMS asks the partner about requirements for the private label products. RFQ: Request for Quotation. Part of the sourcing process of AMS where the suppliers give their offer for the private label products. RSPO: Round Table for Sustainable Palm Oil. RSPO addresses the problem of palm oil by cooperating with suppliers and stakeholders. RTRS: Round Table on Responsible Soy. RTRS is working to promote responsible production and trading of soy by creating a third-party certification program for suppliers SA 8000: Social Accountability. SA 8000 is a global social accountability standard for decent working conditions. SQTS: Swiss Quality Testing Services ST&PIW: Sustainable Trade & Product Integrity Workshop. Workshop 25 th May 2010 Swiss-GAP: Swiss Good Agriculture Practices. The aim of Swiss-GAP is to take the GlobalGAP standard into account in the special Swiss structures and implement it for Fruit, Vegetables, Potatoes WBCSD: World Business Council for Sustainable Development. Global association of some 200 companies dealing exclusively with business and sustainable development.

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX B: REASONS FOR CSR

APPENDIX C: FOOD SUPPLYCHAIN

The US Food Supply Chain (Adapted from Stock (2004))

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX D: ACTIONS NGOS ON FMCG SECTOR

Greenpeace & Nestlé Nestlé, maker of Kit Kat, used palm oil from companies that are trashing Indonesian rainforests, threatening the livelihoods of local people and pushing orang-utans towards extinction (Greenpeace, 2011 January). Therefore Greenpeace pressured Nestlé to stop buying palm oil from destroyed forests and Nestlé stopped.

C1000 & Wakker Dier In June 2010 Wakker Dier started a campaign against C1000, as C1000 had the most and the lowest meat-promotions, with average prices often below the price of cat feed, within the retail in the Netherlands. Besides that C1000 was the only large supermarket chain in the Netherlands that did not promote a single time with biological meat products. After the campaign of Wakker Dier, C1000 decided to stop with two meat promotions and it seems that C1000 is including biological meat in promotion. However Wakker Dier remains skeptical, it this a change in policy or just a single adaption because of the current radiocampaign of Wakker Dier (Wakker Dier, 2010 August).

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX E: INTERVIEW QUESTIONS FOR PARTNERS AMS Interview Ahold/Kesko/Migros/Jerónimo Martins, XX-XX- 2010 1. Position in the home market? a. Features of home market b. Competitors & their position regarding CSR c. Position of partner vs. competitors d. Timing, first mover, early adopter, second mover 2. Consumer profile a. Description of typical Dutch/ Finnish/Swiss/Portuguese consumer b. What does the consumer value? c. Is there an interest in responsibility & sustainability? d. For how long this interest, recently or already longer period. 3. Motives and drivers for CSR? a. Most important motive for CSR b. Changes over time c. Importance in general in the company d. Drivers E.g. Self-presentation and impression management, Economical-financial perspectives, Reputation, Brand / brand loyalty, Store loyalty, Customer demand, Marketing – Publicity, Innovation, Industry trends, Increase employee commitment, Competitive position, Transaction costs, Pressure from stakeholders & investors, Increased sense in social responsibility of company itself/ CEO/Board commitment 4. CSR strategy a. CSR strategy is written in reports, however strategy on CSR over the years where is it based on? Environment, lower costs, preempts competitors or future position? E.g. Organizational culture & top management leadership, Employee initiatives and values, Government regulation, Customers, Trust & reputation in the supply chain 5. How are CSR practices organized? a. Decision and degree of importance b. Reporting c. Measurements d. Training

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The Greening of Home Brands – Elke W.A.M. Huisman 6. Which issues are currently playing a role? a. Difficulties E.g. Ethical trading, Local & regional foodstuff sourcing, Food safety, Animal welfare, Purchasing from MWBE, Environmental purchasing, Labour conditions at supplier plants, Human rights, safety and philanthropy issues in supply management 7. How do you see the role of AMS? a. Current sourcing, CSR + AMS b. Future sourcing, should the role of AMS change

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX F: CASE AHOLD

The description of the Ahold case will be as follows; first a general description of CSR at Albert Heijn/Ahold will be given. Then CSR practices with regard to environment and marketplace will be discussed, after which the motivation and results of CSR policy will be delineated. Finally an outline will be given on the influence of stakeholders and Albert Heijn’s position in the market.

1. CSR in general at Albert Heijn/Ahold Albert Heijn is founded in 1887 and is the oldest supermarket chain in the Netherlands. Albert Heijn has in the Netherlands about 750 stores. Albert Heijn has 4600 private label articles under five categories; AH Homebrand, AH ‘Puur & Eerlijk’ (‘Pure & Honest’), AH Excellent, AH Express and EURO SHOPPER ™ (Albert Heijn, 2010). In this report I tried to place focus on Albert Heijn’s activities regarding CSR. In case reference is made to the overall policy of Ahold, this is mentioned. Ahold was judged for not publishing enough on its claimed leading position in for instance recycling in 1995 (Van Tulder et al., 2009). In 1998 the company published its first CSR report. Before that time environmental issues were included in the general Annual Report. In the first CSR report quality choices, efficiency and care were the main topics and underlying actions were given (Ahold CSR, 1998). After the first CSR report in 1998, every two years a new CSR report was published. Some of Ahold’s CSR publications are somewhat superficial, but a reason can be that Ahold had to recover from a major financial and reputational set-back in the beginning of the 21rst century. The former CSR report changed to Sustainability report in 2004. From 2007 onwards the CSR report was published every year, at the same time as the annual report. New priorities were food safety, consumer health and social and environmental issues (Ahold CSR, 2004). In 2007 Ahold CSR activities felt under four categories Healthy Living, Sustainable trade, Climate action and Community engagement. Above a roof is situated, which are the customers. The temple is supported by a basis, the employees (Ahold CSR, 2007). Furthermore a CSR Coordination Committee was set up to guide Ahold’s CSR strategy. The CEO of Ahold John Rishton mentioned during the shareholders meeting in 2007 that CSR is a key element of Ahold’s global strategy.

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The Greening of Home Brands – Elke W.A.M. Huisman According to Rishton CSR is essential to the longer-term success - even survival - of the business (Duurzaam-ondernemen, 2008 April 28). The CSR reports from 2007 onwards differ from the previous ones as they are more specific on CSR practices of the individual retailers. Where the previous reports gave more a general outline of Ahold’s CSR policy with some best practices mentioned, from 2007 onwards on each CSR topic actions of the individual retailers were mentioned. In December 2009 Albert Heijn stated that by January 2015 all private label products must be sustainable and/or responsible (AH B&B, 2009). Albert Heijn has subdivided ‘Sustainability & Product’ into six categories; climate change, animal welfare, use of land, use of water, biodiversity and social issues. On all six aspects Albert Heijn wants to use standards that could be certified by third parties (S. Hertzberger, 2010, August 20). Each of these aspects will be covered in the paragraph to which they belong, either environment or marketplace.

2. Albert Heijn & Environment Environmental issues at store and transportation level Since 1990 Albert Heijn is rather actively addressing reduction and recycling of waste. Albert Heijn was seen as a frontrunner in their recycling practices of paper and plastics (Van Tulder et al., 2009). However this focus was not only based on a sustainability point of view, in the Netherlands municipal waste was no longer allowed on landfills (Van Tulder et al., 2009). Main topics throughout the years were recycling, waste reduction, energy, fuel, refrigerants, use of pesticides and biotechnology. Albert Heijn was quite active in reducing waste and recycling through collaborations with suppliers. The focus in the last years of the 20 th century was mainly on recycling, reducing energy and using fewer pesticides. The issue of global warming and fuel usage has been described in the CSR report of 2002, years after Albert Heijn has more a general stance instead of undertaking new initiatives. However in 2005 due to new technical innovations, the reductions in fuel and energy use were actually realized. In 2007 some working procedures to reduce fuel usage were improved again; truck drivers have been trained in reducing fuel usage and CO2 emissions and also employees are stimulated to recycle paper and plastics (Ahold CSR, 2008). In order to stimulate employees Albert Heijn published in 2008 the first publication of “Bewust en Betrokken” (Aware and Involved), which was distributed to all employees. This employee magazine outlines Albert Heijn’s CR strategy based on the four pillar model and it contains details of many of CR activities of Albert Heijn (Ahold CSR, 2008). Additionally, in 2008 Ahold started collecting data to define its carbon foot print. Not only was an understanding of Ahold’s direct impact developed, also

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The Greening of Home Brands – Elke W.A.M. Huisman the impact of supply chain and consumers (Ahold CSR, 2008). At the same time, Ahold worked with external consultants Arthur D Little, DHV, ERM and Verisae to analyze the information and develop goals and targets in the area of climate action (Ahold CSR, 2008). Albert Heijn introduced ‘whisper trucks’, truck trailers which are almost silent and therefore less disruptive. The aim is to deliver all products in whisper trucks from 2010 onwards. An additional advantage is that now deliveries can be made at night or early in the morning, which avoids traffic in peak hours and reduces travel time and energy use (Ahold CSR, 2008). In stores Albert Heijn is covering its refrigerators in order to reduce energy. Albert Heijn committed to close all refrigerators before January 1, 2015. By the summer of 2010, 200 stores of Albert Heijn will have already doors on their coolers, furthermore LED lightning will be used in the fridges (Ahold CSR, 2009). With these measures Albert Heijn aims to reduce its carbon emissions by an amount equivalent of 1800 Dutch households annually (Ahold CSR, 2009). Furthermore all company reports, like Annual Reports and CSR Reports, have been printed on FSC certified paper. Receipts in shops are printed on FSC certified paper and Albert Heijn promotes customers to reuse their bought plastic bags, which are made from recycled plastics (Ahold CSR, 2008).

Environmental issues at product level Albert Heijn is conducting research and pilot studies into the full life cycle analyses of various private label products and then compares its findings with suppliers asked to provide plans to reduce the carbon footprint of particular products. This enables Albert Heijn to set reduction goals for all private label products in coming years (Ahold CSR, 2009). Furthermore Ahold joined in 2010 a Sustainability Consortium, an international organization consisting of retailers, consumer goods producers, universities, research institutes, government bodies and NGOs, in life cycle analysis. This consortium is working to develop strategies and tools to assess the sustainability impact of products (Ahold CSR, 2009). Albert Heijn is currently deciding which standards to apply for environmental issues on product level, like climate change, use of land, use of water and biodiversity. Albert Heijn is looking for standards, which are certified by third parties, to apply in its own CSR strategy. With regard to climate the method is not known yet, however responsibility of climate and CO2 issues will be put at the supplier. The suppliers should be able to answer questions and to use methods for products and climate change, e.g. they should know what the CO2 footprint of a product is and should have a plan how to reduce it (S. Hertzberger, 2010, August 20). In

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The Greening of Home Brands – Elke W.A.M. Huisman the matter of use of water no decision for a standard is made yet, however here the preference lies at integrating a water-standard in another standard. Ms. Hertzberger gives as an example GlobalGap; GlobalGap is active on water issues and Albert Heijn could include an add-on for areas in which water is an issue (S. Hertzberger, 2010, August 20). Ms. Hertzberger addressed that there are hardly methods to determine the biodiversity in an area. Albert Heijn has no idea yet how to improve this and it is thinking of replacing biodiversity to ‘Environmental Impact’, which means the impact on the environment of some crops and farms (S. Hertzberger, 2010, August 20). In order to prevent quality food turning into waste, Albert Heijn began a waste prevention initiative in 2008 (Ahold CSR, 2009). Albert Heijn prevents waste by efficiently working to match the quantity of products with consumer demand and by marking down fresh products nearing the expiry date (Ahold CSR, 2009). Furthermore food waste is transported to an external processing company to separate organic waste from packaging material. The organic waste is processed into methane gas, which is subsequently processed into green electricity by energy companies (Ahold CSR, 2009). Furthermore in 2009 Albert Heijn removed less efficient light bulbs and expanded the range of low-energy light bulbs, including halogen, energy-saving, LED and low wattage bulbs. In order to introduce these to the public, Albert Heijn partnered with a Dutch national lottery (Nationale Postcode Loterij) to give away a free LED blub, valued at €25.99, to 2.5 million people (Ahold CSR, 2009). See table I for an overview of the findings at Ahold.

Table I: Dimensions of Environment mentioned in literature Variables Theoretical Empirical findings Ahold Environmental impact Walton et al. (1998); Carter et al. (2000); Project to define carbon foot Sen and Bhattacharya (2001); Murphy and print in 2008; Poist (2002); Maignan et al. (2002); Carter Preparing standards from and Jennings (2002, 2004); Carter (2005); climate impact in 2010 Jones et al. (2005a); MVO; Anselmsson and Johansson (2006) ; Lattemann et al. (2007); Heasman (2008); Lai et al. (2010); CommDev (2010); Product / product design Sen and Bhattacharya (2001); Carter & Only low-energy light bulbs Jennings (2002; 2004); Jones et al. (2005a); sold in shops from 2009; Anselmsson and Johansson (2006); Studies in full life cycles of Markley & Davis (2007); Lai et al. (2010); PL products from 2009. Green innovation / Maignan et al. (2002); MVO (2010); Lai, Fuel reductions and energy technology investment Cheng and Tang (2010) usage in 2005&2007; Energy consumption and Jones et al. (2005a); Maloni & Brown LED lightning in stores and emissions (2006); MVO (2010); Lai et al. (2010); refrigerators Raw material usage Jones et al. (2005a); FSC paper; Joined Sustainability Consortium in 2010 Water conservation Jones et al. (2005a); Maloni & Brown Preparing standards for water (2006); Lai et al. (2010); usage in 2010 Waste reduction Carter et al. (2000); Carter & Jennings Waste prevention initiative

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The Greening of Home Brands – Elke W.A.M. Huisman (2002); Jones et al. (2005a); Maloni & from 2008; Brown (2006); Markley & Davis (2007); Processing of organic waste MVO (2010); Lai et al. (2010); into green electricity Volume of packaging Carter et al. (2000); Carter & Jennings Studies in full life cycles of (2002); Jones et al. (2005a); Markley & PL products from 2009. Davis (2007); MVO (2010); Lai et al. (2010); Recycling Carter et al. (2000); Carter & Jennings Recycling of paper & plastics (2002); Jones et al. (2005a); Maloni & and stimulation of employees Brown (2006); Markley & Davis (2007); to recycle; Recycled plastic bags Store design Lai et al. (2010); Covering of refrigerators in stores in 2010; LED lightning in stores and refrigerators in 2010 Genetically modified foods / Jones et al. (2005a); Maloni & Brown / biotechnology (2006); Use of chemicals / pollution Jones et al. (2005a); Anselmsson and / control Johansson (2006); Markley & Davis (2007); Logistics Carter et al. (2000); Maloni & Brown Truck drivers trained in (2006); Markley & Davis (2007); MVO reducing fuel in 2007; (2010); Lai et al. (2010); Whisper trucks in 2008 Inventory management Markley & Davis (2007); Waste prevention initiative from 2008

3. Albert Heijn & Marketplace Product safety (Food safety & non-food safety) Ahold has very strict food safety codes and control. In the CSR report of 1998 points out that food safety is a top priority and that HACCP is used to keep food safety in control. Albert Heijn was involved in developing a standard for good agricultural practices, EUREPG.A.P. This standard is designed to assure product safety, reduced agrochemical use, environmental protection and labor safety. EUREPG.A.P. integrates various systems used by European retailers, in order to have simpler, more effective and cheaper certification of growers and to avoid unnecessary price increases for consumers (Ahold CSR, 2002). EUREPG.A.P. is now known as GLOBALG.A.P, which is a key reference for Good Agriculture Practices in the global market place (GLOBALG.A.P., 2010). The GlobalG.A.P. certification is an assurance of correct food safety management at farm level (Ahold CSR, 2007). Furthermore CSR report of 2002 covers that Ahold has chaired the GFSI (Global Food Safety Initiative) organization, a non-profit organization which aims to improve food safety management systems in order to ensure confidence in the delivery of food to consumers (GFSI, 2010). Moreover Ahold has been the first global retailer to designate that it accepts any food safety certification accredited by the GFSI for suppliers of private label food products (Ahold CSR, 2007). Besides that Ahold has throughout the whole company food safety experts supervised by the Food Safety

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The Greening of Home Brands – Elke W.A.M. Huisman Steering Committee (Ahold CSR, 2002). Ahold requires their private label product suppliers to act in accordance to product safety practices and to demonstrate compliance with internationally accepted standards. Suppliers are supported by Ahold in making improvements. Therefore it has set up the ‘Ahold Model Food Safety Program’ as well, in which suppliers have to self-evaluate their performance against the program. This has to be done by answering questions related to food safety. With regard to product safety, Ahold has implemented the British Retail Consortium (BRC) Consumer Products certification for private label suppliers of higher risk non-food products (Ahold CSR, 2007). Extensive communication and training on product safety is provided to employees of Ahold (Ahold CSR, 2007).

Nutrition & Health In 1990 Albert Heijn started with the “Earth & Values” program, which addresses consumer concerns regarding the way people, animals and the environment are treated during the production process of perishable products (Ahold CSR, 1998). This program has accomplished that pesticides used in cultivation of fruits and vegetables were reduced significantly. Furthermore it led to environmental and animal welfare improvements in pork farming, like better living conditions, more space, better transport and elimination of preventive antibiotics in pig feed (Ahold CSR, 2002). Furthermore the CSR report of 2002 mentioned that similar initiatives have been undertaken for poultry, veal and fish, however no concrete examples were given. Albert Heijn introduced Healthy Choice Clover on its corporate brands in 2005. The symbol helps customers identify food low in saturated fat, sugar and salt, and high in fiber. In early 2009, Albert Heijn made changes to the symbol based on recommendations of the Dutch Health Council (Ahold CSR, 2008). Albert Heijn Healthy Choice clover was in 2009 replaced to two clovers; healthy choice & responsible choice (Ahold CSR, 2009). Furthermore Albert Heijn published in its customer magazine, AllerHande, nutritious recipes for customers on a budget, including nutritional information (Ahold CSR, 2008). Albert Heijn organizes “Class Lunch”, an in-school educational program that explains the benefits of a healthy diet, which is organized from 2007 onwards. These programs are aligned with the ‘healthy living’ strategy Ahold has towards consumers. Albert Heijn is very active in selling biological/organic products as it has set up a private label ‘AH Biologisch’ in 1998, years before other retailers in the Dutch market started to do so (Van Tulder et al., 2009). These organic farming products do not use artificial

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The Greening of Home Brands – Elke W.A.M. Huisman fertilizers or chemical pesticides for crop protection. Albert Heijn’s ambition is to sell only certified organic products to ensure that such claims are legitimate (Ahold CSR, 2002). Over the years the number of private label biological products was not extended much, and even decreased between 2006 and 2007. However in May 2009 Albert Heijn has introduced a new private label ‘Puur & Eerlijk’, which covers biological, fair trade, sustainable fishery, free- range meat and ecological products (Ahold, CSR 2009). Albert Heijn started in 2008 with a pilot to make it easier for customers to spot products with allergens. The system worked with hand-held scanners in the stores (Ahold CSR, 2008). Customers could register their allergy profile using their bonus card, and by scanning the products when shopping, the allergy information got checked against their personal profile. In February 2009, Albert Heijn completed the six-month program (Ahold CSR, 2009), however no information is given about the results of the pilot and if the program will be introduced in all stores.

Sustainable Trade & Social Compliance In the CSR report of 2002 Ahold mentions problems around fishery. At that time the issue was only challenged in the USA by collaboration with NGOs like New England Aquarium. From 2005 onwards the issue Albert Heijn addressed the issue in the Netherlands. Collaborations were started with Marine Stewardship Council (MSC) and World Wildlife Fund (WWF). The CSR report of 2007 mentions that Albert Heijn is now selling MSC certified products, furthermore is has been stating on several fish products that it is putting effort in making fishery more sustainable. The MSC label guarantees sustainability, which means that fish stocks may not be overfished and must be given time to recover. By the end of 2008 the assortment of Albert Heijn included 15 MSC certified products (Ahold CSR, 2008). In 2009 Albert Heijn added 25 private label and an additional 10 MSC-certified products to its assortment (Ahold CSR, 2009). Furthermore Albert Heijn will gradually phase out sale of eel in 2010, given the endangered status of the species (Ahold CSR, 2009). Besides, Ahold participates in the Aquaculture Stewardship Council (ASC). The first standards were issued in 2009, full operation expected in 2011 (Ahold CSR, 2009). From above can be concluded that Albert Heijn just recently started the collaboration with WWF to improve sustainability of its fish assortment . According to Van Tulder et al. (2009), several other Dutch retailers went already into collaborations. So although it always claims to be front-running regarding CSR issues, this shows the contrary.

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The Greening of Home Brands – Elke W.A.M. Huisman Animal welfare is important in the eyes of the Dutch consumer (S. Hertzberger, 2010, August 20), therefor it is surprising that the issue of animal welfare has not been described a lot in the CSR reports. Since 2002 Ahold started reporting on animal welfare; however this was just a statement that it supports local regulations on animal welfare, but no examples or policies were given. In 2004 Albert Heijn gave some concrete examples and at that time it was focusing at on the living conditions of veal and internet tracking is made available, which allows customers to enter the farm code of the veal package to find out the origin of the product. Furthermore Albert Heijn only sells free-range eggs and its Greenfields beef is produced in a way that is similar to free range and almost organic. Albert Heijn does not sell certain products which have animal welfare concerns connected to their production, like foie gras and quail eggs (Ahold CSR, 2004). In the CSR report of 2007 is mentioned that Ahold has developed animal welfare indicators, during food safety audits compliance with these indicators is assessed. Furthermore private label beauty products are not tested on animals (Ahold CSR, 2007). The reason that Ahold has limited reporting on animal welfare is because the CSR report is for both companies in the USA and Europe. In Western-Europe animal welfare is an important issue, however in the USA not, therefore not much is reported on this topic. In ‘Bewust & Betrokken’ however Albert Heijn is reporting on animal welfare as they risk affects are quite big (S. Hertzberger, 2010, August 20). As the risk affects are quite big Albert Heijn included animal welfare as a category in ‘Product & Sustainability’. Competitor of Albert Heijn, C1000, has recently to coop with actions WakkerDier (animal welfare organization). This means, although animal welfare is not discussed very extensively in the CSR report Albert Heijn is paying attention to it, this can be concluded form recent newspaper articles as well. Also Albert Heijn is using here a standard that is certified by a third party, namely the star-system of the Dierenbescherming (the Royal Society of the Prevention of Cruelty to Animals) (S. Hertzberger, 2010, August 20). In 2008 Albert Heijn had conversations with the foundation “Pigs in Need” about the castration of piglets, a common practice due to the fact that the meat from some male piglets that have not been castrated has an odor that makes it distasteful (Ahold CSR, 2008). As a result of those talks, Albert Heijn has agreed to only sell from 2009 meat from pigs that were anesthetized before castration (Ahold CSR, 2008). At the end of November 2010 a newspaper reported that Albert Heijn is now striving to have only responsible pork meat by mid-2011, which means the piglets used are no longer castrated, have more space in the loft, get sustainable soy to eat and have a bale of straw or a block of wood to play. The pigs are not approved as organic as they

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The Greening of Home Brands – Elke W.A.M. Huisman are not free range (Trouw, 2010 November 25). Furthermore in 2009 Albert Heijn bought its organic meat product range in line with the three-star Better Life hallmark (Ahold CSR,

2009).

Ahold is quite unique with its participation in roundtables on risky and sensitive ingredients and products, like responsible palm oil (RSPO) and responsible soy (RTRS). Just a very few other retailers in the world participate, mostly UK retailers like Asda, Morrisons, Tesco and Swiss retailer Migros. The Round Table for Sustainable Palm Oil (RSPO) addresses the problem of palm oil by cooperating with suppliers and stakeholders. Ahold is member of the trade and traceability working group of the RSPO. In 2008 Albert Heijn committed to only use sustainable palm oil in its private label products by 2015 (Ahold CSR, 2009). Besides, Ahold is member of the Round Table on Responsible Soy (RTRS). This group is working to promote responsible production and trading of soy by creating a third-party certification program for suppliers. In 2009 the third-party certification program was actually launched. In addition, Ahold is part of the RTRS criteria development group (Ahold CSR, 2008). From above can be concluded that Ahold is quite active when environmental and social problems come together with the production of particular raw materials, like soy and palm oil. With respect to cacao, another critical commodity, Ahold actively joins Roundtables and collaborations, namely with UTZ Certified and Solidaridad. In 2002 Ahold has raised the UTZ Kapeh organization for sustainable coffee and eventually all of the private label coffee was being UTZ certified. Instead of only rewarding producers with a premium for their sustainable coffee, UTZ educates producers to lower production costs, increase efficiency, reduce accidents etc. This training program leads to additional income as volume and price increase due to increased quality. From this empowerment producers gain more than from just the premium (UTZ meeting, 2010 July 14). Besides UTZ, Albert Heijn has launched together with Solidaridad, Café Ok in 2006; a coffee brand that carries the Max Havelaar seal. In response to consumer demand Albert Heijn has several other Fair Trade (15) products in its assortment in 2005, and by 2009 a new private label category for responsible products was launched, AH ‘Puur & Eerlijk’, and the assortment has 67 Fair Trade products (Ahold CSR, 2005; 2009). The CSR report of 2007 mentioned that the quality and quantity of these products can be lower. Apart from fair trade coffee and chocolate, Albert Heijn introduced in 2009 Fairtrade flowers to its stores (Ahold CSR, 2008).

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The Greening of Home Brands – Elke W.A.M. Huisman With regard to above mentioned risky and sensitive ingredients and products, Albert Heijn made an important decision in August 2010; to focus only on ingredients when more than 5% of that ingredient is present in the product (S. Hertzberger, 2010, August 20). For example when more than 5% of soy is in the product, then Albert Heijn starts focusing on the sustainability of soy in that product. If necessary this percentage can be moved up or down in the future. For example Albert Heijn is at the moment, in 2010, discussing with suppliers to make ice cream more sustainable; with UTZ certified chocolate on all ice creams and no use of palm oil (Ice cream supplier visit, 2010). Albert Heijn is not yet communicating on sustainable ingredients; however the communication department is busy to get sustainable ingredients and sustainable products in a better position to consumers, the media and the society. So far a lot of attention is given to sustainable products as a whole, like ‘Puur & Eerlijk’, however this is a niche; biological, fair-trade etc. Albert Heijn is now busy with main-stream preservation with goal 2015 all private label sustainable and/or responsible (S. Hertzberger, 2010, August 20).

Furthermore Ahold is involved in social issues; indicators are for example the membership in the BSCI program since 2005. The BSCI program is being implemented at all Ahold’s suppliers in high-risk countries (Ahold CSR, 2007). Audits in Asia and Africa were performed in 2007 by a third-party. Besides the BSCI membership, Ahold has set up a partnership with Fair-MatchSupport and ICCO and has its own program 'Ahold Sustainable Business Development' (ASBD) (Ahold CSR, 2007). These all have the aim to support African suppliers to meet several production and quality standards (Van Tulder et al., 2009). Through the Albert Heijn Foundation, which is established in 2007, the company is financing these projects in Africa (Ahold CSR, 2007). Ms. Hertzberger elaborated that with regard to social aspects, Ahold uses BSCI or equivalent standards, like ETI (Ethical Trade Initiative). Currently Ahold is in a transition phase in which it is redefining “the equivalent standards” (S. Hertzberger, 2010, August 20).

Local sourcing In 1998 Ahold has made some comments on supporting local farmers, however no specific way of doing this was mentioned. More recently Ahold describes it supports local suppliers and is organizing trade shows and focusing on supplier diversity, however this is only done in America and not in the Netherlands (Van Tulder et al., 2009). In the CSR report of 2008 Albert Heijn states that its philosophy is of buying local is to buy as close as possible, as far

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The Greening of Home Brands – Elke W.A.M. Huisman away as necessary. This is because buying close to home enables shorter transportation distances, which is often cheaper, while the import from developing countries creates income in areas where it is greatly needed (Ahold CSR, 2009). According to Ms. Hertzberger in the Netherlands there is a biased view on local sourcing. The Dutch consumer knows tomatoes from Spain are sweeter than Dutch, and in the end prefers those. The same counts for strawberries. The Dutch consumer does not have the feeling that the Dutch products are the best (ST&PIW, 2010 May). This is totally different form the Belgium consumer for example, who expect Belgium seasonal products in the shops. An example given was commercial activities at the beginning of the season ‘the local apple is now in stores’ (ST&PIW, 2010 May). See table II for an overview of the findings at Ahold.

Table II: Dimensions of Marketplace mentioned in literature Variables Theoretical Empirical findings Ahold Ethical trading / Carter & Jennings (2002; 2004); UTZ certified set up in 2002; fair trade Roberts (2003b); Jones et al. Café Ok launched together with Solidaridad; (2005a); Maloni & Brown (2006); ‘Puur & Eerlijk’ from 2009; Salam (2009) (Sustainable) Maignan (2002); Carter & AH Biologisch from 1998; procurement Jennings (2002); Roberts (2003b); EUREPG.A.P / GLOBALG.A.P. from 2002; Maloni & Brown (2006); MVO UTZ certified set up in 2002; Collaboration WWF for (2010); Lai et al. (2010); MSC from 2005; AH starts selling MSC fish from 2007; Increase of MSC fish assortment in 2008 and 2009; Participation in ASC from 2009; Phase out sales of eel in 2010; Participating in RSPO & RTRS since 2007; Only sustainable palm oil in PL in 2015; Main stream sustainable/responsible by 2015 Food / product Carter & Jennings (2002; 2004); HACCP since1998; safety Carter (2005); Jones et al. GFSI since 2002; (2005a); Jones et al. (2005b); Food Safety Steering Committee from 2002; Anselmsson and Johansson Ahold Model Food Safety Program since 2002; (2006); Maloni & Brown (2006); BRC since 2007 Animal welfare Jones et al. (2005a); Jones et al. Animal welfare improvements in pork farming in (2005b); Anselmsson and 2002; No foie gras and quail eggs in stores since Johansson (2006); Maloni & 2004; Only free range eggs sold in stores since 2004; Brown (2006); Living conditions of veal improved since 2004; Stated local regulations on animal welfare are supported in 2005; Animal welfare indicators developed in 2007; Talks with ‘Pigs in Need’ from 2008; Organic meat 3* bought from 2009; Only responsible pig by mid-2011. Nutrition and MVO (2010); Anselmsson and AH Biologisch since 1998; Health Johansson (2006); Maloni & Earth & Values since 1998; Healthy Choice Clover Brown (2006); Heasman (2008); since 2005; “2 fruit, 2 vegetables” in 2005; Class Lunch since 2007; Nutritious recipes in AllerHande since 2008; Allergen pilot study 2008-2009 Healthy choice & Responsible choice from 2009; ‘Puur & Eerlijk’ since 2009 Supply chain / Carter et al. (2000); Maignan UTZ certified program since 2002; supplier (2002); Carter and Jennings Ahold Sustainable Business Development' since 2007 relationships and (2002; 2004); Roberts (2003b); monitoring Carter (2005); Maloni & Brown (2006); Heasman (2008);

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The Greening of Home Brands – Elke W.A.M. Huisman CommDev (2010) Non-domestic Sen and Bhattacharya (2001); UTZ certified program since 2002; operations Anselmsson and Johansson Collaboration with Solidaridad ; (2006) Member BSCI since 2005 Minority/women- Maignan (2002); Carter and / owned purchasing Jennings (2002; 2004); Carter (diversity) (2005); Salam (2009) Sourcing local and Maignan (2002); Jones et al. / regional foodstuffs (2005a); Jones et al. (2005b) Working Maignan (2002); Carter & Member BSCI since 2005; conditions & safety Jennings (2002; 2004); Carter Ahold Sustainable Business Development' since 2007 at supplier plant (2005); Jones et al. (2005b) Human / worker Maignan (2002); Carter & Member BSCI since 2005; rights at supplier Jennings (2002; 2004); Carter Ahold Sustainable Business Development' since 2007 plant (2005); Jones et al. (2005b); Salam (2009) Child labor Maignan (2002); Carter & Member BSCI since 2005; Jennings (2002); Jones et al. Ahold Sustainable Business Development' since 2007 (2005b)

4. Motivations Albert Heijn Albert Heijn is focusing on ‘product and sustainability’ and has two main reasons for this; first of all to reduce the risk-prejudice. Albert Heijn has in the Netherlands the largest market share; this attracts NGOs as when they attack the largest chain a lot of publicity will be gained. Ahold sees itself as a target for NGOs, which brings risks, and Albert Heijn wants to prevent these risks. Therefore Ahold wants to be in a precursor’s position so that NGOs have less reason to pay attention to Ahold. So this motive is really based on outside pressures. This motive rose over time; the reason of this is the success of Ahold. As success became bigger and bigger, more attention is received from NGOs. In order to prevent actions Ahold is moving to more sustainable products. When the NGOs did not pressured that much the change would probably have been slower (S. Hertzberger, 2010, August 20). The second reason to focus on ‘product and sustainability’ is because it offers opportunities. A requirement for ‘product and sustainability’ is a transparent supply chain. It is important to know where products are coming from, and not only from the closest link, but through the entire chain. In order to have a transparent supply chain Ahold needs to know all links; which could lead to eliminating links. A transparent chain is the start for cost reductions. Besides this ‘product and sustainability’ offers market opportunities, when being the first in the market and exploiting that opportunity (S. Hertzberger, 2010, August 20). Although Ahold is taking its own way regarding sustainability, sometimes forced by NGOs, the CSR approach from competitors plays a role as well. Jumbo, Lidl, and Plus in the Dutch market are paying more and more attention to CSR. Albert Heijn does not like the successes of them, and vice versa. In the market is competition on CSR, to be more specific

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The Greening of Home Brands – Elke W.A.M. Huisman on scarce raw materials and even more on sustainable raw materials. Sustainable raw materials are very scarce and the retailers are fighting to get those, e.g. UTZ certified cocoa, all retailers want to have their chocolate letters of UTZ certified cocoa, but this cocoa is very scarce. Competitive position can be mentioned as underlying motive (S. Hertzberger, 2010, August 20). Albert Heijn is not very active in setting up joint initiatives with their competitors, at least not within the Netherlands (ST&PIW, 2010 May). Albert Heijn believes that it is important that the whole Dutch retail business gets at a higher sustainable level, however Albert Heijn is not going to share ideas or best practices. Van Tulder et al. (2009) mention that Dutch retailers are in general not very active in creating joint initiatives with their competitors. In general statements published by the retailers, they lack on the importance business associations for issues on CSR. As will be mentioned later, this is a clear difference from Finland or Switzerland. Van Tulder et al. (2009) explain the little initiatives of retailers for intra-industry competition on CSR relevant issues which you see in countries like the UK, can be a result of the fragmented Dutch retail landscape and the lack of government initiatives. Reputation is another reason for CSR. Ms. Hertzberger mentioned that reputation is part of risk prevention. This risk is twofold; it is reputation and it is that consumers are not buying Albert Heijn’s products because it does not feel good. Reputation is a soft matter with two important aspects; customers must be able to shop at Albert Heijn without being ashamed, that it is too expensive or being ashamed as they treat e.g. animals bad. Second important aspect regarding reputation is that people would like to work at Ahold; it needs to be attractive to employees (S. Hertzberger, 2010, August 20). Retailers feel more and more pressure from NGOs, the press and the government regarding safety issues and CR issues, credibility in the eyes of these instances has influence on the reputation of the retailer (S. Hertzberger, 2010 March 11). See table III for an overview of the various motivations for CSR of Albert Heijn.

Table III: Motivations for CSR Albert Heijn/ Ahold Variables Theoretical Empirical findings Ahold Self-presentation and Snider et al. (2003); Jones et al. (2005a); impression management Economical-financial Miles & Covin (2000); Piacentini et al. A transparent chain is the start for perspectives (2000); Price WaterhouseCoopers cost reductions (2002); Orlitzky et al. (2003); Jones et al. (2005a);Van de Ven & Graafland (2006); Lattemann et al. (2007); Tetrault Sirsly & Lamertz (2008)

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The Greening of Home Brands – Elke W.A.M. Huisman Reputation Miles & Covin (2000); Price Reputation in the eyes of customers WaterhouseCoopers (2002); Orlitzky et and (future) employees al. (2003); Tetrault Sirsly & Lamertz (2008); Lee et al. (2009) Brand / brand loyalty Spar and La Mure (2003); Musso & Risso (2006) Customer demand Piacentini et al. (2000); Price Customers must be able to shop at WaterhouseCoopers (2002); Musso & Albert Heijn without being ashamed Risso (2006); Lai et al. (2010) of not correct practices, like animal welfare Marketing - Publicity Maignan et al. (2002); Van de Ven & Graafland (2006); Musso & Risso (2006) Innovation Maignan et al. (2002) Industry trends Price WaterhouseCoopers (2002) “In today’s world you cannot proceed without paying attention to sustainability”. Increase employee Maignan et al. (2002); Van de Ven & Albert Heijn needs to be attractive commitment / loyalty Graafland (2006); Musso & Risso for (future) employees (2006); Competitive / market Miles & Covin (2000); Price AH ‘Puur & Eerlijk’ (NRC Next position WaterhouseCoopers (2002); Spar and La 2009); Mure (2003); Jones et al. (2005a); In the market there is competition on CSR. Transaction costs Price WaterhouseCoopers (2002); Spar and La Mure (2003); Jones et al. (2005a); Pressure from stakeholders Piacentini et al. (2000); Ernst & Young Preventing attacks from NGOs & investors (2002); Price WaterhouseCoopers (2002); Tetrault Sirsly & Lamertz (2007) Increased sense in social Ernst & Young (2002); Price responsibility of company WaterhouseCoopers (2002) itself/ CEO/Board commitment Customer loyalty Piacentini et al. (2000); Musso & Risso Customers must be able to shop at (2006) Albert Heijn without being ashamed of not correct practices à retain customers Store loyalty Musso & Risso (2006) Inclusion in sustainability Musso & Risso (2006); indexes Market differentiation Piacentini et al. (2000);

Surprising is however that Ahold is reporting sustainability in its vision and strategy, but that sustainability is not incorporated in its mission statement. Ms. Hertzberger elaborated that the day before the interview, August 19 th 2010, Ahold decided that CSR need to be incorporated in the mission statement as well. From a responsibility perspective Ahold has to pay attention to it in the mission statement. Ms. Hertzberger mentioned that in “today’s world you cannot proceed without paying attention to sustainability. Also employees are consumers, and these have children who have to live on this earth as well, apart from the consumers”. Although the consumer is not asking actively for sustainability, it does expect that Ahold takes care of it (S. Hertzberger, 2010, August 20).

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The Greening of Home Brands – Elke W.A.M. Huisman 5. Results of Albert Heijn’s CSR practices Concrete results of the CSR policy of Albert Heijn are presented in the overview below. With regard to environment Albert Heijn started measuring emissions, fuel and gas consumption and waste from 2007. This makes it hard to compare. Volume of CO2 emissions, electricity consumption and fuel consumption went up from 2008 to 2009. The increase of electricity use is partly because of the 50+ stores acquired from Schuitema in the second half of 2008 (Ahold CSR, 2009). See table IV for an overview of the measured CSR results. Table IV: Measured results by Albert Heijn 2009 2008 2007 2005 2004 2002 Environment CO2 emissions (volume in thousands of tonnes) / 431 / 424 376 / 405 n.a. n.a. n.a. n.a. Efficiency (kg per m2 sales area) Electricity consumption (volume in mln. of 552 / 544 500 /539 n.a. n.a. n.a. n.a. KwH) / Efficiency (in KwH per m2 sales area) Fuel consumption (volume in thousands of liters) 25.799 / 24.168 / n.a. n.a. n.a. n.a. / Efficiency (liters per 1000 products sold) 3.99 4.13 Natural Gas Consumption (volume in thousands 25.045 /25 25.764 / 28 n.a. n.a. n.a. n.a. of m3) / Efficiency (m3 per m2 sales area) Water consumption (volume in mln. of liters) 483 - n.a. n.a. n.a. n.a. Waste (volume in mln. of kg) / Efficiency (kg per 117 /115 107/115 n.a. n.a. n.a. n.a. m2 sales area) • Organic waste 33 31 • Cardboard & paper 63 57 3 3 • Plastic 17 15 • Other Total waste in % by disposal method n.a. n.a. n.a. n.a. • % reused/recycled/ recovered waste 57 57 • % fermented waste 28 29 15 14 • % incinerated waste Marketplace Healthy Choice products at the end of the year 741 1185 Children educated through healthy living 200.000 137.881 - - - - programs Certified organic products at the end of the year 304 290 176* 280 275 275 Fairtrade-certified products at the end of the year 67 68

* Private Label Albert Heijn Albert Heijn will measure its own results and successes in the process of preserving mainstream private label products by 2015, by the sustainability ladder. This ladder is introduced in August 31 2010, from this date Albert Heijn will start measuring achievements. The sustainability ladder consists of steps, for example a step could be ‘all raw materials certified’ or ‘all products in risk countries audited’ (S. Hertzberger, 2010, August 20). As Albert Heijn committed to have all its private label products sustainable and/or responsible by 2015, it has to start monitoring the progress via the ladder and for this IT tools will be needed. At the moment Ms. Hertzberger (2010) sees as a main difficulty getting the supply chain

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The Greening of Home Brands – Elke W.A.M. Huisman transparent. Ahold does not always know where products are produced, especially not in cases with very long supply chains. Getting the supply chain transparent is the major challenge (S. Hertzberger, 2010, August 20).

The Ahold measures the impact of CSR on stakeholders through associate satisfaction survey or consumer tracking study. For example in 2009, the Christmas Report by market research group GfK reported that Albert Heijn XL stores provide better information on healthy living products than other supermarkets in the Netherlands. Regular Albert Heijn stores were ranked third. In the same report Albert Heijn was rated for best fresh offering (Ahold CSR, 2009).

In the Dow Jones Sustainability Index World 2010 (DJSI), Ahold increased its score. The DJSI tracks leading companies around the globe on sustainability issues. Ahold was re- awarded its place after being analyzed on corporate economic, environmental and social performance (Ahold, 2010). In 2009, Ahold proved the value of its CR efforts by winning a spot on the index two years before its goal of 2011. For 2010, the company has not only kept its spot, but improved its score from 54% to 62%. The score of Ahold, 62%, compares well with the overall Food and Drug Retailers average of 51%, the highest score in the sector was 78%. This achievement is even more striking considering that 11 companies in the “Food and Drug Retailers” sector lost their places on the index this year, including Marks & Spencer, Metro AG and Staples Inc. (Ahold, 2010).

6. Albert Heijn & Stakeholders The Dutch consumer The Dutch consumer in general has a lot of money to spend, but will not spend it easily. By nature the Dutch consumer tends to be resistant to change, which means that they prefer known products over new products (Laposte Export Solutions, The Netherlands, 2010). Furthermore they are very sensitive for advertisements; as a consequence a good advertisement campaign can have a big effect on sales. Lately there has been a lot of publicity about the environment, which has increased the willingness of Dutch consumers to buy environmental-friendly products (Laposte Export Solutions, The Netherlands, 2010). In order to remove consumer confusion when seeing a lot of different the sustainability labels, Albert Heijn introduced ‘Puur & Eerlijk’, which covers all labels which makes it easier for consumers to buy sustainable products (Trouw, 2009, October 30).

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The Greening of Home Brands – Elke W.A.M. Huisman According to Ms. Hertzberger the Dutch consumer there are a few things important with regard to sustainability and responsibility. First of all, the Dutch consumer values health a lot. A lot of market research is done over the past years and Dutch consumers chose their diner meal not (anymore) based on price, but based on health. Over the past years the health-aspects has increased a lot, also because of the media (S. Hertzberger, 2010, August 20). Verhoef and Van Doorn (2009) argue on the other hand that the Dutch consumer has very limited willingness to pay more for those products. Therefore in the Netherlands the market share of sustainable food, like organic products and the “healthy choice”-products are still low (Verhoef & Van Doorn, 2009). They belief the Dutch consumer even wants to pay less for healthy products as they believe the quality of sustainable food is lower. The consumer survey of Verhoef and Van Doorn among 1180 Dutch consumers shows that the high price and the low quality views form a barrier to buy sustainable food. The Dutch consumer is willing to pay only six percent more for products with an organic label, while the price differences are often much higher, somewhere between ten and forty percent (Verhoef & Van Doorn, 2009). Besides that, according to Albert Heijn the Dutch consumer believes climate change is very important, however they feel powerless as they have the feeling that they cannot make any difference. Furthermore they relate climate change hardly to the products itself (S. Hertzberger, 2010, August 20). In addition, the Dutch consumer expects that the supermarkets have been taking care of sustainable trade. Also sustainability aspects as animal welfare play a large role in the minds of the customer. Furthermore in social aspects, biodiversity, the use of water with cultivating, the consumer is totally not interested in or they expect that the supermarkets have solved these issues (S. Hertzberger, 2010, August 20). As mentioned at the paragraph ‘Local Sourcing’ the Dutch consumer does not favor local products over foreign counterparts (Laposte Export Solutions, The Netherlands, 2010). The Dutch consumer does not have the feeling that the Dutch products are the best. Strawberries or tomatoes from Spain are sweeter and in the end preferred above the Dutch ones (ST & PIW, 2010 May). Albert Heijn continues to expand its Fair Trade assortment in response to consumer demand (Ahold CSR, 2005; 2009). Research by GfK Panel services shows that fair-trade products are expanding more and more in the Netherlands. The number of households that bought fair-trade was 28% in 2008 and is increasing over the years. 28% of the Dutch households is about 2 million households. Compared to 2006, a (buyers) increase is realized of 55%. Reasons for this are a broader assortment of fair-trade products and more attention to these products during “fair-trade weeks” (in October/November). Albert Heijn is the most

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The Greening of Home Brands – Elke W.A.M. Huisman important sales channel for fair-trade products and as said Dutch households are buying more often fair-trade products at supermarkets due to a broader assortment.

Employees As mentioned reputation is a part of risk prevention, this is based on reputation towards customers but towards employees as well. According to Ms. Hertzberger reputation of Albert Heijn in the eyes of the employees is very important; people should like to work at Albert Heijn, it needs to be attractive to employees (S. Hertzberger, 2010, August 20). Therefore Albert Heijn’s 100.0000 employees are being kept up to date on sustainability with the staff magazine ‘de AH’. Every month a topic of sustainability is discussed, like palm oil, sustainable fish and pork. At the kick off meeting for ‘product and sustainability’ at August 31rst 2010, employees were informed about the goal is and what is expected from everyone. For example a template is made in which the quality manager, the sourcing manager and the category manager are working together in a trio. Furthermore, at the end of the meeting is clear for all employees “what do I have to do now” (S. Hertzberger, 2010, August 20). The goal of the kickoff meeting was that it is clear for all employees; ‘What do I have to do now’ with use of the template.

NGOs Although Albert Heijn is collaborating with various NGOs on projects, like WWF on MSC, the NGOs are not perceived as companions. Ms. Hertzberger mentions that NGOs attack Albert Heijn, as it is the largest chain, in order to gain a lot of publicity. Albert Heijn is a target for the ‘enemies ’, the NGOs, which brings risks and therefore Albert Heijn wants to be in a precursor’s position (S. Hertzberger, 2010, August 20). Therefore at the end of 2010 all important NGOs will be invited for a stakeholder meeting in whom Ahold will explain its approach of ‘product and sustainability’ (S. Hertzberger, 2010, August 20).

7. Albert Heijn’s position in the market Daily 3 million consumers are buying at the shops of Albert Heijn (S. Hertzberger, 2010, August 20). With a market share of 32% is Albert Heijn for 1/3 of the Dutch population the closest supermarket nearby (Infonu, 2010). The Netherlands Competition Authority considers a market share of 40% as an ‘economische machtspositie’ [in English: a dominant position]. The three biggest retailers in the Netherlands, Albert Heijn, C1000, and Jumbo have together

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The Greening of Home Brands – Elke W.A.M. Huisman a market share of 56 percent. The market for discounters Aldi and Lidl has stabilized around 15%.

Albert Heijn has a formula based on service; quality, convenience in the shops and an extensive assortment are characteristics of Albert Heijn. Although in the past (till 2003) Albert Heijn had prices above average, the retailer has focused more and more on a low price the last couple of years. Albert Heijn wants to be suitable for everybody, and it wants to lose their high price image (Albert Heijn, 2010). Albert Heijn is focusing the last years mainly on families with children. This choice is made as already a lot of single youth and seniors are visiting the shops. Albert Heijn wants to grow in the segment of families with children therefore it has put a lot of effort in making clear to the consumers that Albert Heijn is not expensive and that Albert Heijn has a broad assortment that appeals to children as well (S. Hertzberger, 2010, August 20). With its broad range of private label and EURO SHOPPER™ products, Albert Heijn is trying to attract these consumers (S. Hertzberger, 2010, August 20). Furthermore Albert Heijn stunts with red wallets-signs with ‘Lowest Action price guarantee’, ‘Lowest price’, ‘Benefit packaging’ (Albert Heijn, 2010), this in order to lose the expensive image. The five private label categories of Albert Heijn give the consumers a lot of choice in quality and price (Albert Heijn, 2010). The mission of Albert Heijn is connected to this; “The everyday [products] affordable, the special [products] accessible”. Unlike in the past, Albert Heijn is now built on the competitive aspects of quality and price. Albert Heijn focuses on daily-use products, special products all with high quality and that at a good price for everybody.

In the Dutch market Albert Heijn is seen as a pioneer, with innovative product ideas and marketing. Various retailers copy the ideas of Albert Heijn. Albert Heijn was the first retailer in the Netherlands to come up with a whole private label line on sustainable, responsible and/ or ecological products. Emté, supermarket of parent company Sligro, is introducing at the end of 2010 a similar brand like Albert Heijn’s ‘Puur & Eerlijk’, namely ‘Heerlijk & Eerlijk’ (Distrifood, 2010 July 23). Furthermore in 1997 Ahold Coffee Company founded with Guatemalan coffee producers the UTZ Certification, which stands for responsible produced coffee (Ahold Coffee Company, 2010). Since 2004 Douwe Egberts is purchasing UTZ Certified coffee beans. Albert Heijn has 52 percent of the total turnover on biological products in the Netherlands (NRC Next, 2009 December 22). The brand name of Albert Heijn is very well known. Both on news-website as in social media Albert Heijn has been

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The Greening of Home Brands – Elke W.A.M. Huisman mentioned the most. Between May 27 th 2009 and July 27 th 2009, Albert Heijn is mentioned in 18.456 messages; the second place is for Aldi with 5.998 messages (Clipit, 2009 July 28).

8. End remarks Albert Heijn At the moment Ahold/Albert Heijn’s position towards CSR is quite active; however this has not always been the case. This less active approach might be caused by interfering demands and ambitions of primary stakeholders. In 2003 the accounting scandals of Ahold’s subsidiary US Foodservice came to light (Smit, 2006). From this Ahold experienced harsh reputational and financial damage, which forced the company to reposition, so to rethink its strategy (Ahold, 2010). Ahold focused on its financial and purchasing strategy, by lowering the prices the distance with competitors became smaller and step by step customers are returning to Albert Heijn (Ahold, 2010). This has most probably kept Ahold from following a more active CSR approach. In order to become more CSR active, the concept really has to be promoted and educated to stakeholders otherwise finding financiers is difficult. Now Albert Heijn clearly want to do things right, the retailer wants to accomplish its objectives in a socially responsible way. A major step in this is ensuring that all corporate brand products, about 4600 products, are sustainable or responsible by 2015. Furthermore in 2009 Albert Heijn was the first supermarket in the Netherlands to introduce a sustainability label, this happened in economic instable times, where other supermarkets in the Netherland more focus on low prices. Albert Heijn wants to be a frontrunner in the Dutch retail market on CSR. While other AMS partners during Sustainable Trade and Product Integrity Workshop were mostly focused on sustainable food topics, Ahold is having a look at their non-food sustainability and responsibility as well. The policy to be sustainable in 2015 has direct influence on both food and non-food items. With regard to collaborations with NGOs, Albert Heijn is not that active compared to other Dutch retailers. In 2007 Albert Heijn engaged in collaboration with WWF to improve the sustainability of the fish assortment, other retailers went already in collaboration and delisted unsustainable fish products. A reason for this attitude could be that the relationships with NGOs are not good because of their attacks in the past. Overall one could say that the focus on CSR topics has changed over the years; where the report of 1998 was focused on quality, efficiency and care, the report of 2004 was more focused on food safety, consumer health and social and environmental issues. From 2007 onwards the focus lies more on social and environmental issues. Regarding food safety Ahold has made major steps since 1998. All suppliers are certified, food safety is much better secured.

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX G: CASE KESKO

The description of the Kesko case will be as follows; first a general description of CSR at Kesko will be given. Then CSR practices with regard to environment and marketplace will be discussed, after which the motivation and results of CSR policy will be delineated. Finally an outline will be given on the influence of stakeholders and Kesko’s position in the market.

1. CSR in general at Kesko Kesko was formed when four regional wholesaling companies were merged in October 1940. Kesko has about 2,000 stores engaged in chain operations in the Nordic and Baltic countries, Russia and Belarus. Kesko is engaged in the food trade, the home and specialty goods trade, the building and home improvement trade, and the car and machinery trade (Kesko, 2010). This case study will only focus on Kesko Food. Kesko Food is a strong operator in the Finnish grocery trade. K-retailers, whose operations are based on the K-retailer business model, are responsible for customer satisfaction at the more than 1,000 K-food stores. Kesko Food manages 5 store concepts, from large supermarkets to city markets to smaller local high service supermarket and ultimately to a HoReCa wholesaler, Kespro Ltd (Kesko, 2010). As the group consists of independent retailers, Kesko Food’s main functions include the centralized purchasing of products, selection management, logistics, and the development of chain concepts and the store site network. These chain operations ensure the efficiency and competitiveness of business (Kesko, 2010). For more than 20 years, Kesko Food as a private label range, called Pirkka. The Pirkka products combine quality and low prices. At the moment there are 1800 Pirkka products, of which nearly 30 Pirkka Fair-trade products and more than 40 Pirkka Organic products. Although Kesko’s first CSR report was published in 2000, in 1998 it already made some efforts relating CSR in supplier relations to internal alignment. Among personnel an ethical assessment was made of the implementation of the value 'responsibility and honest working methods'. This provided a basis for the ethical code, which was going to connect the corporate values and the operations of the employees (Van Tulder et al., 2009). For 1997- 126

The Greening of Home Brands – Elke W.A.M. Huisman 1999 Kesko has published three separate environmental reports in addition to the annual reports (CSR report Kesko, 2000). As said since 2000, Kesko is annually reporting on its corporate responsibility. Kesko is doing that in accordance with the Global Reporting Initiative (GRI) recommendation and describes on ten principles its progress (Kesko CSR, 2009). Kesko’s current CSR policy is build up in four clusters; economic responsibility, human resources responsibility, environmental responsibility and responsible purchasing and sales (Kesko CSR, 2009). Key issues in environmental responsibility are impact on climate change, energy and water consumption, transportation and return logistics, waste, use of materials and environmental risks, damage and incidents. With regard to responsible purchasing and sales Kesko sees as key issues; product safety, healthy way of life and eating habits, working conditions and terms in the purchasing chain, product stands and statements (Kesko CSR, 2009).

2. Kesko & Environment Environmental issues at store and transport level For 2008-2012 Kesko has a responsibility program which includes improving energy efficiency, reducing its emissions and increasing recovery and material efficiency. The environmental topics have been very extensively discussed in Kesko’s CSR reports. From 2001 onwards energy, electricity and heat consumption are measured, the waste recovery rate is calculated and CO2 emissions are compared to volumes transported. In 2001 Kesko introduced the KELO environmental calculation of its logistic chain in logistic warehouses of Kesko. In addition to waste management, this model includes a transportation model (purchasing and delivery transport, vehicle cost monitoring), a transportation fleet monitoring model, a logistic return model and a packaging model (Kesko CSR, 2001). Each year the aim lies on improvements of the figures compared to the year before, figures will be presented in chapter 5.2.5 ‘Results of CSR practices’. In 2002 the logistics of Kesko Food received the ISO14001 environmental system (Kesko CSR, 2002). Furthermore Kesko started focusing on decreasing the total distance driven by trucks, which was reduced from 17.3 million km in 2001 to 14.9 million km in 2002. This was due to structural changes in the distribution network, optimization of distribution routes, distribution volumes being transferred to other operators and trainings in economic driving for truck drivers (Kesko CSR, 2002). Kesko reports in 2002 about reductions in the amount of carbon dioxide emissions in electricity used, these decreased as the Nordic electricity consists to a large extent of water

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The Greening of Home Brands – Elke W.A.M. Huisman and nuclear power (Kesko CSR, 2002). From the beginning of 2008, Kesko has started to purchase ‘Carbon Free Electricity’ from its main electricity provider (Kesko CSR, 2007). As a result of purchases of carbon free electricity, CO2 emissions of the electricity purchased for the K-Group decreased by 80% (Kesko CSR, 2008). In 2009 the carbon dioxide emissions of electricity used in the K-Group properties decreased by 59% in Finland due to the owing of carbon-free electricity (Kesko CSR, 2009). From 2002 the emphasis was on expanding energy consumption monitoring and increasing its accuracy in stores. About 60% of the Kesko stores included multi-energy monitoring (electricity, heat and water) in 2002. Electricity consumption was monitored in 80% of the premises (Kesko CSR, 2002). From 2008 onwards LED lighting technology will replace neon and fluorescent tubes in K-food stores’ signage. LED lighting only will be used in the new illuminated signs of K-food stores. The most immediate environmental impact of giving up the use of neon and fluorescent tubes is reduced electricity consumption, as the adoption of LEDs for new signage is estimated to save the amount of electricity used by 40 electricity-heated one-family houses annually (Kesko CSR, 2008). In 2008 K-Group signed the trading sector energy efficiency agreement and made a commitment to save over 65 GWh (65 million kWh) by the end of 2016 (Kesko CSR, 2008). The K-environmental store diploma, which is an environmental management system and a marketing concept created for K-stores, was introduced in 1997. The system helps stores to improve their management of environmental affairs and to give customers an opportunity for responsible consumption (Kesko CSR, 2001). This diploma was developed by Kesko, the K-Retailers’ Association and the Finnish Association for Nature Conservation. In order to get the diploma all employees of the stores must be trained and an environmental audit is performed by an external party (Kesko CSR, 2001). The diploma gained international recognition as the United Nations Environmental Program (UNEP) and the International Chamber of Commerce (ICC) selected it among the ten best sustainable development partnerships out of over 120 candidates in 2002. At the end of 2002, 162 K-food stores had this diploma (Kesko CSR, 2002). At year-end of 2009, 457 K-food stores (423 in 2008) had the K-environmental store diploma (Kesko CSR, 2009).

Environmental issues at product level In 2000-2002, Kesko Food participated in the life-cycle assessment survey ‘Environmental impacts in the food basket – FOODCHAIN’ as one of the main sponsors. The target of the research was to produce life-cycle assessment data on the environmental impacts of selected

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The Greening of Home Brands – Elke W.A.M. Huisman products, based on the real production chain and processes. One of the four products studied was the Pirkka potato flour manufactured for Kesko by Finnamyl (Kesko CSR, 2002). Kesko’s Finnish suppliers of vegetables must belong to the Finnish Horticultural Products Society (for ‘good production practices for growers’) to be entitled to use the society’s seed leaf symbol (Kesko CSR, 2007). In 2002 Kesko continued its active work in Finnish producer associations and international standardization-organizations, aiming for packaging standardization, the use of environmentally sound materials and a reduction in the amount of materials used. In 2002, a packaging seminar was arranged for the manufacturers of Pirkka products, Kesko’s house brand, for the first time. During this meeting development needs of packaging from both logistical as environmental starting points were discussed (Kesko CSR, 2002). The recycling of disposable plastic (PET) bottles started in Finland in 2008, and the number of plastic deposit bottles recycled reached 18 million during the first year (Kesko CSR, 2009). In 2009, a total of 28.5 million PET bottles were collected for raw material recycling, which was 58% more than in the previous year (Kesko CSR, 2009). The number of recycled transbox crates increased from 7 million to 9 million – as of 2005 the number of recycled crates increased by 75% (Kesko CSR, 2008). Since the end 2007 K-food stores offer the Pirkka 100% biodegradable shopping bag as an alternative to the plastic bag. Furthermore a new Pirkka non-disposable shopping bag was introduced at the same time (Kesko CSR, 2007). Besides this Kesko Food has a target to increase the waste recovery of the K-food stores from 86% in 2009 to 90% by 2012 (Kesko CSR, 2009). Apart from educating its employees, Kesko educates consumers on environmental issues. In 2004 K-food retailers started cooperation with teachers of biology and geography. The ‘Let’s recycle’ project for grade 7 comprehensive school pupils involves approximately 9,000 participants. Some 25,000 pupils have participated in the project between 2004 and 2006 ( Kesko CSR, 2006 ). In 2007 MTV3’s Good Morning Finland featured a series of short programs (34 in total) sponsored by Kesko entitled ‘The Environment’s The Point’. These programs were designed to help people act more responsibly in consumer-related areas and were focused on everyday subjects related to consumption, such as the environmental aspects of cars and driving, recycling, energy saving in the home, ethical consumption, and product safety (Kesko CSR, 2007).

In 2006 Kesko reported for the first time on Genetic Engineering, in this report and the more recent reports is mentioned that Kesko’s house brand products (Pirkka, EURO SHOPPER™,

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The Greening of Home Brands – Elke W.A.M. Huisman Rico) are GMO-free. Furthermore K-food stores do not sell any other GMO products supplied by Kesko Food (Kesko CSR, 2006-2008). Furthermore Kesko has set up criteria which are part of the environmental diploma to independent suppliers. Companies that do not satisfy the criteria are “red light suppliers” and are delisted from all Kesko’s warehouses. However as Kesko is owned by individual retailers it is possible that these will still use the “red light suppliers”. CSR practices really need to be “sold” to these retailers. In Finland and Sweden Kesko is performing itself all audits regarding food safety (ST&PIW, 2010 May). See table V for an overview of the empirical findings at Kesko.

Table V: Dimensions of Environment mentioned in literature Variables Theoretical Empirical findings Kesko Environmental Walton et al. (1998); Carter et al. K-environmental store diploma from 1997; impact (2000); Sen and Bhattacharya Pirkka 100% biodegradable shopping bag from (2001); Murphy and Poist (2002); 2007; Finnish Horticultural Products Society for Maignan et al. (2002); Carter and vegetables suppliers from 2007; In 2009 96.5% Jennings (2002, 2004); Carter of import suppliers fruit and vegetables (2005); Jones et al. (2005a); MVO; GlobalGAP; Responsibility program 2008- Anselmsson and Johansson (2006) ; 2012; ‘Red light suppliers’ delisted from Lattemann et al. (2007); Heasman Kesko’s warehouses (2008); Lai et al. (2010); CommDev (2010); Product / product Sen and Bhattacharya (2001); Pirkka 100% biodegradable shopping bag from design Carter & Jennings (2002; 2004); 2007; Introduction non-disposable shopping bag Jones et al. (2005a); Anselmsson in 2007 and Johansson (2006); Markley & Davis (2007); Lai et al. (2010); Green innovation / Maignan et al. (2002); MVO technology (2010); Lai et al. (2010) investment Energy Jones et al. (2005a); Maloni & Energy, electricity and heat reduction from consumption and Brown (2006); MVO (2010); Lai et 2001; Comparisons of CO2 emissions to emissions al. (2010); volumes transported from 2001; Multi-energy monitoring in stores from 2002; ‘The Environment’s The Point’ in 2007; Carbon Free Electricity from 2008; LED lighting technology in stores from 2008; Responsibility program 2008-2012; Raw material usage Jones et al. (2005a); Participation FOODCHAIN 2000-2002; Pirkka 100% biodegradable shopping bag from 2007 Water conservation Jones et al. (2005a); Maloni & Responsibility program 2008-2012; Brown (2006); Lai et al. (2010); Waste reduction Carter et al. (2000); Carter & Calculations of waste recovery rate from 2001; Jennings (2002); Jones et al. Introduction KELO environmental calculation (2005a); Maloni & Brown (2006); model in 2001; Participation FOODCHAIN Markley & Davis (2007); MVO 2000-2002; Aiming for packaging (2010); Lai et al. (2010); standardization from 2002; Recycling transbox crates from 2005; Recycling PET bottles from 2008; Responsibility program 2008-2012; Volume of Carter et al. (2000); Carter & KELO packaging model from 2001; Aiming for packaging Jennings (2002); Jones et al. packaging standardization from 2002; (2005a); Markley & Davis (2007); MVO (2010); Lai et al. (2010);

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The Greening of Home Brands – Elke W.A.M. Huisman Recycling Carter et al. (2000); Carter & ‘Let’s recycle’ project in 2004; ‘The Jennings (2002); Jones et al. Environment’s The Point’ in 2007; Target to (2005a); Maloni & Brown (2006); increase waste recovery to 90% by 2012; Markley & Davis (2007); Responsibility program 2008-2012; Store design Lai et al. (2010); K-environmental store diploma from 1997; Multi-energy monitoring in stores from 2002; LED lighting technology in stores from 2008 Genetically Jones et al. (2005a); Maloni & Kesko’s house brands GMO-free and no GMO modified foods / Brown (2006); products supplied by Kesko Food from 2006 biotechnology Use of chemicals / Jones et al. (2005a); Anselmsson pollution control and Johansson (2006); Markley & Davis (2007); Logistics Carter et al. (2000); Maloni & KELO transportation model from 2001; KELO Brown (2006); Markley & Davis transportation fleet monitoring model from (2007); MVO (2010); Lai et al. 2001; KELO logistic return model from 2001; (2010); ISO14001 environmental system for logistics from 2002; Reducing total distance driven by trucks from 2002; Economic driving trainings for truck drivers from 2002 Inventory Markley & Davis (2007); management

3. Kesko & Marketplace. Product safety food & non-food Kesko has an own Product Research that ensures the quality of groceries and speciality goods. The system complied with the ISO9000 standard in 2002, which is an important international recognition for competence (Kesko CSR, 2002). The Product Research unit has opinions on ethical issues in food production, such as gene technology, use of hormones and use of azo colours (Kesko CSR, 2002). In 2002, the product research unit audited 39 suppliers of which 29 were Finnish. The auditing was carried out in compliance with Kesko Food’s own protocol and mainly house brand suppliers were included. Furthermore in 2002 a total of 8,820 product samples were analysed, of which 7,622 were food products (Kesko CSR, 2002). In 2009 the name changed to the Pirkka Product Research and in February 2009 the research unit was awarded the ISO 17025 accreditation as it is the only laboratory in Finland responsible for quality assurance for the trading sector’s own brands (Kesko CSR, 2009). The Pirkka Product Research ensures the quality of the products purchased by Kesko, develops Kesko's own brand products, coordinates self-control, keeps abreast of food legislation, and is responsible for recipe and consumer services (Kesko CSR, 2009). In addition to food products, the unit controls the quality of some non-foods and home and specialty goods (Kesko CSR, 2009). In 2009, the Product Research audited 41 suppliers, of which 9 were Finnish. Mainly improvements were suggested related to the planning and hygiene of production facilities. A total of 8,177 product samples were analysed, 55% of which related to product development

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The Greening of Home Brands – Elke W.A.M. Huisman of Kesko's own brands. The number of samples related to new products was 1,169. A total of 1,393 batch control and other self-control samples were analysed (Kesko CSR, 2009).

In 2005 nearly all Kesko’s producers of imported fruit and vegetables are EurepGAP-certified for good agricultural practices in 2005 ( Kesko CSR, 2005 ), in 2006 this was 91% of producers of imported fruit and vegetables have the EurepGAP ( Kesko CSR, 2007 ). In 2007 Kesko reports that 91% of the producers obtained the GlobalGAP certification, which is the successor of EurepGAP. In 2009 most, 96.5%, of Kesko’s import suppliers of fruit and vegetables have GlobalGAP certificate.

Nutrition & Health The CSR report of 2004 stated that the aim is for house brands to always include nutritional values on the packaging of house brand products, although this is not always required by law (Kesko CSR, 2004). Any allergenic ingredients, country of origin, manufacturer’s name and domicile on domestic products are marked on house brand packages in addition to the obligatory markings. Furthermore instructions for package labeling information specify how different symbols relating to domestic origin, environmental aspects, and recycling are to be used ( Kesko CSR, 2004; 2006 ). In 2007, Kesko introduced the Guideline Daily Amounts (GDA) labeling to the Pirkka range and reduced the amount of salt in six and the amount of fat in four Pirkka products (Kesko CSR, 2007). Since 2008, fat, salt and sugar have been systematically reduced from the products whenever this has been possible and reasonable (Kesko CSR, 2009). The reduced contents of fat, sugar or salt are not replaced by new, supplementary ingredients. A total of 61 Pirkka products had been reformulated by the end of 2009 (Kesko CSR, 2009). In 2002, Kesko Food had 445 organic products and 215 products with environmental labeling. At that time Kesko had difficulties monitoring the retail sales of organic products and products with environmental labeling, because some products, like milk and meat, are delivered to K-stores straight from suppliers. Therefore Kesko’s own sales statistics do not show organic products’ real market shares. It is only for fruit and vegetables, mainly sold from warehouses, that the market share of 2% is relatively exact, but even in that case retailers buy organic vegetables from local producers outside Kesko’s range (Kesko CSR, 2009). At the end of 2009, Kesko Food had approximately 850 organic products and products with environmental labeling in its selection, 41 of these were Pirkka Organic products and 73 were Pirkka products with the Swan label (Kesko CSR, 2009).

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The Greening of Home Brands – Elke W.A.M. Huisman Kesko has provided consumers with information on health issues for decades. The Pirkka test kitchen, which is part of the Pirkka Product Research, has prepared recipes for K- store customers for 50 years and promotes in these a balanced and healthy diet. Diverse recipes are published in the Pirkka magazine, which is mailed to K-Group loyalty customers, in the online cookery book on Pirkka.fi, in the K-RuokaPirkka leaflet that is published monthly and available at all K-food stores, on the TV program “What are we having today?”, and on Pirkka product packaging (S. Päällysaho, 2010, October 6; K-Ruoka Pirkka, 2010 October). Besides the K-stores highlight health aspects in their customer service; a program is started to train about 500 specialists of healthy eating for K-stores in 2010 (Kesko CSR, 2009).

Sustainable trade & Social Compliance In the spring of 2000, Kesko suggested to all importers operating in Finland to formulate ethical principles for imports. The ethical principles Kesko apply to imports from developing countries and are based on United Nations Universal Declaration of Human Rights and Convention on the Rights of the Child and on International Labor Organization’s key conventions on Fundamental Rights and Principles at Work, (Kesko CSR, 2001). A working group with representatives from six companies has since been formulating common principles, and the commitment was signed by 13 major companies (Van Tulder et al., 2009). Quality control had been carried out in compliance with the Social Accountability SA 8000 standard, particularly for purchasing with a risk component like imports from developing countries until 2004. In 2000 the decision was made that suppliers should have compliance with the SA 8000 standard, in 2000 one company had the SA 8000 certificate, in 2001 eleven of Kesko’s suppliers received the certificate and 17 in 2002 (Kesko CSR, 2003). In 2005 Kesko became a member of Business Social Compliance Initiative (BSCI) and since then the SA8000 standard has been complemented with BSCI audits (Kesko CSR, 2009). According to Van Tulder et al. (2009) Kesko has been the first Scandinavian company to publish its compliance to the international Social Accountability SA8000 standard. However so far, compliance with SA8000 or BSCI is not yet a prerequisite for supplying Kesko. Although the number of audits is increasing, just a fraction of the suppliers yet have been audited. As said during the sustainability meeting, BSCI is really on its starting point, currently just a few suppliers have this certificate. Between 2005 and 2009 Kesko has performed BSCI audits and 18.1% of the results were good, at 24.4% of the companies improvements are needed and 57.5% of the companies were not compliant. Mayor fallacies

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The Greening of Home Brands – Elke W.A.M. Huisman were working hours, compensation, documentation, health and social facilities and occupational health and safety (Kesko CSR, 2009). In 2007, Kesko has set up a steering committee which consists of representatives from the division parent companies, like trade managers and laboratory managers. This steering committee is originated to develop and coordinate responsible purchasing. In monitoring the social compliance of its suppliers, Kesko primarily focuses on suppliers operating in the 'high- risk' countries. In 2009 for example the Steering Group focused on the monitoring work in China, the risk classification of suppliers in high-risk countries, and the setting up and introducing a database of suppliers in high-risk countries (Kesko CSR, 2009). Furthermore projects were launched to improve the efficiency of supplier audits in developing countries. As Kesko wants to increase market area in the East, it has set up two monitoring offices in Asia, named Kesko Global Sourcing. These two offices currently perform 160 audits per year in Asia (ST&PIW, 2010 May). In the CSR reports from 2001 till 2004 Kesko was mentioning a few Fair-trade products it had in its assortment, like Fair-trade coffee, tea, chocolate, cocoa, honey, sugar, bananas and mangoes. From 2005 specific numbers of Fair-trade products were appointed. In 2005 Kesko had 43 Fair-trade products in its assortment and 4 in the Pirkka range (Kesko CSR, 2005). In early 2007, Kesko signed a cooperation agreement with the Fair-trade Association for Promoting Fair-trade in Finland. Kesko aimed to be the market leader in the sales of Fair- trade products in Finland (Kesko CSR, 2007). Kesko has a comprehensive cooperation agreement with Fair-trade Finland and a licence for Fair-trade products in the Pirkka range. At the end of 2009, Kesko Food had 150 Fair-trade products (120 in 2008) in its selection, of which 28 (16 in 2008) were Pirkka products (Kesko CSR, 2009). According to the statistics of Fair-trade Finland, Kesko Food had 112 Fair-trade suppliers in 32 countries, and the products sold by Kesko Food generated more than €210,000 in Fair-trade premium for social development projects. In the Pirkka product range the number of Fair-trade products grew by 42% and in Kesko Food range by 25% (Kesko CSR, 2009). So far the Fair-trade system is the only audit system applying both social and environmental criteria that grants the label suitable for consumer marketing to goods produced by the suppliers it has audited (Kesko CSR, 2009).

With regard to sensitive ingredients, Kesko replaced in April 2007 its own coffee brand, Costa Rica, by the UTZ certified Pirkka Costa Rica. The new coffee soon became the most responsibly produced bought coffee in Finland. The UTZ certification is based on complying with the demanding Code of Conduct, which includes both environmental and social aspects.

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The Greening of Home Brands – Elke W.A.M. Huisman Consumers can trace the UTZ certified coffee all the way back to the coffee plantation with the help of the coffee pack’s ’best before’ labeling (Kesko CSR, 2008). Kesko describes in the CSR report of 2007 that associations like WWF Finland and Greenpeace paid a lot of attention to the use of palm oil in food industry. Furthermore it reports that suppliers producing Kesko’s house label products are not obliged to use sustainable palm oil in their production. The manufacturer of pure palm oil which Kesko Food sells to HoReCa follows the principles of Round Table on Sustainable Palm Oil (RSPO) (Kesko CSR, 2007). It is surprising however that the report of 2007 is the only report that discusses sustainable palm oil. However during the Sustainable Trade and Product Integrity workshop in 2010 it became clear that Kesko was the first partner of AMS who added three CSPO products (Certified Sustainable Palm Oil) to the AMS tender. At that time results were not yet known, however the decision was made that when the price for CSPO cookies was 20% higher, then an evaluation is needed to decide to move on or not (ST&PIW, 2010 May). Kesko has partnerships with WWF and Marine Conversation Society for developing sustainable fishery strategies. In 2004 Kesko joined the WWF program for protecting the Baltic Sea. In 2006 the raw material used in EURO SHOPPER™ fish fingers was changed from Baltic Sea cod to cod sourced from the Barents Sea, and two products under development were cancelled as their raw materials were regarded as unsustainable (Kesko CSR, 2006). Furthermore Kesko has a ‘fish and shellfish statement’ that guides both Kesko Food's and K-food stores' own purchasing to secure responsible fishing and cultivation of fish. The suitability of fish caught in neighbouring areas in selections is evaluated with the help of WWF Finland's Fish Guide. In practice, Kesko has delisted all fish suppliers that are not on the WWF list (ST&PIW, 2010 May). Regarding fish from distant areas, Kesko Food relies on www.fishonline.org, the website of the Marine Conservation Society of the UK. When making decisions on the sales of fish both from neighbouring and distant areas, focus is on fish species that are widely available and selling endangered fish species is avoided (Kesko CSR, 2009).

The only practice with regard to animal welfare published in Kesko’s CSR reports is regarding free-range eggs. Since autumn 2008, all Pirkka eggs have been produced either in free-range cage systems, organic poultry houses or enriched cages (Kesko CSR, 2009). This statement is prepared well in time for the EU decision to phase out conventional battery cages throughout the EU from the beginning of 2012, requiring that only eggs laid by hens in free- range production systems or enriched cages can be produced and sold (Kesko CSR, 2009).

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The Greening of Home Brands – Elke W.A.M. Huisman Local sourcing In 2004 the proportion of domestic purchases in K-food stores accounted for 90% in Finland. In addition to Kesko’s basic assortment, K-retailers may have many local suppliers for bread, meat, processed meat, vegetables, potatoes, flour, juices, jam and dried spices (Kesko CSR, 2004). K-retailers bought such products directly from local suppliers to a value of nearly 400 million Euros (Kesko CSR, 2004). This means that the local sourcing is done by Kesko’s independent retailers themselves, like a K-retailer who buys bread from a local bakery (ST&PIW, 2010 May). In 2005 a campaign was designed to focus on the benefits of choosing Finnish products in encouraging employment, and was carried out in cooperation with various organizations dedicated to promoting Finnish food and domestic producers ( Kesko CSR, 2005 ). 500 national and local suppliers took part in the campaign and held product demonstrations and tastings, and provided customers with information about natural Finnish products and farm tourism services ( Kesko CSR, 2005 ). After the campaign the percentage of consumers that consciously increased their domestic purchases went up from 15% to 26% ( Kesko CSR, 2005 ). The report of 2007 mentions that ‘Buying from local producers and suppliers is part of Kesko’s social responsibility. When products are sourced locally, it’s easier to know where they come from, and provides employment for local people as well’ (Kesko CSR, 2007). The ability of K-retailers to adapt their offering to local demand and needs is seen as a particular K-Group strength on the Finnish retail arena (Kesko CSR, 2007). In 2009 more than 70% of Kesko’s purchases come from suppliers operating in Finland (Kesko CSR, 2009). Furthermore Kesko actively increases the amount of local purchases and encourages K- retailers to purchase locally. Whenever possible, Kesko has Pirkka products manufactured in Finland. For example, all Pirkka milk and Pirkka soft drinks are made in Finland (Kesko CSR, 2009). See table VI for an overview of the empirical findings at Kesko.

Table VI: Dimensions of Marketplace mentioned in literature Variables Theoretical Empirical findings Kesko Ethical trading / Carter & Jennings (2002; 2004); SA 8000 from 2000; Fair-trade assortment from fair trade Roberts (2003b); Jones et al. 2001; Pirkka Fair-trade products from 2004; BSCI (2005a); Maloni & Brown (2006); from 2005; Steering committee for responsible Salam (2009) purchasing set up in 2007; Cooperation with Fair- trade Association Finland from 2007; UTZ certified Pirkka Costa Rica from 2007; Licence for Fair- trade products in the Pirkka range from 2009; (Sustainable) Maignan (2002); Carter & Jennings SA 8000 from 2000;Organic products from 2001 procurement (2002); Roberts (2003b); Maloni & and increase from 336 in 2001 to 850 in 2009; In

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The Greening of Home Brands – Elke W.A.M. Huisman Brown (2006); MVO (2010); Lai et 2001 30 organic Pirkka products & 10 Pirkka al. (2010); products with environmental labelling; WWF program for protecting the Baltic Sea from 2004; BSCI from 2005; Change of cod species in 2006; Steering committee for responsible purchasing set up in 2007; UTZ certified Pirkka Costa Rica from 2007; No use of palm oil from 2007; RSPO principles from 2007; In 2009 41 Pirkka Organic products & 73 Pirkka products with Swan label; Purchasing viaWWF Finland's Fish Guide; FSC Food / product Carter & Jennings (2002; 2004); Kesko/ Pirkka Product Research set up before safety Carter (2005); Jones et al. (2005a); 2001; Kesko Product Research complied with Jones et al. (2005b); Anselmsson & ISO9000 from 2002 and ISO 17025 from 2009; Johansson (2006); Maloni & Brown Sample testing from 2002; EurepGAP-certified (2006); producers from 2005; Animal welfare Jones et al. (2005a); Jones et al. Free-range Pirkka eggs since 2008 (2005b); Anselmsson &Johansson (2006); Maloni & Brown (2006); Nutrition and MVO (2010); Anselmsson and Kesko/ Pirkka Product Research set up before Health Johansson (2006); Maloni & Brown 2001; Balanced, healthy diet recipes in various (2006); Heasman (2008); media; Organic products from 2001 and increase from 336 in 2001 to 850 in 2009; Nutritional values and allergenic ingredients on packaging of house brand from 2004; GDA labeling to the Pirkka range from 2007; Reduced amounts of salt, sugar and fat in Pirkka products from 2007; 61 Pirkka products reformulated by end of 2009; Training of 500 specialists of healthy eating for K-stores in 2010; Supply chain / Carter et al. (2000); Maignan Supplier audits from 2002; Kesko Global Sourcing supplier (2002); Carter and Jennings (2002; set up in Asia; UTZ certified Pirkka Costa Rica relationships and 2004); Roberts (2003b); Carter from 2007; monitoring (2005); Maloni & Brown (2006); Heasman (2008); CommDev (2010) Non-domestic Sen and Bhattacharya (2001); operations Anselmsson and Johansson (2006) Minority/women- Maignan (2002); Carter and owned purchasing Jennings (2002; 2004); Carter (diversity) (2005); Salam (2009) Sourcing local and Maignan (2002); Jones et al. Campaign in 2005 to promote domestic food; 70% regional foodstuffs (2005a); Jones et al. (2005b) of sourcing is local in 2009 Working Maignan (2002); Carter & Jennings Fundamental Rights and Principles at Work conditions & safety (2002; 2004); Carter (2005); Jones included in ethical principles Kesko from 2001; at supplier plant et al. (2005b) BSCI from 2005; Human / worker Maignan (2002); Carter & Jennings Human rights included in ethical principles Kesko rights at supplier (2002; 2004); Carter (2005); Jones from 2001; BSCI from 2005; plant et al. (2005b); Salam (2009) Child labor Maignan (2002); Carter & Jennings Rights of the Child included in ethical principles (2002); Jones et al. (2005b) Kesko from 2001; BSCI from 2005;

4. Motivations of Kesko for CSR The CSR report 2009 mentions six drivers of Kesko for having a responsible operation. First of all responsibility is part of competitiveness, it is a tool in the competition for investors, personnel and customers. Secondly in addition to financial indicators, stakeholder groups evaluate the company's operations in terms of other indicators as well. Additionally responsibility is about better leadership aimed at a good working community, and at

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The Greening of Home Brands – Elke W.A.M. Huisman environmental efficiency contributing to cost-efficiency. Good performance in environmental and social responsibility improves financial results and respectively, good financial results enable environmental and social responsibility to be developed further. Responsibility improves the corporate image, if the company is seen as a forerunner. Lastly, responsibility is about managing reputation risks, which ensures a steady development in sales, profitability and share value (Kesko CSR, 2009; S. Päällysaho, 2010, October 6). According to Mr. Päällysaho the most important motive is that responsibility is part of competitiveness; it is used in the competition for investors, personnel and customers (S. Päällysaho, 2010, October 6). Therefore Kesko is actively following the situation in the market and competitors as Kesko’s target is to be a forerunner in this area. All drivers mentioned above have in one way or the other something to do with the competitiveness of the firm. Improving corporate image, managing reputation risk, improving financial results by cost-efficiencies and good performance in environmental and social responsibility, these have influence on the retention of investors, personnel and customers. This retention is needed to be competitive successful in your market.

These motives have been mostly the same over the years, but as the issues within CSR are reviewed continuously, the areas on which the emphasis and efforts are put on have been changed according to the changes in Kesko’s operating circumstances (S. Päällysaho, 2010, October 6). In 2009 two responsibility issues were considered as in need of most efforts. Firstly, the leverage of responsibility in the business operations of the K-Group stores can remain inadequate unless communication to suppliers, K-retailers and customers is effective enough. This means that without effective communication nor Kesko’s suppliers, nor the independent K-retailers, nor the customers, can leverage the responsibility to the Kesko Food’s operations itself. The second responsibility issue is purchasing from high-risk countries as it involves a concern about violations of labor (S. Päällysaho, 2010, October 6). Apart from these two major responsibility risks, other challenges with high risk for Kesko are; product safety, supply chain quality assurance in the supply chain or product control, the loss of customer confidence and health hazards (S. Päällysaho, 2010, October 6). These risks drive Kesko into responsibility actions in order to prevent themselves from missteps which could lead to reputational damage.

Apart from being motivated by risks, Kesko is motivated to act responsible as it sees opportunities in responsibility. Kesko notices the following opportunities for various parts of

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The Greening of Home Brands – Elke W.A.M. Huisman the business, which are mentioned in both interview and annual reports; First of all Kesko’s product selections include abundant alternatives with which Kesko and customers together can reduce the ill effects of consumption and promote sustainable development. The responsibility inherent in them creates significant possibilities to improve competitiveness and increase business. Secondly, climate change, as it progresses, sets new requirements for construction and agriculture - both sectors being Kesko's operating sectors. Thirdly the implementation of the EU’s Integrated Energy and Climate Policy, and the Finnish Government's energy policy report may increase energy prices, adding to energy saving pressures. Fourth, Kesko's direct purchases and purchases outside Finland via other importers account for about one third of Kesko's total purchases. The climate change may have an impact on the sources and availability of products both in and outside Europe. It is possible that prices rise in this context; however this has less influence on Kesko as its locally- and nationally-sourced stake is very large. Finally, obesity and other health problems have become increasingly widespread in the developed countries. Promoting healthy ways of life and eating habits is a key opportunity and a strategic goal for Kesko Food. Furthermore Kesko believes product safety, reliability, and ethics will gradually rival price in communications and marketing (Kesko AR, 2009; S. Päällysaho, October 6 th 2010).

Concluded can be from above that Kesko has three main motivations for acting responsible, first of all to maintain or improve its competitive advantage, second of all it is driven by various risks which need to be diminished and thirdly because there are opportunities in the market of which Kesko can take advantage. See table VII for an overview of Kesko’s motivations with regard to CSR.

Table VII: Motivations for CSR Kesko Variables Theoretical Empirical findings Kesko Self-presentation and Snider et al. (2003); Jones et al. (2005a); Corporate image –forerunner; impression management responsibility is about better leadership Economical-financial Miles & Covin (2000); Piacentini et al. Improvements financial results; perspectives (2000); Price WaterhouseCoopers (2002); steady development in sales, Orlitzky et al. (2003); Jones et al. profitability and share value; (2005a);Van de Ven & Graafland (2006); opportunities in the market Lattemann et al. (2007); Tetrault Sirsly & Lamertz (2008) Reputation Miles & Covin (2000); Price Corporate image -forerunner; WaterhouseCoopers (2002); Orlitzky et al. Managing reputation risks; (2003); Tetrault Sirsly & Lamertz (2008); Lee et al. (2009) Brand / brand loyalty Spar and La Mure (2003); Musso & Risso

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The Greening of Home Brands – Elke W.A.M. Huisman (2006) Customer demand Piacentini et al. (2000); Price WaterhouseCoopers (2002); Musso & Risso (2006); Lai et al. (2010) Marketing - Publicity Maignan et al. (2002); Van de Ven & Product safety, reliability, and ethics Graafland (2006); Musso & Risso (2006) will gradually rival price in communications and marketing Innovation Maignan et al. (2002) Industry trends Price WaterhouseCoopers (2002) Increase employee Maignan et al. (2002); Van de Ven & Responsibility is tool in the commitment / loyalty Graafland (2006); Musso & Risso (2006); competition for personnel Competitive / market Miles & Covin (2000); Price Responsibility is seen as part of position WaterhouseCoopers (2002); Spar and La competitiveness Mure (2003); Jones et al. (2005a); Transaction costs Price WaterhouseCoopers (2002); Spar Cost-efficiencies and La Mure (2003); Jones et al. (2005a); Pressure from Piacentini et al. (2000); Ernst & Young Responsibility is tool in the stakeholders & investors (2002); Price WaterhouseCoopers (2002); competition for investors; Tetrault Sirsly & Lamertz (2007) Stakeholder groups evaluate the company's operations on non- financial indicators Increased sense in social Ernst & Young (2002); Price Environmental and social responsibility of company WaterhouseCoopers (2002) responsibility can be developed itself/ CEO/Board further when financial results are commitment good Customer loyalty Piacentini et al. (2000); Musso & Risso Responsibility is tool in the (2006) competition for customers Store loyalty Musso & Risso (2006) Inclusion in sustainability Musso & Risso (2006); indexes Market differentiation Piacentini et al. (2000);

5. Results of Kesko’s CSR practices Kesko’s responsibility program 2008-2012 describes detailed which objectives and actions are set up in 2008 and monitors its performance in accomplishing these objectives in 2009. For example in 2008 for Kesko’s two monitoring offices in China was to make 160 factory visits to Kesko’s suppliers annually. In 2009 161 factories were visited. Or by the end of 2010 all Pirkka products with high salt, sugar and fat contents have to be reformulated. At the end of 2009 61 Pirkka products were reformulated (Kesko CSR, 2009). With regard to local sourcing, climate change, energy efficiency, transportation, recovery and martial efficiency, responsible purchasing, responsible products, etc. Kesko has set up objectives and activities which have to be accomplished by the end of 2012. Apart from this ‘new’ responsibility program 2008-2012, from the first CSR reports onwards output is measured and compared to previous years. See table IIX for an overview of the measured CSR results at Kesko.

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The Greening of Home Brands – Elke W.A.M. Huisman Table IIX: Measured results by Kesko 2009 2008 2007 2006 2005 2004 2003 2002 2001 Environment Consumption of electrical energy in real estate 862 820 825 962 919 719 730 644 628 (GWh) Consumption of heat energy in real estate (GWh) 362 320 299 316 299 296 337 282 290

Water consumption in real estate (1,000 m3) 686 663 651 682 650 669 713 545 546 Emissions from the production of electrical and 114,3 119,3 206,0 250,2 254,3 263,1 311,0 231,7 293,5 heat energy used. Climate change (tn CO2 eq) 52 99 26 52 67 17 95 02 09

Transportation managed by Keslog in Finland 38,90 38,20 36,30 17,02 16,14 20,12 19,70 15,36 17,84 kilometres (1,000 km) 0 0 0 0 9 6 0 5 0

Transportation managed by Keslog in tons 1,826 1,834 1,813 586,6 579,8 576,0 609,0 697,0 658,5 ,000 ,422 ,813 00 00 00 00 00 52 Waste in tons 6,539 6,503 6,926 7,296 7,607 8,298 8,346 8,304 8,775 • Organic waste - 388 419 498 574 874 967 931 791 • Energy waste - 574 519 481 455 359 363 322 341 - 383 376 797 902 764 437 512 620 • Wood waste - 56 136 168 153 174 193 239 210 • Paper - 345 301 253 237 248 327 267 185 • Film plastic Waste of which for recovery (%) (including 84.6 88.3 88.6 89.2 89.8 89.4 89.8 89.7 85.8 organic waste) Marketplace Supplier audits by Pirkka Product Research 41 31 28 ------Products with organic labeling / environmental 850 600 500/ 500/ 500/ 450/ 450/ 445/ 336 / labeling products total total 550 700 500 200 200 215 221 Pirkka products with organic labeling / 41/ 30/ 35/31 33/25 34/- 33/- - - 30/10 environmental labeling products 73* 59* Fair-Trade products / Fair-trade Pirkka products 150/ 120/ 64/ 8 48/ 5 43/ 4 13/3 9/0 8 /0 8/0 28 16 Suppliers with SA8000 certification 30 23 16 28 24 24 19 17 11 Suppliers with BSCI audits 119 35 23 27 42 31 - - - *=Swan label

Over the years Kesko has been rewarded for its responsible actions and extensive reporting. In 2004 it was chosen as best in its sector for the Dow Jones Sustainability Index of European companies (Kesko CSR, 2004). Furthermore the Kesko Corporate Responsibility Report for 2004 was ranked the best in Finland ( Kesko CSR, 2005). In 2005 the Kesko Corporate Responsibility Report for 2005 was ranked the best in the world in the trading sector in the Global Reporters Survey 2006 ( Kesko CSR, 2006 ). In 2009 Kesko has been included in the Dow Jones sustainability indexes for the seventh year in succession. As in 2008, Kesko was chosen for the list in both of the indexes, DJSI World and the European DJSI STOXX for the period 2009/2010. Kesko is the only Nordic trading sector company included in both indexes (Kesko CSR, 2009). In the 2009 assessment, Kesko gained the subsector's best score for its innovation management, risk management, standards for suppliers, environmental reporting,

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The Greening of Home Brands – Elke W.A.M. Huisman operational eco-efficiency, and corporate operating principles for preventing corruption and bribery (Kesko CSR, 2009). In the Sustainability Yearbook 2010 published by SAM Group qualified Kesko's responsibility work in the SAM Silver Class in the food and drug retail sector, as in the previous year. No companies in this sector qualified in the gold class. Kesko was recognised as the 'Sector Mover', a qualification given to the company that has achieved the biggest proportional improvement in its sustainability performance (Kesko CSR, 2009). In January 2010, Kesko was chosen for the sixth time for ‘The Global 100 Most Sustainable Corporations' list published by World Economic Forum. Eleven indicators of sustainable development were used to evaluate companies. Environmental indicators were used to assess companies' energy and water consumption, waste ratio and carbon dioxide emissions in relation to their net sales. Kesko was placed 33rd.

It is noteworthy that Kesko puts a lot of attention to the environment; however it is to a lesser extent involved in marketplace practices like ethical trading, human rights, animal welfare, etc. Also from the inclusion in various sustainability indexes can be concluded that Kesko CSR performance is mostly appointed towards the environment.

6. Kesko & Stakeholders The Finnish consumer According to Kesko the Finnish consumer interest in corporate responsibility is continuing to increase, despite the fact that purchasing decisions are strongly based on price. Responsibility is seen as embracing high-quality products, the maintenance of services, good human resources policies and wellbeing at work, high standards of environmental protection, promotion of equality, and improving the working conditions of employees in manufacturing operations (Kesko CSR, 2009; S. Päällysaho, 2010, October 6). The Finnish consumer behavior is mostly affected by quality, safety and the origin of the product (Laposte Export Solutions, Finland, 2010). Brands are considered a strong signal of quality. The Finns favor national products especially with food products, besides that conformity with European norms is seen by consumers as a guarantee of quality. Mr. Päällysaho offered me study conducted to the ‘Eating Habits in Finland 2010’, that mentioned that food produced nearby, locally grown food, is considered important and that it highlights the values of national origin. Please see at the end of this case (p. 61) for all results of the study. 44% of the respondents seeking to buy food produced as close as possible, especially those respondents over 50 (Eating Habits in

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The Greening of Home Brands – Elke W.A.M. Huisman Finland, 2010). Most common reasons to buy locally produced goods are supporting Finnish employment or businesses, reliability and safety, a desire to favor buying Finnish, and quality and freshness ( Kesko CSR, 2005 ). According to Kesko the same counts for ecological labels, these are seen as a guarantee of quality; therefore it is not surprising that the Finnish consumer highly values Swan products. Swan is the official Nordic Eco label and is available for around 60 product groups (ST&PIW, 2010 May). According to ‘Eating Habits in Finland 2010’ the popularity of organic products has remained relatively stable during the reference period. About a quarter of the respondents, and mainly parents, want to use as often as possible organic products. 57% of Finnish believe organic products keep the environment cleaner. However, nearly one-third of respondents did not believe in organic products to be less environmentally damaging (Eating Habits in Finland, 2010). In Finland 82% of the population knows what Fair-trade means and 49% of the Finns would like to buy more, and the most important reason why they buy these products is that they want to support the farmer or producer: be fair towards them (TNS Gallup 2008; TNS Gallup 2009 both mentioned in Kesko CSR, 2009). Therefore Kesko beliefs it took the right decision to increase the offering and selection of Pirkka Fair-trade products. Furthermore is mentioned by Kesko that Pirkka Fair-trade products lower consumers' purchase threshold because surveys show that the Pirkka range is regarded as favourably priced (Kesko CSR, 2009).

In the consumer’s eyes the price is less important when products are of good quality, technological advanced and conforming environmental protection criteria (Laposte Export Solutions, Finland, 2010). Mr. Päällysaho confirmed this when mentioning that, despite the fact that purchasing decisions are strongly based on price, the consumer interest in corporate responsibility is continuing to increase, (S. Päällysaho, 2010, October 6). According to ‘Eating Habits in Finland 2010’ one-third of the respondents are paying close attention to environmentally friendly packaging. 35% believe they can slow down climate change on their own food choices (Eating Habits in Finland, 2010). Kesko recognizes its key role in supporting sustainable production and consumption by offering sustainable alternatives. However sustainability is not (yet) the main reason behind the purchasing decisions of the average consumer. The Finnish consumer puts increasingly more importance to health and responsibility (Van Tulder et al., 2009). In the consumer survey on companies' responsibility made for Kesko Food, product safety was rated number

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The Greening of Home Brands – Elke W.A.M. Huisman one among responsibility factors – 83% of respondents considered it very important or important (TNS Gallup 1/2010). Please see Figure I for the TNS Gallup results.

Figure I: Consumer expectations of responsibility in food trade (survey of Kesko Food on corporate responsibility conducted by TNS Gallup 1/2010)

Kesko believes it has a major role in shaping families' healthy way of living and overall quality of life. Therefore health aspects have been highlighted in the product development of the Pirkka range and fat, salt and sugar will be reduced. As previously mentioned information is provided on health issues via various channels like the Pirkka magazine (S. Päällysaho, 2010, October 6). So Kesko tries to make healthy choices easier; furthermore by creating the most environmentally friendly supply chain possible, from producer to customer, it actively develops responsible operating practices, products and services (Van Tulder et al., 2009).

Kesko sees its customers as the key stakeholder group. The aim is a satisfied customer. K- food stores are visited by nearly 900,000 customers every day. Successful customer encounters every time are a prerequisite of overall success and are ensured through favorable prices. Kesko believes that favorable prices are a prerequisite for growth and customer satisfaction (S. Päällysaho, 2010, October 6). Local K-retailers are responsible for the customer service, competence of personnel, quality, and profitability of business. Making use of customer data, the retailer builds a selection and service that meets customer needs, offering, for example, food from local producers to complement joint selections of the chain

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The Greening of Home Brands – Elke W.A.M. Huisman (S. Päällysaho, 2010, October 6). The customer data is obtained with the help of customer loyalty programs, K-Plussa customers can be offered exactly the selections and services they need locally (S. Päällysaho, 2010, October 6). Furthermore customer satisfaction with the Group's performance is measured systematically (Van Tulder et al., 2009).

Employees The CSR report (2009) mentions that responsibility is part of competitiveness; it is a tool in the competition for personnel. Kesko’s aim is to be the most attractive workplace in the trading sector and therefore commitment, job satisfaction of current employees and attractiveness to other trading sector professionals and students is important. Kesko sees a good community is a prerequisite for the employees' wellbeing and excellent performance. Progress in this area is monitored in Kesko through a regular personnel survey evaluating management quality (Kesko CSR, 2009). Kesko does write about the importance of job satisfaction, however it is not stated which factors Kesko beliefs do exactly lead to satisfaction with the job or not. Equality, training opportunities and job-rotation are mentioned in the report. Kesko’s responsible behavior is not listed, so it is not clear to what extent the employees value the responsible behavior of Kesko and if Kesko recognizes this. However employees are involved in CR activities though day-to-day activities. As supporting Kesko’s responsibility work, the Code of Conduct guidebook ‘Our Responsible Working Principles’ is available to all personnel in all operating countries by mother language. Furthermore Corporate Responsibility is integral part of other training and education. Kesko’s own experts in CR and external specialists are participating in training and planning of the training material (S. Päällysaho, 2010, October 6).

NGOs Researchers, nongovernmental organizations, and the media can be expected to pay increasing attention to investigating any shortcomings in the supply chain helping consumers to distinguish between responsible and irresponsible trade (Kesko CSR, 2009; S. Päällysaho, 2010, October 6). Therefore Kesko is collaborating with a number of institutions, governmental- , non-governmental organizations and business community, to develop solutions and contribute to societal issues. Kesko recognizes that, in order to be able to actively monitor and foresee changes in society, it needs to have close contacts with NGOs, authorities and other decision-makers. Besides this, it has to actively participate in national and international organizations in the trading sector (S. Päällysaho, 2010, October 6). The

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The Greening of Home Brands – Elke W.A.M. Huisman interaction with stakeholders is on a regular, systematic, and measurable basis so that stakeholder groups to feel that Kesko meets their expectations and for Kesko to benefit from cooperation in developing its operations (Kesko CSR, 2006). According to Van Tulder et al. (2009) civic organizations and other NGOs are in Finland overall not as critical as in other European countries. Van Tulder et al. (2009) elaborate that their opinions come clear, but that they are not aggressive.

7. Position of Kesko in the market All Kesko stores in Finland are run by a retail entrepreneur (Kesko AR, 2008). The entrepreneur buys its groceries from the group and pays something similar as franchise fee (Swoboda et al., 2009). The K-Group is responsible for the traditional wholesaling; it manages the store network, business concepts, chain marketing, data systems and training. The entrepreneurs are responsible for the local marketing, store employees, the result and profit of the store (Niilola et al. in Swoboda et al., 2009). Compared to most other European grocery markets is the Finnish grocery market relatively small as a result of the small population size and the rather moderate level of food consumption expenditure (Swoboda et al., 2009). For example, the mean consumption expenditure for food and non-alcoholic beverages per household in 2005 was among the lowest of the mature European Union countries, although higher than the new member countries (Eurostatt cited in Swoboda et al., 2009). In addition to being quite concentrated, the competitive situation of the Finnish retail market has traditionally been quite stable and closed and is furthermore characterized by regional competition due to low population density. Therefore are, all ready for years, best store sites and competing for regional market share important aspects of the Finnish grocery competition (Swoboda et al., 2009). However last few years the competitive situation among leading retailers has changed significantly, as the K-Group (Kesko) has lost a part of its market share, while the S-Group (Coop) has won a greater part of the market and has been market leader since 2005 (Paavola et al. cited in Swoboda et al., 2009). According to the Finnish Grocery Trade report (PTY) 2008-2009 is the market share among Finnish retailers divided as follows; S-Group 41%, K-Group 33.9%, Suomen Lähikauppa 11.9%, others (including Lidl 4.7%) 13.1%. Finland’s membership of the European Union in 1995 resulted in changes in regulation; however it took till 2002 before the first foreign-owned grocery retailer, the German hard discounter Lidl, entered the market (Swoboda et al., 2009). Before Lidl, the

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The Greening of Home Brands – Elke W.A.M. Huisman Finnish retailers before competing primarily with product range, ease of buying, shop environment and customer loyalty systems, furthermore there were only fairly small price differences (Niilola et al., 2003 in Swoboda et al., 2009, p. 189). Lidl forced the domestic market leaders to review their prices, particularly in regions that Lidl had entered (Swoboda et al., 2009, p. 190). According to Swoboda et al. (2009) is Kesko trying to differentiate itself from competitors by emphasizing corporate responsibility, food ideas and recipes, local entrepreneurs and private labels in communication and marketing. The reasons behind the success of market leader S-Group are efficient chain control and logistics, “good store concepts, intensive opening of new stores, customer ownership and good community relations through regional cooperatives” (Swoboda et al., 2009, p. 190).

Although Lidl entered the Finnish market in 2002, international competition has traditionally been rather scarce in the Finnish retailing market. The small market size, long distances, high density of outlets, regulations on land use and building, and indigenous culture and language have been among major constraints on internationalization of retailing in Finland (Niilola et al., 2003 in Swoboda et al., 2009). As an answer to the increasing price competition from both international competitors entering the market, as from existing competitors, the number of private labels has been growing. However the private labels just cover only 9% of the Finnish grocery market in 2007, compared to the rest of Europe where this percentage is approximately between 20-40% (PTY, Finnish Grocery Trade 2008-2009). The differences in market share of private labels among Finnish retailers are significant; K-Groups private label penetration in Finland is the highest, with 15% of K-Group’s turnover coming for private label products. In five years the private labels’ share of sales is expected to be 25% (Tuormaa in Swoboda et al., 2009). Private label strategies in Finland are still mostly focused on cost effectiveness (Elg & Paavola in Swoboda et al., 2009), however more high price, premium quality positioned store brands, for example Pirkka Parhaat (translation: Best of Pirkka), are emerging partly due to Lidl’s entry to the market (Tuormaa in Swoboda et al., 2009).

Kesko is a well-recognized brand in the Finnish market; it has strong brand recognition and a good reputation for both quality and value on private label brands. Over three million (out of five million population in Finland) consumers are signed up for the loyalty card of Kesko, the Plussa card (S. Päällysaho, 2010, October 6). This means Kesko has rather strong loyalty card and brand recognition with Finnish consumers.

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The Greening of Home Brands – Elke W.A.M. Huisman So Kesko’s response to price competition was increasing the number of private labels, lowering the prices of thousand Pirkka products and by improving the efficiency of operations with a new operations control system (Van Tulder et al., 2009). However Kesko will stay probably vulnerable on issues relating to pricing as Lidl’s presence in the Finnish market is growing fast. So Lidl has become a fierce competitor in the Finnish market, and lowered profit margins for everyone with its hard discount style. However as mentioned before there is still potential for international players in the Finnish market, this could challenge Kesko's position in the long run. Kesko's corporate structure, with its reliance on independent retailers, can be vulnerable for these new competitors. According to Petri Mikkela, former buyer at Kesko, the Kesko shops are mid-tier/quality segment, because of the independent retailers there is quite some variation in the quality of the shops. These independent retailers are never the cheapest; furthermore they always want to add something, like a wider assortment or more regional products. A saying at Kesko is “we have the best shops, but also the worst”.

8. End remarks Kesko When comparing practices on environmental and marketplace level it is noteworthy that Kesko’s environmental policies are extensively elaborated. Kesko puts a lot of attention to the environment. From 2001 its environmental impact is measured on various fronts like energy consumption, CO2 emissions, waste, transportation and water consumption. For example food safety is not mentioned in the reports from 2000-2002. From 2003 onwards more is written on food safety. In the beginning the environmental part of the report is mostly focused internally and not externally on the supplier’s side. The environmental impact of the products is not covered in the report. For its extensive environmental policy Kesko has been rewarded last years, it has won various awards for sustainable development, like Eco-efficiency in the Dow Jones Assessment. Kesko’s corporate responsibility is seen as a tool in the competition for customers, investors and personnel. The underlying motive has a competitive nature. Kesko aims to be seen as a forerunner in the trade industry and responsibility improves the corporate image. In 2008 Kesko announced its responsibility program for 2008-2012. In the program targets are set on issues that play internationally a role and issues closely related to Kesko and its divisions. This is a guide for Kesko for the coming years to assure that various CSR issues are improved. Kesko mentions that these issues are estimated to create business opportunities and generate competitive advantages (Kesko CSR, 2009).

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The Greening of Home Brands – Elke W.A.M. Huisman In the reports the customers, operational efficiency, and competitiveness play a central role. This is assured in the chain operations defined in the chain agreement with Kesko Food and the independent K-food retailers. According to Mr. Päällysaho (2010) chain operations ensure customer-orientation, operational efficiency, competitiveness and the attainment of competitive advantages. The ‘objectives and strategic emphasis’ section in the CSR report of 2009 states that Kesko Food’s key objective is to increase market share. The implementation of Kesko Food’s strategy aims at growth faster than the market, increased customer satisfaction and competitiveness (Kesko CSR, 2009). Apart from individual initiatives with regard to corporate responsibility, Kesko has industry wide initiatives. An example of an industry wide initiative is that Kesko proposed in 2000 that all importers operating in Finland should sign ethical principles for import, which lifted the ethical standards in the whole supply chain. Furthermore by actively searching for CSR related measures Kesko tried to create entry barriers for newcomers (Van Tulder et al., 2009). In this way the CSR level of the whole country is raised, which gives companies a competitive advantage as well through regulation. An example is that Kesko requested for more emphasis on quality and CSR norms on products imported in Finland for instance by discounters as Lidl (Van Tulder et al., 2009). Furthermore Kesko has active relations with environmental and civil society organizations. This is showed by Kesko’s cooperation with WWF Finland on sustainable fishing, the stake holding in Global Reporting Initiative (GRI), and the good relations with organizations focused on FSC certification for wood. However the Finish NGOs are more collaborative than confrontational, so that could be a reason of the good relationships with them (Van Tulder et al, 2009).

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Tabel X: Eating habits in Finland Suomi syö 2010 -tutkimus: • Elintarvikkeiden ympäristöystävällisyyteen kiinnitetään melko paljon huomiota . • Kolmasosa kertoi kiinnittävänsä huomiota pakkausten ympäristöystävällisyyteen. Lisäksi reilusti yli puolet vastaajista toivoi elintarvikkeisiin ympäristövaikutuksista kertovaa merkkiä. • Vain joka kuudes vastaaja oli sitä mieltä, ettei ympäristön hyvinvointi vaikuta ruokavalintoihin. 35% uskoo voivansa hidastaa ilmastonmuutosta omilla ruokavalinnoillaan • Jätteiden kierrättäminen koetaan hyvin tärkeäksi, sillä 80% vastaajista oli eri mieltä jätekierrätyksen ja –lajittelun turhuudesta. • Luomutuotteiden suosio on pysynyt melko vakaana vertailujaksolla. • Noin neljännes vastaajista pyrkii mahdollisimman useasti käyttämään luomutuotteita. Erityisen suosittuja ne ovat vanhempien vastaajien keskuudessa. • 57% suomalaisista pitää luomutuotteita tavanomaista puhtaampina. Kuitenkaan lähes kolmannes vastaajista ei usko luomutuotteiden olevan vähemmän ympäristöä rasittavia. • Lähellä tuotettua ruokaa pidetään tärkeänä ja siinä korostuvat kotimaisuuden arvot • 44% vastaajista pyrkii ostamaan lähellä tuotettuja elintarvikkeita mahdollisimman paljon, eritoten yli 50-vuotiaat. Kahdelle kolmasosalle suomalaisista lähiruoka on yhtä kuin Suomessa tuotettu ruoka.

Translation: Finland eats 2010: 'Eating Habits in Finland 2010’ • Environmentally friendly food got quite a lot of attention. • One-third reported paying close attention to environmentally friendly packaging. In addition, well over half of respondents wanted environmental impact of food narrative characters. • Only one in six respondents felt that the welfare of the environment affect food choices. 35% believe they can slow down climate change on their own food choices • Waste recycling is perceived to be very important, because 80% of respondents disagreed with the waste recycling and sorting of the vanity. • The popularity of organic products has remained relatively stable during the reference period. • About a quarter of the respondents will as often as possible to use organic products. Particularly popular are the parents among respondents. • 57% of Finnish organic products to keep cleaner. However, nearly one-third of respondents did not believe in organic products to be less environmentally damaging. • Produced nearby - locally grown food is considered important and it highlights the values (NATIONAL ORIGIN ) • 44% of the respondents seeking to buy food produced close to as much as possible, especially those over 50. Two-thirds of the Finnish local food is the same as the food produced in Finland.

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX H : CASE MIGROS

The description of the Migros case will be as follows; first a general description of CSR at Migros will be given. Then CSR practices with regard to environment and marketplace will be discussed, after which the motivation and results of CSR policy will be delineated. Finally an outline will be given on the influence of stakeholders and Migros’ position in the market.

1. CSR in General at Migros

Migros was founded in 1925 in Zürich by Gottlieb Duttweiler and the first store was built in 1926. By 1941 Duttweiler had built a number of supermarkets, but decided to give the business to his customers by transforming everything from his privately owned enterprises into regional cooperatives (Migros, 2010). With this act, Duttweiler created a ‘people’s’ company that today has almost two million Cooperative Members (Migros CSR, 2006). These cooperatives are led by the Migros-Genossenschafts Bund, in English the Federation of Migros Cooperatives (Migros, 2010). Another special feature of Migros is that it has 15 industrial companies which are active mainly in the food sector. Therefore Migros is country’s largest food manufacturer (Migros CSR, 2006). Therefore a great majority of Migros’ range of processed foods and in its near-food segment consists of its own-brand products; of which many are manufactured in Switzerland (Migros CSR, 2006). Migros has an extensive range of traditional Migros brands, besides that it has a low-prices M-Budget line since 1996 and a premium segment ‘Sélection’ since 2004 (Migros CSR, 2006). “Migros is more than just a retailer” (J. Züblin, 2010, September 16). Besides putting effort in the environment and in marketplace practices, which will be covered in next paragraphs, Migros takes responsibility to educate the Swiss population. The ‘Migros- Kulturprozent’, in English the Migros Cultural Percentage is a commitment of Migros in the fields of culture, society, education and leisure (Migros CSR, 2009). Furthermore Migros is the biggest provider of adult education from Europe, with 150.000 students every year following Migros’ courses (J. Züblin, 2010, September 16). The adult education program had 450 courses varying from politics to IT, to how to drive a car. Furthermore language courses

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The Greening of Home Brands – Elke W.A.M. Huisman are given to foreigners. “With this we show that we are more than just a retailer” (J. Züblin, 2010, September 16). Migros’ sustainability policy is focused sustainable consumption, ecology and the cultural percentage (Migros CSR, 2009). Sustainable consumption is subdivided in sustainable labels, procurement guidelines, animal welfare, product safety, nutrition, overfishing and climate-friendly products (Migros CSR, 2009). Migros includes in ecology; energy consumption, photovoltaics, eco-drive, environmental-friendly transport, customer traffic, and recycle (Migros CSR, 2009).

2. Migros & Environment Environmental issues at store and transportation level Migros has been committed to environmental protection for the last decades. For example since 1975 it has kept consumption statistics from the M-Industrial companies, the Cooperatives and their shops (Migros CSR, 2006). Furthermore twenty years ago Migros installed its first solar energy system on its Gossau operations center, since then it has installed 14 of such systems at its operation centers and retail outlets and producing now 2.3 million kilowatt hours of electricity a year (ESM, 2010b). By 2012 Migros intends to reduce its carbon emissions with 27 percent compared to 2000, with its ambitious climate protection strategy which has influence on the Group’s industrial companies, stores and operation centers (Migros CSR, 2009). An example is that Migros is working since 2002 with the Swiss Engerie-Agentur der Wirtschaft (EnAW) on putting together target agreements for increasing energy efficiency and cutting down the level of CO2 emissions generated by its stores. By the end of 2010 all Migros operations have energy and climate-protection targets (Migros CSR, 2006; 2009). Migros is making use of energy-efficient equipment, heat recuperation, waste heat utilization and the Minergie Standard in order to reach that Migros has agreed with the EnAW (Migros CSR, 2009). Seventeen stores have already been developed or converted to the new low-energy consumption building standard, called Minergie. The Minergie buildings are not allowed to use more than 38 kilowatts per square meter which is achieved by energy-efficient equipment, heat recuperation, and waste heat utilization (ESM, 2010b; J. Züblin, September 16 2010). Not just construction-related measures were taken; employees and building managers were informed and motivated as well. Migros organized in November 2009 the ‘energy-saving weeks’. Water consumption was reduced by employees, devices were switched off during

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The Greening of Home Brands – Elke W.A.M. Huisman breaks and the room temperature was lowered. These actions alone reduced the heating requirement of the unit's administrative building by around a quarter (Migros CSR, 2009). As Migros recognizes that a significant percentage of greenhouse gas emissions result electricity production, Migros is turning to electricity efficiency and to renewable-source electricity (Migros CSR, 2009). Last year the eleventh own photovoltaic system went into operation . Apart from building these systems, Migros increasingly allows energy supply companies to use the large roofs of its properties free of charge (Migros CSR, 2009). For example energy supplier Romande Energie installed the largest photovoltaic system yet on a Migros site at the beginning of 2010. This system generates around a million kilowatt hours per year, which equals the consumption of 300 households. Migros is therefore contributing significantly to green electricity generation in that area (Migros CSR, 2009). Other greenhouse gases like hydrocarbons CFC and HCFC, which contain fluorine and chlorine, were still used in refrigeration facilities at Migros. Small quantities of CFC’s were still in use in older shops which were due for renovation (Migros CSR, 2006).

Furthermore Migros is taking care of impact of its transport. Nowadays sixty percent of Migros’ transport is on rail; additionally lorries are running on biogas of organic waste (J. Züblin, 2010, September 16). Over long distances Migros uses rail transport whenever possible (Migros CSR, 2006). Migros has taken ecological measures with its fleet of lorries. In 2005 the National Transport Optimization Project (NATRO) was launched in 2005, is to cut domestic road transport costs by 10 percent. In 2006 Migros already managed to reduce the cost per pallet by 5 percent (Migros CSR, 2006). Besides this Migros aims to reduce environmental pollution, therefore it uses climate-friendly fuels. In 2006 seven Cooperatives were using a type of diesel containing rapeseed methyl ester (RME). RME is produced from rape, and is climate-neutral in the consumption phase which means that in combustion it only releases as much carbon dioxide as the plant originally took in (Migros CSR, 2006). As very few fuels on the market met Migros requirements for a favorable environmental audit, the use of these fuels is reduced. Nowadays green technology in the shape of gas or hybrid vehicles is used (Migros CSR, 2009). Since the completion of the NATRO project in 2008, it has led to higher loads per haul and more efficient transport routes. Eco-Driving training courses on energy-saving and economic driving were given to the drivers (Migros CSR; 2006). Due to the constant renewal of the vehicle fleet, with more environmentally friendly lorries of the Euro 4 and Euro 5 emissions categories, nitrogen oxide emissions have been reduced by 40% per cent since 2005 (Migros CSR, 2009).

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In order to get employees more involved, Migros encourages already ‘green transport’ to its supermarkets. All Migros outlets are located in areas that could be reached well by public transport, by bicycle or on foot, and Migros has set up a ‘Bike to Work’ campaign to stimulate its employees to cycle to work (ESM, 2010b; Migros CSR, 2006). However, in the autumn of 2010 the ‘M-Way’ project, a rental system for electric vehicles, will be launched in Zurich. The M-Way project is a next evolutionary step by which Migros hopes to shape people’s perceptions of electric vehicles. As it is a new technology, people are cautious about it, however with Migros supporting this project, people might be reassured and open to try it. With this project Migros wants to give people the bigger picture and to be seen as the center for electro-mobility (ESM, 2010b, p. 31).

Environmental issues at product level In 2004, Migros contributed to the start-up funding of the Nogal biodiversity projects, a long- term nature conservation project in Costa Rica, a country rich in plants and animals species. Furthermore two banana sales promotions with Chiquita were done to raise funds. Early in 2006, the Nogal rainforest reserve was officially declared a private nature conservation area by the Costa Rican government (Migros CSR, 2006). “Migros aims to close material cycles as far as possible and to design products and packaging so that they can be disposed of in an environmentally friendly manner” (Migros CSR, 2006). Therefore reusable containers are used instead of cardboard boxes in logistics, where it is ecologically practical (Migros CSR, 2006). Furthermore Migros set up in 2005 the ‘Waste Exchange’ project, which aims on collecting waste together and pooling of waste disposal channels of enterprises in order to optimize the quality of waste manage and to reduce costs (Migros CSR, 2006). In 2005, Migros was actively involved in the national ‘Battery Collection Weeks’, to improve the unsatisfactory collection rate for batteries. ‘Battery Bags’ were places in shops which provided information on mandatory return and which could be used for collection of used batteries (Migros CSR, 2006). In 2006, Migros accepted about 13,000 tons of customer waste; the in-shop redeposit system covers PET beverage bottles, PE dairy product bottles, batteries and electrical appliances and devices. Specialist markets take back a range of other materials, such as lamps and lighting, paints and varnishes (Migros CSR, 2006). In 2009 Migros launched two pilot projects to recover even more materials, CD recycling and recycling of empty PE containers like shower gel, cosmetics and cleaning materials (Migros CSR , 2009).

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The Greening of Home Brands – Elke W.A.M. Huisman In 2005 Migros decided to no longer accept genetically modified feed for imported meat and poultry (Migros CSR, 2006). Spot checks are conducted on food where these is an increased risk of impurities derived from genetic engineering (Migros CSR, 2006). Migros does not sell, in principle, any genetically modified foods that are subject to declaration (Migros CSR, 2007). Migros has recently received an invitation from Boeing and other large companies to join to set up a benchmark system for biofuel (J. Züblin, 2010, September 16). Mr. Züblin explains Migros is generally speaking not interested in ‘burning palm oil in an airplane’; however it is interested in adding a module of how to use organic waste or another waste to recycle and to retrieve energy (J. Züblin, 2010, September 16). Migros aims to come up with an international standard for the use, reuse and recycling of organic waste. Before organic waste becomes compost, Migros strives to get energy form it. As a standard for this first and second generation of organic waste does not exist yet, Migros is preparing and getting help to set up this standard (J. Züblin, 2010, September 16). In 2006 Migros launched the first LED lighting in its stores. At that time energy efficient lamps such as energy saving and compact fluorescent lamps and fluorescent tubes already made up 25 percent of the whole product line (Migros CSR, 2006) Besides this, Migros decided in 2009 not to make printed versions anymore of its Annual Report and CSR Report. As the modules can be downloaded from the website, Migros believes there is no reason to send out printed versions, “in this way we avoid printing that nobody is reading” (J. Züblin, 2010, September 16). See table IX for an overview of the empirical findings of Migros.

Table IX: Dimensions of Environment mentioned in literature Variables Theoretical Empirical findings Migros Environmental Walton et al. (1998); Carter et al. Keeping environmental consumption statistics impact (2000); Sen and Bhattacharya since 1975; Since 2004 Nogal biodiversity (2001); Murphy and Poist (2002); project Maignan et al. (2002); Carter and Jennings (2002, 2004); Carter Green transport of employees to work; Bike to (2005); Jones et al. (2005a); MVO; Work in 2006 Anselmsson and Johansson (2006) ; Lattemann et al. (2007); Heasman (2008); Lai et al. (2010); CommDev (2010); Product / product Sen and Bhattacharya (2001); LED lighting since 2006; design Carter & Jennings (2002; 2004); Jones et al. (2005a); Anselmsson and Johansson (2006); Markley & Davis (2007); Lai et al. (2010); Green innovation / Maignan et al. (2002); MVO Photovoltaic systems; ‘M-Way’ project in 2010; technology (2010); Lai, Cheng and Tang Set up standard for use, reuse and recycling of investment (2010) organic waste standard since 2010

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The Greening of Home Brands – Elke W.A.M. Huisman Energy Jones et al. (2005a); Maloni & First solar energy system in Gossau in 1980; consumption and Brown (2006); MVO (2010); Lai et Working with EnAW to reduce energy from emissions al. (2010); 2002; Removal of refrigeration facilities with CFC and HCFC in 2006; Minergie buildings; ‘energy-saving weeks’ in 2009; 11 photovoltaic systems by 2009; Climate protection strategy, reduce 27% CO2 by 2012; Raw material usage Jones et al. (2005a); Water conservation Jones et al. (2005a); Maloni & Brown (2006); Lai et al. (2010); Waste reduction Carter et al. (2000); Carter & Use of reusable containers instead of cardboard Jennings (2002); Jones et al. boxes since 2006; ‘Waste Exchange’ project in (2005a); Maloni & Brown (2006); 2005; No printed version of Annual Report and Markley & Davis (2007); MVO CSR Report since 2009 (2010); Lai et al. (2010); Volume of Carter et al. (2000); Carter & packaging Jennings (2002); Jones et al. (2005a); Markley & Davis (2007); MVO (2010); Lai et al. (2010); Recycling Carter et al. (2000); Carter & ‘Battery Collection Weeks’ in 2005; In-shop Jennings (2002); Jones et al. redeposit system; CD recycling since 2009; (2005a); Maloni & Brown (2006); Recycling of empty PE containers since 2009; Markley & Davis (2007); Set up standard for use, reuse and recycling of organic waste standard since 2010 Store design Lai et al. (2010); Genetically Jones et al. (2005a); Maloni & Since 2005 no genetically modified food modified foods / Brown (2006); biotechnology Use of chemicals / Jones et al. (2005a); Anselmsson pollution control and Johansson (2006); Markley & Davis (2007); Logistics Carter et al. (2000); Maloni & NATRO since 2005; Brown (2006); Markley & Davis RME diesel for lorries since 2006; Eco-Driving (2007); MVO (2010); Lai et al. training courses since 2006; Gas or hybrid (2010); vehicles Inventory Markley & Davis (2007); management

3. Migros & Marketplace Product safety Since 2002 Migros is reporting EurepGAP, all suppliers of fruit, vegetables, flowers and plants had to commit to this standard. Migros expected this ambitious goal to be achieved by mid-2004 (Migros CSR, 2002). However in 2006, 95 percent of imports in the fruit and vegetable sector and 50 percent of imports of flowers and plants were certified (Migros CSR, 2006). In 2005, a start was made by putting Swiss-GAP into effect for Swiss production (Migros CSR, 2006). The aim of Swiss-GAP is to take the GlobalGAP standard into account in the special Swiss structures and implement it for Fruit, Vegetables, Potatoes (ST&PIW, 2010 May). Migros would like all Swiss farmers and suppliers to be guided by internationally accepted standards and to make consistent use of the SwissGAP (Migros CSR, 2008).

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The Greening of Home Brands – Elke W.A.M. Huisman Therefore by the end of 2010 at the latest all farms that supply products to Migros must meet the standard (Migros CSR, 2008). For suppliers of processed food Migros requires the Global Food Safety Initiative (GFSI) certification to guarantee food safety since 2003. By the end of 2007 97% of all major Swiss and foreign suppliers of Migros’s processing companies, and the Cooperatives’ own operation centers were certified (Migros CSR, 2007). In order to assure food safety Migros used HACCP and ISO principles and standards in the food industry (Migros CSR, 2006). Since 2004 Migros is reporting on the Swiss Quality Testing Services (SQTS) which test new products according to risks involved and retests them on a random basis (Migros CSR, 2004). The SQTS belongs to the Migros Group and since 2005 audits took actually place (Migros CSR, 2005).

Nutrition & health In 1970 Migros household members voted in favor of a petition for healthy food, which was free of chemical residuals (Elzen et al., 2004). The management team of Migros took this concern of its members seriously. Migros wanted to support and enhance organic farming; however at that time there were just a small number of organic farmers who could not provide Migros’ quantities of food. Therefore Migros decided to develop itself a new kind of agriculture and hired agricultural experts to set up standards for the so-called ‘M-Sano- programme’ (Elzen et al., 2004). Migros took responsibility for the whole agri-food chain; the standards set were quite different from industrialized agriculture and were to reduce chemical use, to integrate ecological criteria into the whole agri-food chain and to provide the customer with high-quality, healthy food (Elzen et al., 2004, p. 103). Migros took various actions to help customers develop a healthier lifestyle. Since 1983 Migros does not sell alcoholic or tobacco products in its stores. Furthermore Migros took action on trans-fatty acids in 2006. Migros’ aim is for all M-Industrial products to be below the level of 2% by the end of 2007. By the end of 2008, products from outside suppliers should meet these standards as well (Migros CSR, 2006; Migros Regulations for Pre-packed foods, 2009 December). The ‘Actilife’ and reduced-calorie ‘Léger’ line of foods allow consumers to have a balanced diet. These products are labeled with comprehensive data related to nutritional values (Migros CSR, 2006; 2009). By the end of 2011 all prepackaged Migros foods will be labeled with additional nutritive data, like energy, sugar, fat, saturated fatty acids and portion of salt (Migros CSR, 2009). Furthermore Migros runs a nutrition advisory service that all customers can visit free of charge on the Internet (Migros CSR,

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The Greening of Home Brands – Elke W.A.M. Huisman 2006). By the end of 2009 Migros has 58 products on shelves carried the ‘ aha!’ quality label of the Swiss Centre for Allergy, Skin and Asthma (Migros CSR, 2009). Furthermore Migros is communicating its programs to customers by its own weekly newspaper, the Migros Magazine, of which 2.2 million copies are sent out every week to the families. This magazine covers topics about health, nutrition and travelling. During the week of the interview an article was published in Migros Magazine on Bolivian potatoes that are growing in Switzerland. Migros contacted the Bolivian government to get the genetic material of this type of potato and in return Migros pays back 5% of the turnover to have the right to use those genetic resources to Bolivia (J. Züblin, 2010, September 16).

Sustainable trade and social compliance In 1997 Migros drew up a Code of Conduct placing suppliers under an obligation to observe social working conditions, such as decent wage, safe working environment, humane working hours (Migros CSR, 2006). These rules were later adopted into the BSCI (Business Social Compliance Initiative) standard which today is followed by more than 420 companies worldwide (Migros CSR, 2009). All of Migros’ suppliers of non-food products have been complying with the BSCI Code of Conduct since 2003. In 2005 Migros began to ask food suppliers to follow the BSCI Code as well. By the end of 2006, over 80 percent of Migros’ food suppliers signed an agreement to comply with the principles of the Code and to submit themselves to an audit (Migros CSR, 2006). In 2009 more than 120 Migros suppliers were audited (Migros CSR 2009). In the future Migros wants to implement BSCI for fresh food (ST&PIW, 2010 May). As Migros is focusing now on direct sourcing from the Far East, it has two offices in Hong-Kong and Shanghai who are currently focused on non-food. The staff of the offices in Shanghai are visiting suppliers for pre-evaluation, so in the pre-selection stage. The social audits itself are outsourced to organizations specialized in that (ST&PIW, 2010 May; BSCI Information Migros, 2009 August). Migros included extensive requirements on packaging in supplier agreements; however it has no BSCI for packaging itself yet (ST&PIW, 2010 May). Migros is a co-initiator of ISCOM (International Social Compliance Verification), a Swiss NGO established in 2004 by Max Havelaar and welfare organizations (Migros CSR, 2006). The first verifications took place in 2006 in India and China (Migros CSR, 2006). Besides this Migros is founding member of the Global Social Compliance Program (GSCP); a platform for building best practices in labor standards in supply chain. Together with Wall- Mart, Tesco, Carrefour and Metro, Migros has initiated the GSCP in 2006 (J. Züblin, 2010,

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The Greening of Home Brands – Elke W.A.M. Huisman September 16; Migros CSR, 2009). Furthermore Migros has an online tool for benchmarking social standards, for environmental systems and standards for management. Detailed information, such as production facilities, sites and certifications can be retrieved on the ‘Supplier Portal’. Suppliers can enquire their status and obtain information about standards. (Migros CSR, 2006). With one single management tool Migros is mapping worldwide the existing standards to avoid duplication in auditing (J. Züblin, 2010, September 16).

Working with the WWF Switzerland, Migros has drawn up the world’s first set of criteria for sustainable palm oil production, and has been producing margarine from sustainable palm oil since 2001 (Migros CSR, 2006). In 2003 Migros has committed to source all of its palm oil from plantations that not have been set up at the expense of tropical forest (Migros CSR, 2006). At that time Migros contacted WWF to assist them in developing a list of minimum environmental and social criteria for its palm oil products. In 2004 Migros had a central role in setting up the ‘Round Table for Sustainable Palm Oil’ (RSPO). Four years later, in autumn 2008, the first container shipment of RSPO-certified palm oil was unloaded at the port of Rotterdam (Migros CSR, 2009). In 2009 6'500 tons of palm oil, which sustainable cultivation was assured through the purchase of Greenpalm certificates, were processed at Migros (Migros CSR, 2009). The last 40 years 97 percent of the rainforest in Brazil, Argentina and Paraguay is deforested for agricultural purposes. Migros and the WWF have, together with Coop, IP- Suisse and Swiss Farmers Association, created a network for sustainable use of soy cultivation. Their goal is to increase the share of sustainable produced soy to 90 percent in 2014. Furthermore Migros joined on global level in June 2010 the ‘Round Table on Responsible Soy Association (RTRS), which promotes globally sustainable production of soy and obliges to conserve forest and savanna (Migros, 2010).

Since April 2009 Migros offers, as first retailer in Switzerland, MSC fresh fish at its shops and it has removed more products from overfished stocks. Furthermore the retailer has given an undertaking to WWF Swiss to adapt its range to protect endangered fish species and limit overfishing. Up to now 25 types of fish have been removed from the counter and freezer cabinets or supply has been switched to a sustainable supplier. Besides that intensive training is given in 2009 to employees working in Migros’ fish departments regarding sustainable fishing (Migros CSR, 2009).

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The Greening of Home Brands – Elke W.A.M. Huisman In 2006 most Migros’ toilet and household paper products changed to FSC quality without increasing its price. Apart from being market leader in FSC products, Migros is founding member of ‘WWF Wood Group Switzerland’, which energetically promotes the label (Migros CSR, 2006). Furthermore Migros provides aid for organic cotton. Together with a Swiss development organization it selectively promotes the cultivation of organic cotton in the West African state of Mali. By giving purchase guarantees, Migros supports many small farmers who want to switch from conventional to organic cultivation (Migros CSR, 2006).

Migros is committed to animal-friendly production, both for animals under protection of a label program or those who are not (Migros CSR, 2009). Farmers under the TerraSuisse label keep their pigs, cattle, lambs and poultry in animal-friendly stable systems with regular open space to move about. Calves are housed in groups on straw and appropriate to the species are fed with fresh cow’s milk and hay. Compliance with the label directives is regularly checked and certified by independent organizations, e.g. in the case of animal transports, by the Swiss animal protection organization (Migros CSR, 2006). Migros is committed to animals not under protection of a label program. For example in 2008 Migros decided that from mid-2009 latest castration of male piglets should be carried out only under anesthesia. This ruling has placed Migros at least half a year ahead of the law which stipulates anesthesia at the beginning of 2010 (Migros CSR, 2009). Furthermore after hearing about unacceptable rabbit fattening conditions in Hungary and France, Migros imposed an immediate embargo on all rabbit meat from foreign suppliers and demanded suppliers to draw up plans for improvement with binding implementation dates Migros CSR, 2009).

Local sourcing In 1999 Migros launched the program ‘From the Region. For the Region’. This product line supports local agriculture and promotes at the same time small businesses which focus on traditional manufacturing methods and specialties. Since 2006 all Cooperatives of Migros carry the ‘From the region. For the region’ line (Migros CSR, 2009). The Swiss quality instills great confidence and therefore can generate good sales potential in the home market and abroad. Another example is the cooperation between Migros and IP-Suisse which resulted in the TerraSuisse label, which stands for sustainably produced Swiss foods (Migros CSR, 2009). Respectively ‘From the region. For the Region’ and TerraSuise had in 2009 the largest sales amount (Migros CSR, 2009).

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The Greening of Home Brands – Elke W.A.M. Huisman The Swiss market is protected; there is no free movement of goods between Switzerland and the EU, there are customs duties and contingents and Swiss has made restrictions on trade. This means that Migros is not free to source whatever it wants and the part that Migros buys from the open market is limited. Therefore approximately 99% of all products come from Swiss. Migros has its own production facilities, where its own products like chocolate are produced (ST&PIW, 2010 May). Besides this Migros is focusing on local sourcing as it believes that agriculture, in specific productive agriculture, will become an issue in the future. Migros wants to be less dependent on large food companies. Nowadays in the industry there is a concentration on wheat, on seeds, on food manufacturing, on the trade, on commodities, therefore Migros it as a challenge to get closer to production and is already actively doing so. When having a direct link to producers, trades via large food companies can be avoided (J. Züblin, 2010, September 16). See table X for an overview of the empirical findings regarding marketplace.

Table X: Dimensions of Marketplace mentioned in literature Variables Theoretical Empirical findings Migros Ethical trading / Carter & Jennings (2002; 2004); ISCOM since 2004; Max Havelaar products in store fair trade Roberts (2003b); Jones et al. (2005a); Maloni & Brown (2006); Salam (2009) (Sustainable) Maignan (2002); Carter & Jennings Criteria for sustainable palm oil production since procurement (2002); Roberts (2003b); Maloni & 2001; Since 2003 only palm oil sourced not at Brown (2006); MVO (2010); Lai et expense of rainforest; Founding member RSPO in al. (2010); 2004; Toilet and household paper products FSC paper in 2006; Founding member WWF Wood Group Switzerland in 2006; Cultivation of organic cotton since 2006; MSC fresh fish in stores since 2009; Since 2010 member RTRS; Food / product Carter & Jennings (2002; 2004); EurepG.A.P/GlobalG.A.P since 2002; Swiss-GAP safety Carter (2005); Jones et al. (2005a); since 2005; GFSI since 2003; HACCP & ISO Jones et al. (2005b); Anselmsson & principles; SQTS since 2004; Johansson (2006); Maloni & Brown (2006); Animal welfare Jones et al. (2005a); Jones et al. Protection under TerraSuisse label (previous IP- (2005b); Anselmsson &Johansson Suisse & M7 label); Anesthesia for castration male (2006); Maloni & Brown (2006); piglets since 2009; Embargo on all rabbit meat in 2009 Nutrition and MVO (2010); Anselmsson and M-Sano-programme since 1970; no alcoholic or Health Johansson (2006); Maloni & Brown tobacco products since 1983; Reducing trans-fatty (2006); Heasman (2008); acids since 2006; Actilife &reduced-calorie Léger line of foods with nutritional values; Nutrition advisory service on internet; ‘ aha!’ quality label; Additional nutritive data on all prepacked goods by end of 2011; health & nutrition topics in M- Magazine; Supply chain / Carter et al. (2000); Maignan Audit offices in Asia; supplier (2002); Carter and Jennings (2002; Audits in Swiss relationships and 2004); Roberts (2003b); Carter monitoring (2005); Maloni & Brown (2006); Heasman (2008); CommDev (2010)

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The Greening of Home Brands – Elke W.A.M. Huisman Non-domestic Sen and Bhattacharya (2001); operations Anselmsson and Johansson (2006) Minority/women- Maignan (2002); Carter and owned purchasing Jennings (2002; 2004); Carter (diversity) (2005); Salam (2009) Sourcing local and Maignan (2002); Jones et al. ‘From the Region. For the Region’ since 1999; Set regional foodstuffs (2005a); Jones et al. (2005b) up TerraSuisse label; Working Maignan (2002); Carter & Jennings Code of Conduct since 1997; BSCI non-food since conditions & safety (2002; 2004); Carter (2005); Jones 2003; ISCOM since 2004; BSCI food since 2005; at supplier plant et al. (2005b) GSCP since 2006 Human / worker Maignan (2002); Carter & Jennings Code of Conduct since 1997; BSCI non-food since rights at supplier (2002; 2004); Carter (2005); Jones 2003; ISCOM since 2004; BSCI food since 2005; plant et al. (2005b); Salam (2009) GSCP since 2006 Child labor Maignan (2002); Carter & Jennings Code of Conduct since 1997; BSCI non-food since (2002); Jones et al. (2005b) 2003; ISCOM since 2004; BSCI food since 2005; GSCP since 2006

4. Motivations of Migros Under Duttweiler a basic rule was written; ‘Mankind is to put mankind in center, our work, the consumer or the worker and those who are producing for us’. This rule is still valid; it is a basic mindset at Migros (J. Züblin, 2010, September 16). Reflecting this altruism of Duttweiler, Migros operates various evening schools for working adults, courses in for example politics, IT, languages, sports and other subjects are given. Migros is the largest provider of adult education from Europe, and has 150.000 students every year who follow their courses (J. Züblin, 2010, September 16). Migros strives always to ‘give something back’ to the community, in this way Migros differs from other supermarkets (M. Bosshard, spokesperson Migros in ESM, 2010b). Besides the basic mindset which is present throughout the whole organization, there is clear commitment of the management. Within the organization there are tools available, financial resources and personnel, which allow the CR department to implement sustainability and responsibility programs (J. Züblin, 2010, September 16). High commitment within the management is reflected, for example, in the visit of the Director of the Food Industry of Migros to palm oil suppliers in Indonesia in November 2010 in order to experience himself the palm oil fields and sustainable practices (J. Züblin, 2010, September 16). However Mr. Züblin stresses that “sustainability is not something only based in our corporate office, but it is everywhere in our factories and in our cooperatives, at all levels people are in charge of this”. The mindset of the employees of Migros is that they are entitled to do something.

Migros is triggered by pressure from NGOs and consumers. If consumers have good ideas these are followed up and implemented. Regarding NGOs Mr. Züblin explains that they play a certain role, but that Migros is in a dialogue with them (J. Züblin, 2010, September 16). For

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The Greening of Home Brands – Elke W.A.M. Huisman instance with WWF various programs are set up, like the ‘Better Cotton Initiative’ and the ‘Forest Stewardship Council’. Migros has been founding member of various programs quite a number of times, this is because the organization is always been interested in being part from the start (J. Züblin, 2010, September 16). Another example is sustainable palm oil, a topic that is receiving a lot of attention lately. In the beginning of 2010, Nestle was attacked by Greenpeace because of the use of non-sustainable palm oil (Volkskrant, 2010 March 22). Instead of being attacked Migros started in 2001 the discussion with WWF as it believed palm oil was getting an issue in the South Far East (J. Züblin, 2010, September 16). Migros contacted WWF to set up a program for palm oil for Migros’ own factories, agriculture and social guidelines were set up and implemented by suppliers. At that time the program was only focused on Ghana as Migros had there its plantations. As the major problem of palm oil is mostly in Indonesia and Malaysia, Migros contacted companies as Body Shop and Unilever to set up the first Round Table for Sustainable Palm Oil (J. Züblin, 2010, September 16). Above indicates that Migros collaborates with other players in the industry to boost environmental practices. Migros has an ‘Open Source’ policy; it does not want to keep good practices for itself (J. Züblin, 2010, September 16). Mr. Züblin clarifies that when Migros runs a project, a competitor can participate as well and even access is given to knowledge. This is because within Migros these sustainability projects are seen as public interest. Migros is a public company, owned by the people (J. Züblin, 2010, September 16). As a Cooperative, Migros is committed to stakeholder value; the added value Migros creates benefits its customers, its employees and society (Migros, CSR, 2006). An example of open sourcing is the Global Social Compliance Program (GSCP); all thirty partners agreed to source open, all documents are open and everybody can join. However commitment from partners is expected and has to be fulfilled (J. Züblin, 2010, September 16).

Furthermore Migros clearly believes in ‘investments for the future’. An example of this is an expensive solar energy system on the roof of its buildings. Migros believes this technology will take over a big part in the margin the next ten, fifteen, twenty years (J. Züblin, 2010, September 16). Mr. Züblin explains through such activities Migros helps to push this kind of technology. With regard to the bottom-line, “we know we could have cheaper energy, earn more profit and sell cheaper products, however this is not how we are, our thinking is really sustainability thinking” (J. Züblin, 2010, September 16). Migros is clearly thinking about the future, about the next ten, fifteen or even twenty years. Furthermore Migros wants to remain

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The Greening of Home Brands – Elke W.A.M. Huisman the best in class, this means investing. Mr. Züblin explains “finally it [the investment in solar energy] will pay back in one or the other sense” (J. Züblin, 2010, September 16). So Migros sees commitment to sustainability not just as a necessity. Migros believes it can open up new possibilities, for instance Migros can improve its competitive position through energy conservation to cut its operating costs (Migros CSR, 2006). It is true that responsible behavior could cost more. Just how far Migros can go along the sustainability road, therefore, depends on its customers’ willingness to reward Migros’ performance on sustainability by paying an appropriate price for it (Migros CSR, 2006). However Migros is of the opinion that with innovate label products additional customer segments can be won and in terms of employment Migros is increasing the motivation and availability of its employees (Migros CSR, 2006). By including most important interest groups in the decision making processes, Migros increases the loyalty of Cooperative Members and creates goodwill among its customers (Migros CSR, 2006). So by achieving more in all areas of sustainable development, Migros aims to achieve better results in external assessments, like ratings and product tests. Migros believes that this ultimately will raise the value of the Migros brand (Migros CSR, 2006). See table XI for an overview of Migros’ motivations regarding CSR.

Table XI: Motivations for CSR Migros Variables Theoretical Empirical findings Migros Self-presentation and Snider et al. (2003); Jones et al. (2005a); Increase loyalty of Cooperative impression management Members; Economical-financial Miles & Covin (2000); Piacentini et al. ‘Investments for the future’; perspectives (2000); Price WaterhouseCoopers (2002); Orlitzky et al. (2003); Jones et al. (2005a);Van de Ven & Graafland (2006); Lattemann et al. (2007); Tetrault Sirsly & Lamertz (2008) Reputation Miles & Covin (2000); Price WaterhouseCoopers (2002); Orlitzky et al. (2003); Tetrault Sirsly & Lamertz (2008); Lee et al. (2009) Brand / brand loyalty Spar and La Mure (2003); Musso & Risso Raise value of the Migros brand (2006) Customer demand Piacentini et al. (2000); Price If consumers have good ideas these WaterhouseCoopers (2002); Musso & are followed up and implemented; Risso (2006); Lai et al. (2010) win additional customer segments Marketing - Publicity Maignan et al. (2002); Van de Ven & Graafland (2006); Musso & Risso (2006) Innovation Maignan et al. (2002) Industry trends Price WaterhouseCoopers (2002) Increase employee Maignan et al. (2002); Van de Ven & Employees are entitled to do commitment / loyalty Graafland (2006); Musso & Risso (2006); something; To increase motivation and availability of employees Competitive / market Miles & Covin (2000); Price Competitive position can be position WaterhouseCoopers (2002); Spar and La improved through energy Mure (2003); Jones et al. (2005a); conservation by cutting operating

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The Greening of Home Brands – Elke W.A.M. Huisman costs; Transaction costs Price WaterhouseCoopers (2002); Spar and La Mure (2003); Jones et al. (2005a); Pressure from Piacentini et al. (2000); Ernst & Young In a dialogue with NGOs; stakeholders & investors (2002); Price WaterhouseCoopers (2002); Committed to stakeholder value, Tetrault Sirsly & Lamertz (2007) benefits its customers, its employees and society; Increased sense in social Ernst & Young (2002); Price Basic rule founder Duttweiler; Clear responsibility of company WaterhouseCoopers (2002) commitment of the management; itself/ CEO/Board commitment Customer loyalty Piacentini et al. (2000); Musso & Risso Create goodwill among its (2006) customers; Store loyalty Musso & Risso (2006) Inclusion in sustainability Musso & Risso (2006); To achieve better results in external indexes assessments Market differentiation Piacentini et al. (2000);

5. Results from CSR practices Migros Migros has set up clear targets for marketing and product related programs like organic and fair-trade. Sales are in this case an easy monitor. For CSR and quality management Migros has an IT solution for suppliers and their factories that are producing for Migros. It is a database which registers the certifications and the certification process a supplier is in. In this database is monitored if the supplier is in the process of getting BSCI, is it has signed the code of conduct etc. Furthermore the auditing is covered in this system. This system allows Migros to do reporting, for example by region or by scope. At the end of 2010 Migros will be able to do its first reporting. Some concrete results of the CSR policy of Migros are presented in table XII below.

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Table XII: Measured results by Migros 2009 2008 2007 2006 2005 Environment Total energy consumption absolute 1.636 1.635 1.644 1.670 1.666 (From electricity, heat and fuel consumption) GWh Total energy consumption specifically 100.4 99.5 104.5 109.2 108.0 (From electricity, heat and fuel consumption) CHF 1'000 per kWh sales Water use, 1000m3 7.617 7.650 8.018 8.219 8.436 CO2 emissions in absolute terms (from fuel and fuel 130.5 / 131.0 / 133.0 / 139.3 / 145.8 / consumption) in 1000tons / CO2 emissions specifically kg 8.00 7.97 8.45 9.11 9.45 per 1,000 CHF sales CO2 intensity in % - 78.6 79.6 81.3 85.0 Waste in 1000 tons 201.4 197.2 197.9 200.3 200.3 Recycled waste in % 68.0 67.1 65.6 62.3 60.8 GFSI certification in % of suppliers 100 98 97 95 80 GlobalGAP suppliers Fruit & Vegetables in % 98 98 95 95 85 Marketplace Implementation BSCI Food suppliers in % 98 98 98 85 10 Implementation BSCI Non-Food suppliers in % 92 90 90 80 60 Revenue organic labels in CHF 2.089 1.995 1.822 1.333 1.344 Sales Bio / Sales FSC / Sales MSC (organic/environmental 364.2 / 338./13 306/ 294 / - labeling products) in CHF mln 148.4/ 3/ 130 / 118 / 35.1 19.4 18 18 Sales Max Havelaar (Fair-Trade) in CHF mln 81.1 79.6 80 71 - Sales From the Region. For the Region / Sales TerraSuisse 747.5 / - / - /217 - /240 - (local sourcing) in CHF mln 654.2 660.7 IP / 601 IP / M7* 614 M7* *=TerraSuisse is in 2007 founded when IP-Suisse and M-7 merged

From table XII can be concluded that Migros has significantly reduced its CO2 emissions in last few years. From the base year 2000 the CO2 intensity was reduced, the reduction target was set of 16% by the end of 2010, but this has already been exceeded (Migros CSR, 2009). The amount of operating waste remained approximately the same over the years; however Migros was able to increase the amount of recycled waste. The total sales of sustainable labels have grown continuously throughout the last few years. In 2009 the figure was around 5% up on the previous year. MSC products reported the largest growth in 2009. The entire Migros fresh fish range was switched to sustainable fish and endangered species were removed (Migros CSR, 2009).

Apart from these results, Migros has received various awards and honors for it sustainable and social actions. In 2002 Migros has received the ‘UNEP Business Award for Sustainable Development’, for its model project for sourcing sustainable palm oil (Migros CSR, 2006). Furthermore the ‘Energy Globe Award 2002’, as Migros was the first company in Switzerland to extract biogas from its own organic waste and use it to drive eleven gas-powered lorries 166

The Greening of Home Brands – Elke W.A.M. Huisman (Migros CSR, 2006). In 2004 the ‘Energy+ Award’, an initiative of the European Commission, Migros was honored for its campaign promoting particularly environmentally friendly and energy efficient refrigerators and freezers. In 2007 Migros received the ‘Distinction for Logistics Innovation’, a prize for the best innovative partnership for sustainable development with its online shop LeShop (Migros CSR, 2007). Furthermore Migros got the ‘ÖBU Prize for the Best Sustainability Report’ in 2007in the Big Enterprise category on the basis of its comprehensive and target group reporting in Swiss (Migros CSR, 2007). In 2008 Migros received ‘Prix naturemade’ as it is the largest consumer of “naturemade” electricity, electricity from renewable sources of energy in Switzerland (Migros CSR, 2008). Besides in 2008 Migros received the ‘Swiss Fairness Prize’ – awarded for the first time – for its responsible corporate governance (Migros CSR, 2008)

6. Migros & Stakeholders The Swiss consumer According to Mr. Züblin the typical Swiss consumer does not exist. There are 2.2 million families member of Migros, they own Migros. Everyday 1.5 million consumers are shopping at Migros due to the good price-quality ratio. “Migros is known because of its good ratio between price and what they deliver, the performance. Migros is considered as the best class in Switzerland” (J. Züblin, 2010, September 16). The type of consumers that is buying at Migros is mixed. Mr. Züblin explains; “we have a low price line with 200 products and we see that some wealthy people buying those one, while on the same time [buying] fair-trade or organic bananas. Furthermore you see families buying expensive food stuff, like organic and at the same time having as well products at a low price”. So the consumers visiting Migros stores vary from families to the young professionals to seniors and these are visiting Migros because of its good price-quality ratio (J. Züblin, 2010, September 16). Mr. Züblin refers to an article in Swiss newspaper ‘Tages Anzeiger’ published the day of the interview. This article gives a critical analysis between Coop and Migros. Migros’s prices were 10% more favorable than Coop’s, when analyzing over 5000 articles, but the best-sellers (Tages Anzeiger, September, 16). From the article can be concluded that Migros has a good price-quality ratio. Migros is of the opinion that people in Switzerland are still very much aware of quality (Migros CSR, 2006). However it recognizes that ‘even’ in Switzerland, price competition is constantly growing in intensity. Therefore many consumers are paying more attention to the discount label when they shop (Migros CSR, 2006; J. Züblin, September 16 th 2010). Furthermore Migros notices a danger of sustainability being pushed into the background when

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The Greening of Home Brands – Elke W.A.M. Huisman it comes to specific purchasing decisions. This could mean that less committed competitors are attaining the economic rewards, even while sustainability is an important issue in the media. To counteract this trend Migros is communicating, as clearly as possible, the added value of its products for all interest groups –particularly for its customers (Migros CSR, 2006).

According to Agentschap NL (part of the Dutch Ministry of Economic Affairs) the biological market in developing strongly in Switzerland. In 2008 the share of biological products was 5.5% of the total market share on foodstuffs. To compare, in the Netherlands that share was 2.1%. Almost 50% of the Swiss households buy at least once a week a biological product. Especially biological vegetables, fruit, bread and dairy products are popular. After Denmark, Switzerland has the highest expenses (81 euro per year) on biological food per inhabitant. The biological market in Switzerland is one of the best developed biological markets of Western- Europe. In Switzerland, 24% of the biological products sold by supermarkets is sold by Migros. However due to the entering of foreign price fighters like Aldi in 2005 and Lidl in 2009 (Distrifood, 2008 March 3) to the biological market, the volumes still increase, however the prices are under pressure. Therefore Swiss retailers, so Migros as well, are forced to lower its prices (Agentschap NL, 2009 July 27). From above can be concluded that the Swiss consumer is quite biological minded compared to others in Europe. They appreciate product quality and are ready to pay extra price for it, if convinced (Laposte Export Solutions, Switzerland, 2010). Furthermore local sourcing, like regional sourcing of Swiss small farmers in mountainous areas, is an important variable in the selection process of Swiss consumers. Mr. Züblin confirms the interest of Swiss consumers in products from Switzerland. “When ‘From the region. For the region’ was introduced at one cooperative, consumers reacted very quickly on that. This specific cooperative had a very high part of organic products, however once the ‘From the Region. For the Region’ program was introduced, sales of these products increased immediately to a very high level, while at the same time the part organic reduced. The trust of the consumers in local products was higher than in organic certified food” (J. Züblin, 2010, September 16). So price-quality ratio, local products and sustainability is important in the eyes of the Swiss consumer, therefore Migros offers products under different labels like Migros Bio, Migros From the Region. For the Region and Terra Suisse for natural animal-friendly agriculture in Swiss. (J. Züblin, 2010, September 16).

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The Greening of Home Brands – Elke W.A.M. Huisman Employees Migros firmly believes that the judgment of the population corresponds broadly with that of the employees. According to Migros the Swiss population “has clear ideas and a clear image of Migros” (Migros CSR, 2006). Apart from being a popular retailer in Switzerland, according to various studies Migros leads in the areas of trustworthiness and personnel (Migros CSR, 2006). Migros mentions that quality of products and services, corporate governance and social commitment at Migros are pointed out as decisive factors (Migros CSR, 2009). Furthermore the mindset of the employees of Migros is that they are entitled to do something (J. Züblin, 2010, September 16). As Mr. Züblin explained “sustainability is not something only based in our corporate office, but it is everywhere in our factories and in our cooperatives, at all levels people are in charge of this”. At Migros it is always possible to integrate good ideas. That is a basic mindset of the workers as well; those working at Migros are pushed to come with ideas of things that can be done or made better bring ideas (J. Züblin, 2010, September 16). Certain sustainability and responsibility programs on product level are driven by the head office. However often application comes from a local cooperative. Decision making is finally done in the board in which all the cooperatives are represented, and these give orders to the CR department (J. Züblin, 2010, September 16). So ideas can come from employees in the local cooperatives. Besides this Migros believes that “if a business enterprise is to stand out from the crowd, to be unique and successful, it must have the capacity to encourage motivation and performance among its employees through sustainable workplace quality” (Migros CSR, 2009). Migros holds that good workplace quality goes hand in hand with higher productivity and greater satisfaction (Migros CSR, 2009).

NGOs In order to be actively involved in shaping the future, Migros has a close exchange of information with numerous stakeholders (Migros CSR, 2006). Migros is in dialogue with over thirty NGOs; especially in the field of social and ecological labels, environmental protection, cultural engagement and observance of human rights in the supply chain (Migros CSR, 2006). So instead of suffering from attacks from NGOs, Migros is continuously in dialogue with them to be a pioneer with regard to sustainability and responsibility.

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The Greening of Home Brands – Elke W.A.M. Huisman 7. Position of Migros in the Market Migros is founded in 1925 and has since grown to become largest retailer in Switzerland. Migros has its own production companies and factories which successfully manufacture Migros’ house brand goods. Migros has a cooperative structure with 10 regional sales cooperatives located throughout Switzerland under the umbrella of Migros Genossenschaftsbund. Mr. Züblin explained Migros’ structure as follows; “we are a joined cooperation that we call a federation, we are not the mother of ten daughters, but the daughter of ten mothers” (J. Züblin, 2010, September 16). Migros position is built around its governance structure, where customers were also owners which create a close link between the retailer and the market, and its emphasis on never selling harmful products. Socially, ecologically, and ethically produced products were key aspects of Migros' product offering. (U. Riedener, Head of Marketing Migros in Reinhardt et al., 2005).

In Switzerland there is a duopoly; there are two main players in the retail market (J. Züblin, 2010, September 16). Migros is market leader in Switzerland; every day 1.4 million customers visit the Group’s supermarkets and specialty stores. This means that 71% of the population shop once a week at Migros, for a total market share of about 17% (SAP, 2005). Like in the rest of Europe, increased competition has caused downward pressure on prices in recent years, which resulted in a drop of profit margins for Migros. Coop Switzerland is the second largest player in the market. Also Coop is a cooperative and has Coops in Sweden, Italia, Finland. Coop Switzerland is a very centralized cooperative, as there is one cooperative for whole Switzerland. The market has become tighter as international retailers like Carrefour (France) and Rewe (Germany) have entered the well- paid Swiss market as well as hard discount chains Denner, Aldi and Lidl. A substantial difference with competitors is that Migros has a highly integrated industry; it is the largest food producer and food processor from Switzerland. Migros owns factories which produce products like meat, bread, coffee and is the biggest producer of chocolate. This means that 90 percent of the products sold at Migros are own brand. Another difference is that Migros’ supermarkets do not sell Alcohol and Tobacco (J. Züblin, 2010, September 16).

As in other western European countries, there is in Swiss a shift away from middle-income customers, this leads to a growing number of lower-income customers set off by an increasing number of number of relatively wealthy purchasers. So social structures are changing and new

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The Greening of Home Brands – Elke W.A.M. Huisman purchasing patterns among customers appear. Sales of discounted items or premium articles seem to be the main growth drivers. Furthermore there is high demand for leisure and organic products in the Swiss market (SAP, 2005). So Migros is affected by changing customer profiles, ongoing struggle to protect market share, deregulated shop opening times and more flexible stock delivery times, which has influence on the group’s logistical processes. In order to preserve its strong position in the market, Migros new assortment concepts with more discount and premium products are used. Besides this Migros has been innovating with e- commerce and new store concepts like convenience stores and mixed-format retail, food, leisure outlets (SAP, 2005). Migros’ name is not only widely recognized in Switzerland because of the large amount of shops in the country. Also because it donates every year 0.5% of retail and 1% of wholesales revenues to cultural and social institutions and projects. In 2003 alone, this was approximately 74 million euro (SAP, 2005).

So Migros has a leading position in the stable Swiss food retail industry. It has successfully diversified into the discount segment and has vertically integrated the food processing. Although the group is not present in international growth market, Migros has diversified into growth segments in Swiss. Among suppliers Migros is known because of its high quality requirements. So the formulae of Migros is mainly based on quality, sustainability, fresh, Swiss-ness and value-for-money. Service and convenience are not mentioned specifically on the website or in reports.

8. End remarks Migros “Migros always has been in a leading position regarding sustainability and taking responsibility” (J. Züblin, 2010, September 16). This interest in sustainability and responsibility can be observed from Migros active role in the development and realization of sustainability labels and round tables. Sustainability and responsibility practices are motivated by the board commitment and by commitment from employees and the cooperatives. Besides this Migros is triggered by an innovation and reputation perspective as Migros wants to be known as leader on sustainability and responsibility. The nature of the Swiss market, however, could have an influence on CSR. The Swiss market is protected; there is no free movement of goods between Switzerland and the EU, there are customs duties and contingents and Swiss has made restrictions on trade (Van

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The Greening of Home Brands – Elke W.A.M. Huisman Tulder et al., 2009). This means that Migros is not free to source whatever it wants and the part that Migros buys from the open market is limited. According to Van Tulder et al. (2009) the closed nature of the Swiss economy and therefore retail market contributes to more positive preconditions for CSR than for countries with an open economy and rougher competition. In more open economies consumers tend to be less CSR minded than in more closed economies (Van Tulder et al., 2009). ESM (2010b) founds that CSR in Switzerland is different from the rest of Europe. According to ESM (2010b) many European retailers are engaging in environmental practices, despite the constrained economic situation. However while many supermarkets began committing themselves to environmental practices in the past few years, in Switzerland, environmental best-practices have been institutionalized for decades. “ Migros is an example of a retailer in which green practice is the norm, and the group continuously strives to take sustainability to the next level, by engaging the customer head-on with its environmental proposition” (ESM, 2010b, p. 30). Twenty years ago Migros installed its first solar energy system on its Gossau operations center, since then it has installed 14 of such systems at its operation centers and retail outlets and producing now 2.3 million kilowatt hours of electricity a year. Migros strives always to ‘give something back’ to the community, in this way Migros differs from other supermarkets. As the spokesperson of Migros, Martina Bosshard, explains in ESM (2010b); “The idea, for us, is to be a pioneer”. This high investment process will mean on the medium-term profitability, at least not directly, but on the longer-term sustainability for the company. The ‘M-Way’ project, is another example of being a pioneer. With this project Migros hopes to shape people’s perceptions of electric vehicles and make them willing to try it (ESM, 2010b). Migros is giving people the bigger picture of issues they have not appointed themselves yet. Migros is aware of its pioneering environmental strategy and is hoping, through its involvement in sourcing group AMS and other multi-retailer discussion panels, to set standards for others to follow in terms of sustainability and the ‘green’ agenda . According to Spokesperson Martina Bosshard of Migros “The strategy is really to set out our position ourselves in this ecological domain” (ESM, 2010b, p. 31).

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The Greening of Home Brands – Elke W.A.M. Huisman APPENDIX I: CASE JERÓNIMO MARTINS

The description of the Jerónimo Martins case will be as follows; first a general description of CSR at Jerónimo Martins will be given. Then CSR practices with regard to environment and marketplace will be discussed, after which the motivation and results of CSR policy will be delineated. Finally an outline will be given on the influence of stakeholders and Jerónimo Martins’ position in the market.

1. CSR in general at Jerónimo Martins In 1792 Jerónimo Martins, a Spanish man, arrives in Lisbon in search of a better life and opens a modest store in the Chiado (Jerónimo Martins, 2010). More than two centuries later the Jerónimo Martins Group operates three different formats in Portugal, having a prominent position in Food Retail under the brands Pingo Doce, 334 supermarkets, Feira Nova, 9 hypermarkets, and Recheio, 33 cash & carry stores (JMR AR, 2009). The Jerónimo Martins Group, of the Soares dos Santos family, belongs to the largest family owned businesses in the world (Cojoweb, 2010). CSR is a relatively recent concept in the Portuguese business world, although many of its principles and philosophies regarding how to act in the market are not new (Jerónimo Martins, AR 2004). The Soares dos Santos family, who owns Jerónimo Martins, is very sensitive to social issues (M. Martins Ramalho, 2010, September 8). However there was an informal way of handling social activities and after some years the decision was made that this informal way is not sufficient anymore. There is a need for structure and strategy. Fist a strategy was formulated for social community support of how to be involved in those projects. Currently Jerónimo Martins is deciding how to how to measure the impact of these social programs in order to communicate it (M. Martins Ramalho, 2010, September 8). This can be noticed when reading the Annual report as well; statements on projects are made, but not how far Jerónimo Martins are with achieving targets (M. Martins Ramalho, 2010, September 8). Jerónimo Martins has not a separate CSR report; the sustainability part is included in the annual report. When reading the Annual Report 2009 sustainability was not included in the values and core competencies of Jerónimo Martins. The values and competencies

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The Greening of Home Brands – Elke W.A.M. Huisman mentioned in the Annual Report 2009 is the DNA of the company and have been determining factors the last years. Furthermore is mentioned that “the operational activity is set on ongoing cost optimization, productivity, exploitation of the Group’s scale and synergies and on being constantly up-to-date technologically”, sustainable or responsible production is not mentioned (Jerónimo Martins AR, 2009). On page 13 the first CSR topic is mentioned, namely that JMR want to continually improving the nutritional profile of their food in order to achieve healthier compositions and ingredients (Jerónimo Martins AR, 2009). In the mission statement social responsibility is mentioned. In the sustainability part of the Annual Report of JMR a lot of statements are made about what JMR prefers, however no concrete targets are given and not much figures that show how far JMR is at the moment.

Within Jerónimo Martins there was the beginning of awareness raising internal meetings on social responsibility in July 2004 (Jerónimo Martins AR, 2004). In October 2005 Jerónimo Martins took place in the 1 st Portuguese Forum of Social Responsibility of Organizations (Jerónimo Martins AR, 2004). When defining objectives, strategies and policies with regard to CSR Jerónimo Martins considers three variables; Profit, People and Planet (Jerónimo Martins AR, 2004). Profit is seen as a necessary condition for a company’s sustainability and the wealth creation of an economy. According to Jerónimo Martins People are essential because sustainable success is based on satisfying the needs of consumers, shareholders, workers, suppliers, institutional partners, and socially disadvantaged groups. As Jerónimo Martins is constantly striving towards the correct use of natural resources, the Planet is important (Jerónimo Martins AR, 2004). The business activities of the Group are subdivided in five broad categories; Business Ethics, Human Resources, Quality and Food Safety, Environmental Management and Patronage (Jerónimo Martins AR, 2004). From 2008 policies and activities could be related to 6 categories; Consumers, Employees, Suppliers, Food Safety, Environmental Management, and Patronage (Jerónimo Martins AR, 2008). A Code of Conduct which is established in 2003, provides essential guidelines on the sustained development of the Jerónimo Martins Group. Furthermore other mechanisms for ensuring good practices are the Supplier Code and the Customer Ombudsman. Since 2003 Jerónimo Martins established an Ethics Committee for the dissemination of and compliance with these Codes of Conduct (Jerónimo Martins AR, 2008).

From the ‘relevant facts 2004’, mainly can be concluded that most CSR activities were focused on the social aspect, not so much on environment yet; from the 22 relevant facts in

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The Greening of Home Brands – Elke W.A.M. Huisman 2004, 5 were regarding environment and one on food safety. In 2009 from the 34 relevant facts, thirteen were regarding the environment, but the major part was more social, like to obtain donors in Portugal and Poland, or the “JM School Books Campaign” or the promotion of healthy lifestyles.

2. Jerónimo Martins & Environment Environmental issues at store and transport level In 2004, Jerónimo Martins took environmental criteria into account when (re)construction fourteen shops, besides this several measures for improvement were implemented on Mains Water, Energy Consumption, Management of Residues, Liquid Effluents, Noise, Emissions to the Atmosphere (Jerónimo Martins AR, 2004). In order to reduce the amount of water Jerónimo Martins prepared ‘The Water Quality Monitoring Plan’ in 2004 which was implemented in all the Distribution units in Portugal, with a view to the optimum control of the quality of water consumed (Jerónimo Martins AR, 2004). A total of 323 analysis was carried out in Portugal, 93% found that for all the analyzed characteristics of water there was full compliance with the limits defined by the Portuguese law of 2003 (Jerónimo Martins AR, 2004). Furthermore the amount of water consumption of 59% of the stores in Portugal was measured through water meter readings made by the units’ employees in 2004. This was the first year a full assessment was made (Jerónimo Martins AR, 2004). In order to reduce the use of water of employees, all staff is alerted throughout the year to rationalize the water use. Furthermore showers and lavatories in one of Jerónimo Martins factories was equipped with timed taps and its automatic washing programs of maturing tanks and piping were redefined (Jerónimo Martins AR, 2004). With regard to waste segregation and recycling, Jerónimo Martins took in 2004 a number of measures to optimize cardboard and plastic waste segregation in its stores, like replacement of some collection equipment, rescheduling collection times, and training store staff (Jerónimo Martins AR, 2004). This resulted in an increase in the separation of waste of 12.8% (Jerónimo Martins AR, 2004). In addition a pilot-project was run in order to assess both technical and economic viability of separating the organic component of waste for composting (Jerónimo Martins AR, 2004). In 2005 25 Pingo Doce, Feira Nova and Recheio stores started with a project for joint organic waste collection. Besides this the stores started with selective collection of used consumables like toners and printer cartridges (Jerónimo Martins AR, 2005).

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The Greening of Home Brands – Elke W.A.M. Huisman Besides this a system of reusable plastic boxes is continued to be used in the Fruit & Vegetables and Meat areas. This system allows for minimization of residue from non-reusable packaging, optimization of space in transportation vehicles, reduction of fuel consumption and minimization of pollutant gases emissions (Jerónimo Martins AR, 2004). In 2004 an identical project has been started with suppliers of dairy products (Jerónimo Martins AR, 2004). The percentage of reusable boxes vs. the total number of boxes transported increased from 6.7% in 2005 to 18.1% in 2009 (Jerónimo Martins AR, 2009). These reusable plastic boxes cover the Fruit & Vegetable, Meat, Dairy, Fish and Bakery sections (Jerónimo Martins AR, 2008). At office level, Jerónimo Martins launched the “Planta” brand campaign viewing the reforestation of the ‘Tapada Nacional de Mafra’ under the motto “a Gesture that Plant in April 2004 (Jerónimo Martins AR, 2004). In order to reduce the consumption of office paper in 2007, a portal was created for managing orders and electronic invoices, which covers 50% of the Distribution suppliers in Portugal in 2008. For 2009, the implementation of similar projects is foreseen for the areas of Human Resources and Logistics (Jerónimo Martins AR, 2008).

In 2008 Jerónimo Martins placed in the Distribution area special attention on the reduction of environmental impacts from the following: water consumption; energy consumption used in preserving foodstuffs, in lighting, in air-conditioning and in operating equipment; production of organic solid waste and paper, cardboard and plastic packaging; and air emissions and the consumption of fossil fuels for transporting goods (Jerónimo Martins AR, 2008). Therefore in 2008 awareness regarding water consumption among employees in the Distribution area was created through training. Furthermore the Annual Report of 2008 mentioned more efficient equipment was used and consumption was regularly monitored. The kind of ‘more efficient equipment’ is not specified. With regard to wastewater produced by the Distribution sector, several steps have been taken to reduce the polluting content of the effluents and Jerónimo Martins planned to monitor the wastewaters covered 58 establishments in Portugal, in order to obey regulations and legal requirements (Jerónimo Martins AR, 2008). Besides this there is an ongoing follow-up of the waste management system in Jerónimo Martins stores; polystyrene and plastic corner guards have been selectively collected for recycling at two Distribution Centers, thereby avoiding 49 tons of waste being sent to the waste burial ground. Furthermore packages (mainly from drinks) have been

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The Greening of Home Brands – Elke W.A.M. Huisman collected in 58 stores and organic waste for recycling (compost and anaerobic digestion) in 85 stores (Jerónimo Martins AR, 2008). Various activities were developed in 2008 in order to improve operational and logistic efficiency, including the development and implementation of a joint project with a transport accessory operator, with a view to obtaining operational synergies in the handling and separation of empty containers (boxes and palettes), reducing stock levels and the costs of transport involved (Jerónimo Martins AR, 2008).

With regard to energy consumption, Jerónimo Martins took several measures to reduce the use of energy resources from 2004 onwards. In 2004 Jerónimo Martins reports it is ‘fitting some of the manufacturing refrigeration equipment with the “Adap-kool” system, which permits reduction in total energy consumption by up to 20%’ (Jerónimo Martins AR, 2004). Furthermore more efficient light bulbs are used and ‘more efficient equipment’ is purchased and installed (Jerónimo Martins AR, 2004). Seven stores started rearranging the lighting applications of their sales areas. Furthermore the Distribution units documented the readings of the respective electricity meters, in order to have better control of electricity consumption (Jerónimo Martins AR, 2004). In 2008 automatic timers on the lighting system were installed in its warehouses and meeting rooms and in a factory of Jerónimo Martins 160 lights in production rooms were replaced, seeking better efficiency and lower energy consumption (Jerónimo Martins AR, 2008). Between 2008 and 2009 electricity and fuel decreased with more than 20% in the distribution centers in Portugal. In the stores however electricity increased with approximately 13% (Jerónimo Martins AR, 2009). Besides this the environmental and economic advantages of purchasing energy-saving light bulbs were disclosed to customers in 2008 (Jerónimo Martins AR, 2008). The Recheio News, magazine for customers, creates in 2008 the heading "Ecology" and publishes articles on water management, energy rationalization, air emissions, and waste management (Jerónimo Martins AR, 2008). In order to fulfill Jerónimo Martins’ commitment to the fight against climate change and reinforce energy consumption rationalization, the Distribution Companies developed various actions in 2008; like the disclosure to all employees of the chapter on Energy in the Manual for Environmental Best Practices; monthly consumption monitoring; implementation of energy consumption rationalization plans in three of the retail Distribution Centers in Portugal; and various energy diagnosis were carried out in the Pingo Doce and Feira Nova stores (Jerónimo Martins AR, 2008).

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In order to involve all shops and employees in various campaigns, a free distribution of a desktop Environment Calendar in the stores was provided. This calendar marked all main dates and events linked to environmental themes, like World Day of the Environment, the World Day of the Oceans or the World Day of the Tree, furthermore the calendar included a short explanation for each event (Jerónimo Martins AR, 2004). In 2008 Unilever Jerónimo Martins invited its employees to take part in an environmental survey, under the scope of the initiative "It's Our Commitment" (Jerónimo Martins AR, 2008). Furthermore over the years various trainings have been given to teach employees about the environmental impact of their actions and to create more awareness. Furthermore national associations are supported by Jerónimo Martins, for example in 2008 Pingo Doce and Feira Nova support the Environmental Awareness Campaign by APED - Associação Portuguesa das Empresas de Distribuição (Portuguese Association of Distribution Companies) (Jerónimo Martins AR, 2008).

Environmental issues at product level In 2003 a Code of Conduct was developed and made available on the company’s website (Jerónimo Martins AR, 2004). The Jerónimo Martins Supplier Code of Conduct must be known and accepted by all suppliers. This Code of Conduct contains guidelines with regard to obeying the law, environment protection, product quality and safety and labor legislation (Jerónimo Martins AR, 2009). In order to reduce the use of plastic and to encourage consumers to reuse bags, Pingo Doce starts in 2008 charging two cents per plastic bag in Madeira, this reduced plastic bag consumption by 80% in comparison with the previous year (Jerónimo Martins AR, 2008). In 2009 the retailer started in the Pingo Doce stores to sell reusable carrier bags for 0.50 Euros in their stores. Besides that customers were requesting for packaging optimization, Jerónimo Martins now actively reduces the amount of waste of its packaging (M. Martins Ramalho, 2010, September 8). Therefore various partnerships have been developed with suppliers from a variety of areas, in order to reduce the number of packing components and their weight. Jerónimo Martins encouraged suppliers to reuse, eliminating superfluous components, minimizing the packaging per sales unit, replacing materials, encouraging package recycling and eco-efficiency (Jerónimo Martins AR, 2008). The private label products of Jerónimo Martins and those of the manufacturing area do, in principle, not contain GMO’s. In case there is no other alternative available, consumers

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The Greening of Home Brands – Elke W.A.M. Huisman are alerted to the fact by providing information on the package in accordance with European Union regulations (Jerónimo Martins AR, 2004). The Annual Report 2008 adds that the Private Brands do not contain ingredients or additives of transgenic origin (Jerónimo Martins, 2008). In 2008 Jerónimo Martins started with the development of concentrated UltraPro Private Brand detergents, in which there are currently nine references in two product lines: liquid laundry detergents and softeners. Furthermore Pingo Doce Private Brand recycled toilet paper and Sun Green Power, an environmentally friendly dishwasher product, were launched (Jerónimo Martins AR, 2008). See table XIII for an overview of the empirical findings regarding the environment at Jerónimo Martins.

Table XIII: Dimensions of Environment mentioned in literature Variables Theoretical Empirical findings Jerónimo Martins Environmental Walton et al. (1998); Carter et al. Code of Conduct for suppliers with guidelines impact (2000); Sen and Bhattacharya on environment protection since 2003; (2001); Murphy and Poist (2002); Environmental criteria taken into account when Maignan et al. (2002); Carter and redesigning stores in 2004; “Planta” brand Jennings (2002, 2004); Carter campaign regarding reforestation launched in (2005); Jones et al. (2005a); MVO; 2004; Free desktop Environment Calendar with Anselmsson and Johansson (2006) ; main dates and events linked to environmental Lattemann et al. (2007); Heasman themes provided to employees in 2004; Ecology (2008); Lai et al. (2010); section in Recheio News magazine since 2008; CommDev (2010); Environmental survey among Unilever Jerónimo Martins employees in 2008; Pingo Doce and Feira Nova support the Environmental Awareness Campaign by APED in 2008; Product / product Sen and Bhattacharya (2001); Development of concentrated Private Brand design Carter & Jennings (2002; 2004); laundry detergents in 2008; Pingo Doce Private Jones et al. (2005a); Anselmsson Brand recycled toilet paper and an and Johansson (2006); Markley & environmentally friendly dishwasher product, Davis (2007); Lai et al. (2010); was launched in 2008; Green innovation / Maignan et al. (2002); MVO Portal created for electronic orders and invoices technology (2010); Lai et al. (2010) to reduce office paper consumption in 2007; In investment 2009 similar projects for HR & logistics Energy Jones et al. (2005a); Maloni & Reduction of total energy consumption due to consumption and Brown (2006); MVO (2010); Lai et “Adap-kool” system in some of the emissions al. (2010); manufacturing refrigeration equipment in 2004; More efficient light bulbs & equipment’ is purchased and installed since 2004; Stores rearranged lighting applications since 2004; In 2008 automatic lightning systems in factories; In 2008 customers informed about environmental and economic advantages of purchasing energy-saving light bulbs; Chapter on Energy in the Manual for Environmental Best Practices for Distribution employees in 2008; Raw material usage Jones et al. (2005a); Water conservation Jones et al. (2005a); Maloni & ‘The Water Quality Monitoring Plan’ since Brown (2006); Lai et al. (2010); 2004, first year of full assessment on water; Staff informed on water use in 2004; One factory equipped with timed taps on showers/ toilets and automatic washing programs of

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The Greening of Home Brands – Elke W.A.M. Huisman maturing tanks and piping were redefined in 2004; In 2008 plan made to monitor waste waters of 58 establishments; Waste reduction Carter et al. (2000); Carter & Partnerships with suppliers to reduce number of Jennings (2002); Jones et al. packing components and their weight in 2008; (2005a); Maloni & Brown (2006); Markley & Davis (2007); MVO (2010); Lai et al. (2010); Volume of Carter et al. (2000); Carter & Partnerships with suppliers to reduce number of packaging Jennings (2002); Jones et al. packing components and their weight in 2008; (2005a); Markley & Davis (2007); MVO (2010); Lai et al. (2010); Recycling Carter et al. (2000); Carter & Joint organic waste collection in 25 stores in Jennings (2002); Jones et al. 2005; Collection of used consumables like (2005a); Maloni & Brown (2006); toners and printer cartridges in stores since Markley & Davis (2007); 2005; Reusable bags for 2 cents at Pingo Doce since 2008; Packages from drinks collected in 58 stores and organic waste for recycling in 85 stores since 2008; Polystyrene and plastic corner guards collected for recycling at 2 Distribution Centers since 2008; In 2009 reusable carrier bags for 0.50 Euros sold in Pingo Doce stores; Store design Lai et al. (2010); Genetically Jones et al. (2005a); Maloni & Private label products do not contain GMO’s. modified foods / Brown (2006); Information provided on packaging in case there biotechnology no other alternative available (2004). Use of chemicals / Jones et al. (2005a); Anselmsson pollution control and Johansson (2006); Markley & Davis (2007); Logistics Carter et al. (2000); Maloni & Reusable transport boxes for fruit, vegetables, Brown (2006); Markley & Davis meat, dairy, fish & bakery since 2004; In 2008 (2007); MVO (2010); Lai et al. joint project with transport accessory operator, (2010); with a view to obtaining operational synergies in the handling and separation of empty containers, reducing stock levels and the costs of transport involved; Inventory Markley & Davis (2007); In 2008 joint project with transport accessory management operator, with a view to obtaining operational synergies in the handling and separation of empty containers, reducing stock levels and the costs of transport involved;

3. Jerónimo Martins & Marketplace Product safety According to Ms. Martins Ramalho, 10 years ago there was no product safety certifications required yet at Jerónimo Martins. In 2004 Jerónimo Martins started to make it an obligation and they started helping suppliers with the requirements (M. Martins Ramalho, 2010, September 8). In 2004 JMR had two projects regarding food safety and quality; firstly the Recheio stores need to use the HACCP methodology to identify hazards and assess associated risks. In 2005 19 Recheio stores got certification (Jerónimo Martins AR, 2005). Secondly all distribution centers need to have the HACCP certificate and the certification of Environmental Management, namely ISO 14001. Furthermore in 2004 various plants of the 180

The Greening of Home Brands – Elke W.A.M. Huisman Jerónimo Martins Group had their Integrated Management System certified under ISO 9001:2000 (Quality), ISO14001:1999 (Environment) and OHSAS 18001:1999 (Occupational Health and Safety) (Jerónimo Martins AR, 2004). Furthermore in 2004 several suppliers were audited based on the main requirements of “Global Food Safety Initiative (GFSI) Guidance Document. In 2004 521 ‘full audits’ were performed to facilities, Food Quality and Safety Systems and the processes involved, based on the main requisites established in the GFSI (Jerónimo Martins AR, 2004). In 2009 the companies of Jerónimo Martins renewed and maintained the Quality certification (ISO 9001:2000), the Environment certification (ISO 14001:2004) and Hygiene and Food Safety Certification (HACCP). Jerónimo Martins maintained the certification of the Quality Management Systems by the SGS ICS (ISO 9001:2000), regarding the activities of "Development of Private Brands and Post-Launch Product and Supplier Follow-Up” at the Companies Pingo Doce and Recheio Cash & Carry (Jerónimo Martins AR, 2008). Furthermore the production facilities of Fima’s Stock Cubes have the BRC certification (Jerónimo Martins AR, 2009). Besides the constant training of staff, internal audits are carried out by specialized technicians to measure the quality index of Group Stores in Portugal. Ms. Martins Ramalho explains that currently all suppliers know they need to have the certificates in order to supply Jerónimo Martins. Jerónimo Martins works together with suppliers and aims to develop them (M. Martins Ramalho, 2010, September 8). In 2004, for example, the “1 st Technical Seminar on Olive Oil” was organized, the most representative suppliers were brought together and the seminar served to raise awareness of Food Safety issues, particularly in terms of good practices, traceability and potential contaminants (Jerónimo Martins AR, 2004). In September 2005 workshops with suppliers of perishable private label products were started in order to improve food safety, quality and environmental management (Jerónimo Martins AR, 2005). Furthermore the Supplier Assessment and Selection Manual was revised in 2005, this manual described the assessment and selection procedures and outlines how the audit reports are to be presented and how food safety rules are to be registered and complied with (Jerónimo Martins AR, 2005). In 2004 the Jerónimo Martins Group was involved in projects assessing the development of automated tractability systems for the food sector. A horizontal approach (Fruit & Vegetables, Fish, and Meat) was used and some of these sub-projects were carried out with external entities, namely farmers and manufacturers using the EAN (European Article Number) system (Jerónimo Martins AR, 2004). To reinforce the control of prohibited substances in fruit products, a project initiated in 2006, and in refrigerated meats, initiated in

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The Greening of Home Brands – Elke W.A.M. Huisman 2007, with the objective of checking producers' compliance with agricultural best practices (Jerónimo Martins AR, 2008). In 2008 in these areas (fruit, vegetables and refrigerated meats) compliance checks, with the specifications agreed, are performed in order to ensure maximum quality and food safety from the source to the consumer. A total of 782 analyses were performed, with a compliance rate of 80% (Jerónimo Martins AR, 2008). Suppliers are audited in accordance with standards, based on internationally recognized requirements (CIES, BRC, EFIS and EUREGAP). In 2008, this internal standard was revised to more easily show the strong points and areas to be improved by suppliers (Jerónimo Martins AR, 2008). Furthermore Jerónimo Martins implemented a new software program the Registration, Handling and Management of Claims at its 3 stores, allowing the optimization of data collection and its statistical processing, integration of data into the same support system for stores and suppliers, and the history and alerts availability when dealing with delays in closing complaints (Jerónimo Martins AR, 2008). In 2008, 220 purchasing specifications regarding fruit and vegetables were reviewed and 20 poultry-purchasing specifications, specifying the chemical and microbiological characteristics to be placed under regular analytical control (Jerónimo Martins AR, 2008). In 2005 a Training plan was drawn up and implemented for workers in Perishable Food areas (Jerónimo Martins AR, 2005). In 2008, 2,264 hours of training in Quality and Food Safety were provided to employees.

Nutrition and health The major landmark in 2005 was the creation of the Client’s Ombudsman. This new entity will provide, in addition to the usual guarantees of food safety and quality of the products on sale in the stores of the Group, nutritional advice to customers to aid them in their selection/ purchases (Jerónimo Martins AR 2005). In 2008 information on the Daily Recommended Doses (DRDs) and nutritional information for each 100 grams, and by portion, among others, were included in the labeling of Private Brand products. This made the communication of product characteristics clearer and more transparent to customers. Besides this in 2008 Pingo Doce developed the program “Mediterranean Flavors” with “Mediterranean Food” being the guiding model for providing healthy choices. This diet recommends greater consumption of vegetables, fruit, cereals, pulses and dairy products, preferably low in fat, and reduced consumption of meat, especially red meat, giving preference to fish and poultry (Jerónimo Martins AR, 2008).

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The Greening of Home Brands – Elke W.A.M. Huisman At the beginning of the ‘90s Jerónimo Martins was the first Portuguese company to launch private label products. In order to reinforce focus on the excellence of its private label products, Pingo Doce started a pioneering program in 2008 to continuously improve their nutritional profile in order to achieve healthier compositions and ingredients. Pingo Doce decided to gradually reduce the amount of salt, sugar and fat in its products, furthermore any potentially allergy-causing coloring will be totally removed. Besides this the ingredients, raw materials, additives and size of the portions are reviewed (Jerónimo Martins AR, 2009). The three-year Plan encompasses the inclusion of the parameters “Trans Fatty Acids” and “Equivalent in Salt” in the nutritional information. Furthermore innovative Private Brand alternatives, such as pre-prepared vegetables for soups and salads, snacks with vegetables, sliced fruit, organic bread and meat, ranges of food for consumers with cholesterol problems, soya drinks (for lactose-intolerant consumers) and products for diabetics and those with high blood pressure, will be developed and launched (Jerónimo Martins AR, 2008). Private Brand pre-prepared meals without flavor enhancers will be developed. Jerónimo Martins launched a range of organic Perishables in 2007 and within this project tests were carried out with thermo-sensitive labels on packaging of ready-prepared chicken and vegetables. Apart from this launch of organic Perishables, Pingo Doce launched, as first Portuguese distribution company, a Private Brand of organic products in July 2007. These products are certified by external entity Ecocert, and 20 references of meat, 23 references of fruit and vegetables and one reference of bread were launched (Jerónimo Martins AR, 2007). Furthermore autochthonous breeds are protected by selling only certified beef, Mertolenga, Barrosã and Alentejana (Jerónimo Martins AR, 2008). Additionally a heat- sensitive label for vacuum-packed Pingo Doce chicken was launched, providing objective information to the consumer regarding maintaining the cold chain, and providing the consumer with a more informed and safe purchasing process (Jerónimo Martins AR, 2008). In 2009 Jerónimo Martins introduced an innovative range of Ready Meals, “Pingo Doce à Casa”, quality fresh meals at accessible prices (Jerónimo Martins AR, 2009). Apart from these product modifications, throughout 2008, the Jerónimo Martins Banners developed various actions aimed at the customers. For example The Recheio News magazine published recommendations on the importance of Quality and Food Safety, promoting healthy nutrition and specific ways of carrying it out (Jerónimo Martins AR, 2008). Jerónimo Martins developed, in partnership with Fujitsu and ACAPO, an innovative solution for labeling in Braille, to be implemented in a group of stores, making information

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The Greening of Home Brands – Elke W.A.M. Huisman available to the blind and those visually impaired (Jerónimo Martins AR, 2008). In light with the Groups Nutritional Policy in 2008 internal training and awareness sessions took place on issues regarding nutrition and health, namely through the participation in the Well Being Week and in the heading "Nutrition" in the internal magazine “A Nossa Gente” (Our People) (Jerónimo Martins AR, 2008).

Sustainable trade and social compliance In 2003 Jerónimo Martins’ Code of Conduct was formally instituted and made available on the Group’s website. The aim was to clarify guidelines on various fundamental themes related to Jerónimo Martins mission; obeying current legislation; respect for the principles of non- discrimination and equality of opportunity; environmental concern; business transparency; and integrity in relations with co-workers, suppliers, customers and official entities (Jerónimo Martins AR, 2004, p. 74). In 2004 an information program was set up to provide all Distribution workers with a copy of the Code. Besides that, training sessions were given to increase employee awareness to the importance of following the Code and to clear up any doubts (Jerónimo Martins AR, 2004). The Ethical Committee, which was established in 2003, ensures independently disclosure of and compliance with the Code of Conduct. In 2005 the Committee executed a new communication channel, which enables any employee to clarify any doubts concerning the Code and to specify irregularities that may occur in within Jerónimo Martins (Jerónimo Martins AR, 2005). All suppliers of the Group should sign the Jerónimo Martins Group’s Supplier Code of Conduct and thereby committing themselves to running their businesses honestly, with integrity and in compliance with the law in the countries where they operate (Jerónimo Martins AR, 2008). Jerónimo Martins is now offering MSC fish. In August, 2008, Greenpeace abandoned all the main Portuguese supermarket chains since none had a sustainable fish buying policy (Greenpeace, 2009 May). Pingo Doce and Feira Nova achieved the worst results in the ranking and Jerónimo Martins was awarded with the Fishbone prize, which represents the future of marine life if this attitude does not change (Greenpeace, 2009 May). Due to this action of Greenpeace Jerónimo Martins switched to sustainable fish and seafood. MSC was no priority for Jerónimo Martins as most fish sold is obtained by local sourcing. Portugal is the third country in the world in the consumption of fresh fish (M. Martins Ramalho, 2010, September 8). This fish is sourced locally, from Portuguese fisherman. According to Ms. Martins Ramalho there are no sustainability issues regarding Portuguese fish, the issues arise from species like Cod and Salmon from South Africa and Scandinavia. As there is in Portugal

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The Greening of Home Brands – Elke W.A.M. Huisman a very high consumption of local species, sustainability of fish was never a priority for Jerónimo Martins. However due to attacks of Greenpeace Jerónimo Martins started focusing on MSC (M. Martins Ramalho, 2010, September 8).

Jerónimo Martins strongly values long-term relationships with suppliers. In the Annual Report of 2009, it mentions that long-term relationships with suppliers are a way to plan and invest adequately in their businesses. Furthermore by carrying out fair negotiations, according with ethical principles and guidelines that reflect the cost structure of each partner, the best cost price can be obtained. Surprising is however that the Annual Report 2008 mentions that competitive prices are a determining factor to attract customers and that Jerónimo Martins therefore focuses on productivity and cost efficiency in order to be able to invest in price. Following the same market logic, the suppliers with whom Jerónimo Martins works must be prepared to offer competitive commercial terms (Jerónimo Martins AR, 2008). Jerónimo Martins prefers long-term partnerships, as long as these suppliers remain up-to-date and competitive in terms of technology and innovation (Annual Report JMR, 2009). This was confirmed by Ms. Martins during the interview. According to her Jerónimo Martins is heaving supplier alliances as it does not intend to change the portfolio of suppliers dramatically (M. Martins Ramalho, 2010, September 8). The long term relationships provide Jerónimo Martins competitive advantages (M. Martins Ramalho, 2010, September 8), as mentioned in the Annual Report of 2008 as “Creating value through partnerships of trust” (Jerónimo Martins AR, 2008, p. 195). An example of such partnership is The Veal Project in 2008. This partnership was pointed at developing direct relations with upstream suppliers in the supply chain, thereby removing intermediaries, and obtaining greater profitability for both parties on the one hand, and greater control over production and capture on the other, as well as over compliance with the set rules. This type of relationship makes it possible to reinforce the offer of more accessible, fresher and better quality products to the consumer (Jerónimo Martins AR, 2008).

Local sourcing Furthermore Jerónimo Martins prefers to choose local suppliers in Portugal in order to boost economic growth in the regions where it operates (Jerónimo Martins AR, 2009). Ms. Martins Ramalho explains that the local souring is advanced because of the crisis (M. Martins Ramalho, 2010, September 8). Whenever possible it uses ‘Integrated Protection products’ like the “Alcobaça” apple and the “Rocha” pear. Small regional suppliers of delicatessen products,

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The Greening of Home Brands – Elke W.A.M. Huisman Cheese, Fruits and Vegetables are provided full technical support to diagnose Food Safety systems and environmental conditions, for further implementation of the appropriate solutions (Jerónimo Martins AR, 2004). In May 2008 Pingo Doce launched the Program "Mediterranean Flavors”. The program was set up to promote simple and accessible Mediterranean recipes. The recipes, which were organized into strongly graphical and informative leaflets, highlighted the benefits of this type of diet. The leaflets included information on the list of ingredients, nutritional information per portion and a comparative guide with the Daily Reference Values (DRVs) for men and women (Jerónimo Martins AR, 2008). See table XIV for an overview of these findings.

Table XIV: Dimensions of Marketplace mentioned in literature Variables Theoretical Empirical findings Jerónimo Martins Ethical trading / Carter & Jennings (2002; Fair negotiations with suppliers, according with ethical fair trade 2004); Roberts (2003b); principles and guidelines; Jones et al. (2005a); Maloni & Brown (2006); Salam (2009) (Sustainable) Maignan (2002); Carter & Organic chicken and vegetables under Pingo Doce private procurement Jennings (2002); Roberts label since 2008; Autochthonous breeds are protected by (2003b); Maloni & Brown selling only certified beef since 2008; MSC fish ; (2006); MVO (2010); Lai et al. (2010); Food / product Carter & Jennings (2002; Since 2003 Code of Conduct including guidelines on product safety 2004); Carter (2005); quality and safety; 1st Technical Seminar on Olive Oil in Jones et al. (2005a); Jones 2004; Since 2004 HACCP and ISO14001 certificates required et al. (2005b); Anselmsson for Recheio stores and distribution centers; Integrated & Johansson (2006); Management System of various stores certified under ISO Maloni & Brown (2006); 9001:2000 & ISO14001:1999; GFSI required since 2004 and audits performed; Renewed ISO 14001:2004; Automated tractability systems for the food sector (EAN) in 2004; In 2005 workshops for suppliers private label products on food safety; In 2005 Training plan was drawn up and implemented for workers in Perishable Food areas; Projects to reinforce the control of prohibited substances in fruit products (2006) and in refrigerated meats (2007); In 2008, 220 purchasing specifications reviewed, specifying the chemical and microbiological characteristics to be placed under regular analytical control; In 2008, 2,264 hours of training in Quality and Food Safety were provided to employees; heat-sensitive label for vacuum-packed Pingo Doce chicken since 2008; BRC certificate for Fima’s Stock Cubes in 2009; Animal welfare Jones et al. (2005a); Jones Organic chicken under Pingo Doce private label since 2008; et al. (2005b); Anselmsson &Johansson (2006); Maloni & Brown (2006); Nutrition and MVO (2010); Anselmsson Client’s Ombudsman provide nutritional advice to customers Health and Johansson (2006); since 2005; Daily Recommended Doses information on PL Maloni & Brown (2006); products from 2008; “Mediterranean Flavors” program in Heasman (2008); 2008; Start-up of three-year Plan in 2008 to achieve healthier compositions and ingredients of PL products; Ranges of food for consumers with cholesterol problems, soya drinks (for lactose-intolerant consumers) and also products for diabetics and those with high blood pressure, will be developed and

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The Greening of Home Brands – Elke W.A.M. Huisman launched in 2008;The Recheio News magazine promoted in 2008 healthy nutrition; Labeling in Braille in 2008; Training of employees in the “Well Being Week” in 2008; Nutrition section in internal employee magazine since 2008; In 2009 start of “Pingo Doce à Casa”; Supply chain / Carter et al. (2000); Ethical Committee set up to ensure compliance with Code of supplier Maignan (2002); Carter Conduct in 2003; Providing full technical support to diagnose relationships and and Jennings (2002; 2004); Food Safety systems and environmental conditions to small monitoring Roberts (2003b); Carter regional suppliers since 2004; Supplier Assessment and (2005); Maloni & Brown Selection Manual revised in 2005; In 2005 workshops for (2006); Heasman (2008); suppliers private label products on food safety; Projects to CommDev (2010) reinforce the control of prohibited substances in fruit products (2006) and in refrigerated meats (2007); Internal standard to audit suppliers revised in 2008; New software program to optimize data collection and statistical processing, integration of data into the same support system for stores and suppliers, and the history and alerts availability when dealing with delays in closing complaints in 2008; Audits of suppliers; Long-term relationships with suppliers strongly valued; Non-domestic Sen and Bhattacharya Since 2003 Code of Conduct with guidelines respect for the operations (2001); Anselmsson and principles of non-discrimination and equality of opportunity; Johansson (2006) Minority/women- Maignan (2002); Carter owned and Jennings (2002; 2004); purchasing Carter (2005); Salam (diversity) (2009) Sourcing local Maignan (2002); Jones et Use of ‘Integrated Protection products’ (“Alcobaça” apple and and regional al. (2005a); Jones et al. the “Rocha” pear) since 2004; Sourcing from small regional foodstuffs (2005b) suppliers of delicatessen products since 2004; “Mediterranean Flavors” program in 2008; Autochthonous breeds are protected by selling only certified beef since 2008; Jerónimo Martins prefers to choose local suppliers to boost economic growth in the regions where it operates (2009). Working Maignan (2002); Carter & Since 2003 Code of Conduct with guidelines respect for the conditions & Jennings (2002; 2004); principles of non-discrimination and equality of opportunity; safety at supplier Carter (2005); Jones et al. Ethical Committee set up to ensure compliance with Code of plant (2005b) Conduct in 2003; Human / worker Maignan (2002); Carter & Since 2003 Code of Conduct with guidelines respect for the rights at supplier Jennings (2002; 2004); principles of non-discrimination and equality of opportunity; plant Carter (2005); Jones et al. Ethical Committee set up to ensure compliance with Code of (2005b); Salam (2009) Conduct in 2003; Child labor Maignan (2002); Carter & Since 2003 Code of Conduct with guidelines respect for the Jennings (2002); Jones et principles of non-discrimination and equality of opportunity; al. (2005b) Ethical Committee set up to ensure compliance with Code of Conduct in 2003;

4. Motivations of Jerónimo Martins The main motivation for commitment to CSR practices is managing the corporate expectations, as these expectations are very high (M. Martins Ramalho, 2010, September 8). Furthermore a second motivation is that Jerónimo Martins wants to eliminate risks. Third main motivation is that Jerónimo Martins wants to explore market opportunities. Besides that not only corporate reputation, also brand reputation (Pingo Doce) is very important (M. Martins Ramalho, 2010, September 8).

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The Greening of Home Brands – Elke W.A.M. Huisman Jerónimo Martins’ focus with regard to CSR has changed over the years. The focus in 2004 was on environment and community. This trend has stayed for a while in the market. In 2008 CSR issues became core business as well. Companies in Portugal started integrating CSR strategy with business strategy. This is a major change; it took a lot of time to integrate CSR with business priorities. Because of the current crisis, CSR has been integrated with business priorities, because some environmental issues could be included in economic issues. For example, both reduction of water and packaging optimization have impact on the cost structure. A lot of CSR topics started with environmental and economic issues. Jerónimo Martins is very clear on these ideas; they keep on being economic and business driven and then look for factors on environment where they can play a role (M. Martins Ramalho, 2010, September 8). “Everything has to make sense business wise” (M. Martins Ramalho, 2010, September 8). M. Martins Ramalho explains that there are so many things to do in relation to CSR. Selection of priorities is crucial. The trigger point is there; in 5 years’ time Jerónimo Martins want to be in a strong market position with regard to CSR. The aim is to perform better in the eyes of customers and towards key competitors. However Jerónimo Martins recognizes CSR not only improves sales, it involves costs as well. “Everything JMR does need to bring value to market opportunity and this value need to have impact” (M. Martins Ramalho, 2010, September 8). Nowadays more and more CSR issues arise, however Ms. Martins Ramalho stresses that the decision to focus more on CSR practices is not a way of just selecting topics, it has to make sense business wise (M. Martins Ramalho, 2010, September 8). As mentioned in previous section Jerónimo Martins is heaving various supplier alliances and does not intend to change the portfolio of suppliers dramatically, for example through tenders. According to Ms. Martins Ramalho these long term relationships provide Jerónimo Martins competitive advantages (M. Martins Ramalho, 2010, September 8). This means that long term relationships with suppliers are not (only) entered from an ethical stance towards suppliers, also because it gives Jerónimo Martins itself competitive advantage. Some CSR actions of Jerónimo Martins result from attacks from NGOs. An example is the attack of Greenpeace with regard to sustainable fishing. Sustainable fish was from a business point of view no priority for Jerónimo Martins, but due to pressure of Greenpeace Jerónimo Martins now has to start focusing on this topic (M. Martins Ramalho, 2010, September 8). Besides NGOs, customers have influence on CSR practices of Jerónimo Martins. Ms. Martins Ramalho mentioned as an example that customers were emailing about

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The Greening of Home Brands – Elke W.A.M. Huisman packaging optimization in order to reduce waste. So Jerónimo Martins acts upon that (M. Martins Ramalho, 2010, September 8). International competitors of Jerónimo Martins are already quite active with regard to CSR in their markets. This impacts Jerónimo Martins to become more involved in CSR practices. But apart from this, the opinion upon Jerónimo Martins of other companies in Portugal, like banks or paper producing companies is very important to Jerónimo Martins. The financial market in Portugal is not yet aiming for CSR, so that trigger is there not yet. However increasingly companies and people are not only focusing on results, also on the way how these results are achieved. More information is required on CSR. Increasingly other companies and people in Portugal are focusing on CSR and international competitors are already more advanced, so this influences Jerónimo Martins to become more active on CSR as well (M. Martins Ramalho, 2010, September 8). Therefore Jerónimo Martins is since 2004 reporting on CSR, which is included in the Annual Reports. The Annual Reports are mostly written for the financial market, and because their interest in CSR was low, a CSR part was not included before (M. Martins Ramalho, 2010, September 8). Since Jerónimo Martins was not involved in many CSR practices, media and the community requested Jerónimo Martins to report on CSR (M. Martins Ramalho, 2010, September 8). Therefore Jerónimo Martins decided to include CSR in the Annual Report. Ms. Martins sees no need to separate the CSR part from the Annual Report. “If you are integrating business strategy with CSR strategy, why should you separate both reports?” (M. Martins Ramalho, 2010, September 8). It is more important what you communicate, and how you communicate. Jerónimo Martins first strategy is on social community support. It is important to make sure you do not get unfocussed, furthermore Jerónimo Martins wants to add value with what is already inside the company (M. Martins Ramalho, 2010, September 8). Brand trends are drivers for CSR as well. An example is trend of consuming more healthy food; Jerónimo Martins believes that the improvement the health of consumers is very important. This concerns not only the products that they sell, also the information that is given to customers. According to Jerónimo Martins, this will have result on the long term, but its impact will be huge. Jerónimo Martins has set the objective that in five years’ time Pingo Doce is not only seen as the best brand for fresh private label and for service, also has the reference in healthy food. Jerónimo Martins is changing the brand reputation of Pingo Doce and happens in two stages; the first stage has a focus on health and local sourcing. The second stage focuses on eco efficiency, like reducing packaging, and on biodiversity, like MSC and land use (M. Martins Ramalho, 2010, September 8). However Ms. Martins mentioned that if

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The Greening of Home Brands – Elke W.A.M. Huisman you are too early in the market with an innovation, you could just kill the innovation as consumers are not yet ready for it and they are asking themselves why other retailers in the market are not doing the same (M. Martins Ramalho, 2010, September 8). Therefore Jerónimo Martins is not a fast runner or early adopter with regard to innovations. Some innovations are done, but as said before it first must make sense to the business strategy. Jerónimo Martins is mainly looking for international trends, in the US or rest of Europe. When eventually a practice is adopted some time has passed (M. Martins Ramalho, 2010, September 8). See table XV for an overview of these findings. Table XV: Motivations for CSR Variables Theoretical Empirical findings Jerónimo Martins Self-presentation and Snider et al. (2003); Jones et al. (2005a); impression management Economical-financial Miles & Covin (2000); Piacentini et al. Eliminate risks; Explore market perspectives (2000); Price WaterhouseCoopers (2002); opportunities; A lot of CSR topics Orlitzky et al. (2003); Jones et al. started with environmental and (2005a);Van de Ven & Graafland (2006); economic issues; Keep on being Lattemann et al. (2007); Tetrault Sirsly & economic and business driven, then Lamertz (2008) look for factors on environment where they can play a role Reputation Miles & Covin (2000); Price Corporate reputation important WaterhouseCoopers (2002); Orlitzky et al. (2003); Tetrault Sirsly & Lamertz (2008); Lee et al. (2009) Brand / brand loyalty Spar and La Mure (2003); Musso & Risso Brand reputation (Pingo Doce) (2006) Customer demand Piacentini et al. (2000); Price Customers have influence on CSR WaterhouseCoopers (2002); Musso & practices Risso (2006); Lai et al. (2010) Marketing - Publicity Maignan et al. (2002); Van de Ven & Graafland (2006); Musso & Risso (2006) Innovation Maignan et al. (2002) Not a fast runner or early adopter with regard to innovations Industry trends Price WaterhouseCoopers (2002) International competitors and companies in other sectors in Portugal are involved in CSR; Brand trends are drivers for CSR (healthy food) Increase employee Maignan et al. (2002); Van de Ven & commitment / loyalty Graafland (2006); Musso & Risso (2006); Competitive / market Miles & Covin (2000); Price Explore market opportunities; Create position WaterhouseCoopers (2002); Spar and La strong market position with CSR; Mure (2003); Jones et al. (2005a); “Everything JMR does need to bring value to market opportunity”; Competitive advantages through long term relationships with suppliers Transaction costs Price WaterhouseCoopers (2002); Spar Eliminate risks and La Mure (2003); Jones et al. (2005a); Pressure from Piacentini et al. (2000); Ernst & Young Managing the corporate stakeholders & investors (2002); Price WaterhouseCoopers (2002); expectations; CSR actions result Tetrault Sirsly & Lamertz (2007) from attacks from NGOs; Financial market in Portugal is not aiming for CSR yet; Media and the community

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The Greening of Home Brands – Elke W.A.M. Huisman requested Jerónimo Martins to report on CSR Increased sense in social Ernst & Young (2002); Price responsibility of company WaterhouseCoopers (2002) itself/ CEO/Board commitment Customer loyalty Piacentini et al. (2000); Musso & Risso (2006) Store loyalty Musso & Risso (2006) Inclusion in sustainability Musso & Risso (2006); indexes Market differentiation Piacentini et al. (2000);

5. Results from CSR practices of Jerónimo Martins The first year a full assessment was made on the water consumption of Jerónimo Martins’ stores was in 2004 (Jerónimo Martins AR, 2004). Also in 2004 a voluntary programme was set up aimed at rationalising energy consumption and hence reducing the emission of greenhouse gases and other pollutants. The Annual Report of 2004 state that the available data for 2003 was scarce, but the objective for the future is to map and present the evolution of electricity consumption indicators (Jerónimo Martins AR, 2004). From the Manufacturing area of Jerónimo Martins, figures are present about water consumption, electricity use and waste. With regard to the stores and distribution, from 2004 onwards Jerónimo Martins started measuring more and more its environmental impact. Some results are presented in table XVI below.

Table XVI: Measured results by Jerónimo Martins 2009 2008 2007 2006 2005 Environment Energy consumption in stores – Electricity (kWh/sqm) 700.9 621.3 694.6 727.1 653.9 Energy consumption in Distribution centers – Electricity 120.4 150.7 132.6 118.5 125.5 (kWh/PBU in thousands)* Energy consumption in stores – Fuel (GJ**) 30,304 35,262 32,901 - - Energy consumption in Distribution centers – Fuel (GJ) 1,864 2,511 2,259 - - Consumption of energy (electricity, fuel, steam) per unit of 1.89 1.93 1.88 2.11 - produced product (GJ/t) (manufacturing) Water use stores, per sales area (m3/sqm) 2.69 2.25 2.12 2.08 2.03 Water use distribution centers, per thousand boxes of 0.71 0.72 0.59 0.58 0.47 throughput (m3/PBU in thousands) Total number of industrial wastewater per unit of product 0.74 0.81 0.89 1.01 - produced (thousand m3/t) (manufacturing) Waste per unit of produced product (t/t) (manufacturing) 0.0281 0.0335 0.0299 0.0296 0.0285 Total recycled waste (cardboard & plastic) 27,989 24,970 18,559 14,889 14,200 Equivalent CO2 emissions stores per volume of sales (t CO2 0.059 0.053 0.058 0.058* 0.052*** eq/€thousands) ** Equivalent CO2 emissions distribution centers per thousand 0.061 0.075 0.066 0.058* 0.062*** boxes of throughput (t CO2 eq/PBU in thousands) ** Equivalent CO2 emissions per unit of product produced (t 0.105 0.108 0.104 0.095 0.091 CO2 eq/ t) Percentage of reusable boxes vs. total number of boxes 18.1% 11.7% 12.9% 9.2% 6.7%

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The Greening of Home Brands – Elke W.A.M. Huisman transported Marketplace Organic products private label ? ? 44 - - Fair trade products - - - - -

From table XVI can be concluded that the water consumption increased over the years. According to Jerónimo Martins this is caused by the increased focus on Perishables, which by nature cause an increase in water consumption (Jerónimo Martins AR, 2008). The values tracked by the indicators for water consumption do not present significant increases within the Distribution Centers, however due to the constant changes in size of Purchasing Buying Unit; these indicators show a negative evolution (Jerónimo Martins AR, 2008). Investments in efficient equipment and the adoption of day-to-day best practices has resulted in the reduction of energy consumption in the Distribution stores, however again a negative evolution is shown in the table XVI as the size of the Purchasing Buying Unit constantly changed over the years (Jerónimo Martins AR, 2008). Between 2008 and 2009 the significant reduction can be noticed. The amount of waste sent for recycling increased over the years, opening of new stores together with the strong awareness and commitment of all employees, contributed toward this (Jerónimo Martins AR, 2009). During the interview Ms. Martins Ramalho explained that their CSR efforts are not really measured and no targets are set for CSR. This is because Jerónimo Martins is still deciding which path to take (M. Martins Ramalho, 2010, September 8). First a clear business strategy, priorities and targets have to be set. Then a general CSR strategy can be developed and this should be integrated with the business strategy and priorities. Jerónimo Martins is now in this stage. When the CSR strategy is defined, targets can be set and results be communicated (M. Martins Ramalho, 2010, September 8). At this point Jerónimo Martins is not spreading around that it for example wants to reduce the CO2 footprint by 2015 and make up a percentage, like 5%, while in the end it can be reduced by even 10%. Jerónimo Martins is not doing that because first of all they do not know if it is a priority or not, how it must be achieved, how it will be measured and what the impact will be on the business. Jerónimo Martins is currently in the stage of deciding this. Then targets will be set (M. Martins Ramalho, 2010, September 8).

With regard to awards received because of good practices, Jerónimo Martins received a lot, but not much of these awards were related to CSR. In 2004 the FimaVG plant of Jeronimo

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The Greening of Home Brands – Elke W.A.M. Huisman Martins received an “Award for Excellence in Consistent TPM Commitment 2004 - First Category” from the Japan Institute of Plant Maintenance (JIPM), which rewarded teamwork and the consistency of the practices and methods adopted to TPM (Total Productive Maintenance) program tools (Jerónimo Martins AR, 2004). In 2008 the Company Unilever Jerónimo Martins received the “2008 Good Eggs” award from the Compassion in World Farming (CIWF), a leading international organization for the protection of farm animals (Jerónimo Martins AR, 2008).

6. Jerónimo Martins & Stakeholders Portuguese consumer The purchasing behavior of Portuguese consumers is mainly determined by advertising and for food mostly by price (M. Martins Ramalho, 2010, September 8). Environmental aspects have still a subordinate place; however among young people it is becoming more popular as they are more open to awareness campaigns in the press. In Portugal brand names are associated with social status. Currently the preference for domestic or foreign goods is changing; traditionally preference is, apart from wine and cheese, almost always for imported goods. However, currently awareness campaigns have been launched to encourage consumers to buy domestic products (Laposte Export Solutions Portugal, 2010).

Apart from this, a study of the Research Institute for Organic Agriculture mentions that the demand for organic products in Portugal is still very small (Organic-Europe, 2010). Rosa et al. (2009) conducted research to explore the consumer demand for organic milk products in Portugal. This research is used to get to know more about the Portuguese consumer behavior, although mostly is concerning organic milk this at least gives an idea about the behavior. Consumer survey (620 responses) of Rosa et al. (2009) indicated that forty percent of the respondents have already consumed at least once an organic milk product. Sixty percent on the other hand had never contact with such products. Reasons mentioned for this are lack of information and the high prices. Regarding awareness and level of knowledge of organic products, twenty percent have no idea what an organic agricultural product is. This study indicates that when more information is available on organic milk products and when prices remain relatively controlled, the consumption levels of organic milk products will grow significantly in Portugal. Furthermore Rosa et al. (2009) expect an increase in the role of health, nutrition and environmental factors as major drivers of food consumption. As among Portuguese consumers is a widespread lack of knowledge about organic products,

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The Greening of Home Brands – Elke W.A.M. Huisman good communication and promotion programs are needed to enhance the demand for such products. Furthermore the research shows that there is a strong correlation between family income and level of consumption of organic milk products, where households with a higher income consume more organic milk products. Ms. Martins Ramalho recognizes that price plays an important role. The Portuguese consumer is for economic reasons not interested in CSR (M. Martins Ramalho, 2010, September 8). Organic food is launched five years ago in the Portuguese market; however it is much more expensive than regular food. The customers of Jerónimo Martins informed Jerónimo Martins that they would like to consume organic food, but that they cannot afford it. Also ready-to-cook meals, a segment in which Jerónimo Martins is now market leader, had a very slow start; it took Jerónimo Martins eight years to get large volumes. The Portuguese consumer is very price sensitive (M. Martins Ramalho, September 8 th 2010). Besides that Portugal is pressured heavily by the current economic crisis and unemployment is high. At the moment the economy is facing a lot of struggle. The consumer is afraid; food is not suffering a lot from that, but non-food is (M. Martins Ramalho, 2010, September 8). So the typical Portuguese consumer is focused on price. However CSR is becoming a more important topic as recently much more information is available and as media and TV are paying attention to it. As more and more information is available, awareness increases. The consumer is not questioning a topic like food safety anymore, as they assume it is good and taken care off (M. Martins Ramalho, 2010, September 8). Food safety is an issue since 20 years, at that time consumers became more aware. Nowadays food safety is a standard in the market; it is a survival issue for retailers. “It is not a concern for the consumers; it is an obligation for Jerónimo Martins and the consumer is not questioning food safety as they assume it is good and taken care off” (M. Martins Ramalho, 2010, September 8). The Annual Report 2008 acknowledges that the Group works to continually improve its performance in terms of Quality and Food Safety, in order to add to the scientific and technological progress in its sector, and to meet current and future needs and expectations of its customers. This means that even if it is not yet a concern now, Jerónimo Martins works on future needs. Ms. Martins Ramalho mentioned that Jerónimo Martins has a very strong reputation in Portugal and its reputation regarding CSR is valued by the population. Furthermore Jerónimo Martins is recognized as low-profile in communication; things are not made bigger than they are. Although Jerónimo Martins is low-profile in communication, it still has a huge

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The Greening of Home Brands – Elke W.A.M. Huisman responsibility as the expectations from the market are always very strong (M. Martins Ramalho, 2010, September 8). The study of Paço and Raposo (2009), on the environmentally friendly behavior of consumers, shows that Portuguese consumers, regardless of their support for policies to improve the environment, do not turn their concerns into actions, like joining environmentalist associations. Paço and Raposo (2009) argue that the participation of the Portuguese is often based on protecting the environment by saving electricity and water; these concerns are more closely connected to economic drivers than with environmental consciousness. Furthermore Paço and Raposo (2009) conclude that Portuguese consumers recognize the challenges regarding the environment and are aware of the existence of environmental problems, even if their concerns are not always turned into environmentally friendly behavior.

Employees Jerónimo Martins invests in the social community because it beliefs that all what it does for the community will be good in the end for the business itself. For example, help in education will lead to stronger employees in the future. Jerónimo Martins actively strengthens communities and is therefore active on a local basis. The different Jerónimo Martins retailers are very close connected to the local people (M. Martins Ramalho, 2010, September 8). The employees value social community practices on local level as the retailers are very close connected to local people. Besides that education is perceived as important. This is probably because about 90-95% of the manpower at Jerónimo Martins is low educated and has low wages, see table XVII. Just 2% of the Jerónimo Martins Group consists of management (M. Martins Ramalho, 2010, September 8), see in table XVIII below. Therefore Jerónimo Martins started two years ago, in 2008, a social program for employees ‘Jerónimo Martins for us’.

Table XVII: Total number of employees of Jerónimo Martins as of December 31 2008)

Retrieved from Jerónimo Martins Annual Report 2008

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The Greening of Home Brands – Elke W.A.M. Huisman

Table XVIII: Distribution per Academic Degree Jerónimo Martins Group

Retrieved from Jerónimo Martins Annual Report 2008

In the past social support was provided to employees upon request, for example employees who wanted better education for their children contacted Jerónimo Martins for support. There was an informal culture to support those employees. However two years ago Jerónimo Martins structured this with the program ‘JMR for Us’, an Internal Responsibility area (Jerónimo Martins, AR 2008). This is actively communicated so that all employees are aware that every employee has a chance to get help from Jerónimo Martins, like education, child support or financial (M. Martins Ramalho, 2010, September 8). Employees are given a chance to improve their selves; people in stores start studying again, from finishing secondary school to getting a master-degree. This internal training and development program is still in the beginning phase, with a lot of little initiatives happening, however in the end the results need to be evaluated (M. Martins Ramalho, 2010, September 8).

In order to keep employees informed about CSR, since March 2005 a permanent section dedicated to Social Responsibility was launched in the internal Jerónimo Martins magazine “A Nossa Gente” (Jerónimo Martins AR, 2004). As Jerónimo Martins did not decided yet on which sustainability issues to focus, employees are not yet trained on sustainability topics. However some information is given to employees in stores and press releases are showed, for example the Greenpeace arguments. But this is to a minimal extent yet, first a plan have to be draft and then employees will be trained (M. Martins Ramalho, 2010, September 8).

NGOs In the scope of the mission Jerónimo Martins reports that it aims to “ensure the entire organization operates to the highest standards of conduct and Social Responsibility, through

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The Greening of Home Brands – Elke W.A.M. Huisman the building of relationships of trust with all the Group’s stakeholders” (Jerónimo Martins AR, 2009, p. 24). NGOs and associations are considered that promote common interests with regard to market regulation and protection of the sector’s interests, in technological and social development, or in preservation of the environment and natural resources, among others (Jerónimo Martins AR, 2009). However in the Annual Report 2009 no NGOs are mentioned with regard to environment and marketplace in combination with purchasing. Jerónimo Martins does report it is member from several associations that promote the implementation of sustainable development, like BSC and RSE Portugal which is a partner of CSR Europe (Jerónimo Martins AR, 2009). With regard to pressure from NGOs, Ms. Martins Ramalho mentioned that some CSR actions of Jerónimo Martins result from attacks from NGOs. The example of Greenpeace was given. Sustainable fish was from a business point of view no priority for Jerónimo Martins, but due to pressure of Greenpeace Jerónimo Martins now has to start focusing on this topic (M. Martins Ramalho, 2010, September 8).

7. Position of Jerónimo Martins in the market The Portuguese market consists of 10 million inhabitants. Over the last 10 years there have been several changes in the retail market. There was a lot of expansion from retail groups and traditional retail decreased, furthermore there was an increase of fresh products. During this expansion period there were a lot of shop-openings. The legislation to the market in the early 90’s gave the chance to open stores (M. Martins Ramalho, 2010, September 8). The law was interrupted for a few years and is opened up again in 2004, which meant that ‘everyone’ can open a store again. This resulted in huge activity in Portugal between 2004 and 2008. According to Jerónimo Martins, now growth is slowing down and the market is not increasing anymore in volume, but in value (M. Martins Ramalho, 2010, September 8). The last five years there have been a concentration of main players on modern retailing. Jerónimo Martins market leader in supermarkets (Pingo Doce) and in cash&carry (Recheio). Sonae is market leader in hypermarkets, and is the main competitor of Jerónimo Martins’ Feira Nova hypermarkets (M. Martins Ramalho, 2010, September 8). As can be seen in figure X below, in the Portuguese market Sonae is in market share larger than Jerónimo Martins. The total market share of Sonae (Continente, Modelo and Modelo Bounjour) with 21% in 2009 and of Jerónimo Martins 17% (Pingo Doce and Hipers). See figure II. The total number of stores of Jerónimo Martins is more than twice the number

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The Greening of Home Brands – Elke W.A.M. Huisman of stores of Sonae. According to Ms. Martins the difference in market share is small and Jerónimo Martins aims to become larger than Sonae soon. On an international basis Jerónimo Martins is larger as it owns Biedronka in Poland. Jerónimo Martins is the largest Portuguese Group amongst the retail companies and entered last year (2009) the Deloite’s list of “Global Powers of retailing”, holding the 94 th position, while in 2006 it was at position 180. This shows that Jerónimo Martins grows a lot (M. Martins Ramalho, 2010 September 8 th ; Jerónimo Martins AR, 2009).

Sales Stores Sales Area Market Market Share Share Banner 2008 2009 ∆(%) (08) (09)* 2008 2009 ∆∆∆∆(%) 2008 2009 ∆∆∆∆(%) Pingo Doce 2.060 2.294 11% 13% 15% 334 334 0 0% 332 333 2 0% Hipers 404 339 -16% 3% 2% 9 9 0 0% 79 79 0 0% 2.465 2.634 7% 15% 17% 343 343 0 0% 411 413 2 0% Continente 1.735 1.772 2% 11% 11% 38 39 1 3% 275 286 11 4% Modelo 1.201 1.308 9% 8% 8% 84 91 7 8% 169 179 9 5% Modelo Bonjour 140 152 9% 1% 1% 26 26 0 0% 24 24 0 -1% 3.076 3.232 5% 19% 21% 148 156 8 5% 468 488 20 4% Jumbo - 0% 0% 19 21 2 11% 139 159 20 14% Pão de Açucar - 0% 0% 7 10 3 43% 15 22 7 46% 1.188 1.245 5% 7% 8% 26 31 5 19% 154 181 27 17% Intermarché 1.218 - - 8% - 145 158 13 9% 202 220 18 9% Ecomarché 236 - - 1% - 63 63 0 0% 38 38 0 0% Netto 0 - - - - 21-1- 10-1- 1.454 1.518 4% 9% 10% 210 222 12 6% 241 259 18 7% Minipreço 924 914 -1% 6% 6% 498 524 26 5% 185 193 8 5% Lidl 1.236 1.232 0% 8% 8% 215 219 4 2% 215 220 5 2% El Corte Ingles (Hiper) 39 nd - 0% - 2 2 0 - 8 8 0 0% Supercor 13 nd - 0% - 2 2 0 - 3 3 0 0% Total El Corte Ingles 52 56 7% 0% 0% 4 4 0 11 11 0 E.Leclerc 342 358 5% 2% 2% 21 23 2 10% 44 48 4 9% Aldi 39 63 62% 0% 0% 15 19 4 27% 12 16 3 27% 10.776 11.252 4% 67% 71% 1.480 1.541 61 4% 1.742 1.829 87 5% Figure II: Food Retail Portugal

According to Ms. Martins Auchan (Jumbo and Pão de Açucar) is strong, but not in the number of stores, which were in 2009 31 stores, see figure X. Intermarché (and Ecomarché) is a strong player in the Portuguese market; however since they are a franchise enterprise they do not compete with Jerónimo Martins. The Intermarché stores follow an international strategy, but there is a lot of difference in quality among stores (M. Martins Ramalho, 2010, September 8). Jerónimo Martins sees Lidl as a very strong player; it is the main discounter in Portugal and has a strong strategy. In 2009 Lidl has 219 stores in Portugal. Other discounter Aldi recently entered the Portuguese market, but has less than 20 stores in 2009 (M. Martins Ramalho, 2010, September 8). Minipreço of the Dia grupo, is a very strong discounter, but is losing market share most probably due to Lidl and Aldi. According to Ms. Martins Dia is a main competitor as it has proximity to the Pingo Doce stores, as Pingo Doce positions itself has having low prices all over the year with not using discounts (Pereira, 2010).With 524 stores Minipreço has the largest amount of stores in Portugal in 2009.

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The Greening of Home Brands – Elke W.A.M. Huisman In the Portuguese market Jerónimo Martins has three main competitors; the Sonae Group, the Dia Group and Lidl. However as there are a lot of international players active in Portugal, who follow international strategies on CSR and are already quite advanced, Jerónimo Martins has to follow. Jerónimo Martins has a very strong reputation in Portugal and a reputation with regard to CSR is important (M. Martins Ramalho, 2010, September 8). Jerónimo Martins is known for its low-profile communication; it is not making things bigger than they are. However the expectations from the market are very strong and Jerónimo Martins has a large responsibility. Jerónimo Martins should not be seen as fast runners or early adopters; in some areas they innovate but in steps. Jerónimo Martins is looking for international trends, mainly in the USA and the rest of Europe and then adopts eventually the best practices. But this means delays in timing. Besides that, as said, steps taken must make sense to the business strategy (M. Martins Ramalho, 2010, September 8). That Jerónimo Martins has a strong reputation in Portugal could be concluded from research of Pereira (2010) as well. Her research focused on CSR image and Brand attitude of four supermarkets brands with stores in Portugal; Continente and Modelo (both of Sonae), Jumbo (Auchan) and Pingo Doce (Jerónimo Martins). Contrary to the expectations of Peirera (2010), the CSR image of Pingo Doce is more positive than the CSR image of the other brands. “Continente and Modelo develop several philanthropic activities, including several cause-related marketing activities involving consumers in it. Despite Pingo Doce don’t positions itself as a socially concerned brand (with the exception of environmentally concerned) is has the highest rates, according to our sample” (Peirera, 2010, p. 10). Furthermore Peirera (2010) concluded that “Pingo Doce has the highest rates of CSR image and Brand attitude, meaning that brand attitude is also influenced by this CSR image” (p. 10).

8. End remarks Jerónimo Martins In 2004 interest was raised in CSR. According to the Annual Report of 2005, the year 2004 was focused on the design, development and implementation of certification systems, while 2005 was dedicated to validating the operability and the completion of the certification processes (Jerónimo Martins AR, 2005). Jerónimo Martins’ communication is mostly focused on the financial markets and on the media to a lesser extent. As Ms. Martins Ramalho explained they are doing some press releases (M. Martins Ramalho, 2010, September 8). Jerónimo Martins is not communicating CSR to the consumers yet, as said Jerónimo Martins is low-profile in communication.

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The Greening of Home Brands – Elke W.A.M. Huisman However although its communication is low-profile the consumer positions the Pingo Doce brand as a socially concerned brand. Ms. Martins Ramalho mentioned that Pingo Doce is on the shortlist for the Green festival 2010. This is a project where used palm oil is recollected for biodiesel. According to Ms. Martins Ramalho this festival is a way of communicating. At the moment the client reimbursement is a communication channel, here Jerónimo Martins shares information on sustainability issues like sustainable fish. However the clients contact Jerónimo Martins instead of vice versa. Ms. Martins pointed out that Jerónimo Martins will become in the near future more active on communicating to consumers; it will communicate on the website and in-stores about CSR. Besides this Jerónimo Martins is running a project to restructure its website and create new platforms, as “Jerónimo Martins has done so much [CSR-related] things in the past, there is a lot to communicate about” (M. Martins Ramalho, 2010, September 8). Ms. Martins Ramalho adds that Jerónimo Martins has not yet a clear communication strategy because it is still under construction. After is decided where to focus on, the communication strategy can be set. The Annual Report is just a piece of communication, although that structure needs to be improved (M. Martins Ramalho, 2010, September 8). Internally Jerónimo Martins is very comfortable about its CSR policy. “We are doing much more that we communicate, that can be a competitive advantage as well” (M. Martins Ramalho, 2010, September 8). Jerónimo Martins is running a lot of projects; however these are not communicating that explicitly. But as mentioned before, Jerónimo Martins is in their eyes a ‘low-profile company’, and according to Ms. Martins Ramalho investors and consumers know that. Jerónimo Martins has a rather reactive stance, which makes the company vulnerable for continuous attacks from NGOs. This happened in 2009 when Greenpeace pressured Jerónimo Martins to switch to MSC fish (Greenpeace, 2009 May). According to Greenpeace (2009) Pingo Doce and Feira Nova were at the bottom of the retailers ranking in Portugal with regard to sustainable seafood. Paço and Raposo (2009) concluded that the participation of the Portuguese consumer is often based on protecting the environment by saving electricity and water; these concerns are more closely connected to economic drivers than with environmental consciousness. This is quite comparable to the CSR policy of Jerónimo Martins, ‘everything has to make sense business wise’ and a lot of CSR practices are driven from an economic perspective. Besides that most CSR practices are focused on the environment (waste reduction, energy reduction, water consumption), and on the community, which is not discussed in this Master thesis. However with regard to marketplace, the CSR practices are scarce.

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