Shaping a more sustainable food industry
mapping different sustainable organisations' business model
BORLO VITTORIA GIUDICE NICOLÒ
KTH ROYAL INSTITUTE OF TECHNOLOGY
SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT
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Shaping a more sustainable food industry
Mapping different sustainable organisations' business model
by
Borlo Vittoria
Giudice Nicolò
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Master of Science Thesis INDEK 2017:2017:119 KTH Industrial Engineering and Management
Industrial Management SE-100 44 STOCKHOLM
Master of Science Thesis INDEK 2017:2017:119
Shaping a more sustainable food industry
Borlo Vittoria Giudice Nicolò
Approved
2017-06-01
Examiner
Gregg Vanourek
Supervisor
Terrence Brown
Commissioner
UPV- Universitat Politècnica de València
Contact person
Jose P. Garcia Sabater
Abstract
It is scientifically proven that the actual consume of natural resources cannot sustain the European life style of the entire world population forever. Therefore, sustainability is a very hot topic right now. The food industry counts for the 30% of the global pollution.
The food industry needs to become more sustainable. Therefore, this research investigates the
"triple sustainability" concept, by developing and applying a sustainable model. That is used to evaluate organization's sustainability.
The purpose is to investigate and map different existing sustainable business models which aim to increase the consumption of sustainable food in two different geographical clusters.
The conventional food supply chain makes critical and difficult to handle some of the sustainability issues. This due to existing economies of scale and market networks, build of many intermediaries between production and consumption. Therefore, we analysed a more innovative food supply chain: the Short Food Supply Chain and the derived concept of "local food".
The research question of this study is: "How different sustainable business models respond to
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the sustainability issue in two different geographical areas?". To analyse the sustainability, we develop a model. Moreover we analysed the similarities and differences in the two different clusters. We found that there are no remarkable differences in the business model used.
We also report the analysis about the reproducibility of the business model. At the end, we suggest future researches.
Key-words
Food sustainability; Sustainable Business Model; Sustainability evaluation;
Sustainable organization; short food supply chain; local food; organizations' differences in different European areas; Sustainable food industry; triple sustainability.
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Summary
DEFINITION & ACRONYMS 12
CHAPTER 1: INTRODUCTION 14
1.1BACKGROUND 14
1.2PROBLEM FORMULATION 16
1.3PURPOSE 16
1.4RESEARCH QUESTIONS 16
1.5DELIMITATIONS 17
1.6MASTER’S THESIS FRAMEWORK 17
CHAPTER 2: LITERATURE 18
2.1BUSINESS MODEL 18
2.2CROSS-NATIONAL CLUSTERS 19
2.2.1NATIONAL CULTURE AND CROSS-NATIONAL CLUSTERS 20
2.2.2FOOD QUALITY RELATED TO THE TWO CLUSTERS 22
2.3SUSTAINABLE FOOD 25
2.4FOOD SUPPLY CHAIN TODAY 28
2.4.1CONVENTIONAL FOOD SUPPLY CHAIN TODAY AND ITS CONSEQUENCES 28
2.4.2SHORT FOOD SUPPLY CHAIN DEFINITION. 30
2.4.3DIFFERENT PERSPECTIVES ON SFSC 31
2.4.4CHARACTERISTICS OF THE SFSC 34
2.5LOCAL FOOD 35
CHAPTER 3: METHODOLOGY 37
3.1SCIENTIFIC APPROACH 37
3.2CREATING SUB-QUESTIONS 37
3.3DATA COLLECTION METHOD 38
3.3.1PRIMARY DATA 38
3.3.2SECONDARY SOURCE DATA 44
3.3.4RESEARCHING DIFFERENT SUSTAINABLE ORGANIZATIONS 45
3.3.5BUSINESS MODEL ANALYSIS METHOD 46
3.4SCIENTIFIC QUALITY 48
3.4.1VALIDITY 48
3.4.2RELIABILITY 49
3.4.3GENERALIZABILITY 50
3.5ETHICS 50
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CHAPTER 4: RESULTS 52
4.1GENERAL DESCRIPTION OF THE ANALYSED BMS 52
4.2INITIAL CONDITION TO START THE BM 56
4.3FUNDAMENTAL VALUE OF THE ORGANIZATION 57
4.4CHARACTERISTICS OF THE MODEL 58
4.4.1VALUE PROPOSITION 59
4.4.2CLIENTS 62
4.4.3REVENUE MODEL 64
4.4.4RESOURCE AND ASSETS 65
4.4.5COSTS 66
4.4.6 PROCESS AND ACTIVITIES 67
4.4.7SUPPLIER 68
4.4.8FINANCING 69
4.5CRITICISM 70
4.6LOCAL FOOD 70
4.7DIGITALIZATION OF SERVICES 71
4.8SUSTAINABLE MODEL 72
CHAPTER 5: ANALYSIS 75
5.1SFSC-SHORT FOOD SUPPLY CHAIN 75
5.2THE BUSINESS MODEL'S SUSTAINABILITY 77
5.3THE BUSINESS MODEL CHARACTERISTICS IN DIFFERENT CLUSTERS 81
WE NOW REPORT THE BM’S DIFFERENCES OF THE TWO CLUSTERS. 82
WE NOW REPORT THE BM’S SIMILARITIES OF THE TWO CLUSTERS. 82
5.4ANALYSIS OF THE STUDY’S RELIABILITY AND VALIDITY 83
5.5CRITICISM 84
CHAPTER 6: FINDINGS 85
6.1SHORT FOOD SUPPLY CHAIN 85
6.2THE BM REPRODUCIBILITY 86
6.3BM FEATURES: SIMILARITIES AND DIFFERENCES. 87
6.4RECONNECTION TO THE PURPOSE 87
7.1CONTRIBUTION TO KNOWLEDGE 89
7.2FUTURE WORK 89
REFERENCE LIST 90
WEB SITES: 94
REPORT AND CONFERENCES 95
APPENDIX 96
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APPENDIX A:JUSTIFICATION OF COUNTRIES IN DIFFERENT CLUSTERS 96
NORDIC CLUSTER 96
LATIN EUROPEAN 97
APPENDIX B:INTERVIEW’S STRUCTURE FOR THE ORGANIZATION 99
APPENDIX C:TEMPLATE FOR PRELIMINARY BM ANALYSIS 106
APPENDIX D:THE SUSTAINABLE MODEL. 107
SOCIAL SUSTAINABILITY 107
ENVIRONMENTAL SUSTAINABILITY 110
ECONOMICAL SUSTAINABILITY 114
9 Dedication.
We would like to thank all the people assisting and supporting during the whole writing process. Especially the two professors (Terrence and Jose), the interviewees who dedicated to us their precious time, all the people involved in the write storming, all the people that we get in contact with during this period of time, all our families and friends (who with pressure, who with beers, who with a big smile, helped us during this). We also want to say a very special thanks to a friend who correct all the language through the report.
Moreover, we need to give a dedication to two countries that have host us, Spain and Sweeden.
And thanks to the whole word and to all the people which are investing their life to shape a better world.
We are dedicating this to every one.
10 List of table
Table 2.1: The nine elements of the business model
Table 2.2: Summary of culture difference founding from different authors Table 2.3: The two geographical clusters
Table 2.4: Consumers' requirements in the Nordic Cluster
Table 2.5: Consumers' requirement in the Latin European Cluster Table 2.6: Characteristics of sustainability
Table 2.7: Definition of “local food”
Table 3.1: Structure of semi-structured interviews for the experts we interviewed Table 3.2: Interviewed experts in the food industry – primary sources
Table 3.3: Interview template for sustainable organizations
Table 3.4: The interviewed people belonging to the sustainable organizations Table 3.5: The participants of the write-storming
Table 3.6: The SOs we interviewed
Table 3.7: SOs which had not been interviewed
Table 4.1: Sustainable Organization's description and number Table 4.2: Sustainable Organization's description and letter Table 4.3: Dimension of each BM
Table 4.4: The main strength of each BM Table 4.5: Organization's value proposition
Table 4.6: The relationships between the organization and the end customers Table 4.7: The source of income for the different organizations
Table 4.8: Cost model and structure of the SOs Table 4.9: The main processes of the organizations Table 4.10: The definition of local food for the SOs Table 5.1: Mapping the triple sustainability for the SOs
List of image
Image 2.1: Reineck's 30 KPIs
Image: 2.2: Funnel scheme of the supply chain in the agri-food sector.
Image 3.1: Social sustainability
Image 3.2: Environmental sustainability Image 3.3: Economic sustainability
Image 3.4: Framework followed for our analysis Graph
Graph 1: Triple sustainability level of single organization Graph 2: Triple sustainability level of single organization Graph 3: Triple sustainability level of single organization
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Graph 4: Triple sustainability level of single organization Graph 5: Triple sustainability level of single organization Graph 6: Triple sustainability level of single organization Graph 7: Triple sustainability level of single organization
Graph 8: Triple sustainability level of all the organizations compared
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Definition & Acronyms
Acronyms used in the paper:
SFSC: Short food supply chain.
CFSC: Conventional food supply chain.
KPI: Key Performance Indicator.
SO: sustainable organization.
BM: Business model.
EOD: Earth Overshoot Day.
EU: European Union.
13 Definition:
Community: is a group of people. They interact between each other and share some particular characteristics in common. Group´s dynamics are highly important.
Territory: represents the environment, the society and their interactions of a geographical area.
High quality food: food which has been produced with a high level of attention towards sustainability. Moreover it has high hygienic standards and high nutritional values (i.e.
healthy food).
Organization: An organization is a group of people who share interest in the same business.
They work together in an organized and official way, which could be either a cooperative, an association, a profit or no profit company.
Small organization: has between 1 and 9 (full time) people who are actively and directly working in the organization.
Medium organization: has between 10 and 60 (full time) people who are actively and directly working in the organization.
Client: are all the organizations and person who buy a products or services, they are consumers and also intermediaries.
ASL (Azienda Sanitaria Locale): Regional public entity responsible for the national health service in Italy
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Chapter 1: Introduction
This chapter introduces the research project to the readers. In this chapter, we included most of the main areas touched in this research. We start introducing the research topic. This leads to the problem formulation and purpose of this study. They drive the readers to the main research question (and consequently to the sub questions). The chapter ends with the limitations of the study. Finally, we explain how this project was born (i.e. its framework).
1.1 Background
The “Earth Overshoot Day” (EOD) is the critical date, which declares when the world´s population consumes all the available resources for the current year (Betti, 2016). For instance, in the 1970, the EOD was on the 23rd of December. Since 1970, the EOD day has fallen earlier and earlier in the year. Last year (2016) the EOD was on the 8th of August, which is five days earlier then the previous year. It caught everybody's attention on the resources of this planet. The ways of how people are living is not longer sustainable for just a single planet. That is why everybody should make an effort and invest energies in order to conduct a more sustainable everyday style of life.
Every aspects of our life can be evaluated from a sustainable point of view. Everyday we have an incredible amount of choices to make that might have an important impact on the global sustainability. They range from how we physically move to how we decide to feed ourselves or to how we work and how we interact with the environment and the society around us.
The only food industry counts for 30% of the global pollution (2012), to this we have to add as well all the activities that are supporting the food industry (such as transport, fertilizing and pesticide industries) (TED, Tristram Stuart, 2012 ). This large amount of pollution is due to many reasons (such as transports, productions methods, over productions, waste).
Furthermore, there is a double negative effect. From one side we have a lot of transport throughout the whole supply chain and, from the other side, we have a lot of waste at the end of the supply chain. It has been calculated that between 1/3 and 1/2 of the world food production is not consumed (Gustavsson et al, 2011; Bio Intelligence study, 2010).
The European Commission calculated the amount of food wasted in the EU in the year 2016.
Such amount is around 88 million tons. It generates 143 billion of euro of waste (Fusion, 2016).
The last International Exposition (Milan Expo 2015) focused its attention on this topic: how we can feed the planet in a sustainable way. This exhibition had the effect of denounce the wastes and the low attention on the sustainability issue in the food industry.
Around 1-2 centuries ago in Europe, eating habits were just for feeding our bodies and for satisfying our primary needs. At that time, 95% of the population was working in agriculture
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in order to provide food, mainly for their families. Today just 5% of the European population is employed in the agriculture (2016). Nevertheless, the European population has been more than doubled and we eat and waste then three times more than in the past. In addition to this, we eat more processed and unsustainable food, such as junk food, meat, processed food and not seasonal food. This change is due to different factors such as innovations, technologies and mechanizations.
In the developed countries, eating is not a need anymore. It becomes an assured pleasure which allows us to focus our energy on other fields.
Today thanks to different factors (such as an increased awareness, sensitization, healthy reasons) more and more people are careful about what they eat. They want to be more informed about what they eat and - therefore - this influences their purchasing decisions.
Now we are still looking for pleasure but we aim to be more and more responsible of our choices‟ consequences.
Different organizations develop new business models which aim to grasp this new
“qualitative” demand and they aim to shape a new sustainable food industry. During the universal expositions (Milan Expo 2015) the main message was to start new food processes, supply chains, production‟s methods, in order to re-shape the whole food industry. The new food industry needs high attention on the sustainability issue.
All actors involved in the food chain have a role to play in preventing and reducing food unsustainability. From those organizations which produce and process foods (farmers, food manufacturers and processors) to those which make food available for consumption (distributor, retailers, supermarket) and ultimately consumers themselves.
Those factors, connected with consumers‟ needs, open new opportunities for small and medium food producers to enter into the market. Since for the conventional supply chain is hard and difficult offer this closer shop experience to address the new customer's needs.
So new business models are popping up. They want to directly reach consumers and to increase the availability of sustainable food. They are leveraging different aspects: strong values; technology (digitalization); innovative concepts such as sharing economies; changing in consumers‟ behaviours, and so on. As a result, they are based on stressing different consumers‟ values (quality products oriented, more sustainability oriented, etc…).
How different business models (i.e. organizations) address the sustainability issue is part of the study of this research.
Sustainability had been considered from the “triple bottom line of sustainability”, which means from the following different point of view. The is economic. The organizations should financially maintain themselves over a period of time. The second aspect is society. The organizations need to take into high consideration people and society‟s needs, requirements and wellbeing. The last aspect is environment. Organizations have to take care of the future of the world environment, allow future generation to live in the same condition as we live
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today. Organizations have to pay high attention and take over responsibility on these factors in order to be sustainable in a log term prospective.
1.2 Problem formulation
It is not present in the web a database of triple sustainable business models that are sharing their work and their knowledge in order to facilitate new entrance, even if they are willing to do it. Each organization has different approaches to the sustainability. The approach may be influenced by the geographical areas and the cultures.
Different business models stress different aspects of sustainability. Some examples are:
minimizing the waste, inserting circular economies, maximizing the usage of resources and so on. As a result, organisations can be sustainable in many different ways. On the other hand there are not clear instructions on how to be sustainable. Each organization has its values and ideas on how it contributes to sustainability. Furthermore, every organizations claim to be sustainable referring to several and different parameters or guidelines. There is not an official evaluation scale that can be applied in the food industry in order to assure and to claim an objective sustainability level.
1.3 Purpose
The purpose of this research is to investigate Sustainable Organizations (SO) which have in common the aim to increase the availability of sustainable food products for consumers.
Our aim is to map the different Business Models‟ (BM) strategies belonging to different geographical clusters (I.e. Nordic and Latin European) with special attention on evaluate their triple sustainable.
The scope of mapping them is to help the new entrants to choose the right BM, providing them with information, specific examples and different instances on sustainability. This should lead to increase the number of SO therefore the availability and consumption of sustainable food.
1.4 Research Questions
In order to be able to fulfil the purpose, we develop a main research question. It is:
⇒How do different sustainable business models respond in the Nordic and Latin European Cluster?
To answer this question, we need to understand:
1. How different business models are triple sustainable? (SQ1)
This is our first sub-question. In order to reply to this, we need to investigate on how it is possible to evaluate and to map the triple sustainability.
Moreover, we research on the similarities and differences in the BMs. This in order to see
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how (and if) the two geographical areas affect the BMs
In the Chapter 2, we report the existing literature we used for answering these questions and for performing our analysis. In Chapter 3, we describe the methods we used in order to scientifically reply to these questions.
1.5 Delimitations
We present the limitations of our research.
● The study is focused on the business model's analysis of just small and medium food producers.
● The changes consumers‟ demand are indeed just in quality, not in quantity.
● The study is limited by availability of time of five months.
● The scientific information about food characteristics had not been verified by official documents.
● This study has been conducted within a very specific context; thus it has a low degree of generalizability. However, we provide information, highly descriptive analysis which can be partly transferred in similar context.
1.6 Master’s thesis Framework
We are two students of KTH- Kungliga Tekniska Hogskolan finishing our Master in
“Industrial Management Engineering”. We are performing this research project as our Master Thesis. This project is in collaboration with UPV- Universitat Politècnica de València.
Professor Jose P. Garcia (professor of Business Management in UPV) offers us this research topic. He aims to create a database of sustainable small and medium organization‟s business models in order to ease the creation of new similar organizations, which help the flow of sustainable food from small/ medium producers to the consumer.
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Chapter 2: Literature
In this Chapter we present the literature study (so previous researches) around our topic. We start describing briefly what a business model is, then we present our geographical clusters.
These two elements together form the background of our research. Consequently we link these two clusters with some food habits. Finally we deeply present the sustainability issue and the short food supply chain, which can be considered a part of the broader sustainability aspect.
2.1 Business model
There is a lot of research about what a business model is and how it is used. We now aim just to present what it is and why it is important. A business model has a double aspect. From one side, it describes the business (“descriptive function”); and from the other side, it calculates the economic value of an organization (“numerical function”) (Magretta, 2002).
To present a business model, we can break it down in two main elements. One is called
“value proposition”, the other one is called “operating model”. Both of them are composed by three different sub-elements.
The value proposition highlights the customer's side; i.e. the people that the model is targeting, with services or products. Clients and products together define the revenue model.
The operating model, instead, expresses how the organization is delivering the offer. It is oriented towards the organization's resources. Thus, the main focus is on how to operate in order to be profitable. The company operates in a supply chain.
Many researchers have then drawn their own business model‟s definition. A definition, given by Osterwalder & Pigneur (2005), states that a business model is “a conceptual tool that contains a set of elements, concepts and their relationships, in order to express the essence and the logic of a business. Therefore, it should be taken into account that the elements and their relationships allow a simplified description and representation on, what value is provided to customers, how it is done and with what financial implications ".
The components (mentioned in the previous definition) are four. These four blocks are:
products, relationships with clients, operational structures and finance. They are then subdivided in elements. In total a business model has nine elements.
Concept Element Definition
Product Value proposition It is the general overview of
products and services that a company is offering
Relationships with clients Targeted market The market segment that a company aims to reach.
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Sales channels How a company reach the clients.
Relationships The types of links that a company develops with its segmented clients
Operation system Activities and resources How the activities and resources are allocated.
Skills and competences The needed capabilities to carry out company‟s operations.
Stakeholder‟s network The cooperation with other companies in order to be able to offer and commercialize company‟s offered products/services.
Finance Cost structure The consequences of
exploiting the assets.
Revenue model The company‟s model to generate earnings.
Table 2.1: the nine elements of the business model
We decided to follow the framework propose by Osterwalder´s (2005), the same followed by Ana Galeano (2013) in her research on BMs. The peculiarity of this method is that the BM's elements are described from an academic point of view, therefore suitable for a more reliable and valid research.
We chose to use Osterwalder's framework (to analyse the nine elements) because it fits our scientific needs. For instance, Canvas business model, which is the best known framework, works very well from a business point of view. We, instead, are interested in a clear and easy way to read model for an analysis of case study. This explains why we chose Osterwalder´s (2005) framework instead. The nine elements are present also in the Canvas‟ BM but the difference is how they are described.
Taking into consideration these nine elements, we analysed different business models. In Chapter 4, you can read the described BM's elements, results of our investigation.
2.2 Cross-national clusters
Since our study is based on “How do different sustainable business models respond in the Nordic and Latin European Cluster?” (RQ), we need to define the two different geographical areas. We need to define the clusters we take into consideration understanding and
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highlighting their differences. Here we start presenting the cluster we chose and the previous literature and researches.
2.2.1 National culture and cross-national clusters
Many nations are multicultural, whereas many cultures are multinational. Prior researches (Ronen & Shenkar, 1985) demonstrated the existence of country clusters which report similar values and beliefs (i.e. culture). These similarities come from similar history, geography, language and religion.
Many studies and researches have been conducted to identify the country clusters. Ronen &
Shenkar, (1985), represent a pillar in this research field. In their research “Clustering Countries on Attitudinal Dimensions: A Review and Synthesis”, they collected and analysed previous researches on the topic. It emerged that there are nine macro cultural clusters which divide the world.
As stated before, these macro-regions have very similar language‟s roots, religion history and geography (and climate) very similar.
Source
Haire Ghiselli, Porter (1966)
Sirota &
Greenwood (1971)
Romen &
Kraut (1977); SSA of Sirota &
Greenwood (1971)
Hofstede
(1976) Ronen &
Kraut (1977);
Griffeth,Ho m,Denisi &
Kirchner (1989)
Hofstede (1980)
Anglo
UK US
UK US Australia Canada India New Zeland South Africa Austria Switzerland
UK US Australia Canada India New Zeland South Africa
UK US Sweden
UK Ireland South Africa Israel
UK Canada
UK US Australia Canada Ireland New Zeland South Africa
Germanic
Austria Germany Switzerland
Austria Germany Switzerland
Austria Germany Switzerland
Austria Denmark Finland Germany Norway Sweden Switzerland
Austria Germany Istrael Switzerlan d
Nordic
Denmark Germany Norway Sweden
Denmark Finland Norway
Denmark Finland Norway
Denmark
Norway Denmark
Finland Norway Sweden
Denmark Finland Norway Sweden Netherland
21 Table 2.2 summarises the findings.
Table 2.2 "Clustering Countries on Attitudinal Dimensions: A Review and Synthesis” source.
Own Elaboration: the Arabic Cluster has been the only one removed. As far as the researches Badawy 1979 and Redding (1976).
Beside “Anglo-American” cluster, all the other clusters group countries are form the same area/continent. This exception may be due to colonization and migration phenomena (Ronen
& Shenkar, 1985). Language is another aspect underlying the cluster‟s groups. Countries within the same cluster speak the same language or share the same language‟s root.
The technological development affects managerial style and attitudes (Webber, 1969). This is important to take into consideration for the analysis of different BMs. (See: Chapter 5.3 “The Business Model Characteristics in different cluestes”).
Moreover, the national culture influences the nature of the relationship of an organization
s
Latin European
Belgium France Italy Spain
Belgium
France Belgium
France Brazil France Italy Switzerland
Belgium
France Belgium Greece Italy Netherlands Portugal Spain
Argentina Belgium Brazil Frace Italy Spain
Latin American
Argentina Chile India
Argentina Chile Colombia Mexico Peru
Argentina Chile Colombia Mexico Peru Venezuela
Chile Colombia Mexico Peru Portugal Venezuela
Near East
Greece Iran Turchey Yugoslav ia
Far East
Hong Kong India Pachistan Philippines Singapore Taiwan Thailand
Independe nts
Japan Brazil Germany Isreael Japan Sweden Venezuela
Brazil Israel Japan Sweden
India Iran Japan
Japan
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with its environment as well as relationships among people within an organization (Schneider, 1989). That explains why it is important to identify the similar cross-national culture. Culture also shapes the consumers' requirements for the food industry.
Given the framework of our research project (in collaboration with the Polytechnic of Valencia), we decided to chose the Nordic and Latin European‟s clusters.
Based on the previously reported literature review, we define the Nordic cluster composed by: Denmark, Norway, Finland and Sweden. Meanwhile, the Latin European cluster is made up by Belgium, France, Italy and Spain.
Cluster Country
Nordic
Norway Sweden Denmark Finland
Latin European
Italy Spain Belgium France Table 2.3: the two geographical clusters.
See Appendix A: Justification of the clusters for reading the reasons and justification of our choices.
In the Chapter 5 Analysis, we determined the differences and similarities of the BMs in different clusters.
2.2.2 Food Quality related to the two clusters
We are now going to briefly introduce the concept of “quality of food” and its characteristics. Afterwards we present the different consumer's perception of food quality in
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the two different clusters. We decided to introduce it here for clarifying our “quality” point of view for the whole research project and introduce consumers requirements and needs.
Quality of food
Food quality has different definitions depending on which lens this concept is analysed with.
There are usually three typical actors who define the “quality of food”. They are: producers, clients and government official (Lien, 1989). Each of these major players has its own characteristic to define the quality of the product.
For producers, for instance, the quality is related to technical use-attributes (yield, sustainability for mechanical harvesting and industrial preparation, resistance against insects and diseases) (Nilsson, 1978).
For government, instead, the quality is higher related with regulations concerning health and production aspects (for instance allowed a determinate quantity of chemical products, additives, and so on).
As far as the third point of view, the clients‟ one, the quality reflects the level of satisfaction required by them. Once, clients were more careful to the esthetical appearance (shape, size, colour, freshness, and so on). In the last years, trends show that clients are focusing also on other aspects not related with appearance (Smith, 1991; Jussaume & Judson, 1992; Schafer et al., 1993; Wandel, 1994). Clients attention is moving closer to government official‟s aspects.
Thus, consumers are becoming more careful about food‟s productions, hygienic standards and environmental impact. So “high quality products” come from the combination of different characteristics both from the product itself and from subjective values perceptions (Migliore, 2015). This trend shows the shift of attention towards the processes within the whole supply chain rather than the product itself.
The actual supply chain is not perfectly responding to the client‟s new needs. It may be valuable for food producers to seek for other information and distribution channels which hit better client‟s new priorities (Wandel, Bugge, 1997). This is what the Short Food Supply Chain (SFSC) aims to leverage. They want to better meet consumer‟s new needs in order to create trust and loyalty between them and producers.
The quality in SFSC is not assured by a certification system but through a set of values, relationships and behaviours of clients and producers. Indeed, often food quality is associated with special economy where there is a strong presence of environmental, social, ethical, political, personal health and cultural issues. This leads to the binomial local-natural to be a requirement for quality food products (Migliore, 2015).
This research takes into consideration consumers' point of view. Therefore, when we refer to
“high quality food”, we mean the low environmental impact, high hygienic standards and high nutritional values (i.e. healthy food).
We now report some already carried out researches on what consumers are mostly seeking in the food.
24 Quality of food for consumers in different clusters
There are more and more researchers about alimentary habits. The researchers aim to explain by what and how the alimentary habits are affected by. To analyse how different BMs are triple sustainable and thus how the sustainability is taken into consideration in two different clusters, we now present previous researches on what people are seeking in the sustainability within the food industry (SQ1). This is also to investigate how different geographical areas affect the organization’s offerings and operations (RQ).
Starting from the Nordic Countries, there is a hanging trend in nutritional habits. The trend is pushing forward a healthier diet (less sugar and increase the consumption of fresh and natural product such as organic fruit and vegetables, for instance) (Nilsen, Krokstad, Lingaas, Westin, 2009).
Some researches try to explain the underlying forces of this new trends. There is a major trend on high consumption of organic food1 (this due to selfish reasons) (Magnusson, Arvola, Hursti, Åberg, Sjödén, 2003) (Wandel, Bugge, 1997) (Tregear, Dent, McGregor, 1994).
The table 2.4 summarises the three main reasons why consumers prefer organic food in the Nordic clusters. Therefore, what consumers are seeking and taking care of in the consumption of food.
Number Characteristic
1 Internal Food quality characteristic - absence or low presence of additives, preservatives and residues 2 Environmental Aspect
3 How food has been processed
Table 2.4: Consumers´ requirements in the Nordic Cluster
Many researchers agree on the fact that the first reason is for personal health (organic food is perceived as healthier); the second reason in order of importance is for environmental issues (Wandel, Bugge, 1997) (Tregear, Dent, McGregor, 1994) (Grankvist, Biel, 2001). The organic food is also perceived as more environmentally friendly. This last concern is reflected also in meat purchasing decision. Consumers agree on paying a price premium (up to 10%) for purchasing meat which has had a production process that was respectful of animal welfare (Wandel, Bugge, 1997).
The most notable results find that the purchase decision is based on the food production ( low
1A product for being classified as “organic” needs to meet several requirements on both the product itself and the production system. On the product level, a requirement is that the nocive chemical residue on the product needs to be lower of a determinate maximum level. On the production level, it determinates certain practices and usage of natural product or mechanical procedures in order to have a low chemical residue level on the product and on the land.
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presence of additives, preservatives, and so on) (Land, 1998 and Torjusen et al., 2001).
As far as the future trends, it is likely that the organic food sales will keep on increasing because young people are more affected by organic labelled food (Magnusson, Arvola, Hursti, Åberg, Sjödén, 2003).
Also in the Latin European countries, the food consumption has shifted toward a more sustainable consumption. An increase in the attention of food information has been registered in order to respond to consumers‟ concerns about safety of food, human health and environment protection (Garcia, Magistris, 2008).
The main reasons are self egoistic benefits. Consumers are more careful about the health (food‟s nutritional value and characteristics). Then, they also take into consideration the environment. However, in the Latin European Countries, consumers value the relationship between food and environment rather than the way of processing food. Therefore the “local”
aspect of food is taken into high consideration in these countries (Garcia, Magistris, 2008). (See Chapter 2.5“local Food”). Partly as a consequence, consumers are willing to know the
“history” of the food (how and where it has been processed).They want to be responsible consumers. Table 2.5 summarizes the results for the Latin European Cluster.
Number Characteristic
1 Internal Food quality characteristic - absence or low presence of additives, preservatives and residues
2 Environmental Aspect
3 Knowledge
Table 2.5: Consumers´ requirements in the Latin European Cluster
We have now generally presented the new trends for the two clusters. In Chapter 5, we analyse the consequences of this.
2.3 Sustainable food
It is hard to define what “sustainable food” is. This is due to several used definitions. There is a broad literature about this topic. We now aim to introduce the topic dealing with the most important aspects.
Starting by analysing the meaning of sustainability in accordance with the Brundtland Commission, FN, 1987 “Sustainability” is the “development that meets the needs of the present without compromising the ability of future generations to meet their own needs."
Another definition, given by Sandhu (2014), is a statement which declares: "it is our
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responsibility, as consumers, to make the decisions to live in a way that does not use our resources at an higher rate than they are regenerated".
Both definitions highlight that it is important to leave -to the future- the possibilities to use natural resources.
Sustainability is also analysed based on the base of its geographical range of impact. Based on this distinction, we have local or global sustainability (Sandhu, 2014). The first one concerns the habits and behaviours which are sustainable in the local areas; whereas the second concerns the rate of using the global resources (i.e. the rate of using them needs to be lower than the rate of regeneration). Anyway, there are some features which are common to both aspects of sustainability. Sustainability should be a collective activity (not individual). If people want to behave in a sustainable way, they need to be engaged with each other.
Moreover, sustainability is a “progressive action”. It can always be extended and further developed to be continuously improved and adapted to de different scenario. The source of continuous improvement comes from self-reflexive activities.
Table 2.6 reports some necessary characteristics to define what sustainability is.
Some characteristics that define sustainability are:
Sustainability is a collective activity. A sustainability initiative engage different members of the community.
Sustainability is a progressive activity. A sustainability initiative seeks to identify unsustainable practices and change them, or, to identify sustainable practices and develop or extend them.
Sustainability is a self-reflexive activity. A sustainability initiative will improve in response to a self-relative critique of current practice.
A sustainability initiative is undertaken and owned by a community or a number of co- operating communities. A community can include organizations of many different sizes and purposes.
A sustainability initiative should develop a sustainable relationship with the natural environment. That is, it should ensure that the community’s use of particular environmental resources is better than before it was implemented, and does not deplete resources at a greater rate than they can be replenished.
Human communities are part of the natural environment. Thus, a sustainability initiative should improve and sustain relationships within its own community, and with other communities.
Table 2.6: Characteristics of sustainability
If we link the sustainability topic with the organization‟s operations, a very relevant concept
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is the “Triple bottom line” sustainability concept of Hudson (2014). The core focuses on environmental, social and economic sustainability impacts of the different activities done by the organization. Hence, the “triple” sustainability line. It is important that these sustainable aspects are balance between them to reach an equilibrate and sustainable organization.
Other authors have developed different indicators of sustainability to give some guidelines to organizations. We use them in order to develop our sustainable model.
The researcher Holton (2008) has developed a list of elements which could be taken into consideration in order to develop a sustainability strategy. These elements are different depending on the sector where the business is operating. The framework aims to help organizations to integrate economic, social and environmental risk. It also aims to increase the organization competitiveness through a defined sustainable strategy. Nevertheless, we could not directly apply this framework to our case. This is because the framework is focused on sustainability strategy for brick, forest and steel construction industry. Furthermore, they do not give a measurement scale to measure and evaluate the sustainability. Anyway we mention it since we had use it to keep examples and inspiration to develop the sustainable model.
Reineck (2011) considered thirty different Key Performance Indicators (KPIs) which could be taken into consideration in order to evaluate the sustainability development. Image 2.1 present the KPIs divided into their triple sustainable classification.
28 Image 2.1:Reineck's 30 KPIs
Each of these KPIs has a specific method for being calculated described by the author Reineck (2011). Looking at these KPIs, the organization manages to monitor if the processes are aligned with the sustainability and - in accordance to them – it manage to drive the future suitable actions.
A sustainable food system is a collaborative network which integrates several components in order to enhance a community‟s environmental, economic and social well-being (Pothukuchi, 1999). We consider sustainable food all the agro-alimentary products which are produced and distributed in a sustainable way. All the aspects of sustainability (i.e.“triple bottom line”) must be taken into consideration. Therefore, sustainable food should come from a sustainable supply chain, which should be made of sustainable organizations (SO) that have an impact on all the triple sustainability parts. The integrated approach (between production and the supply chain) plays an important role.
We exploited all the frameworks, definitions and concepts, mentioned above, extracting ideas and identifying the starting point for some reflections to develop our "Sustainable Model".
(See Chapter 4.8 “Sustainable Model” for reading our framework about map the sustainability).
2.4 Food supply chain today
In this sub chapter we present literature over the food supply chain. In detail we describe the conventional food supply chain followed by a description of the short food supply chain and its characteristics based on different prospective.
2.4.1 Conventional food supply chain today and its consequences
The conventional food supply chain (CFSC), or Agri-food supply chain, is facing a lot of challenges. This is due to the nature of the handled product (food) which is usually subjected to long lead times and significant uncertainties - both in demand and in the supply side (Lowe and Preckel, 2004). These challenges are even more complex to handle when the regulations are also taken into consideration. The food industry has been highly regulated in order to create a safe system for consumers and organization's agreement.
The result is that the CFSC is highly regulated and strictly hierarchical. Making decisions is a long process which involves different parties. As a consequence, the conventional food supply chain is not efficient for dealing with the fast dynamic environment. Moreover, this low flexibility makes harder to meet consumer's new requirements.
The CFSC, due to the standardization to decrease costs, has favoured the presence of a few numbers of intermediaries between the producers and the consumers. The CFSC leads to:
longer transportation distance; standardized products, which often need to be processed or submitted to different operations; less direct interactions or relationships between the
29 producer seller and end consumers.
All these CFSC facts lead to a different unsustainable effects from all the bottom line points of view (environmental, social and economical). Some example of these effects are:
increasing products travel distance, using more packages for optimizing the transport of all items, standardization of the production which leads to decrease product‟s variety, using of security and safe stocks long all over the supply chain; increasing food scraps (items which had not fulfilled all standard requirements); cultural isolation of producers especially in the rural area; increasing the cost of the products due to the long supply chain, increasing economic dependency and so on. These are just some of the consequences of the CFSC.
The Image 2.2 represents the actual situation of the supply chain in the agri-food sector. It shows the result of CFSC.
Image 2.2: Funnel scheme of the supply chain in the agri-food sector. Source: (Grievink, 2008) Based on data from seven Western European countries.
The Image shows as well the purchasing power of the intermediaries of the CFSC. As it can be seen, there are several intermediaries and the power is not equally divided between them.
There are large numbers of producers and consumers but there is a remarkable squeeze in the middle of the supply chain. This results in an hourglass structure which leads to the middle players to have a large amount of power. Moreover, it also shows as well the number of intermediaries between producers and consumers within the CFSC.
Therefore, in order to better meet consumers‟ new quality requirements, a new typology of supply chain is needed. Technological development, e-commerce, and so on allow the development of a new type of supply chain: the Short Food Supply Chain - SFSC- or network supply chain.
With our project we aim to contribute to analyse different BMs which are possible to reproduce and which are operating with the SFSC (so they aim to eliminate the majority of the intermediaries: semi-manufactured, supplier, buying desks, banners, supermarkets and shoppers). So, we also aim to provide tools for entrepreneurs to enlarge the hourglass of the
30 supply chain of the agri-food sector.
2.4.2 Short Food Supply Chain definition.
This paragraph introduces the definition of Short food supply chain (SFSC) and it gives a brief description of the critical points of SFSC concept from different prospective.
Due to the main reasons stated above, this unsustainable CFSC offers possibilities to develop a new more sustainable supply chain. Therefore, the “alternative food chains” (or network) has attracted a lot of attention in the recent years. New food politics began to fill the gaps between old government regulations and consumers‟ concerns over food and its manipulation (Marsden T., Banks J., Bristow G., 2000). Consumers are seeking for more natural and local food (see Chapter 3.2.2 “Food quality” and 3.5 “Local food”). They agree on paying a premium price for having higher quality, traceability and natural production process on food.
It is important that the product reaches the market embedded with its information (Marsden T., Banks J., Bristow G., 2000). This upsets the previous “non” existing relationships between the producer and the consumers (Thvenot, 1998).
The concept of a food supply chain which increases the consumption of local and sustainable food is identified with different names Short Food Supply Chain (SFSC) and Agri-food Network (AFN). The SFSC concept is more specific than AFNs, and, rather, covers the interrelations between the actors who are directly involved in the production, processing, distribution, and consumption of food products (Renting, 2002). That is why in this paper we focus more on SFSC rather than AFN.
SFSC have a double aspect to consider. Firstly, they redefine the producer-consumer relationship by giving clear signal of the origin of the food products; secondly, they refer to the rural economic development that the countryside is living nowadays (Marsden T., Banks J., Bristow G., 2000).
Canfora (2016) has defined the SFSC as capable “to reach the goals of sustainable agriculture, through the reduction of transportation costs and consequently of CO2 emissions. In addition, it promotes biodiversity and implements peri-urban agriculture”.
This definition comes from the legal definition, Regulation 1305/13, providing the Rural development policy scheme 2014-20, art 2 §. 1, m (Canfora, 2016), of short supply chain which is defined as: “a supply chain which involves a limited number of economic operators, that are committed to co-operation, local economic development, and close geographical and social relations between producers, processors and consumers”.
Two authors Renting (2003) and Petit (2010) simplified the definition declaring that the models of short supply chain are local distribution systems where intermediaries, between consumers and producers, are reduced. These models have always existed; but nowadays, eliminating intermediaries bring a series of advantages and they can assure producer‟s revenues.
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There are two types of short supply chains: Short circuit, where products are sold through one intermediate; and direct sales, where the products are sold directly by the producers to the end consumer (Maelle, 2015).
Every organization, which operates within the SFSC, has its own view of the main characteristics needed by a SFSC. However, Galli (2013), Coley (2009) and Hogan & Thorpe (2009) stated the two main criteria needed to define SFSCs. They are physical and social proximity. The first one refers to the transportation distance from the place of production (or the place of provenience of the material used for the production) to the place of sale (Coley 2009). An optimal physical proximity distance is difficult to identify due to cultural and regional diversity. The second concept (i.e. social proximity) refers to the number of intermediaries between producers and consumers. Usually it is zero, but two intermediaries maximum are allowed as well.
Social proximity implies the construction of a direct channel of communication between producers and consumers (Marsden, 2000). This is an important aspect to take into consideration since reducing the number of intermediaries between producers and consumers has been also a strategy for supermarkets to straight their power (Sevilla, 2012). The strategy used by supermarkets could not be considered as a SFSC since it does not lead to a better relationship or better conditions for consumers or producers. Although the number of intermediaries is important, it should not be the main focus of social proximity. Instead intangible aspects such as direct relationships, trust, acknowledgement, flow of information balance of power between actors, ethics and value should have a higher weight (Galli, 2013).
The physical proximity is easier to be objectively measured; meanwhile the social proximities (trust, loyalty, awareness, and so on) are more complicated to be measured.
Due to the difficulty of giving an objective description and of objectively measuring every aspect taken into consideration, there is not a generic universally accepted definition of SFSC.
Nevertheless, there are some common keys and general features to all the definition and concept previous presented. First, they introduce new relationships between associations and institutionalizations. This is the key core of the SFSC. It is reflected in (secondly) leveraging face-to-face relationship (the social proximity). Third, SFSC do not share the bulk food commodities (mass food distribution). Fourth, they have regulatory exception and special relationships with state regulations. Fifth, SFSCs are based on new experiment and innovation, often natural qualities and regional values are linked with the food production and SC. Sixth, the power is more equally split for producers and consumers over all the supply chain that are often active players.
2.4.3 Different perspectives on SFSC
In this section we isolate and analyse the effects and consequences of SFSCs. First we
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present different perspectives which influence the SFSC - legislative, organizational and social- then we discuss the tripe sustainability within SFSC. However, SFSC is a complex interrelated system, thus, it is difficult to isolate the three sustainable aspects (social, economical and environmental).
Under a legislative perspective, communities (EU) and nations are encouraging organizations and economies to operate on SFSC. They believe SFSC helps to reach environmental and social goals, as well as the maintenance and the development of rural areas. These incentives are obtained through regulations and legislations which help to
improve economic performance of the organizations.
Some examples of the legislations, in this direction are: labelling scheme regulations on local product and local farming (Santini, Gomez y Paloma, 2013), more flexibility on the rules, the development of special rules for local markets which help small business (Canfora, 2016), as well as, the presence of multiple financial incentives.
These evidences show the growing interest on SFSC and their growing presence. Regulation is moving towards free movement of goods for local markets dimension (Marsden T., Banks J., Bristow G., 2000).
From a social perspective SFSC has claimed to have different impacts on the communities.
During Crock 2.0 (which was a EU Conference on rural development), the attention was on the link between rural and urban development. Another aspect is the ideological, ethical and sustainable intrinsic values of SFSC, form organizations which are motivating consumers, producers and people in organization to be active part of SFSC.
SFSCs contribute to the equity and fairness among actors that are operating in the chain.
Producers and consumers become equal and active owners of the food chain with an equal power. They organize and control the food chain by establishing their own rules and by increasing interaction between the members of the same community. This developed and stressed networks, enhanced knowledge and increased social cohesion.
Common social concepts associated to SFSC are: trust; fairness in relation with price and ethical recognition; solidarity; shared values; motivational aspect; power equality; cultural identity; sensibilization; cohesion (Galli, 2013)
In some types of SFSC (i.e. "direct sell"), where there is a direct relationship between producers/farmers and consumers, personal interactions generate obligations and responsibilities among parties. This leads to establish also a sense of morality and relationships based on trust (Migliori, 2015). Moreover, it increases the awareness and knowledge of consumers regarding production and products.
These facts help the local development of communities by increasing social relations among people. It also increases the presence of local workplace and people's awareness on food, production, sustainability issue and work efforts. All together these aspects contribute to the rural development phenomenon (i.e. territorial revitalization) (Migliori, 2015).
The form a study of Migliori (2015), conducted in the south part of Italy, shows that the perception of the quality, that strongly influences the purchase decision, is affected by
