The institutional logic of the sustainable organisation: the case of a chocolate supply network

Institutional logics

Institutional logics consist of organising principles and sources of power (Thornton and Ocasio, 1999). For the purpose of this study, we differentiate between logics as practice and logics as organising principles, and our focus is on the latter, covering values, beliefs, rules and assumptions. We believe this distinction necessary, as practices, commonly the focus for SSCM research, are the behaviours formed by the organising principles. Logics as organising principles are the frameworks for reason that govern belief systems (Scott, 2001), and their sources of power shape a networks' practices and structure (Thornton and Ocasio, 1999). The organising principles that underpin SSCM practices have had scant attention in the field.

Dominant logics are those that take precedence in an institutional field (Gümüsay et al., 2020). As the boundaries of institutional fields (which in this instance is the supply network) interplay and overlap, a paradigm shift can occur if alternative logics form and transform the dominant logics of another field. Institutional logics are inextricably linked to power and control, as they can legitimise profound change across a field (Suddaby and Greenwood, 2009). In commercial situations, dominant logics might predetermine the balance of value appropriation afforded to each party in a contract, but in broader contexts, including sustainability, there are consequences to this power play, particularly if the assumptions of the dominant logics are not acknowledged and considered.

The urgency and scale of the sustainability challenge, coupled with the lack of prior attention in the SCM field, necessitates change to SCM (Pagell and Shevchenko, 2014). The suggestion here is that the need for fundamental change to achieve SSCM requires the adoption of alternative logics. In dynamic and complex environments, multiple logics that are fragmented and contradictory are likely to co-exist (Suddaby and Greenwood, 2009), or they may be divergent or incompatible (Friedland and Alford, 1991; Thornton and Ocasio, 1999). Alternative logics become apparent during periods of transformation, which are characterised by heightened uncertainty, heterogeneity of fields, inter-organisational co-evolution, shifts in belief systems and new organisational forms (Lounsbury, 2002).

Institutional logics of SSCM

Sustainability's ideology necessitates shared value among social and economic actors (Silva and Figueiredo, 2017) as an instrumental precondition (Burger and Christen, 2011). It is within this context that multiple stakeholders with diverse heterophilous values and practices, operating within a network, redraw a system boundary to create sustainable stakeholder value. Scholars have long recognised the need for sustainability to adopt a change of mindset from competitive to collaborative advantages for multiple stakeholders across supply chains (Vachon and Klassen, 2008), yet insufficient attention has been paid to its conceptual foundations. Organising principles, as an element of institutional logics (Thornton and Ocasio, 1999), are situated a step back from practice, as the values that shape SSCM practice. It is at this deep, often unseen level of organising principles, that tensions between SSCM and “traditional” SCM priorities and metrics are situated. A lack of synergy between SCM and ethics-based research and theories (Quarshie et al., 2016) and misaligned core logics between socially-oriented and commercial stakeholders (Longoni et al., 2019) adds weight to the call for fundamental change in priorities and practice to enable SSCM (Pagell and Shevchenko, 2014).

Sustainability ideology, as a transformative logic across organisations, industrial networks and societal fields, is resulting in the emergence of a new organisational form – sustainable organisation – the action of organising sustainability within the institution (Fuenfschilling and Truffer, 2014). In organising sustainably, stakeholders' needs are not points to be resisted by individual firms (Rowley, 1997) or reconciled into their economic logics (Margolis and Walsh, 2003). Rather, sustainable organisation represents the collaboration of multiple stakeholders on sustainability initiatives with logics beyond the commercial realm (Laasch, 2018; Schneider, 2015). Non-commercial actors can impose normative demands on the system and have been shown to advance the social dimensions of SCM through acting as a bridge between business and society (Rodríguez et al., 2016), to broaden the spectrum of social issues that are considered and mainstreamed (Kelling et al., 2020).

An emergent body of research recognises the importance of logics in the SSCM field (c.f. Nath et al., 2020; Pullman et al., 2018; Sayed et al., 2017), with the complexity of competing or multiple logics being a common focus. The multiple logics related to sustainability in SCM are evident within the breadth of business models represented (Bocken et al., 2014), the diversity of stakeholders (Miemczyk et al., 2012; Seuring and Müller, 2008) and how environments are shaped through focal firms' attitudes towards stakeholder (Alvarez et al., 2010; Busse et al., 2017; Rowley, 2017). As logics partly determine which stakeholders are attended to (Crilly and Sloan, 2012), it is important that these are revealed and understood. While multiple stakeholders can facilitate the development of alternative logics that are essential for sustainability, organising complex supply chains with multiple logics exposes a gap in the SSCM research base around which actors define the organising principles that underpin the institutional field and the role of the network structure in diffusing these logics.

While progressive research has set out to show the different approaches to the logics of sustainable organisation (Nath et al., 2020; Sayed et al., 2017), two critical issues remain. First, while heterogeneous value logics are co-shaped by SCM and organisations (Laasch, 2018), privilege is given to economic theory and the role of business in understanding sustainability (Johnston et al., 2007). Nascent discourses transcend the economic focus, in particular in the value-laden debates (Fuenfschilling and Truffer, 2014; Schneider, 2015), and applications of institutional theory (Pullman et al., 2018; Sayed et al., 2017). Therefore, SSCM research cannot assume economics as the defining force, despite the dominant hold it has had (Margolis and Walsh, 2003). Second, while the dimensions of sustainability are addressed in relation to practices, the implicit values and mechanisms that determine how the dimensions are handled remain under-scrutinised in supply chain and OM research. The theoretical development of SSCM is limited by the implicit economic assumptions in extant research; thus by continuing to study SSCM within the logic of SCM, we fail to capture and understand the fundamental differences of sustainability (Pagell and Shevchenko, 2014).

Sources of power in SSCM

Given the tensions of accommodating sustainability under an economic logic (Longoni and Cagliano, 2015) and the potential for alternative values, understanding how organisations gain and sustain power over logics is a critical gap in SSCM's development. While the seminal work of French and Raven (1959) has provided a foundation for understanding the bases of social power in intra-organisational settings, the SCM literature develops our knowledge on sources of power to direct inter-organisational commercial practices (c.f. Gold et al., 2010; Marshall et al., 2016; Meehan and Wright, 2012; Touboulic et al., 2014). Supply chains are increasingly complex structures requiring vertical (Pagell and Wu, 2009) and horizontal alignment (Carter and Rogers, 2008) of multiple commercial and non-commercial stakeholders through the supply network (Alvarez et al., 2010). Yet, SSCM typically focuses on focal firms (Golini and Gualandris, 2018; Meinlschmidt et al., 2018) who are considered, at least commercially, to hold the locus of power, orientation and decision-making across the supply chain (Seuring and Müller, 2008).

The power discourse has evolved beyond transactional and dyadic relationships bounded by hierarchical organisation, to a more nuanced view of social organisation (Hearnshaw and Wilson, 2013). Networks are increasingly seen as the “foundational unit of analysis” to understand the global economy and supply chains (Dicken et al., 2001, p. 91), and research is moving the focus from dyadic to network power (Johnsen et al., 2020; Meqdadi et al., 2019). In networks, decentralised social mechanisms and institutionalising organising principles allow for broader concepts of benefit, with gains accruing beyond channel leaders (Hearnshaw and Wilson, 2013).

The power dynamics between dominant and dependent actors determine a network's organising principles, and power imbalances shape economic practices for how sustainability standards are diffused (Gold et al., 2020). Power to influence a network's organising principles brings institutional logics to the fore, as they play a key role in setting the rules, values and success criteria within the system. Hegemonic stakeholders are able to use dominance, authority and mastery to shape the legitimating ideas and norms within a network, whilst simultaneously limiting the articulation of alternative ideologies (Johnsen et al., 2020). Control over logics can become hegemonic if a dominant firm's strategic agenda is accepted in the common interest through a lack of attention on values (Ben-Porat, 2005). Stakeholders' values can influence the mainstreaming of sustainability logics across an institution (Kelling et al., 2020), although if these do not sufficiently accommodate the wellbeing of both human and environmental resources, progress is questionable (Silva and Figueiredo, 2017). In broader institutional contexts where there are misaligned social and commercial logics, relational mechanisms can contribute to managing tensions (Longoni et al., 2019), adding further weight to the importance of reconceptualising SSCM in the context of sustainable organisation by accounting for power beyond that which is embedded in dyadic commercial contracts.

Stakeholder network theory (SNT)

SNT considers how network configurations affect power dynamics between a firm and its stakeholders (Rowley, 1997). As a source of pressure, the network constitutes the stakeholders who shape institutional rules. In doing so, SNT helps explain how the organisation relates to its institution. Supply chain networks represent the configuration of members and their links beyond dyadic ties of trading partners (Zhu et al., 2018). There are calls for studies to use network-orientated mapping (Fabbe-Costes et al., 2020) and a recognition that in supply networks, influence emerges and diffuses, rather than being determined by more directed, linear power mechanisms of any one party (Meehan and Bryde, 2015).

Network analysis allows power and the influence of multiple and interdependent relationships on logics to be studied (Law, 1990; Rowley, 2017). Power forces at play, within the network structure, affect behaviour (Rowley, 1997). The structural dominance of a firm within a supply network is a long-identified critical component of power (Cox, 1999). Yet, what is missing from the SCM literature is a recognition and understanding of the deep structures – the space where rules are historically and socially shaped (Thornton and Ocasio, 1999), and the protected spaces that allow for transformation and maturation of the institutional context (Fuenfschilling and Truffer, 2014). The complex array of actors and their interactions in SSCM requires exploration from a network perspective. Stakeholder relations are commonly examined in SSCM with interesting insights into governance (Alvarez et al., 2010) and visibility (Busse et al., 2017), but the network foci are still viewed, ultimately, through an economic focal company perspective (Svensson et al., 2018).

SNT uses centrality and density as a schema to examine power through the structure of relationships, diffusion of practices and the influence on outcomes (Roy et al., 2006). Centrality refers to an actor's relative position in the network based on direct and indirect ties and control over others (Rowley, 1997). The relative importance of a firm's reputational quality and informal power are indicative of the regime that constructs the logics. High centrality enables information to flow or be restricted, providing a source of power through controlling liaison between disparate players (Vurro et al., 2009) and accessing information sources from multiple actors in the network (Meehan and Bryde, 2015). Density describes the network's overall structure and connections (Lambert and Cooper, 2000). High-density links allow the diffusion and conformity of institutionalised norms (Vurro et al., 2009). The diffusion of institutionalised norms increase efficiencies as denser links enable flow, communication and knowledge exchange; and the more central an organisation, the greater their ability to diffuse influence (Rowley, 1997). However, by increasing density to achieve these gains, this can conversely have a constraining effect on diversity, as norms are institutionalised limiting the development of alternative logics. Network analysis provides a framework for understanding the degree of institutionalism of dominant logics, and the variable degrees of centrality and density suggest transformative structures that enable alternative logics (Fuenfschilling and Truffer, 2014).

In sum, for SSCM, alternative sustainability principles and value propositions beyond an economic focus require examination. While extended boundaries of responsibility and the importance of multi-stakeholder collaboration are recognised in the extant literature, our knowledge of the foundations and values upon which sustainable organisation rests is scant. This leads us to our first research question: What are the organising principles that underpin the institutional field? Here we aim to identify the business models, stakeholder relationships and inter-organisational activities across the supply network that manifest the assumptions and values at play among multiple stakeholders. The inclusion of non-commercial stakeholders in the analysis provides opportunities for a richer understanding of network relationships and power and the impact these may have on shaping logics for sustainability. This leads us to our second research question: who are the powerful actors that define the organising principles? Given that logics are antecedent to SSCM practice, power is deeply embedded in how, and by whom, these develop. Rather than focussing on focal firm or contractual influence, our final research question asks: how is network structure used to define and diffuse institutional logics? The adoption of SNT captures measures of centrality and density to reveal wider relationship structures that may shed light on how the network enables institutional logics to be shaped and diffused.

Empirical context – the chocolate supply network

The world consumes over seven million tonnes of chocolate annually and the global chocolate confectionery market is worth over USD 114.33bn with the top five companies representing 52.4% of the market share in 2019 (Euromonitor International, 2020). The concentration of power has led to uneven value distribution across the supply chain (Barometer Consortium, 2016). To meet growing consumer demands, global cocoa production rose by 15% to approximately 4.6 million tonnes in 2017/18 (Fountain and Hütz-Adams, 2018). Over 70% of production is in the West African countries of Cameroon, Ghana, the Ivory Coast and Nigeria, approximately 17% in the Americas, i.e. Brazil, Columbia, Dominican Republic and Ecuador and 9% from Asia and Oceanica (Franchise Help, 2020). It is within these developing countries that sustainability issues come into relief. Climate change and socio-political effects have put a strain on production, farmers, communities and the environment (Fountain and Hütz-Adams, 2018). More than five million farmers and nearly 50 million workers are dependent on cocoa, a highly volatile commodity, and many workers are among the 2.01 billion people living on less than £1.48 a day (Fairtrade International, 2018).

The chocolate supply chain has five broad tiers through which the core commodity, cocoa, is grown, processed, manufactured, packaged and retailed as chocolate (Figure 1) (Fountain and Hütz-Adams, 2018). Despite a relatively simple and linear product flow, the network consists of multiple commercial and non-commercial organisations. The primary commercial companies are classified as farmers/farming associations, traders/processors, manufacturers and retailers. The secondary commercial companies are classified as packaging, third-party logistics providers and warehousing. Non-commercial partners consist of non-government organisations (NGOs), certifiers, national and local governments, international governmental organisations and trade unions.

Data collection and analysis

Organising principles of institutional logics

The organising principles of institutional logics identified are summarised and categorised in Table 4 and explained below.

Business model value

All business models identified across the 63 organisations in this study capture some aspect of sustainability, yet patterns occur. The classical business models, including the triple bottom line and B-Corp models, categorise business models whose logic is founded on fitting sustainability into existing firm-level economic theory, in line with the predominant framing in the extant SCM literature. The second category captures business models including fair trade and co-operatives, whose logic is founded upon alternative, socially oriented logics, as to how the wider economy should organise and rebalance. Despite the presence of alternatives, classical economic models represented the dominant logic across the organisational field.

Inequitable value distribution is reported between upstream farmers and downstream multi-national corporations (MNC) traders, manufacturers and retailers. The interviews illustrate tensions. A manufacturer, aligned to the classical business model, describes how “we seek to integrate [sustainability] as closely as possible within our business model”, while another said: “there is a challenge in putting plans into practice given differing sustainability perspectives”. In contrast, a respondent from a non-profit organisation, aligned to the alternative business model stated, “There is no definition unless people can add value at source. Sustainability is about capturing optimal amounts of value at source. We do not talk of ‘supply chains’ in our awareness-raising work but of ‘value chains’ as it puts the focus on who is creating value and who is getting paid how much. Supply chains are about supplying big companies”. Tensions are felt as margins are squeezed upstream in commodity markets with the living wage considered particularly problematic.

Stakeholder value

Stakeholder value captures sustainability's social imperative through attitudes to stakeholders. Two streams of discourse were identified, which we categorise as resistance and receptivity. Resistance assesses the impact of stakeholders on the business in relation to the value they can create and manifests from an economic logic. In receptivity, the business considers its impact on stakeholders. It represents the value of partnerships with commercial and non-commercial organisations and as such manifests from a social logic.

Inter-relational activities

Inter-relational activities reveal how, and when, network collaboration takes place. The data describe alignment, implementation and maintenance of inter-relational activities that develop and sustain relationships for mutual advantage. Organisations experienced in collaboration are moving beyond traditional dyadic partnerships and focussing on sectoral-level partnerships. An interesting and unexpected finding is that socially driven, non-commercial collaboration is identified, and crucially, this is pre-competitive collaboration. We term these activities “concurrence”. Concurrence requires high collaborative capacity. Firm-led initiatives, such as those by Unilever and Danone to scale-up the B-Corp business model to MNCs are seen, as well as sectoral partnerships such as the merger of UTZ and Rainforest Alliance to create a single sustainability standard adopted by 85 member companies. The leading cocoa and chocolate companies are strategically forming agreements for sustainability stewardship programs under the World Cocoa Foundation (WCF). The WCF's Cocoa Action scheme attempts to accelerate sustainability through ten of the largest traders and manufacturers working with governments and key stakeholders.

Sources of power

Table 5 outlines ties used as mechanisms of power by members of the network. SNA illustrates how powerful actors leverage their centralised position in social networks, through pre-competitive concurrence activities that legitimise and mainstream their expertise within the institutional field. Sophisticated social practices are observed, whereby experience and resource fitness enables dominant firms to have network influence that is more subtle, oblique and hegemonic than dyadic or directed actions. Alternative logics are marginalised because less powerful organisations do not have the resources to leverage access, for example multi-stakeholder collaborative events, whereby smaller organisations were not present.

Firms develop multi-stakeholder approaches to harness sophisticated and complex relational power mechanisms. Practices frequently take the form of leadership and focus on changing mindsets and behaviours. Two types of influence approaches were displayed, which we label as hierarchical and facilitating. Practices are tempered by an organisation's attitude to stakeholders as an organising principle, which serves as a central variable in determining stakeholder relationships.

Hierarchical

Hierarchical approaches centre on economic position including scale, brokerage, purchasing power and contract terms were used by dominant, typically downstream firms, to influence supply chain orientation towards their conception of sustainability. For example, firms perceived as legitimate market leaders hold privileged central positions of influence on pre-competitive platforms, roundtable events, inter-governmental initiatives and across media. Resource and scale are used to consolidate power in clusters, such as the WCF trade association. Clusters are considered hegemonic because these communities are populated with downstream MNC manufacturers and retailers, and except for a co-operative retailer, all operate within the organising principles of classical economic theory, potentially impeding the development of alternative logics. Various structural activities drive their sustainability agenda, including mergers and acquisitions, transparency and traceability systems, resource sharing and investment, incremental and radical systemic change and organisational reorientation.

Facilitating

Facilitating approaches build relational ties through which firms aim to shift from mandate to legitimacy, accountability to trust, openness to honesty and recognition to validation. The commercial and pre-competitive collaborations revealed in the organising principles involve social practices that define, align, implement and develop a sustainability agenda. Firms use alliances through clusters and strategic communities to shape sustainability logics. Legitimacy is furthered across a wider society, as the firms' CEOs have central roles on global platforms such as DAVOS. However, these collaborations are imbalanced. Actors representing alternative organising principles, such as farmers and their representative associations, have a diminished voice as they often cannot afford access and do not have the resources to initiate or direct structural activities, are represented by a third-party NGOs, or are dependent on dominant firms. Thus, members with a peripheral position in the network structure have no means of leveraging structural mechanisms of power, limiting their influence and the voice of alternative values.

Stakeholder networks as a source of power

The inter-relational collaborative and concurrent activities rely on ties generated in the institutional field to enable the shaping of legitimating ideas and norms. The mapping, outlined in Table 6, reveals highly centralised actors operating within a low-density network, characteristic of greater agency for independent behaviours, an increased ability to resist external pressure and lower levels of isomorphism of institutional logics. To overcome issues of isolation and individual behaviour, organisations are responding through collaboration and pre-competitive clusters. As a retail respondent reported: “You've got to get that kind of thing where we can actually achieve more for businesses through this not being a competitive space and by this being a collaborative space. A lot of this is around, right we can all do one thing, and we know that it will cost us much more individually, and will we get better quality out of this by doing our own thing, by individually managing that? And that’s a really useful question and if the answer to that is no, then the answer is very often, most usually, some kind of pre-competitive alliance or collaboration, and would be a more sensible way to approach this”.

Interestingly, however, our results reveal that in this low-density network, this shift in mindset, from individual to collective action, requires resource fitness to enable increased centrality or access to clusters. A total of 49% of organisations analysed have below-average degree centrality and 62% below-average clustering coefficient. This explains why commercial farmers' associations remain isolated, as they reported limited resources to develop ties. Conacado, a union of cocoa cooperatives integrated with Fairtrade partnerships, being the only exception found in our study. In comparison, within the non-commercial cohort, four (out of nine) trade associations have below-average centrality, but are able to compensate with above-average clustering coefficients owing to their high levels of resource fitness.

To counteract the polarised power dynamics, organisations with aligned strategic priorities related to materiality impacts have created clusters. The first set of clusters occurs within collaborative partnerships but is structurally rooted in commercial organisations' direct supply chains. A critical and unanticipated result is the identification of the second set of clusters that occur pre-competitively through trade associations and these exhibit dense interconnections. To compensate for the increased challenge of compromising in a dense cluster, companies have kept the definition of sustainability broad with a focus on dimensional priorities rather than ethical values.

The network has a low number of connections, but their quality denotes high-density links illustrated by greater levels of graph density (36–50%). The institutionalisation of sustainability norms and practices is illustrated by the degree of concurrent interaction. Of the 366 unique connections, 129 are concurrent, of which, 66 are with trade associations. The average clustering coefficient in the network is 35%, indicating cohesion and high local transitivity. Pre-competitive collaboration institutionalises organising principles, as an MNC retailer explained, “The key message is leverage. Can we grow our leverage by joining in with others? You can find similarities, but they will apply differently. So you need the indicators, the KPIs, the measures, the language to be the same.” Peripheral industries, such as retailers, leverage the betweenness and eigenvector centrality of network members to gain access to farmers to collaborate with.

The mapping identifies two significant communities. The first is upstream focused on sustainable agriculture (representing 69% of all relationships) and the security and stability of commodity supply. The second community is downstream focused on waste, carbon and energy. An indicative example is Ceflex, a consortium of European companies and associations including Amcor, Marks and Spencer (M&S), Nestlé and Unilever. Ceflex is engaged in developing a circular economy for packaging, with similar initiatives being adopted across the network by trade associations and NGOs, such as WRAP, the Carbon Trust, Institute of Grocery Distribution (IGD) and the Consumers Goods Forum (CGF). These communities enable organisations to position themselves centrally within the cluster while remaining on the periphery of the network. Examples include Tesco and M&S's participation in the WCF downstream to strategically sustain cocoa production and, upstream, IGD to tackle waste and the CGF to drive consumer change.

As an inverse measure of centrality, the network's low closeness score (0.008) suggests that partners are directly connected with high centrality. The organisations lacking centrality were retailers and trade associations, for whom cocoa was not the primary commodity or those who represented an alternative paradigm, such as Traidcraft and Proudly Made in Africa. Retailers committed to embedding sustainability, optimise clusters and place themselves in central positions within communities of strategic interest, with one retailer commenting “Most supply chains, particularly commodity supply chains, are kind of hourglass-shaped and there's nearly always a certain point in that supply chain where there are a relatively small number of actors. We recognise that we do have a leadership role within a retail sector, and we have chosen to participate with almost every forum that you can think of”. For example, M&S has higher-than-average connections (degree centrality = 18), and while this denotes a relatively low central position in the overall network, the firm uses sophisticated connections to influence. Their higher-than-average eigenvector value (0.023) and betweenness centrality (49.46) suggests it controls flows through strategically important nodes and clusters, evidenced through their lead role in trade associations, allowing them to act as gatekeepers in collaborative and pre-competitive activities.

Across the network, 29 organisations have an above-average eigenvector score of 0.016, suggesting influential positions. As a more sophisticated representation of degree centrality, eigen centrality assumes that not all connections have equal value in terms of quantity and quality. The groups that tend to lack influence are retailers, non-agricultural trade associations and NGOs. However, there are exceptions, such as Cocoa Barometer (0.029), Solidaridad (0.037) and Oxfam (0.023).