Towards sustainable supply strategy in the food industry: the case of Finland

Abstract

Purpose

This paper investigates how sustainability requirements modify supply strategies at different levels in the food industry companies. The paper integrates single supply decisions into firm-level supply strategy and views supply strategy as one coherent strategy in which the decision-making is based on the values and principles of a firm.

Design/methodology/approach

The paper captures the decade of change and studies the renewal of supply strategy by utilising two qualitative data sets with a ten years of difference. The data contain 41 interviews from a retailer and 5 of its food supplier companies.

Findings

Results confirm that a decade ago only minor attention was channelled towards sustainability whereas today sustainability is a key driver behind supply decisions and supply strategies because firms need to respond to sustainability requirements and challenges. The study presents a framework for analysing different levels (firm, category and supply market levels) of changes and sustainability requirements faced by food companies and their supply strategies.

Originality/value

Previously, sustainability has rarely been connected to firm-level supply strategy. This study presents the supply strategy elements that were important for Finnish food industry companies over a decade ago and matches these elements to the needs of today’s firms. As a result, the study incorporates the concept of sustainability with the supply strategy frameworks.

Citation

Kähkönen, A.-K. and Lintukangas, K. (2022), "Towards sustainable supply strategy in the food industry: the case of Finland", British Food Journal, Vol. 124 No. 13, pp. 143-164. https://doi.org/10.1108/BFJ-03-2021-0257

Introduction

Consumers’ awareness and their sustainability requirements have changed the ways how food companies manage their business. United Nations has defined many food-related issues as key to achieving the sustainable development goals around the world, such as the goals of zero hunger and good health and well-being (United Nations, 2021). The food sector faces many sustainability challenges because of its high energy consumption and greenhouse gas emissions, food waste, water consumption, soil degradation and biodiversity impacts (de Canto et al., 2020; Farooque et al., 2019). New sustainability-related innovations are highly needed to solve food-related challenges, and it has been found that innovations are the main driver of sustainable economic growth and together with sustainability, innovations are key elements in the development and competitiveness of different countries (Bresciani et al., 2021). In previous research, the focus has largely been on consumers’ sustainability requirements and their buying behaviour (e.g. Kallas et al., 2021; Pacho, 2020; Schipmann-Schwarze and Hamm, 2020; Watanabe et al., 2021), whereas the research of sustainable purchasing and supply and the purchasing decisions of firms in the context of food sector is still limited. Together with the current sustainability requirements and challenge of population growth, it has become evident that food supply chains need restructuring, with high priority on not only economic but also environmental and social viability (Chkanikova, 2016; Leon Bravo et al., 2021). Thus, more research on the sustainability of food supply chains from the perspective of firm’s purchasing and supply is needed (Chowdhury et al., 2020; Farooque et al., 2019; Khan et al., 2021) to help companies to solve sustainability-related problems and challenges.

This change has been remarkable during the past decade and has largely affected firms’ purchasing and supply management. Firms have several different stakeholders, such as employees, customers, suppliers, governments and shareowners, and sustainability requirements coming from those have modified the decision-making of the firm’s supply management. In previous research, for instance, supplier selection (e.g. Bai and Sarkis, 2010; Dai and Blackhurst, 2012; Zhan et al., 2021), supply practices (e.g. Beske and Seuring, 2014; Chowdhuru and Quaddus, 2021; Kähkönen et al., 2018), type of supplier relationships (e.g. Brun et al., 2020; Dabhilkar et al., 2016; Touboulic and Walker, 2015) and location of the supply base (e.g. Stanczyk et al., 2017; Tate and Bals, 2017) have been studied through the lens of sustainability. However, firms cannot consider only separate decisions, but instead they should take a wider perspective that gives a complete view to understand why sustainability requirements are visible in these decisions and how their holistic supply strategy has changed. The holistic firm-level supply strategy is one coherent strategy that creates the background and defines the principles for purchasing and supply and reflects company values. In previous research, each supply strategy element has been studied individually through the lens of sustainability, but the holistic view of a firm’s supply strategy including all the elements has rarely been taken. Therefore, this study investigates how sustainability requirements have modified firms’ supply strategies and at what levels these changes can be observed?

The paper captures this decade of change, and the renewal of supply strategy is studied by using qualitative interview data collected from a retailer company and five of its food suppliers in both 2006 and 2016. The research context is the Finnish food industry, which is Finland's biggest manufacturer of consumer goods and fourth biggest industry, making it a significant contributor to the economy (Finnish Food and Drink Industries' Federation, 2021). With a high domesticity rate, high levels of food safety and high concentration ratio in retailing (Finnish Food and Drink Industries' Federation, 2021), Finland offers not only an interesting but also a slightly frontier case context for the research of sustainable supply management (SSM). The food industry is in closeness, proximity and often very visible to consumers; thus, the sustainability of food supply chains is constantly under public scrutiny.

This study contributes theoretically to purchasing and supply management literature by creating a framework that shows the effects of sustainability requirements to firms’ supply decisions and supply strategy at different levels. We contribute by identifying that supply strategies face sustainability requirements at the levels of firm, category and supply market. Even though the firm and category level requirements are important, the most significant sustainability pressures towards supply strategies emanate from the level of supply market. In addition, we provide practical implications by highlighting that firms should have a strategic perspective on purchasing and supply and understand that single supply decisions should be connected via firm-level supply strategy that is based on firm values and gives the principles for decision-making. As purchases typically represent large proportion of the turnover for example in retail companies, developing purchasing and supply management can lead to better economic performance in addition to enhanced sustainability.

The paper is structured as follows. First, we discuss the theoretical background of the study, specifically exploring the current state of discussion of supply strategy elements. Next, we explain the adopted methodology and present the results of the empirical study. The final section presents a discussion together with the theoretical and managerial implications. Limitations and future research opportunities conclude the paper.

Theoretical background

Building a sustainable supply strategy

Sustainability and its management in firms is affected by macro-level factors, such as legal, technological, market, societal, cultural and environmental factors, which also influence the corporate-level sustainability strategy of a firm (Baumgartner and Ebner, 2010). According to Baumgartner and Ebner (2010), there are four types of sustainability strategies: risk mitigation, legitimating, efficiency and holistic sustainability strategy. Holistic sustainability strategy is a strategy with “focus on sustainability issues within all business activities; competitive advantages are derived from differentiation and innovation, offering customers and stakeholders” unique advantages’ and the inputs for strategy formulation are derived with outside-in perspective from the market (Baumgartner and Ebner, 2010, p. 78).

Supply strategy is “the pattern of decisions related to acquiring required materials and services to support operations activities that are consistent with the overall corporate competitive strategy” (Watts et al., 1992, p. 5). It is holistic (see Baumgartner and Ebner, 2010) in a way that it connects all issues within purchasing and supply function. Ahtonen and Virolainen (2009) found that the holistic supply strategy should include eight main elements: make-or-buy decision, classification of the purchased items, size of the supply base, location of the supply base, types of supplier relationships, supplier/partner selection, cooperative purchasing and the decision of centralisation versus decentralisation. These elements form the traditional backbone of a firm’s supply decisions. However, the interesting question is how sustainability is evolving in these elements and how the strategy formulation has derived with outside-in perspective.

Implementing sustainability in purchasing and supply management is challenging due to its multidimensional nature, and sustainability actions should be aligned with the company’s goals (Pagell and Wu, 2009). Here we refer to sustainability by following the definition by Elkington (1997) and sustainability including the three dimensions of economic, environmental and social. Dai and Blackhurst (2012) found that purchasing priorities and supplier selection and assessment criteria should be based on the firm’s values and principles regarding sustainability. This enhances the ability to build a firm-level supply strategy founded on strong values and goals, providing congruent principles for purchasing and supply decisions. A sustainable supply strategy can thus be operationalised as a bundle of additional practices to integrate sustainability (Akhavan and Beckmann, 2017) into a firm’s purchasing practices and supply management, and it should be formulated by taken into account the macro-level factors and market changes.

The elements of a sustainable supply strategy

The formulation of supply strategy starts from the make-or-buy decision which is about comparing different governance options based on internal and external resources and competencies. The decisions related to supplier relationships are made after the make-or-buy decision and a decision to outsource. Foerstl et al. (2016) presented a model where outsourcing and insourcing are placed in the same framework with offshoring and reshoring. Whilst outsourcing/insourcing refers to governance structures and ownership, offshoring and reshoring refer to geographic location (Ellram et al., 2013) and can thus be compared to the location of the supply base. The decisions of outsourcing and offshoring seem to be shifting in relation to the changing values behind supply decisions (Ellram et al., 2013). The increase of geographical distance between buyers and supplier is likely to result in an increasingly complex relationship, whereas nearer suppliers enable the supply chain to be shorter and easier to manage. Tate and Bals (2017) state that there has been a trend amongst companies especially in the USA to reshore products and services back to their home country. This phenomenon has been noted in Europe as well, and for example, many food companies such as Danone (France), Fazer (Finland) and Unilever (UK) have been reshoring food manufacturing (The European Reshoring Monitor, 2021). Foerstl et al. (2016) found that environmental and social concerns have affected reshoring and insourcing decisions. However, environmental and social factors are only one driver behind reshoring and insourcing (Foerstl et al., 2016), but when combined with the increased importance of risk management (Lintukangas et al., 2016), sustainability-related factors overall seem to affect outsourcing and make-or-buy decisions as well as the decisions regarding the location of the supply base (Stanczyk et al., 2017).

In 1966, Dickson defined 23 attributes that affect supplier selection decisions. In 2012, Amindoust et al. proposed 29 attributes for sustainable supplier selection relating to economic, environmental and social factors. From the attributes categorised as economic, supplier selection attributes match those of Dickson (1966), while only one attribute from Dickson’s study (labour relation record) could be described as a sustainability-related attribute. This means that almost all environmental and social supplier selection attributes are totally new; thus, it can be argued that the complexity of supplier selection has increased remarkably. However, not only have selection criteria changed but selection processes also appear to have undergone a transition. The current supplier selection process can be divided into two stages: sustainability performance as a minimum requirement and general purchasing practices at the second stage (Chen, 2005). This means that social and environmental criteria should be evaluated first, and only suppliers who comply with these criteria can then be evaluated according to general criteria. For instance, Lee et al. (2009) found that a green supplier is expected to not only achieve environmental compliance but also undertake green product design and life cycle analysis, meaning that supplier selection and evaluation processes are extensive in scope.

Changes in supplier selection processes and criteria have also affected the types of supplier relationship. Today, the assurance of sustainability can be a main target of collaboration. As trust, long-term commitment and open information sharing are commonly recognised benefits of collaboration (Ellram, 1991), it is not surprising that securing sustainability is built upon these factors and these types of relationships. Recent studies (Beske et al., 2014; Brun et al., 2020; Touboulic and Walker, 2015) have demonstrated the importance of collaboration to ensure sustainability and it has been found that collaboration and inter-organisational learning improve sustainable supply chain performance (Touboulic and Walker, 2015). One of the benefits of collaboration has traditionally been a reduced supplier base (Ellram, 1991). Parker and Hartley (1997) explained that firms rely on a small number of preferred suppliers due to collaboration, which leads to a reduction of the supplier base. Vachon and Klassen (2006) found that a smaller, more focused supply base favours greater collaborative environmental practices, meaning that as the supply base shrinks, the degree of environmental collaboration increases. However, it seems that the size of the supply base is more connected to the nature and benefits of collaboration than sustainability itself. It is evident that a smaller supply base is easier to control, which may also lead to more efficient management of sustainability (Vachon and Klassen, 2006).

Along with changed relationship aims, traditional portfolio models, such as Kraljic’s model (see Kraljic, 1983), which are used for defining supply strategies have also been criticised in the context of sustainability. According to Crespin-Mazet and Dontenwill (2012), traditional supplier management systems based on portfolio models may prove difficult to apply in the pursuit of sustainability, and Chowdhury et al. (2020) stated that most traditional models do not consider dynamic changes of the stakeholders’ sustainability requirements. Pagell et al. (2010) argue that because portfolio models classify items based on supply risk and the strategic importance on profitability, the basic dimensions are not working in the context of increased sustainability requirements. As a solution, Pagell et al. (2010) propose an alternative portfolio matrix that meets the needs of sustainability. In this sustainable, purchasing portfolio matrix, items are categorised on the basis of supply risk and the threat to the triple bottom line (referring to economic, environmental and social sustainability dimensions). They propose that Kraljic’s leverage items, where supply risk is low and strategic importance is high, should be divided into three sub-categories, where differentiation is not based on price but on the risk to the triple bottom line dimensions.

It can be concluded that the requirements for increased sustainability and the strive towards sustainable supply chains have modified the elements of supply strategy and renewed holistic firm-level supply strategies. Accordingly, this has directed research towards new junctures and paths. Next, we empirically investigate how this phenomenon is evident in the context of the Finnish food industry.

Research setting and methodology

Research method

A case study was chosen for the examination of the development of supply strategies because it is suitable for acquiring a holistic picture of real-life events (Yin, 2003). A case study was selected to examine the perspectives of different companies and to be able to describe the situation at two time points 10 years apart (2006 and 2016). Voss et al. (2002) state that the case study provides an excellent means of studying emergent practices. Thus, it was considered an appropriate method. Case study research also enables the investigation of a contemporary phenomenon that is difficult to separate from its context but necessary to study within it in order to understand the situational dynamics (Halinen and Törnroos, 2005). Combined with interviews, a case study allows for more in-depth discussion in which why and how questions can be asked, and the fundamental reasons behind certain issues can be explained. The choice of method is further justified by the specific aims and research question of this study.

The empirical research context

The food industry is Finland’s biggest manufacturer of consumer goods and fourth biggest industry, thus making a significant contribution to Finland’s economy. The Finnish grocery retail market is highly centralised: the combined market share of the three biggest grocery retailers in 2016 was 92.2% – the biggest retailer having 47.2%, the second biggest having 36.2% and the third biggest having 8.8% (Nielsen, 2019). The domesticity rate of foodstuff produced in Finland is quite high at 82% (Finnish Food and Drink Industries' Federation, 2021). The level of pesticide use is very low, and the animal disease burden is extremely low, amongst top of the world. The use of antibiotics in food production is also very low when compared to the average use in the EU (Finnish Food and Drink Industries' Federation, 2021). With high domesticity rate, high levels of food safety and high concentration ratio of retailing, Finland offers not only an interesting but also a slight frontier case context for the research of SSM. In general, the steadily growing need to show transparency and traceability and the truly sustainable nature of their supply chains is constantly pushing food companies towards new strategies and actions (Chkanikova, 2016; Fiandrino et al., 2019). Thus, complex food supply chains offer a significant context for the empirical research of SSM.

Case selection

The interview data were collected from the Finnish food industry in 2006 and 2016, providing perspectives with 10 years of difference. Data from 2006 were derived from four case companies: one retailer and three of its suppliers (Suppliers A, B and C). Data from 2016 were derived from the same retailer and two of its suppliers (Suppliers D and E). Thus, the case design is a multiple case design with holistic units of analysis, each case company forming its own case (Voss et al., 2002). Using the same retailer in both data sets and studying the food chain around the retailer increased the reliability of the study. Supplier companies manufacture different kinds of products thus, giving perspectives of different kinds of manufacturers for the analysis. The case companies have different roles and relationships (see Table 1) that affected the sampling logic when selecting cases. The basic rationale for selecting the case companies remained the same for both timepoints, as follows: (1) the companies represent different actors within the Finnish food supply chain, (2) there are different types of relationships between them and (3) all selected suppliers are strategically important for the retailer.

Data collection

The interview is an efficient way of gathering rich, empirical data (Eisenhardt and Graebner, 2007). The use of multiple respondents makes it possible to capture a variety of perceptions and meanings, which is vital to the understanding of complex business relationships (Dubois and Araujo, 2007). Moreover, having numerous highly knowledgeable informants able to view the focal phenomena from diverse perspectives should limit interview bias (Eisenhardt and Graebner, 2007). Therefore, several research informants and data from different sources (data triangulation) were used in this study.

The first data set from 2006 includes 24 semi-structured interviews conducted with four case companies. The second data set from 2016 includes 17 semi-structured interviews with three case companies. Thus, the study findings are based on 41 semi-structured interviews (see Table 1). The interviews were lasting between 29 and 101 min, 54 min an average. The saturation point was used to determine the sufficiency of interviews and was determined based on the guidelines given by Guest et al. (2006) who defined that saturation point has been reached when “new information produces little or no change to the codebook”. In the data of 2006, for the retailer the saturation was achieved after five interviews and for Supplier A after four interviews. After reaching the saturation, we conducted one interview in these companies to make sure that the saturation was reached. For Supplier B, the saturation was reached after two interviews but because key informants had already been interviewed, it was not possible to conduct any more interviews. For Supplier C, interviews both to representatives of purchasing and supply management and marketing and selling were made, and the saturation was reached after six interviews in supply side and three interviews with marketing and other representatives. After reaching the saturation we conducted one interview in both sides to make sure that the saturation was reached. In 2016 data, for retailer company two interviews were conducted after which the data saturation was occurred. For Supplier D the saturation was reached after six interviews and for Supplier E after seven interviews, after which one interview in each company was conducted to secure the data saturation. Overall, it was noted that adding new interviews would not bring any new information relevant to the research question, which is a key characteristic of case studies and data saturation (Eisenhardt, 1989; Strauss and Corbin, 1998).

Research informants were selected based on their involvement in buyer–supplier relationships, supply management and sales management. Thus, informants represented purchasing and supply management (purchasing directors and supply managers), and marketing and selling (customer directors and sales managers). To obtain additional information, interviews were also conducted with informants from other company levels (CEOs, quality managers). No sustainability/corporate social responsibility managers or other purely sustainability-focused interviewees were selected because this would have changed the perspective and focused too much on sustainability. The suggestion by Yin (2003) that multiple sources of evidence should be used to establish construct validity and reliability was followed. The number of interviews differs between the case companies depending on their role, their relationships and the saturation point.

Data collected in 2006 addressed the following issues: supply strategies, supplier relationships and their management, supplier/partner selection, collaboration, supply decisions, and firms’ roles and positions in the food chain. Data collected in 2016 covered the issues of supply strategies, supplier relationships and their management, supplier/partner selection, collaboration, supply decisions, SSM practices and the drivers of sustainability. Even where specific questions about sustainability were not used in 2006, the topic was covered by the variety of themes (see Table 2), which meant that sustainability would have come up, for instance, in relation to supplier selection, if it were considered a significant issue.

Data analysis

Interviews were audio-recorded and the recordings were transcribed literally, which generated 446 pages of written data. Data were colour-coded manually based on the constructs drawn from previous studies (see Table 2), as this was considered a systematic and reliable method of securing the chain of evidence. Codes were employed to bring order, structure and meaning to the raw data, as suggested by Strauss and Corbin (1998), and this facilitated the process of structuring and organising the data into meaningful units. Coding provided a basis for the classification of data, which was categorised according to the constructs. Here we followed the process suggested, for example, by Ferraris et al. (2019), where first-order categories were condensed by creating more analytical second-order themes (see Figure 1). This facilitated effective comparison, and as Strauss and Corbin (1998) state, comparison has an important role in data analysis because it allows identification of variations found in the patterns.

Data were coded, categorised and subjected to qualitative content analysis. As suggested by Miles and Huberman (1994), we employed data reduction, data display, drawing conclusions and verification as part of our data analysis techniques. The theoretical framework of supply strategy elements (Ahtonen and Virolainen, 2009) and the literature review on SSM were used in data categorisation and analysis (see Table 2 and Figure 1). The reliability of the study was increased by defining a case study protocol, developing a database and ensuring the chain of evidence, as suggested by Yin (2003). Insights from the two empirical data sets were discussed by the researchers which help to ensure the validity, reliability and confirmability of the research (Hirschman, 1986; Seuring, 2008), and after searching for differences and similarities, several summaries and matrices were produced. To enhance the construct validity (Yin, 2003) and credibility of the study (Hirschman, 1986), the interviewees also reviewed the case reports, and the results were presented to the informants.

Empirical results

Supply strategies from the 2006 cases

Empirical data collected in 2006 revealed that the firms’ supply strategies and strategic purchasing and supply decisions were mainly based on cost efficiency, quality and operational efficiency. Supplier A, which is a market leader in pasta products in Finland, did not mention sustainability-related issues in the interviews at all. The interviewees did not combine sustainability with supplier relationships or supply management; nor did they combine sustainability with collaborative relationships with its own customer companies. Cost efficiency was mentioned as a key aim of collaboration in relation to their suppliers and buyers. In supplier selection, the suppliers who were located geographically closer were considered more favourable because these suppliers are able to respond rapidly to changing requirements.

Interestingly, Supplier B, who is a manufacturer of packaging solutions, did not mention sustainability issues either. It could have been expected that environmental issues such as the amount of waste might have emerged. The interviewee only briefly mentioned that they have been able to decrease the volume of materials used for packaging by a third, and continued, “this is leading to monetary savings and is also an environmental issue.” Monetary savings were also highlighted as a benefit of collaboration because the interviewee also stated that “although quality and functionality are important, the main issue is still the financial benefit.”

Supplier C is one of Finland’s leading food manufacturers with product categories including convenience food and meat products. The interviews revealed that Supplier C has a clearly defined process for supplier selection and every supplier must be qualified to be a supplier. The most critical factors related to supplier selection were the characteristics of raw materials and their suitability for manufacture of products, not the sustainability of the supplier firm. It was stated, “we require that the supplier is willing to reveal all information about and every ingredient in its raw materials.” This was justified based on quality, functionality and suitability, meaning the key issue was that purchased raw materials were suitable for Supplier C’s products. However, Supplier C was not able to trace all raw materials back to their origin, as the interviewee stated, “we should be able to go to the origin of the raw materials and this is a target for our future development.’” Sustainability was briefly referred to in one statement where the interviewee stated that “for image and brand reasons, in some situations we may select the supplier whose environmental management system is more advanced than that of others.”

Results from the retailer company from 2006 were twofold. Interviews with operational level buyers did not reveal any mention of sustainability, and interestingly it was not included in the supplier/partner selection criteria. Furthermore, sustainability or traceability was not identified as a target of collaboration. However, when interviewing the firm’s strategic management and strategic supply management, the upcoming trend towards sustainability was noted. One interviewee mentioned that “there are a small number of consumers who highly value sustainability and who use sustainability as a main factor behind their buying decisions”, and continued, “this segment of consumers is very small but will be growing in the future. The demand for responsible products will also grow.” The interviewee noted that a couple of their products, certified coffee and bananas, are considered more sustainable than the others. However, considering the large number of the retailer’s total products, these individual examples represented an extreme minority. One interviewee from strategic management highlighted the significance of suppliers’ suppliers by stating that “it would be important to know who the suppliers' suppliers are.” However, at the same time, liability was directed to the first-tier supplier.

Supply strategies from the 2016 cases

In 2016, the retailer is one of Finland’s leading companies in the field of sustainability. Sustainability is embedded within the company’s values and mission, and sustainability is evident in all of its actions and strategic decisions. Their supply strategy is based strongly on sustainability and its assurance. The retailer does not approve suppliers who do not have a certificate from an audit of social responsibility, and as the interviewee mentioned, “only if the supplier candidate can show that they have a certificate from a third-party auditing organisation, the supplier is considered as a possible supplier.” Their supplier selection is based on a supplier code of conduct, sustainability certificates, amfori Business Social Compliance Initiative (BSCI) listings and other sustainability factors. Because the retailer has huge buying volumes, they use their position to pressure suppliers towards more sustainable business. They form collaborative relationships with the most significant suppliers, engaging in joint development, for example, to reduce the amount of waste. Overall, the company’s sustainability and SSM is at a very high level, which clearly reflects and has changed their supply strategy and supply decisions.

Supplier D is a coffee roasting company, for whom suppliers are mainly located in risk countries, as defined by the amfori BSCI listing. The company has clearly defined principles and processes for supplier selection and relationship management, and they use a questionnaire attached to their supplier code of conduct. For example, the use of slavery and child labour as well as environmental issues are controlled by using this questionnaire. In interview, it was stated that “we have certain must-be qualifiers related to sustainability that are required to be fulfilled with no exception.” If the potential supplier lacks clarity in relation to child labour for example, it is not approved as a supplier. In addition, certifications and supplier audits play significant roles in supplier selection. They stated that “We do sustainability audits and visits to countries where the risks are high and where our buying volumes are also high. We visit our Brazilian suppliers once a month.” Supplier D stated that their supply strategy also includes pooling of purchases. They aim to focus their purchases towards certain key suppliers, which may give them the status of significant buyer. Accordingly, they are then better placed to require high levels of sustainability from their suppliers. The supplier relationships for Supplier D are mainly based on collaboration, as they form collaborative relationships, especially with strategically important suppliers. They recognise that this provides better possibilities of securing their own sustainability and the sustainability of their suppliers. They concluded that “it cannot be only monitoring and police work in these supply chains, but it has to be collaboration and you need to be willing to do some development [for securing the sustainability].”

Supplier E has highly valued brands in the field of dairy products. It has a huge amount of purchased items, and some are produced at extremely low volumes because they are seasonally limited raw materials for certain seasonal products. With these types of items, securing sustainability is difficult, specifically because the item is not seen as a strategic item. They require that all supplier candidates fulfil the supplier questionnaire before making final supplier selection decisions and they stated that “We use the supplier questionnaire for collecting the basic information and we also have the questionnaire about the environmental issues. We also use the BSCI listings in supplier selection.” Furthermore, they have “must-be” qualifiers related to sustainability. If a problem arises, for example in relation to child labour, the supplier will not be considered. Supplier candidates are also required to complete a product questionnaire for which the origin of every ingredient must be revealed. Supplier E does not require certification, although this was mentioned as a development target for the near future. From their strategic partners, certain quality, environmental and food safety certifications are required. Their supply strategy with strategically important suppliers is based on long-term collaboration. They have categorised their purchased items according to Kraljic’s portfolio, and they have determined that competitive strategy is used with volume items, which often leads to arm’s length relationships. They stated that “we have categorised our products and set the targets for the development of sustainability based on the classification. Also, in some product categories we use only certified materials.” Portfolio-based categorisation is also used as a background for sustainability because they have determined that the most important items are secured first, and other categories will follow in the future.

Comparison and synthesis of the cases

Previously, the retailer and its suppliers in the Finnish food industry acknowledged only slightly sustainability-related issues such as quality, product safety and environmental friendliness in their supply decisions. However, some case companies did not mentioned sustainability at all and if they did it was loosely connected to supplier selection only. For instance, Supplier C stated that for image and brand reasons they sometimes select suppliers based on their environmental awareness, partly connecting sustainability to their supplier selection (Table 3). It is worth noting that the environmental dimension was at some level recognised amongst case companies from 2006, and environmental friendliness at a conceptual level describes their awareness of sustainability. The retailer, who could be described as a forerunner in sustainability in 2006, combined sustainability with customer requirements, and consequently partly to their supplier selection (Table 3). They stated that “We are the only retailer in Finland whose bananas are all SA8000 certified. We are also buying certified coffee.” This shows that even though they were aware of sustainability issues, they were only in the beginning of their sustainability journey. Overall, sustainability was considered more of a future customer requirement, which has been found in research (Walker et al., 2008) as one of the drivers of sustainable business.

Today, companies initially base their supplier selection decisions on the requirements set for sustainability and then compare suppliers according to the other traditional selection criteria (Table 3). Case companies from 2016 widely use the source country listing (such as amfori BSCI), which affects decisions regarding the location of the supplier base (see Table 3). As Supplier D stated: “we use the BSCI listing for risk counties which greatly affect the size and location of our supplier base”, and as Supplier E continued: “the BSCI risk country categorisation affects the location of the suppliers.” This also affects the size of the supplier base, as companies have noticed that sustainability-related risks are easier to manage with a smaller supplier base. Retailer stated that “the amount of suppliers is clearly influenced by sustainability because for some categories it is really difficult to find suppliers who fulfil the requirements.” Managing the selection process is a necessary step for companies seeking to manage their corporate legitimacy and reputation (Bai and Sarkis, 2010), and many food companies require, for example, sustainability certificates from their suppliers (Chkanikova and Sroufe, 2021). For example, retailed stated that “only if the supplier candidate can show that they have a certificate from a third-party auditing organisation, the supplier is considered as a possible supplier.” Thus, it is not surprising that sustainability plays a critical role in supplier selection. Today, the measurement of sustainability performance can have a significant influence on supplier selection and development. The empirical results show that the assessment of suppliers’ sustainability takes place during supplier selection and throughout the continuous evaluation of suppliers. From the 2016 cases, all companies mentioned that they have “must-be” qualifiers related to sustainability that they require to be fulfilled without exception.

The results also indicate that collaboration is a key factor for ensuring sustainability of the entire food supply chain. In the Finnish food industry, collaboration and open information sharing are considered critical to sustainability assurance. Further, previous research shows that to cope with the sustainability risks that arise from the supply chain (Lintukangas et al., 2016) and to meet customer requirements (Gualandris and Kalchschmidt, 2014), the focus of managing dyadic relationships has changed towards transparency and integration of the entire supply chain including lower-tier suppliers as well (Villena and Gioia, 2018). This was also noticed in the 2016 cases, where Supplier D concluded that “We have to know our supply chain. This has to be done in collaboration with our partners. We know our suppliers and perhaps suppliers' suppliers, but to be able to know the original supplier we need our suppliers and collaboration with them.” Table 4 presents a comparison between the cases from 2006 to 2016 and concludes in which of the supply strategy elements sustainability was taken into account in 2006 cases and in which of the elements the sustainability requirements were acknowledged in 2016.

Discussion

Theoretical implications

Our study contributes to literature on purchasing and supply management by forming a framework that shows how sustainability requirements affect firms’ supply decisions and holistic supply strategy at different levels. We also contribute to research of food industry as the previous research has focused especially on consumers’ sustainability requirements and consumers’ buying behaviour whereas the research of sustainable purchasing of food industry firms is still very limited. Our study provides empirical evidence on how food companies can develop sustainable supply strategies to obtain more sustainable supply chains and to solve sustainability-related challenges.

Based on our study, we were able to identify that supply strategies face sustainability requirements affecting three different levels: firm, category and supply market (see Figure 2). Sustainability requirements are reflected to firm’s competencies and capabilities and ultimately, to their make-or-buy decision and decision of outsourcing versus insourcing. Redesigning food supply chains and developing competencies to achieve more sustainable food production and food waste management (Krishnan et al., 2020) are key concerns, for both food companies and society. These challenges are visible in firms’ make-or-buy decisions, where they must consider their manufacturing competencies and resources by also measuring performance with sustainability measures. Another perspective that further complicates the decision in addition to the perspective of sustainability in manufacturing, is that the trend of reshoring has been fostered by the increasing demand for sustainability (Foerstl et al., 2016). This is where companies face sustainability requirements especially from the social perspective.

Further, these challenges apply do not only to the firm’s capabilities in manufacturing and production but also to their capabilities in managing the purchasing and supply functions. The importance of capability development concerning sustainability practices has been found significant in previous studies by Beske et al. (2014) and Paulraj (2011). It was noticed that using sustainability assurance practices such as codes of conduct, auditing and BSCI are widely adopted in food industry companies today. Further, they have been found to affect a company’s financial and environmental performance (Paulraj et al., 2017). Even though highly developed capabilities have been found to be important in sustainability assurance (Beske et al., 2014), competencies and capabilities to manage sustainability in purchasing and supply management still require improvement in many companies (Bals et al., 2019).

Sustainability requirements were also found to affect category-level decisions of purchasing. In the categorisation of purchased items, the case companies were increasingly including sustainability as a determining factor (see Table 4). This supports the proposition by Pagell et al. (2010), who suggested a portfolio matrix that meets the needs of sustainability. For instance, the management of sustainability-related risks (Hajmohammad and Vachon, 2016) and supplier power and dependency (Sancha et al., 2019) have attracted interest in the context of purchasing categorisation. However, a more comprehensive discussion, as suggested by Pagell et al. (2010), is also still missing from both the scientific and practical viewpoints of companies today. It can be argued that including the threat to the triple bottom line and creating sub-categories based on the triple bottom line components is an exceptional though highly developed way to categorise purchased items.

The most significant sustainability pressures towards supply strategies emanate from the level of supply and supplier markets. Supply markets are dynamic, uncertain, and are constantly changing and evolving. In general, firms’ strategies and their mode of governances can vary depending on a variety of factors that are internal as well as external to the firm (Blažek, 2016). Sustainability requirements are changing both the actions and offerings of suppliers, and the needs and requirements of buyers. To a great extent, this reflects on supplier selection, including both criteria and process. Because of the combination of uncertainty of supply markets and increasing sustainability requirements, decisions regarding the type of supplier relationships are increasingly likely to shift towards collaborative relationships. However, supplier relationship types are generally influenced by dependencies between companies and in the context of food industry, it has been found that the closer the firm is to the end markets, the more power it has and the more independent it is in market intelligence generation (Kähkönen and Tenkanen, 2010). Moreover, the decisions about location of the supplier base have also changed because of the use of source country listing, such as amfori BSCI. In amfori BSCI listing, the countries and their riskiness are evaluated based on the following factors: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption, and Bresciani et al. (2021) found that the stringency of environmental policies overall positively affects innovation efficiency which, moreover, is a driver of sustainability and economic growth. At the supply market level, also the sizes of the supplier bases are reflecting sustainability requirements because sustainability-related risks are easier to manage with a smaller supplier base.

Our study confirms the theoretical assumption and conceptualisation that sustainable supply strategies can be operationalised as a bundle of additional practices to integrate sustainability into a firm’s purchasing practices and supply management. This accords with the previous studies of Akhavan and Beckmann (2017). A firm’s holistic supply strategy that lays its foundation in firm values and goals and gives congruent principles according to which sustainable supply decisions are made, determines practices through which sustainability is secured. Siems et al. (2021) also found that there has been a shift in the food sector from managing sustainability mainly with principles based on standards and certifications towards proactive strategies that aim for the integration of stakeholders.

Managerial implications

Our results have implications for managers and practitioners, especially in the field of supply chain management and context of food industry. It is important that firm managers understand the elements that form its holistic supply strategy. If supply decisions are only seen as individual and unconnected, understanding about the bigger picture of the firm’s supply management may be missing. Further, coherence may be lacking and strategic supply decisions may not be based on strong values; rather, on the decisions and values of individual employees. Being able to combine individual supply decisions under the umbrella of a holistic firm-level supply strategy can lead not only to enhanced supply management but also to the competitive advantage achieved from strategically managed purchasing and supply.

Firm managers should consider the dynamic nature of markets, enabling them to modify and develop strategies when needed. The requirements of sustainability have modified business models and supply strategies, and managers need to be aware of the reasons behind such changes. Moreover, they should look ahead and acknowledge the development targets that still need to be fulfilled. Our results show that while some of the supply strategy elements such as size of the supply base and cooperative purchasing (Table 4) can still face more pressure towards development, they could also benefit from taking sustainability into account more profoundly. This is extremely interesting for retail companies because of their huge supply bases and purchasing volumes.

Conclusions, limitations and future research

In this paper, we studied how sustainability requirements have affected the renewal and development of food industry supply strategies, and at what levels these changes can be observed. To achieve this, different supply decisions were integrated into the holistic supply strategy of a firm. This paper captured the decade of change in two points in time and studied the renewal of supply strategies by using interview data sets within a 10-year period. Empirical results from the Finnish food industry show that quality and price were previously considered the most significant factors in supplier selection. In comparison, sustainability-related factors are the most crucial for companies today. Further, supplier relationships based on a collaborative strategy were utilised mainly because of lower costs. Today, collaborative strategies are often selected to ensure sustainability. This reflects the difference and change that has happened over the past 10 years. The drivers of this change have been the increasing value of sustainable and healthy food, company image and risk management. Today, the sustainability of companies is also heavily based on their values and their fundamental understandings regarding how they want to conduct their business.

Case research such as that presented in this paper does not purport to produce findings that can be generalised in a statistical sense. However, as suggested by Yin (2003), the findings will be valuable in an analytical sense because they may clarify and extend understanding of the existing theory. The aim of this paper was to study how firms’ supply strategies and their elements have been renewed during the past 10 years. If both data sets had included exactly the same case companies, it would have been possible to make a longitudinal comparison case-by-case. However, the aim was not to compare the supply strategies at a single-firm level but rather at an industry level. Furthermore, the intention was to highlight changes at a more general level to form more generalisable results. Thus, the supply strategies were not compared as longitudinal case studies comparing case companies vis-à-vis. Moreover, this study is also limited to examining food industry companies in the Finnish context. Thus, it is proposed that future research should also consider other geographical contexts. Based on our study, we agree with Ellram et al. (2013) and Foerstl et al. (2016) and conclude that more research is needed to understand supplier location decisions, especially pertaining to the topic of reshoring. While examples of reshoring decisions amongst food companies can be found, it would be interesting to study the role of sustainability requirements in reshoring decisions.

Figures

Figure 1

Data coding

Figure 2

Influence of sustainability requirements on the supply strategy elements

Table 1

Interviews in the case companies

Case company		Number of interviews	Relationships to other case companies
2006	Retailer	6	Buyer to suppliers A, B and C
	Supplier A Grain-based products, frozen pastry and bakery goods	5	Supplier to supplier C and to retailer
	Supplier B Packaging solutions	2	Supplier to supplier C and to retailer
	Supplier C Convenience food products, meat products	11	Buyer to suppliers A and B: Supplier to retailer
	Total	24
2016	Supplier D Roasted coffee, coffee service solutions	7	Buyer to supplier E: Supplier to retailer and supplier E
	Supplier E Dairy products	8	Buyer to supplier D: Supplier to retailer and supplier D
	Retailer	2	Buyer to suppliers D and E
	Total	17

Table 2

Interview themes and data coding protocol

Theme	Construct	Description	Literature
Supply strategy	Supply strategy, general	Understanding of the strategic decisions and decision-making in firm’s purchasing and supply function	Kraljic (1983), Watts et al. (1992), Ahtonen and Virolainen (2009)
	Sustainability in supply strategy at the general level	Dimension that reflects the overall effects of the sustainability requirements on firm’s strategic decisions related to purchasing and supply management	Pagell et al. (2010), Akhavan and Beckmann (2017)
Outsourcing Make-or-buy	Outsourcing, general	Understanding about the make-or-buy decision by comparing different governance options based on internal and external resources and competencies	Ahtonen and Virolainen (2009)
	Outsourcing and sustainability	Indicates the effects of sustainability to make-or-buy decisions and outsourcing in general	Foerstl et al. (2016), Tate and Bals (2017)
Location and size of the supply base	Location and size of the supply base, general	Dimension that evaluates the geographical distance between the buyer and supplier. Reflects the amount of suppliers used and evaluates the decisions behind the reduction of the supplier base	Cousins (1999), Ahtonen and Virolainen (2009)
	Location and size of the supply base and sustainability	Understanding about the connection between sustainability requirements and the geographical distance between the buyer and supplier. Shows the extent to which sustainability is reflected to the size of the supply base	Vachon and Klassen (2006), Ellram et al. (2013), Foerstl et al. (2016), Stanczyk et al. (2017)
Supplier selection	Supplier selection, general	Reflects the supplier selection process and criteria used when selecting suppliers and partners	Dickson (1966), Ellram (1991)
	Sustainability in supplier selection	This shows the role of sustainability in supplier selection and the extent to which the companies use sustainability-related criteria in supplier selection	Lee et al. (2009), Bai and Sarkis (2010), Amindoust et al. (2012), Dai and Blackhurst (2012)
Classification of the items	Classification of the items, traditional	Strategic decisions based on the classification of the items	Kraljic (1983)
	Classification of the items in the context of sustainability	Evaluates the classification of the items in the context of current sustainability requirements	Pagell et al. (2010)
Buyer–supplier relationships	Buyer–supplier relationships, general	Level and character of buyer–supplier relationships in general. Understanding about the different types of relationships	Kraljic (1983), Ellram (1991)
	Buyer–supplier relationships and sustainability	Reflects how sustainability is connected to buyer–supplier relationships	Beske et al. (2014), Touboulic and Walker (2015), Dabhilkar et al. (2016)
Collaboration	Collaboration, general	This shows the extent to which the buyers and suppliers cooperate in different activities to achieve common goals	Ellram (1991)
	Collaboration and sustainability	Dimension that shows the extent to which the buyers and suppliers cooperate to be more sustainable. The aim is to achieve higher levels of sustainability by collaborating	Vachon and Klassen (2006), Beske et al. (2014), Touboulic and Walker (2015)
Purchasing organisation	Purchasing organisation, general	Understanding about the decisions related to centralisation and decentralisation as well as cooperative purchasing	Ahtonen and Virolainen (2009)
	Purchasing organisation and sustainability	Shows the extent to which the sustainability requirements are reflected to the decisions of centralisation/decentralisation or cooperative purchasing	Ahtonen and Virolainen (2009)
Purchasing and supply management practices	Purchasing and supply management practices, general	Shows the practices, procedures and tools that firms use in their purchasing and supply actions and supplier relationship management	Ellram (1991)
	Sustainable purchasing and supply management practices	Dimension that shows the various practices that firms have related to managing, implementing, and ensuring sustainability in their supply chains	Beske et al. (2014), Beske and Seuring (2014), Gualandris et al. (2014), Kähkönen et al. (2018)

Table 3

Illustrations of sustainability is supply strategy elements

Construct	Description	Illustrative quotations
Outsourcing and sustainability (make-or-buy)	Indicates the effects of sustainability to make-or-buy decisions and outsourcing in general	SE: “In some cases we have quit the production because the raw materials are difficult to get and ensure their sustainability”
Location and size of the supply base and sustainability	Understanding about the connection between sustainability requirements and the geographical distance between the buyer and supplier. Shows the extent to which sustainability is reflected to the size of the supply base	SD: “We use the BSCI listing for risk counties which greatly affect the size and location of our supplier base”
		SD: “We do sustainability audits and visits to countries where the risks are high and where our buying volumes are also high. We visit our Brazilian suppliers once a month”
		SE: “The BSCI risk country categorisation affects the location of the suppliers”
		SE: “In supplier management, we put more effort on the companies located in risk countries. We took risk country suppliers for a more detailed investigation and decided to start our work from those”
		R2016: “The amount of suppliers is clearly influenced by sustainability because for some categories it is really difficult to find suppliers who fulfil the requirements”
Sustainability in supplier selection	This shows the role of sustainability in supplier selection and the extent to which the companies use sustainability-related criteria in supplier selection	R2006: “We are the only retailer in Finland whose bananas are all SA8000 certified. We are also buying certified coffee”
		SC: “For image and brand reasons, in some situations we may select the supplier whose environmental management system is more advanced than that of others”
		SD: “We have certain must-be qualifiers related to sustainability that are required to be fulfilled with no exception”
		SE: “We use the supplier questionnaire for collecting the basic information and we also have the questionnaire about the environmental issues. We also use the BSCI listings in supplier selection”
		R2016: “Only if the supplier candidate can show that they have a certificate from a third-party auditing organisation, the supplier is considered as a possible supplier”
Classification of the items in the context of sustainability	Evaluates the classification of the items in the context of current sustainability requirements	SD: “Certificates are part of raw material classification”
		SE: “We have categorised our products and set the targets for the development of sustainability based on the classification. Also, in some product categories we use only certified materials”
		R2016: “We have categorised the items based on purchasing portfolio to four categories, and then we take the risk country classification and combine it to our item categorisation. This defines the effort that we put on managing sustainability issues”
		R2016: “In the item classification, sustainability is a critical factor. We are not using certain raw materials because of sustainability-related problems”
Collaboration and sustainability	Dimension that shows the extent to which the buyers and suppliers cooperate to be more sustainable. The aim is to achieve higher levels of sustainability by collaborating	SD: “We are collaborating at the supply chain level to make to entire supply chain more sustainable”
		SD: “It cannot be only monitoring and police work in these supply chains, but it has to be collaboration and you need to be willing to do some development [for securing the sustainability]”
		SD: “We have to know our supply chain. This has to be done in collaboration with our partners. We know our suppliers and perhaps suppliers' suppliers, but to be able to know the original supplier we need our suppliers and collaboration with them”
		SE: “The development of sustainability is a long term project. We see this as a guidance of suppliers as well”
		SE: “You do not have to put any ultimatums, but I would say that securing sustainability is part of the collaboration”
		R2016: “We trust our partners. If they have the sustainability certificate, we do not make audits to their factories, but we trust them”
Purchasing organisation and sustainability	Shows the extent to which the sustainability requirements are reflected to the decisions of centralisation/decentralisation or cooperative purchasing	SD: “We participate to some cooperative purchasing units which aim at developing the environmental and ethical issues as well”
		R2016: “We are part of several international cooperative purchasing consortiums. These big consortiums have a huge negotiation power and we are able to push suppliers towards more sustainable actions”

Table 4

Visibility of sustainability is supply strategy elements