Improving environmental practices in agricultural supply chains: The role of company-led standards

Food retailers and manufacturers are increasingly committing to address agricultural sustainability issues in their supply chains. In place of using established eco-certifications, many companies define their own supply chain sustainability standards. Scholars remain divided on whether we should expect such company-led programs to affect change. We use a major food retailer as a critical case to evaluate the effectiveness of a company-led supply chain standard in improving environmental farm management practices. We find that the company-led standard increases the adoption of most environmental best management practices among the company's fruit, vegetable and flower growers in South Africa. This result is robust across two identification strategies: a panel analysis of over 950 farm audits and a cross-sectional matching analysis using original survey data. In-depth interviews suggest that the program's unique focus on capacity building through audit visits by highly trained staff, coupled with a close business relationship between the retailer and their growers help to explain the increased effectiveness of the program as compared to other private environmental standards. Contrary to the argument that company-led initiatives are mere window dressing, this study provides a critical example of the positive role private governance mechanisms can play in improving environmental farm management practices globally.