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Sustainable Supply Chain Management in “Base of the Pyramid” Food

Projects – A Path to Triple Bottom Line Approaches for Multinationals?
Article in International Business Review · October 2013

DOI: 10.1016/j.ibusrev.2012.12.006
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Accepted for publication in “International Business Review“; doi: 10.1016/j.ibusrev.2012.12.006
Sustainable Supply Chain Management in “Base of the Pyramid” Food Projects – A
Path to Triple Bottom Line Approaches for Multinationals?
Stefan Gold, Rüdiger Hahn and Stefan Seuring
This is a non-final and non-copy-edited version of the article accepted for publication in
“International Business Review”.
For citations refer to the final article; doi: 10.1016/j.ibusrev.2012.12.006
Abstract
Conducting business operations at the Base of the Pyramid (BoP) have necessitated the need
for multinational corporations (MNCs) to involve poor communities in production processes
including management of critical supply chains. However, current research on the interface
between supply chain management and BoP business operation is lacking. In analyzing three
cases of BoP projects in the food industry this study addresses the question of how sustainable
supply chain management (SSCM) applied to BoP projects can help MNCs to achieve their
sustainability goals. Findings indicate that applying SSCM to BoP projects can complement
economic, social, and environmental dimensions of sustainability. In particular, the BoP
projects analyzed show viable paths for integrating the social domain of sustainability with
general SSCM theory and practice. From the perspective of international business research,
the findings help to link sustainability activities to MNC operations at the BoP. Accordingly,
further research is needed to advance integration of these two research streams.
Keywords
Base of the Pyramid, Supply Chain Management, Sustainability, Food Industry, Developing
Countries
1
1. Introduction
In recent years, issues of sustainability and poverty alleviation have gained increasing
attention on the international business (IB) research agenda (e.g., Rodriguez et al., 2006;
Levy, 2007; Kolk and van Tulder, 2010). In this paper, two emerging areas of research are at
the center of analysis: First, a growing stream of academic literature on businesses for and
with the poor of the world has developed in recent years. Following seminal papers by
Prahalad and Hammond (2002) and Prahalad and Hart (2002), scholars refer to the so called
base of the pyramid (BoP) as the bottom tier of the world income pyramid which represents
the large share of people living in extreme and moderate poverty. Recent research contributes
to a holistic view embracing poor communities as an integral part of productive processes and
(international) supply chains (e.g., Simanis et al., 2008; Hahn, 2009; London et al., 2010).
Second, research on sustainable supply chain management (SSCM) as the intersection of
supply chain management and sustainability has likewise developed extensively in recent
years as a response to increasing stakeholder pressures on focal companies to ensure
simultaneous performance of the entire supply chain on a triple bottom line (economic, social,
environmental) (Elkington, 1997).
Combining these two streams of research is intriguing for several reasons: On the one hand,
the social dimension of sustainability has been neglected within SSCM research and practice;
the focus is so far predominantly on environmental aspects (Seuring and Müller, 2008). On
the other hand, BoP projects usually address social issues while tending to neglect
environmental sustainability (Kandachar and Halme, 2007). Furthermore, the academic
research on related supply chain issues is limited (for an early notable exception, see Bellur et
al., 1990; recently Hall and Matos, 2010; Sodhi and Tang, 2011). This dearth is astonishing
since SSCM concepts offer promising ideas and tools for integrating poor communities as
value-creating actors into international supply chains. Against this background, we posit the
2
following research question: How can multinational corporations (MNCs) use SSCM to
integrate the BoP appropriately in creating sustainable value?
We show the status quo of SSCM in BoP endeavors from an analytic perspective and thus
contribute to the sprouting discussion of sustainability issues in BoP literature. On the basis of
these findings, we advance theory and practice on BoP and SSCM by offering avenues on
how to combine both concepts from an IB perspective. Our research focuses on BoP projects
in the food industry which is particularly relevant for the poor as consumers (catering to a
basic need) as well as being one of the most important sectors in many developing countries.
The paper is structured as follows: In section 2 we outline the state of the art in SSCM theory
to arrive at a pattern of analytical constructs for the subsequent case analysis. This pattern is
meant to cover the broad concept of SSCM by three dimensions and varied analytical
constructs. By doing so, we aim at providing a bird’s-eye perspective of the interface of
SSCM and BoP. Within our literature review, we further highlight how much various SSCM
issues are already present in BoP research and point to the main shortcomings in extant
literature. Subsequently, we outline the methodology of the multi-case study research design
in section 3. After presenting our findings in section 4, we discuss them against the
background of SSCM as a facilitator for sustainably integrating poor communities in value
creation in section 5. In doing so, we derive insights regarding how much aspects of SSCM
have already been considered in BoP practices; further, we draw attention to blind spots and
aspects neglected within SSCM so far. We specifically contribute to IB research by discussing
our findings in light of relevant IB literature and by further integrating the SSCM as well as
the BoP topic into this domain. Furthermore, this study contributes to the literature on SSCM
by offering insights into complementing the triple bottom line approach in an IB area with
insights from specific BoP projects and vice versa. Finally, we suggest some possible avenues
for further research.
3
2. SSCM theory and BoP research – a review of the literature
We begin our study by presenting an analytical framework derived from SSCM literature
which will be used later on to assess the status quo of SSCM practices in the BoP projects at
hand. By combining SSCM theory review and the development of the analytical framework in
this section, we deviate slightly from a traditional paper structure. The immediate introduction
of analytical categories is reasonable in the light of our specific research problem that
transfers SSCM theory to the empirical field of BoP projects. We develop categories taking
the comprehensive model of SSCM practices by Pagell and Wu (2009) as a mental starting
point. We supplement the work of these authors with relevant further articles not included in
their initial model. Furthermore, the constructs described in this section have been iteratively
refined throughout our case analysis. In sum, we introduce nine analytical categories
(associated with three main dimensions of SSCM) throughout our review of SSCM theory.
This allows us to provide a bird’s-eye perspective on the question of how firms involved in
BoP projects can achieve corporate and supply chain performance on the triple bottom line.
As a second step in our literature review, we synthesize the two research streams by
highlighting SSCM issues in extant BoP research following the structure of our analytical
framework developed beforehand and we point to the main shortcomings in this respect.
2.1 Deriving analytical categories from SSCM theory
The underlying logic of the SSCM model illustrated in Figure 1 is that the focal company’s
orientation toward sustainability (2.1.1) translates into a specific supply chain design and
operation fostering sustainability (2.1.2), which leads to improving the supply chain’s
sustainability performance (2.1.3).
---- INSERT FIGURE 1 ABOUT HERE-----
2.1.1 Corporate orientation toward sustainability
4
An initial step toward achieving holistic sustainability objectives lies in a corporation’s
orientation toward sustainability. The respective relevant aspects and corresponding analytical
categories are summarized in Table 1.
---- INSERT TABLE 1 ABOUT HERE-----
On the individual level, research indicates top management’s proactive stance toward the
environment paves the way for including ecological issues in supply chain management
(Klassen and Whybark, 1999; Pagell and Wu, 2009). Employees facing supervisory
encouragement are more likely to show environmentally friendly behaviors (Ramus and
Steger, 2000). Thus, managerial support helps enroot sustainability behavior among all
employees, which is indispensable since otherwise sustainability issues risk being neglected
in day-to-day behavior (Simpson et al., 2007). Consequentially, Reimann et al. (2012) show
that—apart from the necessity of top-level engagement—corporate social efforts are often
driven by MNCs’ local mid-level employees. Furthermore, Ramus (2002) stresses the
importance of an environmental vision and its implementation with policies and a
participative communication style for sharing sustainability concerns across the organization.
On the corporate level, Ramus (2002) highlights the use of rewards and recognition to
encourage employees to act sustainably. This is in line with Pagell and Wu (2009) who state
that intrinsic motivation in general is not sufficient to guide the behavior of every employee.
They recommend complementing it with (extrinsic) “measurement and reward systems that
link employee behaviors to sustainability outcomes” (Pagell and Wu, 2009, p. 539). This
applies to environmental management practices and operations (Sroufe, 2003) and sustainable
product design (Handfield et al., 2001; Seuring, 2011). Without such organizational
incentives, employees are likely to ignore sustainability issues and focus on more traditional
goals (Handfield et al., 2001). Furthermore, there is evidence that incentives and intrinsic
motivation need to be backed by a firm’s corporate commitment to sustainability, which can
5
be reflected in the form of a written environmental policy, for example (Ramus and Steger,
2000; Ramus, 2002). Halldórsson et al. (2009) even argue for the need for a radical change in
the corporate mindset to think boldly beyond the—mostly efficiency centered—principles of
traditional supply chain management. In any case, aligning environmental, social, and
economic goals is regarded as crucial so that the former two do not succumb to the quest for
financial performance, but instead reinforce it (Pagell and Wu, 2009), ideally supporting the
corporate strategy and leading to a (measurable) competitive advantage (Rao and Holt, 2005;
Seuring and Müller, 2008).
2.1.2 Features of supply chain design and operation
This corporate orientation then has to be implemented through corresponding features within
the supply chain design and operation as the next element of SSCM (see the summary of
analytical constructs in Table 2).
Reconceptualizing supply chain design and operation is often discussed as a means of
enhancing sustainability performance (cf. Seuring, 2011). Here, a vast and growing stream of
“literature on ecocentricity, servicing, reverse logistics, and the like focuses on changing who
is in the chain, what the chain does and how success is measured” (Pagell and Wu, 2009, p.
39). This embraces, among others, upstream and downstream collaboration within the supply
chain (Vachon and Klassen, 2008) or even the inclusion of nontraditional chain members such
as non-governmental organizations (NGOs) (Pagell and Wu, 2009). Perez-Aleman and
Sandilands (2008) investigate partnerships between NGOs and MNCs that implement social
and environmental standards in global supply chains. Interestingly, the authors specifically
illuminate possible adverse impacts for firms at the BoP and conclude that including poor
producers requires an “active assistance approach,” providing support when adopting new
sustainability practices. Furthermore, a reconceptualization toward SSCM includes different
6
operational procedures such as reverse material flows (Paksoy et al., 2011) as well as altered
process design and operational procedures (Klassen and Whybark, 1999), or even completely
new business models, for example, by redefining business and industrial ecosystems to create
closed loops of inputs and outputs between several different entities (Sharma and Henriques,
2005).
Furthermore, other issues such as decommodization and supplier development are also in line
with such alternative views on supply chains. Although in traditional supply chain literature
suppliers of commodities are often perceived as non-strategic and the focal company’s
strategy involves exploiting the firm’s purchasing power, SSCM literature suggests that
moving suppliers out of commodity status can be beneficial for the entire chain’s
sustainability performance (Hall and Matos, 2010). Decommodization, thus, means treating a
commodity supplier like a strategic supplier, for example, by heading for long-term
partnerships, paying above-market prices, and engaging in supplier development and
education (Pagell et al., 2010) with the final aim of having suppliers that thrive, invest,
innovate, and grow for the benefit of the entire chain (Pagell and Wu, 2009). Similarly,
Ahtonen and Virolainen (2009) conclude that strategic supply decisions should always
consider the whole supply chain with supply chain actors mutually exchanging their points of
view and with powerful chain actors (focal firms) holding a key responsibility in this respect.
Such strong vertical links of MNCs to supplier firms in developing countries are found to be
beneficial for spreading technology and knowledge (Ivarsson and Alvstam, 2005; Giroud,
2007), both basic pre-conditions of enhanced sustainability performance.
To monitor the sustainability of the entire chain, focal firms usually demand information on
the supplier’s achievements in the social, environmental, and economic domains (Müller et
al., 2009). With regard to social and environmental performance, focal firms rely on (third-
party) standards and certificates to reduce reputational risks and safeguard minimum
7
standards. Certification schemes are being used regularly in traditional supply chain
management to enhance different performance goals via constant process improvements
promoting discipline within a single plant and throughout the supply chain (Sroufe and
Curkovic, 2008). In SSCM, standards and certificates are promising instruments bringing
environmental and social issues to more widespread attention (e.g., Teuscher et al., 2006).
Especially environmental management systems and standards such as ISO 14000 (Darnall et
al., 2008) have been widely disseminated. Social standards, such as Social Accountability
SA8000 (Ciliberti et al., 2009) and the recently published ISO 26000 (Hahn, 2012), however,
are still much less prevalent in corporate management systems.
2.1.3 Supply chain performance
The two aforementioned SSCM dimensions then ideally lead to improved supply chain
performance on the triple bottom line. Traditional performance management approaches or
specific supply chain performance measurement systems (Sheperd and Günter, 2006) usually
concentrate on financial and operational performance measurement. Within SSCM, measuring
non-economic implications comes to the fore. Tools such as life-cycle analysis and eco-
balance, however, often capture only the environmental aspects within a supply chain (e.g.,
Awasthi et al., 2010). In the end, this leads to a focus on double bottom line performance
rather than a truly holistic triple bottom line approach. Only recently has performance on the
triple bottom line, in a limited fashion, come to the fore in SSCM research (e.g., Pagell and
Wu, 2009).
Table 3 summarizes the third part of our analytical constructs.
2.2 Linking SSCM theory to BoP research
When linking SSCM theory to BoP research, one has to be aware of the differing nature and
background of these research streams. BoP issues mainly focus on a specific business model
8
in certain developing country environments, while SSCM may be considered an overarching
concept of inter-organizational business activities/processes and a toolset for analyzing and
managing these activities aiming for comprehensive supply chain performance. Thus, SSCM
with its focus on inter-organizational supply chain collaboration and toolsets to foster
sustainability can be applied to various business environments. In the extant paper, we apply
SSCM to BoP business models since this link offers promising insights related to IB issues
(e.g., the interplay between MNC headquarters and their developing country subsidiaries).
Initially, emphasis in BoP literature has been placed on the poor as consumers and related
marketing activities without deeper acknowledgment of additional supply chain issues. In the
wake of fierce criticism (e.g., Jenkins, 2005), however, research has gradually evolved into
viewing the BoP as an integral part of value creation as producers, distributors, or service
providers. While the earlier customer-focused conceptions of BoP strategies were labeled
“BoP 1.0,” the new inclusive strategies are often called “BoP 2.0” (Simanis et al., 2008) or
“integrative BoP” (Hahn, 2009). Screening the academic literature on BoP, several of the
aforementioned categories from SSCM can be retrieved. This shows that constructs borrowed
from SSCM are useful for describing and analyzing BoP projects, but a comprehensive
attempt is missing so far, which again underlines the contribution of the present paper.
2.2.1 SSCM issues in BoP literature
In terms of corporate orientation toward sustainability, research indicates that a lack of
strategic commitment and clear guidelines could easily lead to failures in BoP ventures
(McFalls, 2007). In addition, building up local legitimacy facilitating social capital and hence
the commitment of local communities has been found to substantially impact the success of
such projects (Gifford and Kestler, 2008; Gifford et al., 2010). Furthermore, Schuster and
Holtbrügge (2012) highlight the decisive role of knowledge and experience when MNCs
attempt to enter BoP markets.
9
Perhaps the most prominent relationship between BoP and SSCM can be found in supply
chain design and operation. BoP researchers indicate the need to include non-traditional
actors such as NGOs or government agencies in the supply chain to overcome institutional
barriers, create legitimacy, or overcome gaps between the focal companies and communities
(e.g., London and Hart, 2004; Rivera-Santos and Ruffin, 2010). Closely linked to these novel
partners are the functions the various actors and the focal companies adopt. Exemplary cases
refer to innovative business ideas (e.g., Prahalad and Hart, 2002; London and Hart, 2004), to
new partners taking over vital roles in the supply chain, for example, as facilitators of mutual
commitment and common codes as pre-conditions of developing and deploying co-creation
capabilities (e.g., Simanis et al., 2008), or to focal companies internalizing formerly
outsourced activities such as financing or distribution since they are not readily available at
the BoP (e.g., Rivera-Santos and Ruffin, 2010). A lack of external expertise and appropriate
partners could otherwise easily lead to failures (McFalls, 2007). Furthermore, the idea of
decommodizing suppliers is also well-grounded within BoP literature. Since the BoP is
usually more vulnerable in terms of their economic and physical condition compared to more
affluent parts of the population, it might be in the best interest of companies to engage in
decommodization to ensure the stability of their supply chains (Rivera-Santos and Ruffin,
2010). Finally, when turning to the different pillars of supply chain performance, social
aspects of human development have been discussed in the BoP literature from the very
beginning (see for example Prahalad and Hammond, 2002; Prahalad and Hart, 2002) while a
deeper consideration of environmental sustainability came to the fore only recently (Hahn,
2009).
2.2.2 Synthesis of the two streams of research
On an overarching level, the critique has been voiced that “sustainability as a topic in relation
to the BoP does not appear to be a major area of inquiry” (Kandachar and Halme, 2007, p. 9;
similar Hahn, 2009). The numerous links between BoP literature and the different SSCM
10
categories outlined above entail a promising potential of theoretical cross-fertilization
between the two domains of SSCM and BoP. This potential may be productive particularly
for companies operating in an international environment. Concerning corporate orientation
toward sustainability, the strategic high-level dedication of MNCs and the strong commitment
of local supply chain partners feature indispensable prerequisites for successful SSCM, be it
on the BoP or elsewhere. Supply chain design and operations at the BoP call for innovative
ideas for integrating various non-traditional supply chain members and effort by all supply
chain actors involved in building up trusting and committed long-term partnerships. In terms
of sustainability performance, the objective of economic sustainability is well-grounded in
SSCM and BoP; while SSCM scholars have so far predominantly addressed environmental
sustainability, BoP ventures distinctly aim for social sustainability.
This reasoning suggests that SSCM may develop particular strength when applied to the BoP
business environment. This is hardly surprising since key characteristics of SSCM, such as its
accent on supply chain integration and long-term partnerships, respond to key challenges of
BoP projects, featuring vulnerable actors on the BoP on the one side and unsuspecting MNCs
on the other side. This two-sided handicap may not be resolved by engaging in arm’s-length
business partnerships but requires a long-term collaborative approach. SSCM provides tools
that help MNCs implement this approach in BoP projects, while measuring its success in the
economic, environmental, and social performance dimensions. This links back to our research
question of how MNCs can use SSCM to appropriately integrate the BoP into sustainable
value creation. Seen through an IB lens, MNCs might be especially qualified to foster such
integration: Their often substantial resources allow for several trials and pilot projects that
might be necessary to find new avenues of conducting business in new fields. Additionally,
MNCs can often draw upon knowledge concerning ecological issues of production and
consumption that is often lacking in developing countries and might be used for new
endeavors at the BoP. Injecting this expertise in BoP projects, however, might not be easy
11
since the BoP is usually a new field of activity for Western companies. It can be possible only
in long-term reciprocal learning partnerships where both sides build up specific skills and
capabilities over the course of time.
3. Methodology and data
3.1 Multiple-case study design and sampling approach
We applied a multiple case study research design (Yin, 2009). This is appropriate “especially
when […] the boundaries between phenomenon and context are not clearly evident” (Yin,
2009, p. 18). Supply chain business relationships operating in BoP environments with mostly
informally codified behavioral patterns clearly fulfill these attributes. Empirical evidence
covering the overlap of SSCM and BoP research is indeed scant. Multiple cases allow for
iteratively approaching the research objectives, thus checking inferences drawn from one case
against the empirical evidence of the other cases through replication logic (Yin, 2009). We
use three case studies (see Table 4), which is on the lower margin of a multiple-case study
design but still well in line with various suggestions for the number of cases to process (e.g.,
Eisenhardt, 1989). The underlying logic of our case study research design based on an
analytical framework from SSCM theory follows Yin (2009) who sees case studies suitable
for various deductive research procedures such as proposition testing and the revision of
existing theories. Thus, our research builds on theory from an already well-established field
(i.e. SSCM) and verifies its applicability to the specific conditions and environments of BoP
projects. On this basis we identify areas where our framework needs modification, without
taking the long road of merely inductive theory discovery (Welch et al., 2011).
The BoP projects and MNCs as focal firms were chosen based on theoretical (and not
statistical) reasons, thus facilitating theory development (Eisenhardt and Graebner, 2007).
This selection process was carried out along two main criteria to strive for contextual
appropriateness (Poulis et al., 2012): first, we focused on BoP projects in the food industry
12
since we consider them particularly revelatory for investigating how SSCM may assist in
integrating the BoP in value creation, hence yielding benefits for several sustainability
dimensions. Food is a basic human need, and malnutrition represents a key challenge in many
parts of the developing world (FAO, 2006). Providing the population with good-quality or
fortified (by adding nutrients or vitamins) food provides opportunities to enhance people’s
health and living conditions. Moreover, a large number of rural poor people make their living
from smallholder subsistence farming; hence integrating these farmers into larger supply
chains could enhance the farmers’ productivity and income. Second, we chose to investigate
MNCs playing a leading role in BoP projects that can—from the perspective of an initial
overall evaluation—all be considered “best practice” projects. Although in the same industry,
the projects are characterized by substantially different approaches, hence displaying various
facets of SSCM constructs reflected in BoP project implementation. The projects show
different avenues toward and priorities regarding the triple bottom line performance criteria.
A profile of all cases is presented in Table 4.
3.2 Data sources and material
Primary data gathering for all cases consisted of eleven semi-structured interviews (see Table
5) in English and German, with the average length of an interview of 60 minutes. These
interviews were conducted partly telephonically and partly face-to-face, with managers from
different organizations involved in the respective projects.
Aiming for some equilibrium between leading MNC managers in charge of the projects at the
main offices and in developing countries as well as managers from other involved
organizations allowed a balanced picture and a differentiated perspective of the projects. The
main criterion for choosing interviewees was their intimate knowledge of the project. Data
13
collection took place from November 2008 to February 2009 during the course of a project
about multi-national corporations’ contributions to sustainable development in BoP markets.
Accordingly, the interview guidelines were not focused specifically on SSCM theory, but
covered the broader topic of how to do business for and with the BoP (Schrader, 2011).
Interview techniques such as non-directive questioning with spontaneous in-depth follow-up
questions enhanced the accuracy of the information received (Huber and Power, 1985).
Questions aiming at specific constructs were avoided (cf. Ozcan and Eisenhardt, 2009).
Afterwards, the interviews were transcribed and returned to the interviewees for validation.
The data was selectively triangulated with information from various sources (see Table 6).
3.3 Data analysis
In terms of data analysis, Siggelkow (2007) highlights the necessity of a strong theoretical
background that helps consistently filter data according to conceptual arguments for
successfully dealing with the abundance of data case study research produces. We responded
to this call by using qualitative content analysis to analyze the data (see Duriau et al., 2007).
Dimensions and analytical categories had been deductively developed beforehand as outlined
above. After one third of the data analysis was completed, some categories were further
specified (in terms of their definitions) in an inductive approach from the interview material
under examination, iteratively passing through category building, testing, and revising by
constantly comparing categories and data. By following this technique proposed by
Eisenhardt (1989), we fitted the contents of our constructs into our specific research needs
thus making them more valid instruments of data analysis. In the following section, the
findings of these case studies will be summarized in a cross-case analysis along our pattern of
dimensions and analytical categories to highlight matching and contrasting findings
throughout the three cases.
14
Replicability of the research design is facilitated by a comprehensive and detailed
documentation of the research process. Moreover, a high degree of reliability is achieved by
thoughtful selection of key informants, as well as careful transcription and multi-coder
analysis of the interviews. Involving several researchers in content analysis is considered to
substantially enhance validity and reliability of data analysis. This holds particularly true
when dealing with “soft” criteria largely referring to the deeper meaning buried in the text
(Duriau et al., 2007). To make judgments intersubjective, the coders’ differing judgments
were individually assessed and resolved through discussions, thus gradually aligning
differences regarding the mental schemes of the coders (Seuring and Gold, 2012). Internal
validity was enhanced by repeatedly checking each case against the source data (the single
interviews) and by triangulating the findings from the interviews with those from desk
research. Occasional discrepancies between our data sources were explored and settled
through searching and including various publicly available documents, thus approximating the
“true story” (Pentland, 1999). Furthermore, validation of findings was facilitated by feedback
from various conference presentations as well as by intensive discussions within the research
team. Finally, de-contextualization and theory-led abstraction allow a certain degree of
generalization for the findings (Avenier, 2010).
4. Findings
4.1 Corporate orientation toward sustainability
Regarding the first SSCM category, the case study data shows on the individual level that
proactive top management was crucial for providing an initial impetus for implementing all
BoP projects under consideration as well as for their long-term continuation. Likewise,
employees’ commitment was found to be very important since, throughout all cases, it was
considered indispensable for a successful and enduring project. Especially at Danone and
15
BASF, the BoP ventures were considered highly emotional projects that, in turn, would help
to motivate employees.
On a corporate level, employee motivation via rewards and incentives was not addressed in
our case material. Project employees were influenced by a highly intrinsic motivation that was
not accompanied by extrinsic (material) incentives. Nonetheless, all cases suggested a
proactive organizational stance and organizational commitment as enabling factors for BoP
ventures. Our data indicates that sustainability values pervading the mission, strategies, and
culture of the focal companies are a prerequisite for engaging in BoP business ventures.
4.2 Supply chain design and operation
Reconceptualizing supply chain operations is often connected to innovative approaches for
sourcing, manufacturing, and distribution processes when integrating the BoP as consumers
and/or producers. We found this to be a key concern in all three cases. The companies relied
extensively on help and input from various external partners with the potential of
complementing resources and capabilities and thus fostering mutual learning processes. In
terms of supply chain operation, all projects built on strongly localized approaches. The most
radical form was found in the Danone case where the whole supply chain was located at the
BoP, which also represents the consumer target group. Raw materials (mainly milk) were
procured from farmers near the newly designed small micro-factories where goods (yogurt)
for the BoP are produced. The yogurt was then sold to the local population. Similarly,
BASF’s fortification project aimed at local food production in developing countries.
However, this production might still be centralized while the vitamins for the fortification are
produced abroad. In the Nestlé Milk Districts, the main emphasis was on procuring milk
locally, which was then transported to regionally centralized production sites.
The SSCM construct of decommodizing suppliers (i.e., moving them out of the commodity
supplier status) by offering long-term privileged business relationships and by engaging in
16
supplier development was broadly covered throughout our cases. The Danone case reports
that management and technical trainings as well as educational programs were provided to
women working as distributors, to local farmers, and to dairy employees to tackle the
challenges arising from general low levels of education. Since BASF cooperates with local
food producers in fortifying food products, this case refers to the capacity building and
technical assistance provided to these firms to ensure compliance with international food
fortification standards. Finally, Nestlé aimed for an increase in milk output and quality by
implementing Good Agricultural Practices (as defined by the Food and Agriculture
Organization of the United Nations). This was accomplished by demonstrations and training
in the communities and at model training farms run by Nestlé. Moreover, cooling center
employees were trained to conduct quality checks, as well as monitoring and recording milk
supply, and field offices provided farmers with technical assistance.
Finally, standards and third-party certification do not seem to play a role in any of the cases.
Nestlé, for example, instead used locally implemented supply chain internal measurements
systems (regarding profit margins, free cash flow, product quality etc.) that evaluate the
ability of supply chain members to keep up operations, invest, grow, and ensure quality.
Hence, first-party audits substitute for third-party assessments. Table 7 provides an overview
of approaches with regard to supply chain design and operation.
4.3 Supply chain performance in sustainability
Sustainability performance on the triple bottom line was barely mentioned in the interviews.
One interviewee talked about this construct when picturing the ideal model that serves as
guiding principle for Danone. This ideal model was corroborated by some of the secondary
data. The model merges environmental goals (CO2 emission reduction) and social goals (local
value creation, improved nutrition) with reduced but still decent profitability margins.
17
Altogether, though, the analysis shows that triple bottom line considerations did not play a
substantial role in the BoP cases. Instead, they focused very strongly on social and economic
outcomes, thus following a shortened double bottom line that reflects the usual performance
objectives of BoP projects as can be seen in Table 8. Interestingly, we found a close
interconnectedness between these two dimensions. In the Danone project, for example,
various social goals were complemented by the goal of efficient and cost-effective operations.
Furthermore, the business experience at the BoP in developing and transition countries should
help the entire corporation develop agile and responsive manufacturing and supply chain
operations, and thus be able to deliver (more) competitive products in Western markets.
In terms of economic viability, sourcing raw materials in developing countries was already
part of Nestlé’s core business, while BASF and Danone were in earlier stages of developing a
sound business model, so the economic viability of their activities was still somewhat
uncertain. Interviewees from BASF and Danone underlined the importance of keeping the
BoP projects self-sustaining in the long run; nonetheless, profitability expectations were
limited (and not comparable to the corporations’ other business segments) since the projects
simultaneously pursued social benefits. Nestlé, on the contrary, had a clear purpose of
ensuring proper returns on investments, for the corporation itself but also to some degree for
its suppliers. Reliable relationships between Nestlé and smallholder farmers, facilitating a
regular cash flow from wealthier urban regions to poorer rural ones, safeguarded the
economic viability (and maybe prospering) of these suppliers. Here the economic and social
dimensions of sustainability overlapped, since economically thriving smallholder farming
may also be considered an asset for the social bottom line.
5. Discussion
5.1 Linking case findings to extant IB research
18
5.1.1 Integrating ecological issues into MNCs’ BoP projects
The cases reinforce the idea that simultaneous consideration of triple bottom line issues is still
broadly lacking, while the shortened double bottom line (limited to economic and social
performance) guides BoP activities (Kandachar and Halme, 2007; Hahn, 2009). This could be
due to the MNCs’ profit aspirations flanked by public relations intentions as well as the
altruistic development and empowerment objectives (Simanis et al., 2008) driving the BoP
projects. Thus, these projects consumed a good part of the firms’ resources in the struggle to
reconcile these partly antagonistic founding spirits, entailing the neglect of the environmental
dimension, which has been considered a secondary priority. This limited target horizon is
reflected by the observation that MNCs’ most important external partners are NGOs and
government agencies concerned with infrastructural or social issues. The core rationales of
these partnerships are coverage of consumers, the poor peoples’ standard of living, and
empowerment of the BoP workforce (Reficco and Márquez, 2012); consequently, the impact
control measurement focuses on the BoP’s health and social/economic conditions instead of
ecological dimensions.
Our analysis of the constructs “double bottom line” and “reconceptualizing supply chain
design and operation” points to the opportunity and need to further integrate the
environmental dimension of sustainability in BoP supply chains. This assessment can be
assumed to be quite uncontested; a debated issue is the time schedule and sequencing. Earlier
research suggests that MNCs increasingly standardize their environmental strategies to
achieve cost benefits and prevent reputational damage (e.g., Christmann, 2004; Sharfman et
al., 2004). However, BoP projects often hold a special status within the MNC’s organization
and are often not yet integrated into mainstream day-to-day business operations. Thus, the
projects might not fall under the conventional patterns of a MNC’s environmental
standardization strategies. Drawing analogies from the historical development in the Western
19
world, one may argue that environmental issues will become more important in developing
countries once the most pressing economic and social objectives have been largely satisfied.
Successful (and unsuccessful) BoP projects teach us the outstanding importance of support
from the local population (McFalls, 2007; Gifford and Kestler, 2008; Gifford et al., 2010).
Setting environmental objectives on top of the agenda has to be acknowledged, shared, and
proactively driven by the local BoP—by no means a simple task. However, global awareness
concerning the restricted carrying capacity of the planet and the implied time pressure for
business responses seem to interdict the inert logic of postponing addressing environmental
issues.
Seen through an IB lens, this analysis points to some interesting avenues for driving a holistic
integration of all three sustainability dimensions and pursuing research in the field: MNCs
familiar with SSCM could foster integrating environmental aspects in BoP projects, for
example, by pushing the ecological agenda on their developing country subsidiaries and from
there also explicitly on BoP projects. Vertical links of MNCs to supplier firms in developing
countries can have positive effects on developing suppliers that benefit from technology and
knowledge transfer or otherwise (e.g., Ivarsson and Alvstam, 2005; Giroud, 2007). Within the
setting of BoP projects, this provides specific opportunities to build awareness of ecological
issues and, more specifically, to introduce expertise concerning, for example, environmentally
friendly production techniques, recycling schemes, and product features. The distinct focus of
moving the suppliers out of a commodity status (“decommodization”) in the case studies
indicates the MNCs’ willingness to engage in developing their BoP supply chain partners.
Long-term relationships have indeed proven to be important for inter-firm learning (Ivarsson
and Alvstam, 2005) so that an MNC-driven integration of the ecological perspective in BoP
projects offers promising avenues toward a triple bottom line approach.
20
However, implementing such business practices at the global level proves to be a complex
process. Pushing a global environmental strategy might be especially difficult since ecological
issues often are to a high degree location-bound and context-specific (Foss and Pedersen,
2002) or require advanced technologies (Tsai and Child, 1997) that might not be available and
affordable in a BoP context. To overcome some of these difficulties, Pinkse et al. (2010)
suggest that a high level of absorptive capacity at the subsidiary level fosters the adaptation of
global environmental practices since it allows subsidiaries to adapt global strategies and lower
the cost of implementation. Nevertheless, several IB scholars indicate that there are limits to
globalization and that it is necessary to emphasize complementary regional strategies (e.g.,
Ghemawat, 2003; Rugman and Verbeke, 2004). In this respect, SSCM may contribute to
strengthening the environmental performance dimension of BoP projects by translating
(headquarters and subsidiary) top management support and the MNC’s corporate values and
policies into a reconceptualized supply chain (Pagell and Wu, 2009) that explicitly includes
environmental NGOs as actors and that optimizes supply chain operations regarding not only
social and economic factors but also environmental parameters such as energy consumption
or depletion of non-renewable resources. Such a three-sided optimization could, however,
prove to be difficult in cases of trade-offs between any of the three dimensions. If, for
example, a gain in social sustainability (e.g., by moving a significant number of people out of
poverty) leads to a reduced ecological sustainability (e.g., when all these people significantly
increase their consumption levels), the overall effect on the triple bottom line is ambiguous
(Hahn, 2009). Thus, trade-offs between the performance dimensions at the triple bottom line
have to be explicit to facilitate improvements in one or two dimensions of sustainability
without (unwittingly) harming the other dimension(s). In this regard, moving forward to
holistic triple bottom line thinking instead of looking at a reduced double bottom line might
be of particular importance.
21
Future research could act on such discrepancies and, for example, focus on the question of
how to balance standardized global strategies and environmental challenges with the need to
find local and regional approaches at the BoP. In addition, the entire possible range of roles
and interaction between (top) management from the MNCs’ headquarters and less-developed
countries’ subsidiaries in setting up BoP projects may be further explored.
5.1.2 Fostering social issues in MNC’s SSCM practices
The dominant focus on environmental issues in SSCM cases and literature may be explained
by the fact that SSCM is distinctly biased by industrialized countries’ business and socio-
political conditions. From a historical IB perspective, in the Western world, the struggle for
social and economic advancements dominated wide parts of history, until the 1970s when
environmental awareness got a strong societal voice—next to the civil rights movement and
consumerism. During that period, considerably elevated living standards for major parts of the
population relegated social demands (directed to safeguarding a minimum livelihood) to the
back seat for the time being. A novel vigor of social demands that have been basically
reimported from the developing world through increasingly globalizing economic activities
(Hult et al., 2007) came to the fore only recently. Focal firms in developed countries are now
held accountable for the conditions and activities in their often global supply chains.
Nevertheless, standardized responses toward these new social demands are still missing: the
status quo of SSCM in Western countries predominantly features collaboration with advocacy
groups and third-party bodies for auditing and certification that refer to the environmental
pillar of the triple bottom line. Social standards such as SA8000 have not reached equal
consideration yet.
Our analysis points to some interesting corporate-level opportunities for integrating the social
dimension of BoP ventures into MNC supply chain management to complete the triple bottom
line approach. Successful BoP projects could offer ways to further integrate social issues in
22
other business units with a bottom-up, grassroots-type approach. Earlier IB research focused
on the impact of MNCs’ subsidiaries on a company’s headquarters and overall organizational
performance. Andersson and Forsgren (2000), for example, found that local subsidiaries could
gain status as “centers of excellence” by gathering expertise or capabilities in specific
functions or activities. All our cases indicate the potential for corporate units involved in BoP
projects to become such centers and to drive the whole organization toward an organic
integration of social issues. The projects under investigation emphasize the importance of
organizational learning and innovative approaches to integrate the BoP into their supply
chains. The distinct reliance on local partners and on including non-traditional actors such as
NGOs, local communities, or competitors indicates the need for permeable organizational
boundaries to act in a BoP environment. This is in line with business network literature
showing that a subsidiary’s importance—meaning that the headquarters and other
organizational units acknowledge the subsidiary to have specialized valuable capabilities—is
strongly linked to its external embeddedness with outside partners (Yamin and Andersson,
2011). Thus, the capacity for integrating and applying external knowledge and expertise
seems to be a core competency of BoP ventures to become centers of excellence. The
intention of conveying the acquired expertise to other parts of the company was mentioned
frequently, especially by the MNC interviewees, and might be considered a decisive argument
for company-internal justification of BoP ventures.
However, being a “center of excellence” is not sufficient to disseminate a subsidiary’s
knowledge in an MNC if this knowledge is not perceived as strategically important by the
headquarters. Incoming knowledge in MNCs’ headquarters is mainly filtered depending on its
source so Ambos et al. (2006) suggest “managers may find it most convenient to focus on
strategic lead units” (p. 308), the knowledge input of which is rated as most beneficial. If BoP
projects are not considered such lead units, valuable knowledge from this source might simply
be ignored. Here, again, our cases offer some interesting insights. The distinct proactive top
23
management commitment displayed throughout the projects shows the cases at hand offer the
potential not only to become centers of excellence but also to simultaneously be regarded as
strategic lead units. This, however, is by no means a predetermined outcome. If, for example,
the projects fail to demonstrate their potential contribution to the economic bottom line in the
long run or their strategic value in terms of showing feasible avenues of how to do business at
the BoP, they might easily be abandoned and ignored. The same applies to ventures that are
merely perceived as philanthropic projects, shop-window CSR measures, or temporary
fashion.
Furthermore, and similar to the above-mentioned research on absorptive capacities in
subsidiaries, IB research suggests the absorptive capacity in an MNC’s headquarters is
positively related to achieving benefits from subsidiary knowledge. Additionally, MNCs
without prior experience in the field might fail to generate benefits from subsidiary
knowledge since they prove to be unable to comprehend and use this knowledge (Ambos et
al., 2006). In all cases at hand, managers from the headquarters in developed countries as well
as local affiliates were part of the projects. Thus, a proactive (headquarter’s) top management
(as well as a complementary commitment by the project managers) might be beneficial not
only in terms of securing internal firm support for the respective projects but also for the
entire company since it might help to comprehend, appreciate, spread, and deploy BoP
knowledge throughout the company.
Regarding the issue of how to actually implement social standards in supply chains, the
localized multi-stakeholder approach implemented in numerous BoP projects may be one
promising way that might be transferable to broader application. Multi-stakeholder initiatives
embrace many actors controlling each other. Furthermore, local production (and
consumption) systems make third-party certification redundant, since performance is directly
controlled by the focal company and other stakeholders. Therefore, it is not astonishing that
24
we did not observe supplier certification as an analytical construct in our case studies.
Similarly, transparency is not considered a big issue because the focal companies and other
stakeholders are locally involved and can easily implement systems to ensure product quality,
fair prices and wages, and decent working conditions. This contradicts Ciliberti et al. (2009)
who encourage focal firms to introduce third-party certification in their supply chain due to its
favorable effects on reduced information asymmetry and transaction costs. Such a “back to
the roots” kind of doing business with a plethora of local suppliers represents a common
strategy for targeting sustainability at the BoP, which might be transferable to supply chains
in other business environments. This is in contrast to some of the current state-of-the-art
approaches in traditional supply chain management which considers a multitude of suppliers
favorable only for hedging risks of supply disruptions or for leveraging buying power in
arm’s length supplier-buyer relationships (Lee, 2002); and in SSCM where the commonly
favored strategy is selecting and concentrating on a few key suppliers (Pagell and Wu, 2009).
As possible drawbacks, these multi-supplier approaches entail increased demands of supply
chain coordination and thus possibly reduced efficiency (cf. Lee, 2002) as well as the need to
engage in time-consuming training for a large number of suppliers. Nevertheless, if
implemented properly localized approaches are additional important strategic elements for
improving the social domain in MNC’s BoP strategies.
Finally, it is not surprising that the analyzed projects include the local BoP in their value
chains—either as consumers, producers, or distributors—since otherwise the projects would
not have been selected as BoP cases in this study. The degree of inclusion of local
communities, however, is interesting here. The Grameen Danone project follows an integrated
BoP 2.0 approach. The same can be assessed for the BASF project, although with the
restriction that the initiating company (i.e., BASF) itself does not produce the vitamins locally
at the BoP. BASF instead acts as a facilitator, contributing only a minor share to the final
product (the fortified vitamins account for roughly 1% of the costs of the end product).
25
BASF’s technical know-how, however, adds significantly to the specific added value of the
product at the BoP. The Nestlé project seems to be the least integrated since it concentrates on
procurement issues concerning the basic raw material milk. Although there is no distinct
focus on processing the milk further at the BoP, capacity building for farmers is still a central
aspect of the Nestlé project that goes far beyond simple customer-centered BoP 1.0 strategies.
5.2 Limitations
Our findings are based on a multiple-case study design containing three cases, and there are
some limitations. Since BoP projects may still be characterized as expeditions into unknown
territories, the projects’ approaches are often rather idiosyncratic and may, in many cases, not
be directly applicable to other firms. In this respect, for example, the influence of specific
cultural backgrounds on design, success, or failure of BoP projects could not be sufficiently
taken into account in our analysis. In general, we did not include any environmental
moderators in our categories since this would have been beyond the scope of this paper.
Instead, we focused on best-practice constructs from SSCM literature. A focused analysis of
environmental moderators as well as a more in-depth investigation of specific constructs from
SSCM theory is left to follow-up studies that may build on our findings.
Furthermore, the cases focus rather narrowly on the food industry. As discussed before,
theoretical sampling of “best practice” BoP cases from the food sector is considered
particularly illustrative regarding novel BoP 2.0 approaches. This balances the limited number
of cases with their importance for elucidating our specific research objective, thus enhancing
the validity of our analysis. Similar patterns regarding the role of SSCM in BoP projects may
probably (at least within rough frames) be identified in other comparable BoP projects (from
other industries). Findings could be used as decision support and guidelines for other
companies planning to engage in BoP business models and aiming for a comprehensive triple
bottom line performance. However, the findings might not be applicable to other industries
26
facing different challenges and structures. For example, industries receiving intensive
attention from environmental advocacy groups might feel impelled to proactively introduce
environmental aspects in BoP projects right from the beginning.
Finally, the findings of our qualitative approach rely strongly on (subjectively dyed)
conceptualizations and theory-led de-contextualization to achieve a certain level of
generalization (Avenier, 2010). Here our procedure might find backing from Weick (1989),
who explicitly encourages creative handling of theory in the name of a disciplined
imagination. With this approach, the researcher is supposed to attempt thought trials when
building theory to avoid the trap of overly mechanistic and, thus, uninspired theory use.
6. Conclusion
The analysis of the three food industry cases Danone, BASF, and Nestlé offers interesting
insights on the current level of integration of SSCM in BoP research and practice and on
future opportunities of combining these two concepts. SSCM may help enrich the current
focus of BoP projects on the double bottom line (social and economic) with the so-far
neglected environmental dimension of sustainability. Furthermore, BoP supply chains show
avenues for integrating the social domain into general SSCM theory and practice. Such bi-
directional fertilization may considerably advance the implementation of the triple bottom line
approach. Equal treatment of all three performance objectives may, however, in fact only be
achieved through fundamentally challenging the business logic, thus finding new forms of
integrating profit, social and ecological business. BoP supply chains may serve as
experimental laboratories for exploring new kinds of business thinking that may be
transferred to other business fields and world regions. They are suitable for generating the
necessary innovative power and creativity since the mere adaptation of Western business
models and/or products often proves insufficient at the BoP (Hart and Christensen, 2002;
Giroud and Scott-Kennel, 2009). Such a transfer of underlying assumptions on the role of an
27
enterprise within society is spurred if MNCs are involved that are diversified in terms of
geography and product range; subject to the condition that the BoP projects are
organizationally embedded within the overall corporate structure facilitating resource and
knowledge exchange between different functions, between the headquarter and subsidiaries,
and between different geographically dispersed subsidiaries. For bundling all three
sustainability dimensions, it is important though to have a realistic eye on potential win-wins
and trade-offs between the various dimensions (Seuring and Müller, 2008). This assessment
of synergies and conflicts of goals may then serve as starting point for adequate business
process improvements.
In our BoP projects, a wide range of different actors is actively involved, although currently
with a distinct focus on social, infrastructural, and development issues. One major
characteristic of how BoP supply chains are designed and operated is their localized approach,
that is, local communities are included as producers and, partly, as consumers of the food
products. These local production and consumption schemes eliminating far distance logistics
operations and thus a large part of energy demand represent as well promising paths of
pushing ecological business impacts below the planet’s carrying capacity.
Future research could investigate such aspects in more details, hence enhancing our
knowledge of how BoP supply chain function, how they can be improved against the triple
bottom line, and which interactions and information flows characterize multi-actor BoP
projects and MNCs involved. Follow-up studies may furthermore consolidate the current
findings by taking up other conceptualizations of SSCM as analytical tools, by extending the
investigations to other industry sectors, and by zooming in on individual constructs. Based on
further theory-framed empirical studies, the conceptual integration of SSCM and BoP as well
as its link to IB theory may be advanced and placed on increasingly solid ground.
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Figures and Tables
Figure 1: The Model of Sustainable Supply Chain Management
Corporate Orientation towards Features of Supply Chain Supply Chain Performance

Sustainability Design and Operation
Individual level • Reconceptualizing supply • Sustainability performance

• Proactive top management chain design and operation (i.e., economic, ecological,
• Employee commitment • Decommodization social)
• Standards and third-party

Corporate level certification
• Employee motivation via
rewards and incentives
• Company values and policies
• Alignment of environmental,
social, and economic goals
and activities
Table 1: Analytical Constructs Part 1 – Corporate Orientation toward Sustainability
Analytical Construct Characterization

Proactive top management Time and resources contributed by top management to
Individual level
proactively implement sustainability goals within the

organization.
Employee commitment Responsibility for social and environmental concerns shared
across the organization, and the respective goals proactively
pursued by the entire organization.
Employee motivation via Extrinsic measurement and reward systems linking employee
rewards and incentives behavior to sustainability outcomes complement and
reinforce employees’ intrinsic commitment to sustainability.
Corporate level
Company values and policies Generally defines what sustainability means to the
organization, i.e., is tightly connected to the business model
and brands, and guides decision making.
Alignment of environmental, Environmental and/or social goals and activities have to be
social, and economic goals aligned to the organization’s economic activities, so that non-
and activities economic performance is a crucial factor in financial
performance.
40
Table 2: Analytical Constructs Part 2 – Features of Supply Chain Design and Operation
Reconceptualizing Reconceptualize supply chain design to include (and thus leverage) skills
supply chain design and abilities of a broad scope of non-traditional actors such as NGOs, local
and operation communities, or competitors and reorganize processes to aim for
sustainability.
Decommodization Focal company moves its suppliers out of commodity supplier status by
granting above-market prices, offering long-term relationships, and
engaging in supplier development.
Standards and third- Certification of suppliers on social and/or environmental actions and
party certification outcome via third-party certification schemes and standards (e.g., ISO
14000, SA8000).
Table 3: Analytical Constructs Part 3 – Supply Chain Performance

Sustainability Striving simultaneously and equally for performance in
performance
(a) two sustainability dimensions: economic and social, economic and
environmental, social and environmental (double bottom line)
(b) three sustainability dimensions: economic, social, and environmental
(triple bottom line)
Table 4: Overview of Main Elements of the Case Studies

Company Description Innovative Aspects Sustainability Focus
(Project) and BoP Focus
The Social Business Joint Local production of Economic:
Venture aims at providing the dairy products by Finding a viable business
poor in Bangladesh with way of small “micro- model.
affordable and nutritious factories”. Social:
dairy products. To achieve Providing healthy and
this, “micro-factories” (i.e., affordable dairy products
(Grameen Danone Foods)
comparably small factories BoP as customers

to BoP while increasing
for dairy products) have been and as suppliers /
the local population’s
built in decentralized producers.
income.
Danone
locations. The project

organizers cooperated Environmental:
exclusively with local farmers No distinct focus. Local
as suppliers for raw materials procurement and
and employ solely local small distribution minimize
and micro-entrepreneurs as transport; environmental
distributors. Grameen acts as aspects (e.g., of
a facilitator in the local packaging) considered.
business environment while
Danone brings in managerial
and technological expertise.
41
Foods producers in B2B business model Economic:

developing countries are targeting local food Focus on quality and
supplied with stable and cost- producers with cost-effectiveness of
effective encapsulated products (i.e., food fortification to
vitamins and minerals to vitamins for food ensure positive health
(Micronutrition Initiative)
enrich their products. The aim fortification) effects and avoid

is to achieve positive health benefiting the end jeopardizing affordability
effects on the end consumer. consumer. of product.
BASF acts as supplier for the
BASF
Social:
food processing industry Enriching local food
while offering its business Indirect BoP
ingredients with vitamins
partners expertise on cost- connection via B2B
to achieve positive health
effective fortification of food relationships with
impacts at BoP.
products that are affordable at local businesses.
the BoP. Environmental:
No distinct focus. Local
procurement and
distribution minimize
transport.
The central aim of the project Improving local Economic:
is to establish local sourcing supply chains and Sourcing is economically
of raw materials (i.e., milk) overcoming viable and adds to
for Nestlé’s production infrastructural Nestlé’s economic
centers in developing deficits by bottom line.
countries. Over the years, innovative handling Social:
Nestlé built a network of and processing of Local procurement of
(Milk Districts)
decentralized collecting raw materials. milk adds to generating

points equipped with “cooling
Nestlé
income at BoP.
centers” to circumvent
insufficient infrastructure and BoP as suppliers of Environmental:
distribution systems. Milk is raw material. No distinct focus. Local
cooled down and transported procurement reduces
in insulated tanks to ensure transport.
freshness. Backup cooling
stations add to supply chain
security, and administrative
centers ensure fast payment to
farmers.
42
Table 5: Primary Data – Overview of Interviewees

BoP Position of focal informant Organization Type of
project Organization
Deputy General Manager Danone, France MNC
Danone Foods
danone.communities
Grameen
General Manager of Danone Danone, India MNC

India / South Asia
Senior Manager Investments GAIN (Global Alliance for NGO
& Partnerships Improved Nutrition)
Global Coordinator, BASF, Germany MNC
Micronutrition Initiative
BASF Micronutrition
Head PPP (Public-Private- GIZ (German Agency for Governmental

Partnership) Fortification International Cooperation), body
Initiative
Germany
Program Manager Food IRD (Institut de Recherche pour le Public
Fortification Développement), Cambodia research
institute
Project Manager Ministry of Planning, Cambodia Governmental
Micronutrition body
Corporate Head of Nestlé, Switzerland MNC
Nestlé Milk Districts
Agriculture
Manager Fresh Milk Nestlé, Switzerland MNC
Sourcing / Milk District
Manager Milk Sourcing Nestlé, Pakistan MNC
Project Manager “Women UNDP (United Nations Supra-national
Livestock Training” Development Program), Pakistan organization
43
Table 6: Secondary Data – Main Sources of Triangulation

BoP Secondary Data Source Type of Data
project
Danone, 2010 Company report
Grameen Danone Foods
Danone, n.d. Company website

Ghalib et al., 2009 Case study-based research articles
Govind, 2007 Case study
Grameen Creative Lab, n.d. Partner website
Humberg, 2011 (pp. 128-176) Case study-based dissertation
Rangan and Lee, 2011 Case study
Yunus et al. 2010 Case study-based research articles
BASF, 2011 Company website
Micronutri-
Initiative
Bianchi, 2007 Case study

BASF
tion
Blüthner, 2008a Company presentation

Blüthner, 2008b Company presentation
Goldberg and Herman, 2005 Case study
Nestlé Milk Districts

Nestlé, 2009 Company report
44
Table 7: Approaches and Typical Quotes on Supply Chain Design and Operation
Category Main Approaches Typical Quotes 1

By working together with new partners … we are
learning a lot of things for Danone. ... This model has
been absolutely co-invented, co-built. We would not
Reconceptualizing supply chain design and operation
have been capable to do this ourselves. (Danone

representative)
Partnerships with
Another important factor is strong collaboration
various types of
between the parties. We cannot do without strong
organizations enable
partners from the private sectors. On the other hand
reconceptualization
private sector alone cannot do this either. (Partner
representative BASF project)
It's clear, nobody can do everything himself. Wherever
you go, whatever you do, you look for partners and
stakeholders to cooperate. (Nestlé representative)
The objective is truly to really localize … we want to
have this base for the local proximity business model.
(Danone representative)
99.9 % of the products are locally produced so that we
Localization of supply
can say with a little pride that more local production in a
chains
BoP project is hardly possible. (BASF representative)
In 99 % of the cases we source local raw materials, we
locally process them and we sell them in the local
communities again. (Nestlé representative)
You will have to train people, you will have to build
capacity on the ground to make sure you have the right
capabilities, management, technical, everything.
(Danone representative)
Decommodization
Training, education, The local producers ... are not on a highly industrialized
and technical level, so they really needed technical assistance.
assistance for suppliers (Partner BASF project)
at the BoP We had to start educating the farmers. … Now we have
this whole agricultural extension services and we have
people coming to the village making trainings and
educating farmers, training farmers, demonstrating
things, making trials. (Nestlé representative)
Standards and third-party certification:
No focus identified
1
Some quotes translated by the authors.
45
Table 8: Focus and Typical Quotes on Supply Chain Performance in Sustainability
Dimen- Focus Typical Quotes 2

sion
Aim of economic sustainability broadly acknowledged in all cases
Grameen Danone Bangladesh can run with two to three

percent EBITDA. (Danone representative)
We had long conversations with Danone that the
business model should be self-sustainable. … For them
it’s not a CSR project. It’s a core business project.
(Partner Danone project)
Visions of profitability We make a moderate profit. But we don’t need to
compare ourselves with the highly profitable nutrition
Economic
business. (BASF representative)

We have an internal controlling system measuring the
profit margins. … If you have a positive free cash
flow—no matter if you look at a small or large
business—you can thrive, invest, and grow. (Nestlé
representative)
You cannot expect to have the same economic
performance [as other business units; the authors] since
Emphasis on additional
we offer added-values in terms of communication,
economic benefits
employee-motivation, recruitment, partnership
beyond direct project
brokering which provide measureable business benefits
profits
despite otherwise lower margins. (Danone
representative)
Aim of social gains broadly acknowledged in all cases

You are creating value, because you are using the milk
of the local farmers and thereby you can help the
farmers to be more productive. … In our genes there is
this obsession for holistic value creating: social and
economic impact. (Danone representative)
And regarding the health impact: We try to measure this
Income generation,
Social
in a clinical study in a serious way. (Danone

health improvement,
representative)
and capacity building at
the BoP as main focus Reaching more people, end malnutrition. (BASF
representative)
Our success indicators were provision of local
employment. … Secondly to provide access to fortified
food, which represents more the health or social side. …
They [the local producers; the authors] understood that
producing these noodles can be both, economical
2
Some quotes translated by the authors.
46
sustainable as well as with positive social effects.

(Partner BASF project)
Then you start buying milk which generates cash —
weekly wages for the farmers. … This is generating a
lot of activities in these villages, employment,
commerce, people wanting another telephone line and
stuff like that. It’s the perfect thing for rural
development. (Nestlé representative)
Women are empowered, education is getting improved
in this area, also children education through raised
income, and also health is improved because normally
people have little money to spend on their own health.
(Partner Nestlé project)
Environmental
No distinct focus identified, some limited indications (especially in the Danone case) of
environmental issues being also of concern
47
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Sustainable Supply Chain Management in “Base of the Pyramid” Food

Article in International Business Review · October 2013

Stefan Gold Rüdiger Hahn

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Multi-tier (sustainable) supply chain management View project

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Sustainable Supply Chain Management in “Base of the Pyramid” Food Projects – A

Path to Triple Bottom Line Approaches for Multinationals?

Stefan Gold, Rüdiger Hahn and Stefan Seuring

For citations refer to the final article; doi: 10.1016/j.ibusrev.2012.12.006

for multinational corporations (MNCs) to involve poor communities in production processes

economic, social, and environmental dimensions of sustainability. In particular, the BoP

further research is needed to advance integration of these two research streams.

Second, research on sustainable supply chain management (SSCM) as the intersection of

years as a response to increasing stakeholder pressures on focal companies to ensure

environmental) (Elkington, 1997).

environmental sustainability (Kandachar and Halme, 2007). Furthermore, the academic

integrate the BoP appropriately in creating sustainable value?

constructs. By doing so, we aim at providing a bird’s-eye perspective of the interface of

background of SSCM as a facilitator for sustainably integrating poor communities in value

aspects neglected within SSCM so far. We specifically contribute to IB research by discussing

for further research.

2. SSCM theory and BoP research – a review of the literature

2.1 Deriving analytical categories from SSCM theory

sustainability performance (2.1.3).

---- INSERT FIGURE 1 ABOUT HERE-----

2.1.1 Corporate orientation toward sustainability

An initial step toward achieving holistic sustainability objectives lies in a corporation’s

categories are summarized in Table 1.

---- INSERT TABLE 1 ABOUT HERE-----

importance of an environmental vision and its implementation with policies and a

motivation need to be backed by a firm’s corporate commitment to sustainability, which can

the corporate mindset to think boldly beyond the—mostly efficiency centered—principles of

Seuring and Müller, 2008).

2.1.2 Features of supply chain design and operation

analytical constructs in Table 2).

---- INSERT TABLE 2 ABOUT HERE-----

Reconceptualizing supply chain design and operation is often discussed as a means of

as non-governmental organizations (NGOs) (Pagell and Wu, 2009). Perez-Aleman and

sustainability practices. Furthermore, a reconceptualization toward SSCM includes different

partnerships, paying above-market prices, and engaging in supplier development and

2007), both basic pre-conditions of enhanced sustainability performance.

management to enhance different performance goals via constant process improvements

are still much less prevalent in corporate management systems.

2.1.3 Supply chain performance

performance on the triple bottom line. Traditional performance management approaches or

concentrate on financial and operational performance measurement. Within SSCM, measuring

Table 3 summarizes the third part of our analytical constructs.

---- INSERT TABLE 3 ABOUT HERE-----

2.2 Linking SSCM theory to BoP research

in certain developing country environments, while SSCM may be considered an overarching

concept of inter-organizational business activities/processes and a toolset for analyzing and

2.2.1 SSCM issues in BoP literature

In terms of corporate orientation toward sustainability, research indicates that a lack of

attempt to enter BoP markets.

commitment and common codes as pre-conditions of developing and deploying co-creation

capabilities (e.g., Simanis et al., 2008), or to focal companies internalizing formerly

2.2.2 Synthesis of the two streams of research

categories outlined above entail a promising potential of theoretical cross-fertilization

for companies operating in an international environment. Concerning corporate orientation

of sustainability performance, the objective of economic sustainability is well-grounded in

sustainability, BoP ventures distinctly aim for social sustainability.