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Supply chain transparency as a key


prerequisite for sustainable agri-food
supply chain management
a a
Jonas Bastian & Joachim Zentes
a
Institute for Commerce & International Marketing (H.I.MA.),
Saarland University, Gebaeude A5.4, D-66123, Saarbruecken,
Germany
Published online: 10 Sep 2013.

To cite this article: Jonas Bastian & Joachim Zentes (2013) Supply chain transparency as a key
prerequisite for sustainable agri-food supply chain management, The International Review of
Retail, Distribution and Consumer Research, 23:5, 553-570, DOI: 10.1080/09593969.2013.834836

To link to this article: http://dx.doi.org/10.1080/09593969.2013.834836

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The International Review of Retail, Distribution and Consumer Research, 2013
Vol. 23, No. 5, 553–570, http://dx.doi.org/10.1080/09593969.2013.834836

Supply chain transparency as a key prerequisite for sustainable


agri-food supply chain management
Jonas Bastian* and Joachim Zentes

Institute for Commerce & International Marketing (H.I.MA .), Saarland University, Gebaeude A5.4,
D-66123 Saarbruecken, Germany
(Received 11 August 2013; accepted 12 August 2013)
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This paper discusses the antecedences and consequences of supply chain transparency
(SCT) in sustainable agrarian supply chain management using partial least squares
regression in an empirical sample with 131 supply chains with lead firms in German-
speaking countries (Germany, Austria and Switzerland). We investigated the effect of
such structural antecedences as disintermediation, as well as the effect of governance
tools similar to intensive communication, the integration of third parties in supply chain
governance or the use of formal specifications on SCT. We found that all these
antecedences are helpful in increasing SCT, while low developed countries of origin
significantly reduced SCT. Then, the effects of SCT on the four main performance
dimensions in sustainable supply chain management (SSCM), i.e. social, ecological,
and operational performance and long-term relationship success, were verified. Higher
SCT improves all four dimensions significantly, while the effect on operational
performance is lowest. Supply chain transparency turns out to be a prerequisite or a
basic indicator of good management in SSCM in agri-food supply chains.
Keywords: sustainable supply chain management; supply chain transparency; supply
chain performance

Introduction
For several reasons, supply chain transparency (SCT) is considered an important issue in
modern supply chain management (SCM). This is especially the case in agri-food supply
chains, which are among the most critical (Yakovleva, Sarkis, and Sloan 2012, 1297).
Although quality and safety reasons and the resulting legal requirements were the main
reasons for transparency efforts historically, the last decade’s striving towards cooperative
operational optimization, as well as ecologically and socially sound supply chains, has
yielded new exigencies (Wognum et al. 2011; Trienekens et al. 2012). Presently, the view
that transparency plays a major role in agrarian supply chains and especially in sustainable
supply chain management (SSCM) is widely shared (cf. Deimel, Frentrup, and Theuvsen
2008; Arens, Deimel, and Theuvsen 2011; Trienekens et al. 2012). As a consequence, SCT
may no longer be seen as a mere hygiene factor, but could also set the stage for cost,
quality or flexibility advantages, as well as for ethical differentiation. Much conceptual
research about transparency in SCM has been conducted, but there is still a lack of
empirical data. Our aim is to contribute to closing this gap. We start with a theoretical
discussion of SCT, after which drivers, barriers, antecedents and consequences of SCT in

*Email: mail@jonasbastian.de

q 2013 Taylor & Francis


554 J. Bastian and J. Zentes

socially and ecologically oriented agri-food supply chains are reviewed. Finally, we
present the results of our empirical investigation of 131 agri-food supply chains in which
lead firms from Germany, Austria or Switzerland intend to introduce ethical
improvements.

Background
Supply chain transparency
Supply chain transparency can be defined as the degree to which a supply chain player has
access to relevant information about products, processes and flows of capital ‘without loss,
noise, delay and distortion’ (Beulens et al. 2005, 482). Hence, SCT is an indicator of the
quality, availability, accuracy, accessibility and actuality of supply chain data. In
transparent supply chains, access to information is simple and fast. Moreover, information
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can be revealed to important supply chain members such as customers, regulatory


authorities or shareholders in a comprehensible, comprehensive, credible and rapid
manner (cf. Beulens et al. 2005, 482; Kalfagianni 2006; Pagell, Wu, and Wassermann
2010, 54; Wognum et al. 2011, 66; Trienekens et al. 2012, 55). According to Kalfagianni
(2006, 19), SCT has both horizontal and vertical dimensions. The latter encompasses
knowledge about all companies and input and output flows in the supply chain (Wognum
et al. 2011, 66). The horizontal dimension refers to circumstances, policies and process in
individual companies on particular supply chain tiers and information flows to firm-
specific stakeholders (cf. Wognum et al. 2011, 66). Our understanding is that SCT is the
combination of vertical and horizontal transparency in supply chains.

Legal requirements as drivers for SCT


Scandals in the European agri-food industry concerning health and safety issues such as
bovine spongiform encephalopathy (BSE), dioxin or rotten meat (‘Gammelfleisch’) (Arens,
Deimel, and Theuvsen 2011, 1134), as well as the industry’s role as a source of environ­
mental pollution, with issues such as greenhouse gas emissions, acidification or
eutrophication, have led to what Kalfagianni (2006, 13) characterizes as normative and
structural transformations that are closely related to increased requirements for SCT. In
short, Kalfagianni (2006) identifies the development of agri-business’s main function as a
provider of cheap food after the Second World War into a high-performance industry, highly
capable of competing on a global scale in producing tasty food of high quality, safe as well as
environmentally and socially soundly produced. Also, current trends like the economic rise
of Asian nations are driving the global demand for meat, animal feed and energy feedstock.
The result is a highly competitive environment in European markets where multinational
retailers seek new ways of differentiation. The ongoing globalization of international food
supply chains completes the background for a discussion of SCT in the agri-food industry.
Legal requirements are pushing transparency from two directions, both directly and
indirectly. To begin with, immediate legal requirements such as Regulation (EC) No.
178/2002 article 18 in the EU or article 50 of the Swiss ‘Lebensmittel- und
Gebrauchsgegenständeverordnung’ have to be quoted. These dictate minimum
requirements for traceability systems and assign responsibility for traceability to
importers of food, livestock and feedstuff in the EU and Switzerland. However, several
regulations such as those derived from Directive 2000/13/EC ‘on the approximation of the
laws of the Member States relating to the labelling, presentation and advertising of
foodstuffs’ (see Table 1; cf. Arienzo, Coff, and Barling 2008; Barling 2008; Bertheau
The International Review of Retail, Distribution and Consumer Research 555

Table 1. EU regulation as drivers of SCT.

Instrument Content/goals/actions Legislative bases


Organic farming Direct support schemes; sales Regulation (EC) No. 834/2007;

promotion; organic certification Regulation (EC) No. 3/2008

and labelling
Labelling, presentation Higher transparency, labelling Directive 2000/13/EG;

and advertising requirements: origin (of certain Regulation (EC) No. 1829/2003;

of foodstuffs products), hydrogenated fat, Regulation (EC) No. 1830/2003;

animal fat, dyestuffs, artificial Regulation (EC) No. 1924/2006;

flavours, preservatives, baking Regulation (EC) No. 1169/2011

agents; prohibition of consumer


fraud by false labelling of
nutrition and health claims
GMO labelling Labelling of food and feeding
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stuff containing genetically


modified organisms; possibility
to label non-modified food
Traceability Consumer protection, transparency, Regulation (EC)

fast reaction after incidents, No. 178/2002 (Article 18)

traceability systems are obligatory


for all growers, producers,
processors and distributors ‘food,
feed, food-producing animals, and
any other substance intended to be,
or expected to be, incorporated into
a food or feed’

2011; Brera et al. 2011) state requirements or enable the communication of special food
attributes concerning origin or production processes. It is important to note that these
regulations formulate only basic requirements, so that in practice, agri-food chains reveal
major differences regarding range, scope and sophistication of transparency systems, and
therefore in the degree of SCT achieved.
Besides the external legal framework, there are several supply-chain-specific conditions
for which we assume a significant influence on SCT. Transparency is closely connected to
overall complexity and the handling of information flows in supply chains. In order to
achieve a transparent supply chain, we suggest two main strategies, by which we investigate
reduction of supply chain complexity and handling of supply chains complexity.

Hypotheses
Instruments for reducing the complexity in agri-food supply chains
A primary instrument for the reduction of complexity in agri-food supply chains is the
construction of lean supply chains with few tiers and, therefore, few transactional
intermediaries. Usually, each transactional intermediary in a supply chain has several
suppliers. Hence, they are a potential hub for a number of upstream supply chains with
several other players, which increases complexity enormously. Focal companies have to
ensure data quality for each tier in the supply chain and for each sub-supply chain.
Accordingly, the reduction of supply chain tiers and number of supply chain members
should be an effective instrument for reducing complexity and improving transparency in
the supply chain. We subsume the bridging of supply chain tiers and elimination of supply
chain players through vertical integration or technical solutions under the construct of
556 J. Bastian and J. Zentes

disintermediation. A high degree of disintermediation indicates a short supply chain, with


a low number of supply chain players. Indeed, several scholars emphasize the importance
of ‘short and simple’ supply chains in pursuing ethical improvements (cf. Irland 2007,
213; Sarkis, Zhu, and Lai 2011, 3). In practice, agrarian supply chains differ substantially
in terms of supply chain tiers, the number of involved companies and countries of origin.
Therefore, we propose the following hypothesis:
H1: The greater the degree of disintermediation, the greater the SCT.
In addition to the number of supply chain players and tiers, the stage of cultural, legal
or infrastructural development of the countries of origin regarding ethical requirements,
for example, as depicted in the United Nations Development Programme (UNDP) human
development index or the list of Business Social Compliance Initiative (BSCI) (2011) risk
countries, should also be relevant. In less developed countries with low legal requirements
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or cultural affinity concerning social or ecological issues, the availability of process-


related data should be poorer than in highly developed countries. Furthermore, the
infrastructure and state of knowledge regarding the processing and transfer of information
and the sense for ethical issues is often much poorer in less developed countries.
Consequently, Ponte and Gibbon (2005, 13) propose that choosing countries of origin with
a similar culture to the country of destination is an effective tool for ensuring quality
standards (‘domestic conventions’). Therefore, the choice of countries of origin with high
legal standards and a high affinity towards ethical issues should be another valuable means
of reducing complexity in SSCM. Therefore, we propose the following hypothesis:
H2: The less developed a country of origin regarding ethical standards, the lower the
SCT.

Degree of formalization
Formalization refers to the degree of voluntary standardization and controlling regarding
qualitative or ethical requirements of the focal company in value chains. Standards are
agreements on the performance criteria of a product or service and refer to technical,
physical or procedural characteristics (Alvarez 2010, 481). Standards can be based on
search, experience or credence attributes, and they communicate information on the
achievement of these attributes to the standard setter or other addressees (Ponte and Gibbon
2005, 2; Alvarez 2010, 481). Standards form the basis for product-related labels or
certifications which are important for communicating the surplus value of products, for
instance regarding quality or ethics, to business customers, consumers or other
stakeholders. Therefore, these are important tools, especially in ethically oriented supply
chains with complex quality issues, which often rely on credence attributes (cf. Ponte and
Gibbon 2005, 3). To be meaningful, standards require effective external control by an
individual enterprise or a third party which may be, but does not have to be, the standard-
setting organization. Therefore, our construct degree of formalization is a second-order
construct, formed by the standardization and control of required attributes through the focal
company or commissioned third parties. Formalization should be a valuable tool for
structuring characteristics and enhancing the ability to review goal attainment. Therefore,
formalization can reduce complexity and is also an instrument for dealing with complexity.
Furthermore, formalization is a basic requirement for the reliable disclosure of credence
attributes to external stakeholders. Accordingly, we propose the following hypothesis:
H3: The greater the degree of formalization, the greater the SCT.
The International Review of Retail, Distribution and Consumer Research 557

Third-party integration
The enforcement of standards or other requirements and consequently the choice of the
monitoring or control mode are important decisions in sustainable supply chain
governance. There are three basic modes: self-monitoring (first party) of internal processes
by supply chain members, monitoring by associated sector members, e.g. the customer
(second party) and monitoring by independent organizations (third party) (Alvarez 2010,
484). The latter is associated with several unique advantages. Third parties are not directly
dependent or in a hierarchy with supply chain members, and they usually specialize in
specific issues, geographic regions or industries. Therefore, they have considerable
expertise, which is not only useful for enforcement, but can also enable consulting services
and cooperative improvements or innovations in the supply chain. Regarding ethical
issues, third parties often have greater democratic legitimacy and credibility (Raynolds,
Murray, and Heller 2007, 159; Müller, Dos Santos, and Seuring 2009) than regular supply
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chain members, and are therefore best suited for the external communication of ethical
surplus values. In sum, in their role as information-related agents in supply chains, third
parties can both reduce complexity and increase credibility significantly. Hence, the
integration of third parties seems to be of great value in striving to raise SCT:
H4: The more effectively third parties are integrated into the supply chain, the greater
the SCT.

Supply chain communication


Sophisticated communication routines between supply chain players constitute another
instrument for handling complexity in supply chains. Such routines for supply chain
communication (SCC) extent beyond the simple exchange of information, in terms of
highly codifiable data, and also encompass the mutual long-term transmission of know­
how and experience between actors in different supply chain tiers, which require personal
and informal contacts between these experts (cf. Szulanski 1996; Kogut and Zander 1992,
386; Myers and Mee-Shew 2008). Inter-organizational communication is therefore a
critical factor in collaborative buyer-supplier relationships (Paulraj, Lado, and Chen 2008,
45), which are again highly relevant in ethical sourcing (Bastian and Zentes 2011, 98) and
SSCM (Sharfman, Shaft, and Anex 2009; Pagell, Wu, and Wassermann 2010, 58; Gold,
Seuring, and Beske 2010, 240). Supply chain communication has both an operational
aspect, which is closely related to standardized and automated routines, and therefore
supported mainly by information and communication technology, and a long-term, more
tactical or even strategic aspect, closely related to inter-organizational learning and social
relationships. Both aspects are part of the SCC construct used in our survey. Given the
previously mentioned definition of the SCT construct, it is obvious that SCC is closely
connected to transparency. Informal meetings and social contacts between suppliers and
customers offer deep insights into the processes and culture of the other company.
Furthermore, sophisticated IT-supported information channels and routines are essential
for the efficient exchange of current data, in order to deal with highly complex situations.
Therefore, we propose the following hypothesis:
H5: The better the SCC, the greater the SCT.

Performance dimensions in SSCM


A common weakness of existing empirical research on SSCM is that performance is often
measured unsatisfactorily. Although potential trade-offs between different performance
558 J. Bastian and J. Zentes

and time dimensions are quite clear, many studies do not thoroughly measure different
performance dimensions, which significantly restrict the relevance and practical
implications of the results. Therefore, we integrated four supply chain performance
constructs into our study, which together enable a comprehensive analysis of potential
trade-offs. These are the social performance of the supply chain, ecological performance
of the supply chain, long-term relationship success with a particular supplier, entailing
relationship quality and long-term relationship benefit, and finally the operational
performance of the supply chain as the sum of cost and quality aspects, plus the ability to
supply. Our four performance dimensions refer to the triple bottomline concept
(cf. Elkington 2002). In addition, we distinguish between operational and long-term
performance in the economic dimension, because trade-offs are probable in this context.
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Effects of SCT
From a theoretical point of view, transparency is the absence of information asymmetries,
which are important causes of agency risks in supply chains, such as adverse selection and
moral hazard. In other words, transparency is the basis for external control (cf. Lamming,
Caldwell, and Harrison 2004, 294). Consequently, Aggarwal and Jorion (2012, 110) see
the primary benefit of transparency in its ability to mitigate agency problems. Agency risks
are highly relevant, especially in ethical sourcing (Bastian and Zentes 2011, 89), due to the
credence character of the products’ ethical surplus values. An efficient prevention of
agency problems should be of considerable value for ensuring ethical- and quality-related
requirements in the supply chain and for stabilizing supply chain relationships. Since
transparency diminishes incentives for opportunistic behaviour by supply chain partners,
serious conflicts should be rare in transparent supply chains.
If we take a look at recent scandals in the agri-business industry, it is evident that the
disclosure of deficits, e.g. concerning product quality, husbandry conditions, working
conditions, the use of child labour or the compensation of small farmers has induced high
public pressure on supply chain players. Therefore, it is probable that SCT has a major
control effect regarding ethical and quality compliance.
In the literature, four more positive effects of SCT can be found, relating especially to
companies close to end customers (cf. Lamming, Caldwell, and Harrison 2004; Tsoulfas
and Pappis 2008, 1647; Pagell, Wu, and Wassermann 2010, 67; Trienekens et al. 2012,
58):
. SCT fulfils legal requirements and customer preferences.
. SCT improves supply chain responsiveness and enables rapid responses to
incidents.
. SCT enables supply chain process optimization due to the performance evaluation
of all supply chain tiers and provides deep insights into supply chain processes.
. SCT enables credible communication of surplus values in the supply chain,
especially regarding credence characteristics.
Deimel, Frentrup, and Theuvsen (2008) draw attention to several more positive effects
of SCT, such as improved consumer trust, better quality assurance and a greater market
orientation, as well as possibilities for network-based product and process innovations.
In sum, we propose the following consequences of an SCT:
H6.1: The greater the SCT, the higher the social performance of the supply chain.
H6.2: The greater the SCT, the higher the ecological performance of the supply chain.
The International Review of Retail, Distribution and Consumer Research 559

H6.3: The greater the SCT, the higher the long-term relationship success.

H6.4: The greater the SCT, the higher the operational performance of the supply chain.

Empirical study
Measurement of ethical performance dimensions
In the last few years, several researchers have published on the measurement of ethical or
sustainability dimensions in the context of agrarian supply chains (e.g. Carter and
Jennings 2002; Carter 2004; Kaufmann and Carter 2006; Yakovleva 2007; Wagner,
Bicen, and Hall 2008; Erol et al. 2009; Erol, Sencer, and Sari 2011; Yakovleva, Sarkis,
and Sloan 2012; Torres et al. 2012). However, none of the scales proposed have been
widely established, nor are they suitable for a supply chain-wide overall measurement of
several sustainability dimensions in agri-food chains. Therefore, we decided to develop
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new scales. Because of the complexity and multidimensionality of supply chain issues,
we used formative scales. Items were derived from existing scales and from extensive
analyses of general and agrarian-specific international standards, as well as from
sustainability reports of international companies in the consumer goods sector. The
tentative item set was refined through interviews with four experts in multinational
companies or international NGOs. Final scales were tested with a group of 13 experts
from international companies, NGOs or researchers experienced in SCM. We then chose
10 final indicators for each ethical performance dimension. We took arithmetical means
of the respective 10 indicators as latent variable scores for product-specific social or
ecological performance of the supply chain, in order to avoid problems with
multicollinearity.

The sample
Based on an extensive literature review and expert interviews, we constructed a
questionnaire which was sent to a sample of 4002 companies in the consumer goods and
retail sector. The basic population for this sample were databases of the 10,000 largest
German companies, the 2000 largest Austrian companies, the 914 largest Swiss
companies, as well as all companies with an EU-organic or FLO-CERT certification in
these countries. After eliminating redundancies and companies outside the consumer
goods or retail sector, we had a final pool of 4002 companies. In October 2011, we sent out
our questionnaire which was addressed personally to key informants in these companies,
who were either the director of the procurement department, a chief executive, the person
in charge of bio-certification or the chief executive officer (CEO) in smaller companies.
After 3 weeks, we sent reminders via email and commenced reminder telephone calls.
At the end of January 2012, we had received a total of 161 duly completed questionnaires,
of which 30 dealt with non-food or near-food products, and consequently were not used for
further analysis. The remaining 131 questionnaires form the basis of our statistical
analysis. Considering that willingness to participate in surveys is traditionally low in the
consumer goods industry – this is especially true in the procurement department – and
due to the fact that beforehand, we could not exclude all companies without ethical agri­
food products, the effective response rate of 4.0% is satisfactory.
We checked data for the respondent’s appropriateness concerning job position and
months spent on this position, so we could ensure that all respondents were key informants
related to the specific supply chain. Table 2 shows the structure of the sample and the
respondents.
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Table 2. Structure of the sample and the respondents.


560

Primary area of operations


Retailer Wholesale Consumer goods Othersa Not specified

20.6% 21.4% 33.6% 21.1% 1.5%

Number of employees

Under 50 51– 250 251– 1000 More than 1000 Not specified

57.2% 19.1% 12.2% 9.9% 1.5%

Procurement volume (in EUR)

Under 10 m . 10 – 50 m . 50 –250 m .250 m– 1 bn . 1 bn Not specified

28.2% 29.0% 19.1% 12.2% 9.9% 1.5%

Field of operation of respondent (multiple answers)

Top management Procurement Quality management Production Sustainability Product management Others
J. Bastian and J. Zentes

51.1% 50.9% 32.1% 24.4% 22.9% 23.7% 10.7%

Position in hierarchy

CEO, founder, owner Other C-level, Senior executive Employee


corporate management

43.5% 12.2% 29.8% 14.5%


a
For example, artisanal food-production (bakeries and butchers) and gastronomy.
The International Review of Retail, Distribution and Consumer Research 561

We conducted the Armstrong and Overton’s (1977) non-response bias test which
showed no significant differences between late and early respondents. Herman’s single-
factor test extracted 13 factors and, therefore, yielded no evidence of common method
variance in our data.

Analysis
Each questionnaire described the supply chain of a single agri-food product, so that
respondents could choose a supply chain they knew best and precisely describe the
characteristics of the chain. We used 7-point Likert scales to measure the respondents’
assessment. Performance dimensions were asked for, as compared to the average products
from conventional agri-food supply chains. We performed measurement validation and
model testing using the structural equation modelling tool SmartPLS 2.0M3, because of its
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high suitability for small sample research and the use of formative as well as reflective
measurement scales (cf. Chin and Newsted 1999, 326; Henseler, Ringle, and Sinkovics
2009, 291).
The consistently high values of average variance extracted (AVE, at least 0.669),
composite reliability (at least 0.853) and Cronbach’s a (at least 0.723) indicate a high
level of internal consistency across the reflective constructs. No formative measurement
model revealed critical values for the variance inflation factor (cf. Diamantopoulos and
Winklhofer 2001, 272; Wilcox, Howell, and Breivik 2008, 1222) or condition index
(cf. Belsley, Kuh, and Welsch 1980, 117), so that multicollinearity is no issue in our
data. Moreover, all formative scales yielded significant correlations with separately
prompted phantom variables, indicating a high external validity of the scales
(Tables 3 –5).

Table 3. Internal consistency of reflective variables.


Variables AVE Composite reliability Cronbach’s a
Disintermediation 0.777 0.8744 0.723
Country complexity 0.748 0.853 0.756
Third-party integration 0.814 0.8974 0.777
SCC 0.679 0.894 0.840
SCT 0.751 0.938 0.917

Table 4. Internal consistency of sub-dimensions and test for multicollinearity of formative models.
AVE Composite reliability Cronbach’s a VIF CImax
Formalization
Degree of control 0.792 0.884 0.756 1.175 1.508
Formal standards 0.669 0.858 0.751 1.175
Operational performance
Cost 0.750 0.900 0.836 1.314 2.024
Quality 0.883 0.938 0.872 1.404
Ability to supply 0.834 0.938 0.901 1.534
Long-term relationship success
Relationship quality 0.846 0.943 0.911 1.162 1.494
Relationship benefit 0.907 0.967 0.949 1.162
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562

Table 5. Pearson’s correlation matrix, square correlations and AVE for reflective constructs.
Variables AVE 1 2 3 4 5 6 7 8 9 10
1. Disintermediation 0.777 1.00 0.014 0.055 0.038 0.221 0.309 0.209 0.135 0.171 0.061
2. Country complexity 0.748 2 0.119 1.00 0.008 0.032 0.000 0.065 0.004 0.004 0.007 0.008
3. Third-party integration 0.814 0.234 0.087 1.00 0.155 0.078 0.132 0.104 0.068 0.092 0.021
4. Formalization –a 0.196 0.179 0.394 1.00 0.162 0.155 –b –b –b –b
5. SCC 0.679 0.470 2 0.019 0.280 0.402 1.00 0.291 0.295 0.171 0.500 0.032
6. SCT 0.751 0.556 2 0.255 0.363 0.394 0.539 1.00 0.295 0.167 0.317 0.068
7. Social performance –a 0.457 2 0.060 0.322 0.267 0.543 0.543 1.00 –b –b –b
8. Ecological performance –a 0.368 2 0.063 0.260 0.058 0.414 0.412 0.619 1.00 –b –b
9. LT-relationship success –a 0.413 2 0.086 0.303 0.390 0.707 0.563 0.603 0.462 1.00 –b
J. Bastian and J. Zentes

10. Operational performance –a 0.246 2 0.089 0.144 0.161 0.178 0.260 0.315 0.187 0.341 1.00
Notes: Values under the diagonal are correlations, values above the diagonal are squared correlations.
a
Formative scale.
b
Not needed because the relationship is between two formative measured constructs.
The International Review of Retail, Distribution and Consumer Research 563

Considering Fornell and Larcker’s (1981, 46) criterion for reflective constructs and
non-critical correlations between formative constructs (maximum value 0.619) (cf.
Herrmann, Huber, and Kressmann 2006, 57), the model has high discriminant validity.

Results and discussion


The results of the partial least squares (PLS) regression reveal highly significant
correlations with absolute b-values . 0.1 (Lohmöller 1989, 60) and algebraic signs in the
expected direction for all proposed relationships. Therefore, all hypotheses are supported
by the empirical data. Moreover, a coefficient of determination (R 2) of 0.525 for the SCT
construct and a Stone-Geisser criterion (Q 2) of 0.378 demonstrate a high suitability of
our model for explaining SCT in agri-food supply chains. Thus, the results show that
SCT is a meaningful antecedent for all four performance constructs. Hence, SCT is
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suitable for improving the short-term and long-term economic performance of supply
chains, as well as ethical performance dimensions. Especially for social performance and
long-term relationship success of supply chain partnerships, SCT seems to be an
essential antecedent, as proven by the high path coefficients (b) and effect sizes ( f 2) for
these relationships (cf. Chin 1998, 317; Gefen, Straub, and Boudreau 2000, 64)
(Figure 1).

Conclusion, implications and limitations


When striving for an improved SCT, international companies in the agri-food sector
should start with the configuration of the supply chain. Disintermediation and the choice of
countries of origin with high ethical standards are the most important antecedents of SCT
in our study. Nevertheless, highly developed routines for SCC, the formalization of ethical

Disintermediation

H1
:b R 2=0.294
=0 Social
29
.3
.416 Performance
** 2 =0
Country Complexity *; ;f
H2 2 **
: b= =0 3*
f

–0. .1 .54
264
**; 2
71
b =0
f = .1: 2 =0.205
R 2=0.170
0.1
37 H6 ***; f Ecological
12
R 2=0.525 H6.2 : b =0.4 Performance
H3: b=0.216**; f 2=0.069 Supply Chain
Formalization H6.3
Transparency :b =0.56
0 Q 2=0.378 3***;
2 =0
.04 H6 f 2=0.4 R 2=0.317
*; f .4: 64
* Long-Term
154 88
b=
:b =0. .0
0.2
60
Relationship
H4 2 =0 *** Success
Third-Party- ; f ;f
** 2
=0
Integration 49 .07
.2 3
b =0
H5: R 2=0.068
Operational
Performance
Supply Chain
Communication

Significance of t-values (bootstrapping procedure, m=131; 5,000 samples): *** p < .001, **p < .01,* p < .05
Q 2 values were calculated via the blindfolding procedure of Smart PLS (only usable for reflective constructs)

Figure 1. Results of PLS regression.


564 J. Bastian and J. Zentes

requirements and integration of third parties into supply chain governance are also helpful
for improving SCT. Although these instruments are strong in sum, they surely have to
interact with each other, because there is no single universal tool for ensuring SCT in agri­
food business.
In our research, the positive effects of SCT are diverse and numerous, while no negative
effects could be found. Transparent supply chains perform better in all performance
dimensions. Thus, our empirical research underlines the substantial importance of SCT in
Western European agri-food supply chains, especially for ethical differentiation and the
establishment of strong and enduring supply chain partnerships. Supply chain transparency
seems to be a basic requirement in SSCM and can also sow the seeds for ethical- and quality­
related product and process innovations, as well as supplier development.
Although we put a lot of effort into scale development, data acquisition and quality
control, we are aware that our study has several limitations. Supply chain transparency is
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strongly connected to legislation, so that the results could be different for countries or
products with lower legal or market requirements compared to food in the EU or
Switzerland. The supply chains researched all targeted superior ethical performance.
Although our results show that a further improvement of SCT is useful for ethical
differentiation and not only for risk reduction, it is possible that SCT effects for the
economic performance dimensions could be different in commodity chains without a
specific objective of ethical differentiation. Finally, a personal assessment of ethical
supply chain performance is difficult. We ensured accuracy as much as possible by an
elaborate selection of key informants in companies which are all concerned about ethical
improvements. Therefore, the viability of our ethical performance indices could be lower
when researching commodity supply chains with no special ethical orientation and key
informants with less knowledge about ethical issues. Either way, a further refinement of
comparable social and environmental performance indices for supply chains would be
welcome.

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Appendix
Unless noted otherwise, the items were measured on a 7-point Likert scale where 1 is I do not agree
at all and 7 is I absolutely agree. Original scales were created in German. Their translation was
checked and improved by a professional proof reader.

Corrected
Factor item-to-total Composite
Construct loadings correlation Cronbach’s a reliability AVE
Disintermediation 0.723 0.8744 0.777
The supply chain of this product 0.878 0.566
contains no unnecessary or
unproductive intermediaries.
The supply chain of this product has 0.878 0.566
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less tiers/players than comparable


competitors.
Country complexity 0.853 0.853 0.748
The product or processed raw materials 0.897 0.608
originate from countries where social or
ethical requirements present a major
challenge.
Ensuring social or ethical requirements 0.897 0.608
is particularly difficult, due to the
circumstances in the countries of origin
of this product or processed raw
materials.
Formalization (CImax ¼ 1.508; cf.
Noordewier, John, and Nevin 1990, 92;
Young, Gilbert, and McIntyre 1996,
145; Vachon and Klassen 2006, 819)
Degree of control (VIF ¼ 1.175) 0.756 0.884 0.792
In order to meet ecological and social
requirements in the supply chain . . .
. . . we regularly conduct external audits 0.953 0.818
of suppliers
. . . we waive external controls and rely 0.953 0.818
mainly on suppliers’ statements (r)
Formal standards (VIF ¼ 1.175) 0.751 0.858 0.669
The supplier has detailed formal 0.886 0.693
specifications concerning our social and
ecological requirements for the product
We have a written code of conduct 0.800 0.544
which is mandatory for the supplier
For this supplier, we largely waive 0.764 0.503
formal specifications with regard to
social and ecological requirements (r)
Third-party integration 0.777 0.8974 0.814
In order to comply with ecological and
social requirements in the supply
chain . . .
. . . we closely cooperate with 0.904 0.636
independent organizations
(e.g. NGOs, certifiers)
. . . we are supported very well by 0.904 0.636
independent organizations
(Continued)
568 J. Bastian and J. Zentes

Appendix – continued

Corrected
Factor item-to-total Composite
Construct loadings correlation Cronbach’s a reliability AVE
SCC (cf. Chen and Paulraj 2004, 125; 0.840 0.894 0.679
Chen, Paulraj, and Lado 2004, 519)
Information exchanged with the 0.710 0.520
supplier is up to date, precise and
reliable
We exchange all helpful data with the 0.900 0.783
supplier in a timely manner
We also exchange sensitive information 0.819 0.678
with the supplier if this is mutually
useful (e.g. financial data or sales and
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production figures)
There is a regular open exchange of 0.857 0.736
information, knowledge and ideas with
this supplier which are integrated into
the various functional areas (e.g. quality
assurance, sustainability, marketing,
product development, logistics)
SCT 0.917 0.938 0.751
The supply chain of this product is very 0.865 0.785
transparent
We are very familiar with the individual 0.873 0.797
supply chain processes and their
members
We can trace the product all the way 0.846 0.755
back to the original raw materials
Cultivation or farming methods, and 0.902 0.843
production processes are transparent
and verifiable
The performance and profits of all 0.846 0.759
supply chain members are quite
transparent
Long-term relationship success (CImax ¼ 1.494)
Relationship benefit (VIF ¼ 1.162) 0.949 0.967 0.907
The sourcing project leads to an 0.946 0.880
ongoing increase in the valuable know­
how at the involved companies
The sourcing project leads to a 0.962 0.913
significant increase in innovation
capacity of the involved companies
The sourcing project leads to long-term 0.949 0.885
positive effects in respect to
performance of this supply chain
Relationship quality (VIF ¼ 1.162) 0.911 0.943 0.846
We have a stable business relationship 0.929 0.833
with the supplier of this product
Both the supplier and we are very 0.941 0.858
satisfied with the business relationship
A long-term relationship with the 0.894 0.711
supplier is guaranteed
(Continued)
The International Review of Retail, Distribution and Consumer Research 569

Appendix – continued

Corrected
Factor item-to-total Composite
Construct loadings correlation Cronbach’s a reliability AVE

Operational performance (CImax ¼ 2.024; cf. Paulraj, Lado, and Chen 2008, 60). Please rate the
supply chain performance regarding the following criteria (1 ¼ very expensive/very poor
performance; 7 ¼ very reasonably priced/very high performance)
Ability to supply (VIF ¼ 1.534) 0.901 0.938 0.834
Product availability (right amounts at 0.896 0.771
the right time)
Adaptability and flexibility of the 0.929 0.833
supply chain to actual needs
Adaptability of product to changing 0.916 0.808
market requirements or customer
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preferences
Cost (VIF ¼ 1.314) 0.836 0.900 0.750
Acquisition price of the product 0.847 0.664
Process and coordination costs 0.837 0.643
Total costs of acquiring this product 0.912 0.776
from this supplier
Quality (VIF ¼ 1.404) 0.872 0.938 0.883
Compliance with quality requirements 0.942 0.773
(other than ecological and social
compliance)
Product safety 0.942 0.773
Social performance (mean value of these indicators)
How socially sustainable is the supply chain of the chosen product regarding the following aspects
compared with an average product produced through conventional agriculture (1 ¼ much more
unsocial; 7 ¼ much more caring)?
Avoidance of exploitative forced and child labour
Payment of fair and adequate wages for all workers in the supply chain
Avoidance of all forms of labour discrimination in the supply chain
Freedom of association and protection of rights to organize and to bargain collectively for all
workers in the supply chain
Ensure that farming and production conditions throughout the supply chain do not endanger the
health of workers or residents in the area
Improvement of social environment in regions of origin, farming areas and production sites
(e.g. educational system, health care and food supply for local population)
Avoidance of non-compliant business practices throughout the supply chain (e.g. bribery,
intimidation and price agreements)
Fair trade with all participants in the supply chain and avoidance of one-sided dependencies or
insolvencies in the chain
Ensuring fair treatment of animals (optional)
In the past, considerable scandals have arisen due to social injustices in the supply chain of this
product (at our suppliers and further down the supply chain) (r) (1 ¼ I do not agree at all; 7 ¼ I
absolutely agree)
Ecological performance (mean value of these indicators)
How ecologically sound is the supply chain of the chosen product regarding the following aspects
compared with an average product produced through conventional agriculture (1 ¼ much more
harmful to the environment; 7 ¼ much more environment-friendly)?
Conservation of the environment in the region of origin/in the agricultural area and production
sites
Wildlife conservation/protection of biological diversity
Conservation of natural resources and ecosystems
Water protection with respect to consumption and pollution
(Continued)
570 J. Bastian and J. Zentes

Appendix – continued
Avoidance of greenhouse gas emissions
Avoidance of other polluting emissions
Avoidance of harmful substances and processes
Use of environmentally friendly transportation systems
Avoidance or recycling of waste
In the past, considerable environmental scandals have arisen in the supply chain of this product
(at our suppliers and further down the supply chain) (r) (1 ¼ I do not agree at all; 7 ¼ I
absolutely agree)
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