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Business Models for Sustainability in the Agri-Food sector:
the Role of Management Control Systems
Phd Candidate: Giacomo Fabietti
Supervisor: Professor Angelo Riccaboni
There is little doubt that sustainability represents one the greatest imperatives of the 21st century. In fact, now that poverty, inequality, environmental and human degradation have almost compromised the survival of life on Earth, the need to pursue different paradigms of development, production and consumption have progressively catalyzed the attention of a growing number of academics, practitioners and regulators (as well as society as a whole), to whom the definition of pathways of change able to reverse current global trends has become an absolute priority.
Despite several international events that have recently taken place (first of all the agreement on the United Nations Sustainable Development Goals) made possible to update global sustainability priorities in the light of changed scenarios, it must be underlined that, alongside the definition of new sustainability goals, the effective tackling of sustainability challenges should pass through a greater commitment to the concrete implementation of such priorities by all societal actors.
Among the actors involved in the process of transition towards sustainability, companies certainly play a prominent role. Recent years, in fact, have shown how devastating the effects of reckless corporate behavior can be: frauds, breach of work regulations, as well as increasing pollution caused by corporate activities represent just some of the events that symbolized the failure of profit maximization-oriented paradigm in creating fairer societies and healthier natural environment. Such reality has particularly affected companies operating in the Agri-food sector (given both the key role played by agriculture in the global economic scenario and the serious consequences on food supply levels caused by environmental threats deriving from traditional agricultural paradigms and, more generally, from current Agri-food value chains) and, among these, multinational companies (given the severity of social and environmental impacts deriving from their operate).
Growing awareness of unsustainability of Business-As-Usual trajectories led both business academics and practitioners to focus their efforts on the research of theoretical constructs that could synthetize the need for companies to embrace economic, social and environmental issues in their core business from an integrated standpoint, with the consequence that many concepts promoting the adoption of sustainability principles at company level appeared in literature over the years. However, the majority of such concepts seemed (and seems) to suffer of a lack of an integrated view about different sustainability dimensions. It is moving from this context that the concept of
Corporate Sustainability, as the fullest expression of the integration between sustainability
dimensions within companies, gradually established itself.
The advent of Corporate Sustainability, in turn, made emerge the need for a progressive change in the way in which companies think about what they produce, how they produce what they produce, as well as about the effects that their activities have on society and environment, leading scholarly
2 efforts to focus on the concept of Business Model and, in particular, to question the adequacy of the existing Business Models, accused to do not take into consideration the impact of social and environmental aspects in the creation of value appropriately. In particular, the need to conceptualize Business Models in which social and environmental aspects are fully integrated with economic ones made emerge the term Business Model for Sustainability, certainly not without difficulties. The concept of Business Model per se has in fact been subject to multiple definitions over time, leading to a general disagreement about its exact meaning. Such disagreement has then subsequently shifted to the concept of Business Model for Sustainability, as showed by several conceptualizations through which the term has been defined over time.
Disagreement over the exact definition of Business Model for Sustainability, however, have not weakened the need to move away from Business-As-Usual trajectories in order to embrace a new way of thinking about companies, a way according to which companies are considered as a factor able to improve societal and environmental conditions keeping, at the same time, adequate profitability levels. On the contrary, this had important consequence in terms of research: rather than focusing on the elaboration of specific and precise a priori definitions of Business Model for Sustainability, in fact, an always more consistent part of the literature has begun to focus on the process of transition from “traditional” Business Models to Business Models for Sustainability (with a particular emphasis on the role played by innovation), as well as on possible typologies of Business Models for Sustainability that this process could originate. Moreover, alongside the need to map main changes towards sustainability in Business Models, the need to align Business Models for Sustainability with sustainability strategies emerged, originating an interesting field of research within Corporate Sustainability area. Despite strategy and Business Model are now considered as two distinct concepts, in fact, a close relationship between them has been highlighted by several authors.
Once the importance of aligning Business Model and strategy for sustainability has been highlighted, the need to individuate the elements that can favor such alignment emerged. In this sense, literature has showed that Management Accounting and, above all, Management Control Systems can play a key role both in formulation and implementation of sustainability strategies. Nevertheless, while the relationship between Management Control Systems and sustainability strategies has been extensively explored (and important research results have been achieved in this sense), the relationship between Management Control Systems and Business Models for Sustainability seems to be underexplored in literature. As above mentioned, however, the same literature seems to increasingly agree on the fact that the appropriate formulation and implementation of sustainability strategies should be accompanied by consistent changes in the Business Models or, in other words, changes in strategies and Business Models for Sustainability should be aligned between them, especially in terms of the degree of incorporation of sustainability issues. Therefore, the analysis of the role that Management Control Systems have in the implementation of Business Models for Sustainability and, above all, that of the role that Management Control Systems have in aligning strategies and Business Models for Sustainability should be analysed in more detail.
Given this premise, this work explores the role played by Management Control Systems in aligning sustainability strategies and Business Models for Sustainability. To do this, a case study on Barilla, an Italian multinational company operating in Agri-food sector, has been conducted. After a brief
3 introduction to the objectives and motivations for the research (Chapter 1), in particular, the work provides an overview on the historical development of sustainability concept (Chapter 2), to then explore the evolution of the concept of Corporate Sustainability (Chapter 3) and analyse the concept of Business Model for Sustainability, highlighting its relationships with that of sustainability strategy (Chapter 4). Subsequently, after having provided an overview on Management Accounting and Control for sustainability (Chapter 5), methodology (interpretive) and method (case study) employed in the present work are illustrated (Chapter 6). Finally, after having presented the case study on Barilla, some concluding remarks are provided, and main contributions and limitations of the study are highlighted (Chapter 7).
In terms of scientific contributions, the work shows that, in the case study analysed, although the Management Control System contributed to the alignment between Business Model and sustainability strategy, the magnitude of such contribution was limited by the lack of integration between “traditional” management control tools and sustainability-oriented ones (specifically designed to monitor aspects of sustainability). Therefore, in this sense the work aims at contributing to that stream of Management Control research suggesting that, in order to effectively pursue sustainability, Management Control Systems must evolve, by better integrating economic, environmental and social aspects between them, as well as by highlighting and measuring trade-offs (typical of Corporate Sustainability concept) often existing between these aspects in a clearer way. As known, the adoption of a qualitative approach does not allow to obtain statistically-generalizable results, since main aim of such approach is that of describing in detail, understanding and interpreting social phenomena without providing, however, predictive or explanatory models. Moreover, results of the study may be affected by the definition of Business Model chosen. As widely illustrated in the work, in fact, there are many definitions of Business Model in literature, and even if the definition of Business Model selected is considered a “robust” one, choosing a different definition could lead to different results. However, it must be underlined that is the same literature to suggest, given the heterogeneity in existing definitions, to choose the most suitable definition of Business Model to answer the research question. In this sense, further analyses could explore the role of Management Control Systems in aligning Business Models for Sustainability and sustainability strategies in other companies, also operating in different sectors, allowing to compare results emerging from various case studies, and eventually strengthening evidence provided by the case study object of the present work.
