Goal-Based Private Sustainability Governance and Its Paradoxes in the Indonesian Palm Oil Sector

Abstract

In response to stakeholder pressure, companies increasingly make ambitious forward-looking sustainability commitments. They then draw on corporate policies with varying degrees of alignment to disseminate and enforce corresponding behavioral rules among their suppliers and business partners. This goal-based turn in private sustainability governance has important implications for its likely environmental and social outcomes. Drawing on paradox theory, this article uses a case study of zero-deforestation commitments in the Indonesian palm oil sector to argue that goal-based private sustainability governance’s characteristics set the stage for two types of paradoxes to emerge: performing paradoxes between environmental, social, and economic sustainability goals, and organizing paradoxes between cooperation and competition approaches. Companies’ responses to these paradoxes, in turn, can explain the lack of full goal attainment and differential rates of progress between actors. These results draw our attention to the complexities hidden behind governance through goal setting in the corporate space, and raise important questions about the viability of similar strategies such as science-based targets and net-zero goals.

Leveraging corporate sustainability through responsible innovation: Capacity building with exploration and exploitation

“…Therefore, following a constructive approach towards a paradox can enable organizations to accept tensions and synthesize the diverse and mostly conflicting aspects of sustainability issues (Hahn et al, 2015;Van der Byl & Slawinski, 2015), and responsible innovation can provide a viable framework for organizations to ensure that their solutions are 'responsible, sustainable and ethical' (Long et al, 2020, p. 619). For instance, the findings of a recent study, which focuses on the reactions of supply chain members to the zero-deforestation goals of palm oil sector in Indonesia, reveal that the constructive approaches of actors towards the paradoxes are more or less linked with their efforts for searching creative solutions (Grabs & Garrett, 2023). The incompatibility between diverse goals when managing sustainability can stimulate innovation and contribute to an organization's long-run performance (Calic et al, 2020).…”

A theory of credible cross‐temporal corporate commitments as goal‐based private sustainability governance

“…Corporate commitments to more sustainable activities and sourcing practices are a form of governing through goal setting (Grabs & Garrett, 2023; Young, 2017). While governing through goal setting is perceived as a soft form of interstate governance (Biermann et al, 2017), corporate commitments contain several elements that strengthen them in comparison to other forms of CSR such as philanthropy, membership in multi‐stakeholder organizations, or ad‐hoc projects.…”

“…The example in palm shows a mixed picture: By 2020, zero‐deforestation commitments covered 83% of Southeast Asia's palm oil refining capacity (ten Kate et al, 2020), making it increasingly difficult for deforesting companies to sell their products. Yet, each buying company had its own sourcing policy and slightly different way of implementing it, which gave suppliers more leeway in getting away with small‐scale infractions (Dermawan et al, 2022; Grabs & Garrett, 2023).…”

“…Lead firms in global production networks have thus become private governance actors with the power to change production practices on the ground (Alexander, 2020; Elder & Dauvergne, 2015), and full‐supply chain responsibility is increasingly posited as a key element of corporate sustainability (Ha‐Brookshire, 2017; Sajjad et al, 2015). In response, goal‐based corporate sourcing commitments have become part and parcel of businesses' sustainability strategies (Beckmann et al, 2014; Garrett et al, 2019; Grabs & Garrett, 2023; Vermeulen, 2015). Indeed, such commitments have been one of the dominant forms of tackling commodity‐driven deforestation in the tropics (Lambin et al, 2018; Rothrock & Weatherer, 2019).…”

How well does the implementation of corporate zero-deforestation commitments in Indonesia align with aims to halt deforestation and include smallholders?

“…consumer goods manufacturers and refiners) who then have to disseminate their requirements to upstream actors such as oil palm mills-who process fresh fruit bunches (FFBs)-and the plantations on which oil palms are grown [15,16] (see figure 1). In addition, many ZDC companies own oil palm mills and associated plantations themselves, directly implementing their commitments within their operations [17]. When pursuing best practices, ZDC companies observe their sourcing areas using satellite monitoring and use their purchasing power and engagement strategies to convince mills and plantations in their supply chains to avoid converting forests.…”