Julia Palosaari Responding to second-tier customers’ sustainability expectations through sourcing and procurement Vaasa 2023 School of Management Master’s thesis International Business 2 UNIVERSITY OF VAASA School of Management Author: Julia Palosaari Title of the Thesis: Responding to second-tier customers’ sustainability expectations through sourcing and procurement Degree: Master of Science in Economics and Business Administration Programme: Master’s Degree Programme in International Business Supervisor: Sniazhana Diduc Year: 2023 Pages: 99 ABSTRACT: Corporate responsibility is extending beyond company boundaries and home country. The reputation of multinational corporations (MNCs) is at risk due to the increasing number of scandals related to environmental and social responsibility violations. Moreover, MNCs are held liable for possible environmental and social problems of their suppliers. Equally, several scholars recognize the importance of sustainable procurement in sustainable supply chain management where stakeholder collaboration is considered the most effective in addressing issues on climate change. This thesis focuses on the cooperation aspect among multiple stakeholders and, explores how an MNC operating in the manufacturing industry responds to its second-tier customers’ sustainability expectations through sustainable sourcing and procurement. This study aims to address two key research gaps. First, our understanding about sustainability in procurement and supply chain is limited to the first-tier cooperation between different stakeholders such as manufacturer – supplier or manufacturer – customer. This study expands our understanding about sustainable procurement practices by researching the supplier – manufacturer – second-tier customer relationship in the supply chain. Second, although the literature recognizes the role of the first-tier customer in the supply chain as extremely important in shaping the operation of the manufacturer, the role of the second-tier customer is examined less. Therefore, this study focuses on the second-tier customers in the supply chain by illustrating how their sustainability expectations might shape the operations of the manufacturer. To address these research gaps a theoretical framework was established by conducting an extensive literature review focusing on the fields of sustainable development, sustainable supply chain management, and sustainable sourcing and procurement. The research was conducted as a qualitative single case study to UPM Raflatac. To understand how UPM Raflatac responds to its second-tier customers’ sustainability expectations, seven key people working within sourcing and procurement, sustainability and brand owner interface were interviewed. The data were collected and further analyzed through the lenses of interpretivism, allowing to understand how the topic of the research is perceived among professionals working in the field of the research. The results indicate that UPM Raflatac responds effectively to the sustainability expectations of its second-tier customers. According to the findings the sustainability expectations of the second-tier customers focused on four main areas: the use of recycled materials in UPM Raflatac products, recyclability of products, traceability of raw materials used and overall, the availability of high-quality data. Additionally, sustainability is strongly integrated to the business model and UPM Raflatac has processes in place that support creation of a sustainable sourcing and procurement process that can be offered as an example to other companies working in the field. KEYWORDS: Sustainability, Sustainable supply chain management, Sustainable sourcing, Sustainable procurement; Sustainability expectations, Second-tier customers 3 VAASAN YLIOPISTO Johtamisen yksikkö Tekijä: Julia Palosaari Tutkielman nimi: Responding to second-tier customers’ sustainability expectations through sourcing and procurement Tutkinto: Kauppatieteiden maisteri Oppiaine: Kansainvälinen liiketoiminta Työn ohjaaja: Sniazhana Diduc Valmistumisvuosi: 2023 Sivumäärä: 99 TIIVISTELMÄ: Yritysvastuu ulottuu yli yritysrajojen ja kotimaan. Monikansallisten yritysten maine on vaarassa ympäristö- ja yhteiskuntavastuu-rikkomuksiin liittyvien skandaalien lisääntymisen vuoksi. Lisäksi monikansalliset yhtiöt ovat vastuussa toimittajiensa mahdollisista ympäristö- ja sosiaalisista ongelmista. Samanaikaisesti useat tutkijat tunnustavat kestävien hankintojen merkityksen kestävässä toimitusketjun hallinnassa, jossa sidosryhmäyhteistyötä pidetään tehokkaimpana ilmastonmuutokseen liittyvien toimien ongelmien ratkaisemisessa. Tämä opinnäytetyö keskittyy useiden sidosryhmien yhteistyöhön ja tutkii, miten teollisuusalalla toimiva monikansallinen yritys vastaa toisen tason asiakkaidensa kestävyysodotuksiin kestävän hankinnan avulla. Tämän tutkimuksen tavoitteena on käsitellä kahta keskeistä tutkimusaukkoa. Ensinnäkin ymmärryksemme hankinnan ja toimitusketjun kestävyydestä rajoittuu ensimmäisen tason yhteistyöhön eri sidosryhmien, kuten valmistajan – toimittajan tai valmistajan – asiakkaan välillä. Tämä tutkimus laajentaa ymmärrystämme kestävistä hankintakäytännöistä tutkimalla toimitusketjun toisen tason asiakassuhdetta. Toiseksi, vaikka kirjallisuudessa tunnustetaan ensimmäisen tason asiakkaan rooli toimitusketjussa erittäin tärkeäksi valmistajan toiminnan muovaamisessa, toisen tason asiakkaan roolia on tutkittu vähemmän. Siksi tässä tutkimuksessa keskitytään toimitusketjun toisen tason asiakkaisiin havainnollistamalla, miten heidän kestävän kehityksen odotuksensa voivat vaikuttaa valmistajan toimintaan. Näiden tutkimusaukkojen korjaamiseksi luotiin teoreettinen kehys tekemällä laaja kirjallisuuskatsaus, joka keskittyi kestävän kehityksen, kestävän toimitusketjun hallinnan sekä kestävän hankinnan aloihin. Tutkimus toteutettiin UPM Raflatacille laadullisena yksittäisenä tapaustutkimuksena. Sen ymmärtämiseksi, miten UPM Raflatac vastaa toisen tason asiakkaidensa vastuullisuusodotuksiin, haastateltiin seitsemää avainhenkilöä, jotka työskentelevät hankinnan, vastuullisuuden ja brändirajapinnassa. Aineistoa kerättiin ja analysoitiin edelleen selittävän tutkimusfilosofian linssien kautta, jolloin voitiin ymmärtää, miten tutkimusaiheen aihe koetaan tutkimusalalla työskentelevien ammattilaisten keskuudessa. Tulokset osoittavat, että UPM Raflatac vastaa tehokkaasti toisen tason asiakkaidensa vastuullisuusodotuksiin. Tulosten mukaan toisen tason asiakkaiden vastuullisuusodotukset keskittyivät neljään pääalueeseen: kierrätysmateriaalien käyttöön UPM Raflatac -tuotteissa, tuotteiden kierrätettävyyteen, käytettyjen raaka-aineiden jäljitettävyyteen ja yleisesti korkealaatuisen datan saatavuuteen. Lisäksi vastuullisuus on vahvasti integroitu liiketoimintamalliin ja UPM Raflatacilla on käytössä prosessit, jotka tukevat kestävän hankintaprosessin luomista, jota voidaan tarjota esimerkkinä muille alalla toimiville yrityksille. KEYWORDS: Sustainability, Sustainable supply chain management, Sustainable sourcing, Sustainable procurement; Sustainability expectations, Second-tier customers 4 Contents 1 Introduction 7 1.1 Background of the study 7 1.2 Research gap 9 1.3 Research question and objectives 11 1.4 Structure of the study 12 2 Theoretical background 14 2.1 Towards sustainable development 14 2.1.1 The Trible Bottom Line (TBL) approach 15 2.1.2 Corporate sustainability 18 2.1.3 Regulation as guidance 20 2.2 Sustainable supply chain management 21 2.3 Sustainable sourcing and procurement 24 2.3.1 Challenges and opportunities 26 2.3.2 Value chain stakeholders 28 2.3.3 Sustainable procurement process 33 2.4 Theoretical framework for the study 36 3 Methodology 38 3.1 Research philosophy and approach 38 3.2 Research method 40 3.3 Research strategy 41 3.4 Data collection 43 3.5 Data analysis 46 3.6 Rigorousness of the study 48 3.7 Case company description 49 4 Empirical findings 52 4.1 Perceptions of corporate sustainability 52 4.1.1 Integration of corporate sustainability 52 5 4.1.2 Incentives and pressure 55 4.2 Second-tier customers’ sustainability expectations 57 4.2.1 UPM Raflatac’s relationship with customers 57 4.2.2 Current sustainability expectations 58 4.2.3 Ability to respond to the expectations 60 4.3 Sustainable sourcing and procurement process 62 4.3.1 Purchasing strategies and buyer-supplier relationships 62 4.3.2 Assessing suppliers’ sustainability 65 4.3.3 Training sourcing and procurement personnel 67 4.3.4 Incentivizing among sourcing and procurement personnel 68 4.4 Supply chain flows – the flow of information 68 4.4.1 From 2nd tier customer to manufacturer 68 4.4.2 Within manufacturer 71 4.4.3 From manufacturer to 1st tier supplier 72 4.5 Summary of findings 72 5 Discussions and conclusions 76 5.1 Theoretical contributions 76 5.1.1 Second-tier customer’s sustainability expectations 76 5.1.2 Sustainable sourcing and procurement process 79 5.2 Managerial contributions 83 5.3 Limitations and future research 84 References 86 Appendices 96 Appendix 1. Interview themes and main questions A 96 Appendix 2. Interview themes and main questions B 98 6 Figures Figure 1 Sustainable corporation through the TBL (modified from Carroll, 2017; Carter & Rogers, 2008, p. 265; Wilson, 2015, p. 434) 17 Figure 2 Supply chain flows (Cordón et al., 2012, p. 4) 23 Figure 3 Target analysis: stakeholder categories (Savitz, 2013, p. 200) 29 Figure 4 Buying company's relevant stakeholders 30 Figure 5 Three key interlinked sustainable procurement processes (modified from Villena, 2018) 34 Figure 6 Illustration of the theoretical framework of the study 37 Figure 7 Research onion (Saunders, 2007, p. 102) 38 Figure 8 UPM Raflatac's relationship with its customers 58 Tables Table 1 Interview details 46 Table 2 Categorization of findings 48 Table 3 Summary of findings: Perception of corporate sustainability 73 Table 4 Summary of findings: Second-tier customers' sustainability expectations 74 Table 5 Summary of findings: Sustainable sourcing and procurement process 75 Table 6 Summary of findings: Flow of information 75 file://///Users/juliapalosaari/Desktop/Gradu%20final/Palosaari%20Julia%20Master's%20thesis%202023%20final%2027.1.docx%23_Toc125890990 7 1 Introduction 1.1 Background of the study The current linear model of production sees nature as a resource that can be utilized infinitely without consequences, to maximize economic growth (Franco, 2017, p. 833). However, this model can be seen as the reason for many environmental challenges that our planet is currently facing such as climate change, loss of biodiversity, scarcity of resources, and increasing pollution levels (Franco, 2017, p. 833). The increased heatwaves and floods affect already the lives of billions of people worldwide (United Nations, 2022a, p. 3), whereas climate change on its own is recognized as a “constant threat to the global economy” (CDP, 2021, p. 3). Additionally, the world is facing a variety of social challenges such as child labor and worker’s rights (Epstein et al., 2014, p. 23) with over 40 million people globally victims of modern slavery, where most cases are in the private sector among women and girls (United Nations, 2018). Moreover, other global crises such as the ongoing COVID-19 pandemic and its variants, significant supply chain disruptions, the war in Ukraine, rising inflation levels, and increased pressure on labor markets (United Nations, 2022a, p. 2) are creating challenges. The pandemic alone has caused the loss of the lives of 15 million people, overly charged health care systems, increase in extreme poverty and hunger (United Nations, 2022a, p. 2). As a result of the current situation, greenhouse gas emissions are estimated to increase by almost 14% during the current decade (United Nations, 2022a, pp. 2–3). Collective actions and stakeholder collaboration play a key role in addressing and taking action on climate change (CDP, 2021, p. 3). The sustainability expectations towards companies are continuously expanding (Foerstl, 2014, p. 67) and stakeholders are increasingly requesting companies to address the social and environmental impacts of their business operations and enhance the transparency of their actions (Engida et al., 2018, p. 734). The pressure and expectations from different stakeholders such as customers, consumers, investors, and regulators (Cherel-Bonnemaison et al., 2021; 8 KPMG, 2021) force companies to focus on the environmental and social impacts of their supply chain (SGS, 2021). However, the pressure is not only on the focal company’s operations but also on its supply chain partners (Boruchowitch & Fritz, 2022, p. 1). Supply chains have a huge environmental and social impact. They are estimated to employ 450 million people around the world (SGS, 2022) while for many products majority of their greenhouse gas emissions, almost 90%, are generated in the value chain (scope 3) where two-thirds originate from the upstream supply chain (Cherel-Bonnemaison et. al., 2021). The general development of society and globalization have increased supply chain complexity. Changes in society such as the development of information and communication technologies, low shipping costs, and trade liberalization have encouraged companies to buy instead of making the products by themselves from beginning to end (Kim & Davis, 2016, p. 1897). While globalization has enabled companies to work with suppliers from different parts of the world (Koplin et al., 2007, p. 1053), it has also made supply chains more complex, scattered, and non-flexible (KPMG, 2021). Scattered supply chains are recognized as one of the biggest challenges of our era extending the accountability of a company beyond its boundaries and making it difficult to identify who has made the product (Kim & Davis, 2016, p. 1897). Focal company’s corporate social responsibility is also extending beyond the company boundaries or the home country (Kim & Davis, 2016, p. 1911), and the reputation of multinational companies (MNCs) is at risk due to the increasing number of scandals related to environmental and social responsibility violations (Villena, 2018, p. 1149). The buying company is held liable for possible environmental and social problems arising from the operations and actions of its suppliers (Cordón et al., 2012, p. 4; Koplin et al., 2007, p. 1053) and the “negative press” is most likely directed towards the buyer (KPMG, 2021, p. 4). In addition to the harmful consequences to the company’s reputation and brand, not recognizing and taking action to solve environmental and social risks and possible scandals can have economic consequences such as an increase in costs, a 9 negative effect on share price or profit margins (KPMG, 2021, pp. 5–6). For many companies supply chains are vulnerable to risks even though they are strategically critical in nature (KPMG, 2021). Many authors have emphasized the importance of sustainable procurement in creating sustainable supply chains (Cherel-Bonnemaison et. al, 2021; Meehan & Bryde 2011; Villena, 2018; Walker et al., 2012), networks (Villena, 2018, p. 1167) and in implementing sustainability practices and policies throughout the whole supply chain (Meehan & Bryde, 2011, p. 94). As a function, they can shape the company’s environmental, social and governmental (ESG) performance with their purchasing decisions (Cherel- Bonnemaison et. al., 2021) and the possibility to influence external organizations in the supply chain (Meehan & Bryde, 2011, p. 96). Despite this important role, many MNCs don’t include procurement functions in the discussions concerning the company’s sustainability targets or offer related training or incentives that could support focusing on sustainability in addition to traditional purchasing priorities (Villena, 2018, p. 1163;1165). According to Cherel-Bonnemaison et. al. (2021), even though procurement’s crucial position is recognized among procurement managers, many companies are still missing an actual sustainability strategy for procurement and haven’t incorporated sustainability into category strategies or procurement decisions. 1.2 Research gap Supply chain management (Drake, 2011; Hugos, 2018) and sustainable development in supply chains has been actively researched in the past by many authors (Carter & Rogers, 2008; Kim & Davis, 2016; Miemczyk & Luzzini, 2018; Winter & Knemeyer, 2013). Sustainable procurement is also recognized as a growing field of research (Walker et al., 2012, pp. 202–203; Meehan & Bryde, 2011, p. 95) that has been already studied from different perspectives. Authors have conducted research on sustainable procurement practices (Meehan & Bryde, 2011; Walker et al., 2012), the role of procurement function in creating sustainable supply networks (Villena, 2018) as well as specific procurement practices such as supplier selection (Mohd et al., 2017). Moreover, Walker et al. (2012, 10 p. 202) recognize that especially sustainable operations, sustainable supply chain management, and sustainable procurement are all perceived as current research topics with growing academic interest. Even though prior literature on the topic already exists, the field it is still believed to be in the development phase (Walker et al., 2012, pp. 202– 203; Meehan & Bryde, 2011, p. 95). Therefore, Walker et al. (2012, p. 203) recognize general theory building, and testing as one of the research gaps in the field of sustainable procurement. Thus, this study aims to contribute to this research gap by exploring existing theories on sustainable supply chain management and sustainable procurement. However, this study adopts a different perspective and expands the understanding about sustainable supply chain management and sustainable procurement practices by studying the supplier – manufacturer – second-tier customer relationship in the supply chain. What comes to prior research between buying company’s procurement function and relevant external stakeholders the studies focus mostly on the relationships and communication between the buying company and the suppliers (Foerstl, 2014; Wilhelm & Villena, 2021; Cangurde & Chavan, 2016; Villena, 2018) instead of focusing on the downstream entities, the customers. Even though, general research on customers as stakeholders (Ferrell, 2004; Friedman & Miles, 2006) and related sustainability aspects (Carroll, 2017) has been addressed, the prior literature on the relationship between second-tier customers and the manufacturing company’s sourcing and procurement function is scarce. As a result of a profound literature review, the lack of prior research was found especially in the field of second-tier customer’s sustainability expectations and manufacturing company’s ability to respond to those needs through sourcing and procurement. However, due to the critical role of sustainable procurement in creating sustainable supply chains (Cherel-Bonnemaison et. al, 2021; Meehan & Bryde 2011; Villena, 2018; Walker et al., 2012) and in implementing sustainability practices and policies throughout the whole supply chain (Meehan & Bryde, 2011, p. 94) this research gap is perceived to be important to explore. Since prior theory is limited, this part of the study will focus more on creating new insights of how an MNC is working towards 11 responding to second-tier customers’ sustainability expectations and contribute to the creation of theory in this field in the future. However, the research is not relevant only to fill the gaps in the literature, but also to contribute to the field of sustainable sourcing and procurement in business context. Corporations (Deloitte, 2017; KPMG, 2019;2021;2022, SGS, 2021) and organizations (CDP, 2021; United Nations, 2022a) have shown increasing interest towards corporate sustainability and sustainable supply chains in the recent years. Additionally, the global agreements and legislation that has been and will be developed in the field of sustainability, (European Commission, 2022a;2022b; Ministry of Foreign Affairs of Finland, 2022; United nations, 2022b) will have a major effect on global supply chains of MNCs in the future. Therefore, the practical application of this study is to provide valuable information about what second-tier customers value regarding sustainability and how sourcing and procurement function can support meeting those expectations. 1.3 Research question and objectives The main focus of this study is on sourcing and procurement as a supply chain activity, and its ability to respond to the requirements and expectations of its second-tier customers. The aim of this research is to contribute to the two research gaps identified in the section 1.2. The first one focuses on creating sustainable supply chain management and sustainable procurement processes. The second gap focused on second-tier customers and their sustainability expectations. Therefore, to contribute to the research gaps recognized one research question and one clarifying sub-question were formed. RQ: “How does an MNC perceive and respond to the sustainability expectations of second-tier customer through sourcing and procurement?” Sub-question: “What are known processes and practices that sourcing and procurement function implement to support the sustainable procurement process?” 12 To increase the relevance of the business context, the study is conduced as a single case study on a multinational stock-listed manufacturing company, UPM Kymmene Oyj. UPM has a strong focus on creating sustainable solutions with its 20 000 material and service suppliers, 11 400 customers, and 200 million end users, making it a highly relevant and interesting case company for this study (UPM Kymmene Oyj, 2021, p. 8;83). The study focuses on one of the businesses’ that is a leading producer of sustainable labeling, UPM Raflatac. From the business’ perspective the second-tier customers are brand owners operating in large scale of different industries. More detailed case description is offered in chapter 3.7. To answer the research questions the following objectives of the study were identified. The first objective is to study and understand the previously published literature, research, and theories that support the chosen area of research for this study. This means focusing on research and theories in relevant fields such as sustainable supply chain management and sustainable sourcing and procurement. The second objective aims to collect relevant data to answer the research questions by conducting empirical research. The third objective of the thesis is to present the findings by describing, analyzing, and evaluating the collected data. The fourth and final objective is to compare the collected data to the created theoretical framework and make conclusions and suggestions for further study. 1.4 Structure of the study The structure of this thesis aims to be logical and easy for the reader to follow. The study consists of five main chapters. The first chapter focuses on building the background of the study by introducing the topic, identifying the research gap, and defining the research question and objectives. Additionally, the structure of the study is introduced in this chapter. The second main chapter focuses on building the theoretical framework for the thesis through a literature review. This part of the thesis introduces the relevant theory in the fields of sustainable development, sustainable supply chain management, 13 sustainable sourcing and procurement and customers and suppliers as stakeholders. In the third chapter, a profound introduction of the methodology of the study is offered by focusing on the research philosophy and approach, research strategy and method and collecting and analyzing the data. Rigorousness of the research is also discussed in this chapter. As a final part of the third chapter, a description of the case company is provided. The fourth chapter focuses on introducing the collected data and the findings made. The fifth section connects the findings with the theoretical framework of the study, concludes the research paper, and offers suggestions for further study. 14 2 Theoretical background This part of the study focuses on building the theoretical background for the empirical part of the research through a literature review. The main focus areas are sustainable sourcing and procurement process and suppliers and customers as stakeholders. To create a comprehensive understanding of the topic, a general introduction to sustainable development and sustainable supply chain management is offered. 2.1 Towards sustainable development There are both contradictory and complementary definitions for the word sustainability. The term sustainability is occasionally confused and used interchangeably with other similar terms used in the business context such as corporate social responsibility (CSR), and corporate responsibility (CR) (Carroll et al., 2017, p.61; Savitz, 2013, p. 3), corporate citizenship (Carroll et al., 2017, p.61) and ESG (environmental, social, and governmental) (Leonie, 2022). However, the terms have different meanings. According to Savitz (2013, pp. 3–4), CSR refers to the obligations the company has towards society as a whole whereas the word responsibility emphasizes the impacts on social groups outside the company. Similarly, Carroll et al. (2017, p. 35) define CSR by emphasizing the impact company’s actions have on society. However, the authors add that the specific definitions for the concept vary and refer to earlier found 37 different definitions for the term. Another term that has been increasingly used in the corporate context when discussing sustainability is ESG which refers to the environmental, social, and governance factors. However, Leonie (2022) underlines that ESG is not the same as sustainability. The author explains that if a company has been focusing on ESG factors by for example creating a related policy, it doesn’t automatically make the company sustainable, but guides them in the right direction. The concept of sustainability was first introduced in a document published in 1980 by the International Union for the Conservation of Nature and Natural Resources (IUCN) under the title “World Conservation Strategy” (Bakari, 2017, p. 27). At that time the 15 focus of the concept was merely on ecological sustainability and related concerns such as the conservation of natural resources (Bakari, 2017, p. 27). Currently, the most widely used definition for sustainable development was published a few years later by the World Commission on Environment and Development (WCED) (Bakari, 2017, p. 27), which defines sustainable development in the following way: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (WCED, 1987). The definition has been referenced by several authors focusing on sustainability (Bakari, 2017; Carter & Rogers, 2008; Epstein et al., 2014; Krause et al., 2009, Mohd et al., 2017; Wilson, 2015; Winter & Knemeyer, 2013) UN organizations, NGOs and financial organizations globally such as the World Bank (Bakari, 2017, p. 27). The concept of sustainability has been derived from the definition of sustainable development, which recognizes a long-term, future- oriented perspective as a key consideration (Carroll et al., 2017, p. 61). In this thesis the concept of sustainability is built around the sustainable development definition presented in the previous paragraph and the Triple Bottom Line (TBL) approach introduced in the next section (see chapter 2.1.1). When conducting research on sustainability, the TBL is perceived as a highly relevant model that understands sustainability as a combination of three areas: social, environmental, and economic sustainability. Additionally, since the study is conducted in corporate context it is inevitable to also discuss the corporate sustainability (see chapter 2.1.2) concept and surrounding issues and have a brief overview of some of the relevant agreements and regulations (see chapter 2.1.3) that guide the sustainable performance of companies now and in the future. 2.1.1 The Trible Bottom Line (TBL) approach Companies use different types of resources to conduct their business. The most traditional are the financial resources such as investments and sales revenues (Savitz, 2013, pp. 4–5). However, companies also use environmental resources such as raw materials and energy and social resources such as their employees’ time and 16 competencies (Savitz, 2013, p. 5). Since companies use financial, environmental, and social resources, John Elkington, suggested that companies should be able to measure their performance and impact on all of these three aspects (Savitz, 2013, p. 4). Savitz (2013, p. 5) supports this by stating that corporations should be able to measure, document, and report a positive return on investment (ROI), on these three aspects as well as the benefits they have created for their stakeholders. At the core of this idea is the Triple Bottom Line (TBL) concept that considers the company’s sustainability performance in all these three areas (Savitz, 2013, p. 5). The TBL approach by John Elkington is a central concept when discussing sustainability performance (Savitz, 2013, p. 4) and it has been described to “capture the essence of sustainability” (Savitz, 2013, p. 5). The concept has been utilized and referenced by many authors as a guiding concept in sustainability-related research and publications (Carroll, 2017; Clarke, 2000; Carter & Rogers, 2008; Miemczyk & Luzzini, 2018; Mohd et al., 2017; Savitz, 2013; Wilson, 2015; Winter & Knemeyer, 2013) as well as by organizations and agencies (Wilson, 2015, p. 433). According to TBL, sustainability consists of three areas: social, environmental, and economic (Carroll, 2017, p. 61; Epstein et al., 2014; Savitz, 2013, p. 5; Wilson, 2015, p. 433) also known as people, planet, and profit (Carroll, 2017, p. 61; Wilson, 2015, p. 433; Winter & Knemeyer, 2013, p. 22). Social sustainability focuses on the quality of life and equity between people in different countries and communities (Carroll, 2017, p. 61). In environmental sustainability, the emphasis is on protecting the natural environment in other words, the planet (Carroll, 2017, p. 61). Economic sustainability focuses on profits by creating “material wealth” such as financial income and assets (Carroll, 2017, p. 61). Following the TBL approach, Krause et al. (2009, p. 20) also recognize three pillars for sustainable development: environmental stewardship, societal equity, and economic performance. The authors demonstrate the three pillars by connecting environmental stewardship with minimizing waste, reducing emissions, and protecting natural resources, societal equity with human rights, poverty and injustice, and economic performance with meeting the needs of the company and its stakeholders. 17 To create sustainable operations all the dimensions of TBL should be integrated into company operations in a balanced way (Carter & Rogers, 2008, p. 365). Carroll (2017, p. 61) identifies corporate sustainability as the goal of the TBL approach (see figure 1). The author further recognizes shareholder value creation by utilizing opportunities and managing related risks as the goals of sustainability. However, when sustainability is considered as the combination of social, environmental, and economic dimensions, measuring and integrating sustainability becomes more challenging. Compared to the environmental and social elements of TBL, the economic aspect is perceived as a more traditional dimension that has been widely used in the business context (Winter & Knemeyer, 2013, p. 23). To measure organization’s performance in the different sustainability dimensions different measures are needed (Winter & Knemeyer, 2013, p. 24). Measuring company’s economic sustainability performance (e.g., long-term success and competitiveness) is perceived to be more straightforward compared to measuring environmental or social sustainability due to more developed, well-understood, and used measures (Winter & Knemeyer, 2013, p. 23). Figure 1 Sustainable corporation through the TBL (modified from Carroll, 2017; Carter & Rogers, 2008, p. 265; Wilson, 2015, p. 434) Challenges are also recognized in the integration of sustainability into daily management decisions (Epstein et al., 2014, p. 28). According to Epstein et al. (2014, p. 28), a conflict 18 lies in incorporating social, environmental, and economic sustainability and financial goals, which forces the management to make trade-offs between allocating resources. The authors state that it is not often clear what aspect should be prioritized at a certain point in time and the stakeholders’ desires complicate the decision-making process even more. The authors continue by stating that it is often unclear what the stakeholders recognize as important aspects to focus on at the time and how they will react to the decisions made by the company. 2.1.2 Corporate sustainability Corporate sustainability consists of a wide range of concerns that companies should address in a coherent way concerning the environment, worker’s rights, protection of consumers, and corporate governance, but also the impact of the business in more extensive issues such as human rights, poverty, education, and healthcare (Savitz, 2013, p. 4). Savitz (2013, p. 2) describes a sustainable corporation as “…one that creates profit for its stakeholders while protecting the environment and improving the lives of those it interacts with”. Savitz (2013, p. 6) highlights the increasing importance of sustainability. The author emphasizes the accountability of companies which is no longer limited to the actions and impacts of the company itself but also its suppliers, communities in which they are located, and consumers who use their products. In the 21st century, it has become difficult for companies not to consider the sustainability of their operations and the impact they have on their stakeholders (Epstein et al., 2014, p. 23) and society through their actions. Companies are receiving pressure to improve especially their environmental and social sustainability performance internally through their investors and employees and externally through legislation and customer demands (Winter & Knemeyer, 2013, p. 23). Many companies have faced negative impacts on their reputation due to their negative social, environmental, or economic impact (Epstein et al., 2014, p. 25) and are aiming to become “better corporate citizens” (p. 27). The need for managing and controlling the company’s corporate responsibility performance has been recognized and the question has shifted from 19 whether to incorporate corporate sustainability into management decisions but how to do it (Epstein et al., 2014, p. 23). According to Epstein et al. (2014, p. 25) companies can be in different stages of integrating sustainability into their businesses and have a reactive or proactive way of incorporating it. The authors explain that some companies haven’t developed a systematic way of thinking or managing their sustainability nor developed sustainability strategies while other companies have recognized the effects of their actions in all the sustainability areas (social, environmental, economic) and have developed policies and systems to handle related issues. However, Epstein et al. (2014, p. 25) notify that is unlikely that any company would have integrated or achieved sustainability in its operations to a full extent. Adoption of sustainable business practices first started as a response to regulations (Mohd et al., 2017, pp. 1956-1957), but companies have since understood that incorporating sustainability can also bring long-term economic benefits and competitive advantage for the organization (Carter & Rogers, 2008, p. 364; Mohd et al., 2017, p. 1959). According to Savitz (2013, p. 45), sustainability can help to protect, run and grow a company. Protecting refers to reducing risks by identifying and taking action on emerging risks in their early stages (Savitz, 2013, p. 45), while running is related to cost reductions, productivity improvements, and access to capital at a lower cost (Savitz, 2013, p. 47). With growing Savitz (2013, p. 48) refers to for example the possibility to launch new products and services due to increased innovation pace, increase the number of satisfied and loyal customers, possibility to expand to new markets as well as improved reputation and brand value. Additionally, by promoting sustainability operations within the company by focusing on aspects such as material reductions, working conditions, and fuel usage companies can reduce their costs while improving the corporate image (Carter & Rogers, 2008, p. 361). However, Epstein et al. (2014, p. 28) state that even though implementing sustainability is considered to bring financial benefits, the changing costs related to sustainability and the long-time horizon make it difficult to measure the impact of integrating sustainability into the business. This creates 20 uncertainty on how far companies should go with their sustainability-related efforts and therefore differentiates it from the implementation of other strategic initiatives. 2.1.3 Regulation as guidance Current and developing ESG requirements have diverse focus areas, but they all have the same primary goal which is to support governments in meeting the commitments of the Paris Climate Change Agreement (KPMG, 2019, p. 5). The Paris Agreement entered into force at the end of 2016 and since then 194 parties have joined the Agreement (United Nations, 2022b). The Agreement aims to limit the global temperature increase to 2 degrees Celsius by guiding nations and corporations to reduce their greenhouse gas emissions (United Nations, 2022b). Moreover, the 17 Sustainable Development Goals (SDGs) introduced by the United Nations in 2015 aim to guide companies toward a more sustainable future (KPMG, 2022, p. 57; Soosalu & Larsson, 2022) acting as a basis for sustainable operations of many MNCs. From the total of 17 Sustainable Development Goals (SDGs), most companies report on specific goals they have identified as the most important to their operations (Soosalu & Larsson, 2022). The most popular SDGs for companies to report against are 8: Decent Work and Economic Growth; 12: Responsible Consumption and Production; and 13: Climate Action (KPMG, 2022, p. 60). Although it is good that companies consider the SDGs, the emphasis is strongly on highlighting the positive impacts. According to KPMG (2022, p. 60), only one-tenth of the nearly 5000 N100 and G250 companies examined the report on both the positive and negative impact they have on the SDGs. Additionally, regions and countries are taking action to prevent the use of corporations’ unsustainable business practices during the manufacturing and distribution processes through more specific regulations. As an example, in February 2022 European Commission adopted a proposal for a corporate sustainability due diligence directive with a focus on human rights and environmental issues in the company’s operations and their value chains within and outside Europe (European Commission, 2022 a). Another example is the Uyghur Forced Labour Prevention Act that came into force in December 21 2021 in the US banning the import of any goods mined, produced, or manufactured partly or fully in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China (CBP, 2022). Similarly, the EU proposed in September 2022 a regulation that would ban products made with forced or child labor (The Ministry of Foreign Affairs of Finland, 2022). The regulation would cover the EU market area and concern all companies as well as products manufactured in the EU or imported products (The Ministry of Foreign Affairs of Finland, 2022). To direct investments toward more sustainable activities, projects, and corporations, also sustainable finance legislation has been developed in the EU. One example is the EU Taxonomy, which provides a classification system of environmentally sustainable economic activities (European Commission, 2022 b). The first two objectives of the Taxonomy (climate change mitigation and climate change adaption) came into force in January 2022 and the remaining four will be applicable from January 2023 onwards (European Commission, 2022a). However, according to Epstein et al. (2014, p. 40) social and environmental regulations are still loose in many countries. Additionally, the authors claim that MNCs are facing a challenge when operating globally regarding whether to build the company’s sustainability strategy on the global, country, or locally adapted sustainability standards. Even though the specific regulation would not be applicable in the countries in which the MNC is located, it is most likely applicable in some parts of its supply chain making the MNC accountable as well. 2.2 Sustainable supply chain management To understand the concept of sustainable supply chain management, it is essential to start by defining supply chain (SC) and supply chain management (SCM) concepts. Both terms are rather new and were first introduced in the early 1980s (Winter & Knemeyer, 2013, pp. 19–20). Garcia-Torres et al. (2019, p. 86) define supply chain (SC) as the “range of activities involved in the design, production, and marketing of a product”. Similarly, 22 Hugos (2018, p. 2) describes SCs by stating that they consist of “… business activities needed to design, make, deliver and use a product or service”. Additionally, Hugos (2018, p. 4) emphasizes the relationship between the different companies in a supply chain by describing the concept as “… networks of companies that work together and coordinate their actions to deliver a product to a market”. Respectively, Winter & Knemeyer (2013, p. 19) emphasize the non-linear nature of supply chains and describe them as “complex relationship networks”. Cordón et al. (2012, p. 6) describe supply chains by emphasizing the fundamental impact they have on the company’s finance, leadership, innovation, and risk management processes. Depending on the author the definition of the supply chain can have different nuances, but they all have the same core idea: supply chains are complex networks of companies that participate in delivering products to the end user through different business activities. Thus, this research is built around this definition for supply chain. The second core concept is supply chain management (SCM) which can be defined as: “…the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served.” (Hugos, 2018, p. 4). The definition by the Council of Supply Chain Management Professionals (CSCMP) emphasizes the need to coordinate and collaborate with supply chain partners by defining SCM as: “encompass[ing] the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party, service providers, and customers.” (Drake, 2011, p. 3). Consequently, the supply chain management process includes managing everything from the sourcing of raw materials and manufacturing to delivering the final product to the end customer (Kim et al., 2020, p. 2). Cordón et al. (2012, p. 7) characterize supply chain management as a challenging task due to the complexity of working closely with multiple different organizations and managing change across several different companies (Cordón et al., 2012, p. 7). 23 According to Cordón et al. (2012, p. 4) supply chains have been traditionally divided into three main flows: the flow of goods, the flow of information, and the flow of cash (see figure 2). First is the flow of goods from supplier to the retailer through manufacturer and distributor. Second is the flow of information between these different supply chain partners. The information can be for example order replacements, expected delivery dates, or forecasts. The third flow is the financial flow in other words the flow of cash. In addition to the traditional three flows Cordón et al. (2012, pp. 4–5), emphasize the importance of the additional three flows which are the exchange of risks, the exchange of ideas and innovation, and the exchange of personal relations. Even though the authors discuss the exchange of risks, they outline that many risks are not transferable to the suppliers and usually the responsibility lies at the end with the focal company. Exchanging ideas and innovation refers to companies incorporating their supply chain partners into the process by considering their innovative ideas making them more agile to respond to changing customer needs. Lastly, the authors emphasize the importance of personal relationships with suppliers and customers in evaluating the reliability of the business partner. Krausen et al. (2009, p. 19) emphasize the need for sustainable supply chain management to become the norm and find concentrating merely on supply chain Figure 2 Supply chain flows (Cordón et al., 2012, p. 4) 24 management as “insufficient”. The definition of sustainable supply chain management by Carter & Rogers (2008, p. 368) follows the TBL approach: “… we define SSCM as the strategic, transparent integration and achievement of an organization's social, environmental, and economic goals in the systemic coordination of key inter- organizational business processes for improving the long-term economic performance of the individual company and its supply chains.”. The definition demonstrates that sustainability can be extended beyond organization’s boundaries to include its supply chain activities. The focus on sustainability in the corporate context has shifted from the focal company to the whole supply chain and managing the activities from raw materials to finished goods (Mohd et al., 2017, p. 1957). The complexity of managing supply chains has increased due to globalization (Yadavalli, 2019, p. 1). Most companies are connected to the “global marketplace” and therefore are operating as a part of a global supply chain (Drake, 2011, p. 2). Even companies that operate only within the boundaries of one country, most likely don’t have completely domestic supply chains (Drake, 2011, p. 2). However, in a study by Kim & Davis (2016, p. 1906) focusing on 1262 companies that submitted the conflict minerals report in 2015, 79% of the respondents stated that they were unable to identify where the raw minerals of their products originated from. The complexity and size of the supply chain were recognized as the primary reasons (Kim & Davis, 2016, p. 1906). Since a company is only as sustainable as its supply chain and the suppliers it works with (Deloitte, 2017, p.1; Krause et al., 2009, p. 18; Miemczyk & Luzzini, 2018, p. 240), corporations need to be aware of the supply chains they are connected to and their role in them (Hugos, 2018, p. 2). 2.3 Sustainable sourcing and procurement Procurement is one of the traditional functions of supply chain management (Drake, 2011, p. 2). Sourcing and procurement as a field of research are quite mature since formal books and articles focusing on purchasing have been published for over 200 years since the 1800s (Krause et al., 2009, p. 19). Traditionally the role of the 25 procurement function has been described as: “to deliver the right material (or service) in the right amount to the right place at the right time and the right price” (Sollish & Semanik, 2012, p. 1). Moreover, sourcing can be seen as a part of the procurement process and defined as “… the process of fulfilling organizational buying needs by managing supply base through strategic and transactional interactions with suppliers in alignment with corporate goals” (Giunipero, 2019, p. 1). However, the growing importance and interest in SCM has also increased the strategic importance of procurement (Cangurde & Chavan, 2016, p. 1751) and shifted the role of procurement professionals from purchase order handlers to personnel who are responsible for managing the whole sourcing and acquisition process (Sollish & Semanik, 2012, p. 1). Kraljic’s portfolio model (KPM) is the first widely recognized and utilized model for the procurement and supply management of different items (Cangurde & Chavan, 2016, pp. 1752-1753; Krause et al., 2009, p.19). The model can be seen as a useful tool to support the understanding of purchasing strategies and buyer-supplier relationships and the interaction between the two parties (Cangurde & Chavan, 2016, p. 1753). The model focuses on encouraging to strategic buying behavior by considering the risks and market uncertainties of purchases (Krause et al., 2009, p.19). According to the approach purchased items are categorized into four groups based on their profits and risks after which a specific sourcing strategy is defined for each group (Cangurde & Chavan, 2016, p. 1752; Krause et al., 2009, p.19). The four categories are strategic, bottleneck, leverage, and noncritical or normal items (Cangurde & Chavan, 2016, p. 1752; Krause et al., 2009, p. 19). The development of different categories lies in the notion that different products and different situations call for different types of purchasing strategies (Cangurde & Chavan, 2016, p. 1752). In the case of leverage items, the cost of one part is high, but there are many suppliers available increasing the purchasing power of the buyer (Cangurde & Chavan, 2016, p. 1753). Due to the high competition between suppliers, the competitive auction is the suggested strategy (Cangurde & Chavan, 2016, p. 1753). With strategic items or there are usually less 26 suppliers available, and Cangurde & Chavan (2016, p. 1753) suggest developing a long- term relationship with key suppliers. For bottleneck items, the authors suggest securing the supply while screening for other possible suppliers, and for non-critical items reducing the number of suppliers used and exploring competitive purchasing practices. To build a more comprehensive understanding of the sustainable sourcing and procurement topic the following chapters focus on related challenges and opportunities (see chapter 2.3.1), the relevant stakeholders (see chapter 2.3.2) and finally the sustainable procurement process (see chapter 2.3.3). 2.3.1 Challenges and opportunities The traditional way of procurement is built only around the economic sustainability dimension (Villena 2018, p. 1163). However, the increasing number of scandals among suppliers and lower-tier suppliers has shifted the emphasis more on environmental and social sustainability and indicated the importance of incorporating suppliers into sustainable procurement strategies (Villena 2018, p. 1163). Cordón et al. (2012, p. 7) define supplier-related risks such as lack of supply and quality problems as “the most important risks for companies”. Therefore, sustainable procurement creates new demands for supplier management (Wilhelm & Villena, 2021, p. 4201). From total supply chain costs, suppliers can represent more than 50% (Cordón et al., 2012, p. 4), which creates a critical position for suppliers in improving overall company sustainability (Mohd et al., 2017, p. 1972). Doing business with suppliers that have better sustainability performance can increase the costs of the buying company due to higher costs on the supplier’s end (Krause et al., 2009, p. 21). However, incorporating sustainability will lower costs in the long run (Krause et al., 2009, pp. 22–23). Developing a sustainable procurement strategy, incorporating and prioritizing the social, environmental, and economic goals of the whole supply network is needed (Villena, 2018, p.1164). Even though the purchasing decisions have a direct impact on organizations’ ESG footprint (Cherel-Bonnemaison et al., 2021), the procurement 27 function is often not included in the discussion of companies’ sustainability requirements (Villena, 2018, p. 1150). The importance of procurement is understood, but still, most companies haven’t been able to create a clear vision or sustainability strategy for the unit (Cherel-Bonnemaison et al., 2021). Sollish & Semanik (2012, p. 137) recognize that sustainability is a common effort and requires commitment from the management and employees. Consequently, Carter & Rogers (2008, p. 361) emphasize the critical role of supply chain professionals in influencing the company’s sustainability operations. However, ensuring supplier sustainability is not procurements responsibility alone (Villena, 2018, pp. 1165–1166), even though the function has a central role in the company’s sustainability efforts (Krause et al., 2009, p. 18). Villena (2018, pp. 1165–1166) underlines the importance of cross-functional collaboration between engineering and sustainability functions. Krause et al. (2009, p. 20) also suggest including sustainability as a competitive priority for purchasing function in addition to more traditional priorities: quality, cost, delivery, flexibility, and innovation. However, according to a survey by Cherel-Bonnemaison et al., (2021), only 20 percent of the respondents stated that sustainability was a primary sourcing criterion and only 10% indicated that sustainability was integrated into category strategies. According to Krause et al. (2009, p. 20), the earlier introduced Kraljic’s portfolio model (KPM) aims to “exploit company’s full buying and bargaining power” by utilizing low costs, low risk, and sufficient availability of purchasing inputs (Krause et al., 2009, p. 20). This fundamental objective of the model conflicts with achieving sustainability-focused purchasing (Krause et al., 2009, p. 20). However, to utilize the model in sustainable procurement Krause et al. (2009, p. 21) suggest including sustainability as a “key performance criterion” for all four purchase categories in addition to the traditional criteria (i.e., quality, cost, delivery, flexibility, and innovation). Krause et al. (2009, p. 21) suggest different actions to integrate sustainability into each of the categories. Firstly, with leverage items, the focus should be on prioritizing material reductions, the use of recyclable materials, and tracking down the raw materials. For the 28 buying company, this could mean sharing best practices with their supply network. Secondly, for strategic items, the authors emphasize focusing on innovation to contribute to the development of new more sustainable products in collaboration with their suppliers. The third is bottleneck items. Incorporating sustainability into this group of items is found challenging due to the buyer’s low bargaining power. Therefore, the authors suggest focusing on developing industry-wide standards, which is nevertheless in conflict with Kraljic’s focus on minimizing costs and risks. Lastly, for non-critical items, the authors suggest focusing on supplier selection and selecting sustainable suppliers. 2.3.2 Value chain stakeholders In some companies, sustainability is the core value of the business that the management is committed to, or the company has recognized integrating responsibility into corporate strategies as a source of increased revenues and reduced costs (Epstein et al., 2014, p. 24). However, increasingly often the need for incorporating sustainability stems from external pressure such as regulation, changing market demands, actions of competitors, or nongovernmental organizations (NGOs) (Epstein et al., 2014, p. 24). Moreover, the sensitivity toward social, environmental, and economic issues and concerns from the stakeholders has increased (Epstein et al., 2014, p. 27). Carroll et al. (2017, p. 72) define stakeholders as “any individual or group who can affect or is affected by the actions, decisions, policies, practices, or goals of the organization”. Companies have several stakeholders (Carroll et al., 2017, p. 73), and the most recognized are shareholders, customers, suppliers & distributors, employees, and local communities (Friedman & Miles, 2006, p. 13). Carroll et al. (2017, pp. 75–76) categorize stakeholders as primary stakeholders and secondary stakeholders. The authors recognize shareholders & investors, employees & managers, customers, local communities and suppliers & other business partners as primary stakeholders. These stakeholders have “a direct stake in the organization” and are therefore received as the most influential stakeholder group. Government & regulators, civil institutions, activist groups, media, trade bodies, and competitors are categorized as secondary stakeholders. This group is 29 perceived to have an “indirect or derived” stake in the organization and the organization’s responsibility towards them can be less. The secondary stakeholders are also received as a highly influential and powerful group since they can affect the company's reputation. To operate sustainably, Savitz (2013, p. 3) emphasizes the need to recognize stakeholders that the company is accountable and develop open relationships with them that aim for mutual benefits. Savitz (2013, pp. 200-201) recognizes stakeholder mapping and target analysis as relevant tools for identifying and prioritizing company stakeholders or stakeholders of a specific function. According to the author, this can be done by dividing stakeholders into three categories (see figure 3): internal stakeholders within the company (e.g., employees, investors, and partners), value chain stakeholders meaning the stakeholders the company conducts business with (e.g., suppliers, distributors, and customers) and external stakeholders outside the company (e.g., communities, regulatory agencies, and the media). Figure 3 Target analysis: stakeholder categories (Savitz, 2013, p. 200) To describe the buying company’s relation to its partners in a supply chain, the relevant value chain stakeholders to discuss our suppliers and customers (Drake, 2011, p. 3). When considering the supply chain from the buying company’s perspective suppliers are 30 “upstream entities”, whereas customers are referred as “downstream entities” (see figure 4) (Drake, 2011, p. 3). Both groups can be further categorized based on their distance from the buying company (Drake, 2011, p. 3). First-tier (i.e., tier 1) suppliers are the intermediate suppliers of the buying firm, and second tier (i.e., tier 2) suppliers are the suppliers of the first-tier suppliers, and so on. The same logic applies to customers (Drake, 2011, p. 3). According to Drake (2011, p. 3), supply chain management is described as the coordination of operations from “supplier’s supplier to customer’s customer” and finally to the end customer. Figure 4 Buying company's relevant stakeholders 2.3.2.1 Customers According to Crane & Matten (2016, p. 339), all organizations that need to purchase something from another organization can be referred to as customers. Customers are essential stakeholders, without whom many companies would not be able to continue doing their business (Crane & Matten, 2016, p. 339). Similarly, Gücdemir & Selim (2017, p. 100) describe the important role of customers by stating that “customers are the main reason for company’s existence”. Consequently, according to Carroll et al. (2017, p. 73) the management recognizes customers as one of the more “legitimate” stakeholders from the business perspective due to their direct interest or claim. 31 A manufacturer is a buyer to its suppliers but also a supplier to its customers (Yadavalli et al., 2019, p. 1). Business customers have become demanding and value on time delivery, short lead times, high quality of products, and low prices (Gücdemir & Selim, 2017, p. 100). It has become a necessity for manufacturing companies to consider customer’s sustainability expectations while selecting their suppliers (Yadavalli et al., 2019, p. 1). The relationship between the company and its customers is based on mutual expectations that focus on trust and fair dealing (Ferrell, 2004, p. 126) and companies should aim to treat their customers well (Crane & Matten, 2016, p. 340). Ferrell (2004, p. 126) states that the key to a successful company is to offer customers high quality products that meet their needs and wants. According to Crane & Matten (2016, p. 340) successful companies focus on continuously satisfying their customers’ needs and performing better than their competitors. If customer expectations are not met, the customer can be lost to competitors, resulting in a loss of sales or even profitability (Crane & Matten, 2016, p. 340). Gücdemir & Selim (2017, p. 104) suggest that companies would start by analyzing their customers to understand what the customers are expecting. The authors continue by stating that after that the expectations should be integrated into the production process. Yadavalli et al. (2019, p. 1) connect customer satisfaction with the environmental and social impacts of the final products. The authors continue by stating that therefore companies need to integrate sustainability as a part of their purchasing behaviour. 2.3.2.2 Suppliers Crane & Matten (2016, p. 389) recognize mutual dependency between companies and their suppliers. According to the authors, suppliers rely on the continuity of their business in the hands of their customers and the orders they make, whereas simultaneously the buyer relies on the supplier in delivering the needed products or services to continue their operations. However, the authors add that this interdependent 32 relationship doesn’t mean that both parties have the same interests. While the buyer might focus on minimizing the costs, the supplier most likely wants to focus on maximizing its revenue. According to Crane & Matten (2016, p. 393), a traditional buyer- supplier relationship can be characterized as a short-term, adversarial relationship that focuses on transactional arrangements and the use of many suppliers. However, according to the authors, companies have been moving increasingly towards partnership-based supplier relationships, which rely on collaboration and trust between the buying company and fewer, core, long-term suppliers. Suppliers and their performance are in a key position when it comes to satisfying the needs of the customers, however global supply chains increase the complexity of supplier management (Drake, 2011, p. 41). Krause et al. (2009, p. 20) recognize challenges related to detecting and ensuring sustainability among suppliers. Drake (2011, pp. 55-56) highlights the importance of managing the supplier relationship by monitoring and evaluating suppliers’ performance. The author recognizes that this is often organized in form of regular meetings with the strategic suppliers. The meetings can be utilized to discuss past performance and ways to improve performance in the future. The author further states that the meetings can also be a good way to bring forward possible problems and address possible conflicts. Wilhelm & Villena (2021, p. 4199) highlights the importance of first-tier suppliers in implementing sustainability requirements throughout the supply chain. If the first-tier suppliers succeed in selecting and monitoring their suppliers according to sustainability criteria that means that the second-tier suppliers should meet those requirements as well (Wilhelm & Villena, 2021, p. 4199). However, the authors also recognize the challenge related to engaging even the first-tier suppliers. The challenge can be even higher with suppliers located in emerging countries where the local legislation is nearly nonexistent in supply chain accountability (Wilhelm & Villena, 2021, p. 4199). 33 Villena (2018, p. 1156; 1163) recognizes inefficient information flow in the first-tier suppliers’ end as one of the reasons why the sustainability requirements of the buying company are not implemented among lower-tier suppliers. According to the author supplier’s procurement unit and procurement, managers are often not included in the internal discussions of the buying company’s sustainability requirements. Therefore, they cannot communicate those requirements forward to their suppliers (the focal company’s second-tier suppliers) and manage compliance with those requirements by rewarding or punishing the suppliers. Additionally, MNCs are not in straight contact with the suppliers' procurement team, which is seen as problematic (Villena, 2018, p. 1158). A study focusing on Chinese suppliers by Wilhelm & Villena (2021, p. 4199) indicates that suppliers with integrated management systems for quality, health & safety and environment have better baseline tools for implementing the buying company's sustainability requirements. 2.3.3 Sustainable procurement process Villena (2018, p. 1163; 1167) argues that to develop a sustainable procurement strategy, manage supplier sustainability, conduct sustainable procurement, and create sustainable supply networks it is crucial to focus on three processes: assessing, training, and incentivizing (see figure 5). MNCs that implement all of these processes are more likely to succeed in putting them into practice within their supply networks (Villena, 2018, p. 1160). Where assessing and training requires collaboration between the company and industry associations, incentives are perceived as more company specific (Villena, 2018, p. 1150). However, the three processes are often unbalanced. Companies have a tendency to perform better at assessing sustainability than implementing it and lack sustainability- related training and incentives for procurement personnel (Villena, 2018, p. 1161). Additionally, Villena (2018, p. 1160) discloses a link between the three elements and incorporating sustainability as purchasing value. According to the author, if relevant training and incentives are not offered to the procurement personnel, it is unlikely that 34 the available assessment tools would be used or that sustainability would be included as a procurement criterion along with the traditional aspects (e.g., cost, quality, and delivery time). This highlights the strong link between the three aspects and the need to focus equally on all of them to create sustainable procurement practices. Figure 5 Three key interlinked sustainable procurement processes (modified from Villena, 2018) Assessing The study by Villena (2018, p. 1150) indicated that the only assessment methods used by the MNCs, tier-one, and lower-tier suppliers were supplier audits and self- assessments. However, in the case of an MNC with a global supply chain and global suppliers the challenge with supplier audits is that not all suppliers can be audited (Boruchowitch & Fritz, 2022, p. 10). Therefore, instead of focusing on ensuring the sustainability of procurement through supplier audits, Boruchowitch & Fritz (2022, p. 10) perceive the earlier stages of supplier management such as supplier selection and contracting as important success factors for sustainable procurement. Similarly, Yadavalli et al. (2019, p. 2) recognize supplier evaluation and selection processes as key drivers for efficient supply chain performance. Consequently, Drake (2011, p. 54) emphasizes the role of supplier selection as one of the most important sourcing activities. According to the author generally, the supplier selection process consists of five steps: specifying the product or service produced, creating evaluation criteria for suppliers, identifying suppliers that meet the criteria, evaluating potential supplier candidates that meet at least the minimum criteria, and finally selecting the supplier. According to Koplin et al. (2007, p. 1054), sourcing and procurement functions should be utilized in determining the appropriate criteria for suppliers. Traditional supplier selection elements (e.g., costs, 35 quality, lead time, and delivery time) are considered to be a part of the economic dimension, leaving out the other two important elements of sustainability, social and environmental (Mohd et al., 2017, p. 1972). Training Wilson (2015, p. 441) emphasizes the importance of general sustainability-related training for all employees. By training employees, they can be included in developing related policies and practices and can feel overall more confident in communicating their knowledge to the customers (Wilson, 2015, p. 441). Villena (2018, p. 1165) highlights that the development of sustainability training requires collaborating with different experts on human resources, labor rights, and the environment. The author emphasizes that MNCs need to also consider differences between the countries where the training is offered since the issues might vary depending on the location. However, according to Villena (2018, p. 1159; 1161) companies generally lack sustainability-related training for procurement personnel (both in the buying company and on the suppliers’ side) or offer it limitedly. The author further explains that most of the MNCs’ procurement personnel studied had not received training on sustainability. Moreover, Cherel-Bonnemaison et al. (2021) identify the lack of relevant tools, skills, and data among procurement managers as one of the reasons behind the inadequate implementation of sustainability factors. According to a survey conducted by the authors, procurement managers found it difficult to define what ESG targets should be set and what actions are needed to reach those targets. Carter & Rogers (2008, p. 377) also noticed that supply chain managers have different understandings of what sustainability is. Incentivizing Villena (2018, p. 1165) emphasizes that to create more sustainable supply networks, a company should have sustainability-related incentives in place for their procurement personnel. However, the author recognizes the lack of the use of incentives as a common issue among MNCs and their suppliers and describes procurement personnel as “passive users of sustainability standards”. According to the author (2018, p. 1166) procurement 36 managers don’t recognize supplier sustainability as their responsibility. The managers often focus more on traditional procurement priorities such as cost, quality, and delivery instead of sustainability and even continue buying from suppliers that are unable to comply with the company’s sustainability requirements. One reason for this can be that MNCs’ incentives are based mostly on traditional procurement targets such as reducing costs and improving quality (Villena, 2018, p. 1160). In the MNCs studied by Villena (2018, p. 1160) sustainability was not part of the annual performance review and didn’t affect the received bonus. Similarly, Epstein et al. (2014, p. 28) note that the performance of managers is usually rewarded based on profits even though they are responsible for sustainability (social, environmental, and economic) performance as well. 2.4 Theoretical framework for the study To contribute to the research gaps recognized in chapter 1.2 and the formed research question and sub question the theoretical framework for this study was built. The framework was created based on the most relevant concepts and theories recognized through the extensive literature review built around articles, books and reports on relevant fields. The theoretical framework is illustrated in figure 6. The theoretical framework is built around the concept of sustainable development and corporate sustainability as a combination of social, environmental, and economic sustainability (TBL) as defined in chapter 2.1. To respond to the first research question and contribute to the second research gap recognized, the concept of supply chain flows (Cordón et al., 2012) is utilized. The theoretical framework focuses on one traditional supply chain flow (flow of information), which was recognized as the most relevant regarding the research questions. As the key is to understand how an MNC responds to second-tier customer sustainability expectations through its sourcing and procurement it is inevitable to research the information flow. The flow of information in this research can be divided to three parts. First part focuses on the flow of information from second- tier customer to manufacturer (the case company). The second part focuses on information flow within the company and thirdly on how sustainability is communicated 37 to first-tier suppliers. Moreover, to contribute to the first research question and second research gap the customer requirements and expectations are evaluated in light of the collected literature. To respond to the sub-research question and contribute to the first research gap recognized a few theoretical models are utilized. To understand the sourcing and procurement process, related strategies and the relationship to different suppliers Kraljic’s portfolio model is utilized. Additionally, to create an understanding of the level of sustainability of the sourcing and procurement function, the three building blocks of sustainable procurement process: assessment, training and incentivizing (Villena, 2018) are applied. Figure 6 Illustration of the theoretical framework of the study 38 3 Methodology This section provides a description of methods used to conduct this study. The structure and content of this section is built around the “research onion” concept (see figure 7) introduced by Saunders (2007, p. 102). The first sub-section focuses on defining the two first outer layers of the onion by focusing on research philosophies and approaches. The next two sub-sections concentrate on the next two layers: strategies and methodological choices. The third part focuses on data collection and the fourth section on data analysis, which are considered as the core of the onion. Additionally, the rigorousness of this study is analyzed. Figure 7 Research onion (Saunders, 2007, p. 102) 3.1 Research philosophy and approach The first outer layer of the research onion focuses on research philosophy that refers to “the development of knowledge and the nature of that knowledge” (Saunders, 2007, p. 39 101). Saunders (2007) recognizes all together ten different research philosophies. The choice of research philosophy depends on the research questions and should be selected based on what questions the research tries to answer (Saunders, 2007, p. 116). As this study analyzes the MNC’s ability to respond to second-tier customers’ sustainability expectations through sourcing and procurement from the employees’ perspective, it is logical to utilize the interpretivist research philosophy. The interpretivist research philosophy emphasizes the differences in conducting a study on people instead of objects (Saunders, 2007, p. 106). According to Eriksson & Kovalainen (2008), the research philosophy is “interested in how people, as individuals or as a group, interpret and understand social events and settings”. Therefore, it is important for the researcher to follow an emphatic approach and try to understand the world from the research subjects’ perspective (Saunders, 2007, p. 107). Additionally, interpretivism is perceived as highly appropriate when conducting business and management research in the fields of organizational behavior, human resource management, or marketing (Saunders, 2007, p. 107), which supports the choice of the research philosophy for this study. The study is conducted in the field of business and management and focuses on researching organizational behavior in the form of sustainable sourcing and procurement practices, processes, and the flow of information regarding second-tier customer sustainability expectations. The majority of the studies in the field implement a positivistic approach and therefore this study contributes to the field by studying the phenomena through an interpretivist lens, enabling to interpret of how the key actors perceive reality. Moreover, due to the complexity, rapidly changing circumstances, and uniqueness of business situations, interpretivism doesn’t see generalizability as a crucially important factor (Saunders, 2007, p. 107), but assumes that the same data can be interpreted in different ways that can all be potentially meaningful (Eriksson & Kovalainen, 2008). The second outer layer of the research onion focuses on the research approach. Saunders (2007, p. 117) defines two different research approaches. The deductive 40 research approach focuses on testing existing theories by establishing hypotheses and building a research strategy to test those hypotheses, while the inductive approach develops new theories by collecting and analyzing data (Saunders, 2007, 117). In the deductive approach, the theory is perceived to be the first source of knowledge while in the inductive approach the theory is created as an outcome of the empirical research (Eriksson & Kovalainen, 2008). This study is a combination of these two approaches. Established theories on sustainability, sustainable supply chain management, and sustainable sourcing and procurement are already available and therefore this part of the study utilizes the deductive approach. However, what comes to MNCs’ second-tier customers and their sustainability expectations, the extensive literature review indicated that prior research is scarce. Therefore, this part of the study focuses more on creating theory through an inductive approach. 3.2 Research method There are two main types of research methods that are quantitative and qualitative approach (Krishnaswami & Satyaprasad, 2010, p. 5), which can be best understood through comparison. Qualitative research usually focuses on interpreting and understanding the issues that are being studied (Eriksson & Kovalainen, 2008) by assessing behavior, opinions, and attitudes (Krishnaswami & Satyaprasad, 2010, p. 7). Qualitative data is non-standardized requiring further classification into categories (Saunders, 2007, p. 472), and collecting and analyzing the data is perceived to be more context-sensitive (Eriksson & Kovalainen, 2008). Quantitative research concentrates on testing hypotheses and statistical analyses and is often perceived to be more structured and standardized (Eriksson & Kovalainen, 2008). Quantitative data is standardized and in a numerical form (Saunders, 2007, p. 472). According to Eriksson & Kovalainen (2008), the research method should be selected based on what is the most relevant what comes to the research question. Since the study focuses on understanding how an MNC responds to second-tier customer sustainability expectations through sourcing and procurement in the field of label manufacturing, the 41 qualitative research method was chosen. More specifically this study can be defined as qualitative business research. Eriksson & Kovalainen (2008) emphasize that qualitative business research gives the possibility to focus on “business-related phenomena in their context”. The authors continue that by using qualitative business research it is possible to gain knowledge of how things work in practice and why they work the way they work, in a business context. Additionally, Graebner et al. (2012, pp. 278-279) identify, that qualitative research can be used to test existing theories and build new theories when studying strategic organizations. Thus, this research methodology is highly suitable for this study since it is a combination of testing existing theories for sustainable sourcing and procurement and building new theories on second-tier customers' sustainability expectations in a global manufacturing business. Moreover, Graebner et al. (2012, pp. 278) justify the use of qualitative data by stating that it allows the researcher to “capture individuals’ own subjective experiences and interpretations”. Even though the study focuses on the operations of the business function in specific fields, the research is conducted from the employee’s perspective, which allows for the exploration of how different individuals perceive the topic. 3.3 Research strategy Saunders (2007, p. 135) recognizes seven research strategies: experiment, survey, case study, action research, grounded theory, ethnography, and archival research. According to the author, the research strategy can also be a combination of these such as a case study that utilizes surveys. The research strategy should be chosen based on what strategy enables to provide answers to the research questions and allows to meet the objectives of the study (Saunders, 2007, p. 135). Additionally, the extent of existing research and available time and other resources affect the chosen strategy (Saunders, 2007, p. 135). For this thesis, the single case study strategy was identified as the most appropriate strategy. According to Piekkari & Welch (2006, p. 571) case studies as a research strategy enable to develop and test managerially and theoretically relevant 42 models and concepts. Thus, this research strategy supports the ability to respond to the defined research questions. Case studies can be further categorized into single and multiple case studies (Saunders, 2007, p. 139). This study was conducted as a single case study since it can be the chosen strategy in various situations. Single case study can be utilized if the case is critical or unique or even very typical (Saunders, 2007, p. 140). Additionally, Saunders (2007, p. 140) considers that the case strategy provides a possibility to study and analyze phenomena that haven’t been recognized before. Moreover, it is important to define the case of the case study and for students that work during their studies, the case is usually the organization that employs them (Saunders, 2007, p. 140). Additionally, companies usually appreciate the new insights that the case study offers through the research findings for the organizations that participate in the study (Piekkari & Welch, 2006, pp. 571–572). Similarly, for this study, the case is the company where the author was working at the time of the research. When the research project started the author had been working with the company for six months as a trainee within the field of supplier quality and sustainability working mainly with supplier audits. Due to this short employment period and limited scope of the role, the author was not fully familiar with all the processes and practices within the company nor had an extensive existing internal network of professionals working within the areas the study was focusing on. This made it easier for the author to create distance between the case company and the interviewees and take more of an outsider view and through that increase the quality of the study. The topic area for the study was decided together with the case company. The company representatives who participated in the formation of the topic were the head of supplier quality and sustainability, the social responsibility director, and the responsible sourcing manager. The communication with the company representatives was conducted face-to-face, via email and through online Teams- meetings throughout the research process. 43 3.4 Data collection The core of the research onion focuses on data collection and analysis (Saunders, 2007). When a case study is chosen as a research strategy, the data collection methods can be interviews, observations, documentation analysis, and questionnaires (Saunders, 2007, p. 139). Also, a combination of these methods can be utilized (Saunders, 2007, p. 139). For this study, interviews were selected as the data collection method. In addition to collecting the data through interviews, secondary data was gathered from the company (UPM) and business unit (UPM Raflatac) websites to support understanding of the case company and the research topic and in the preparation of interview questions. The secondary data collected was created and published by the company and is publicly available consisting of the company’s latest available annual report (from 2021) and articles published between 2021-2022 on the company website. An interview can be formal, structured, and standardized or more informal and unstructured conversations (Saunders, 2007, p. 311). Saunders (2007, pp. 311–312) recognizes four main interview categories, where the level of structure and formality vary. The categories are structured, semi-structured, unstructured, or in-depth interviews. Moreover, the author explains that categorization can be made between standardized and non-standardized interview methods. Non-standardized interview methods such as semi-structured interviews are often utilized for qualitative data analysis (Saunders, 2007, p. 313). Thus, the data for this study was collected via seven semi-structured non-standardized interviews. Semi-structured interviews are created by establishing themes and questions that will be covered in the interview (Saunders, 2007, p. 312). However, the themes and questions can vary between the interviews and the flow of the conversation can be considered by modifying the order of questions (Saunders, 2007, p. 312). Since following the discussion is needed in the interview situation, audio-recording the conversation is recommended (Saunders, 2007, p. 312). In this study, the semi-structured interviews were utilized in the following way. The process started by identifying, who would be the relevant people to interview within the 44 case company - UPM Raflatac, regarding the topic of the study and motivation to participate in the interview. The identification process was done together with an existing contact from UPM Raflatac - a Responsible Sourcing Manager. Total of six people were first identified who were then contacted by the author via email. However, two of the selected interviewees did not want to participate to the study, since they felt that their expertise would not bringing additional value to study. The interviewees that did not agree to participate in the study suggested substitutive interviewees that they considered would better serve the purpose of the study. As a result, additional three interviewees were approached via email. These interviewees agreed to participate and after that the final group of interviewees (total of seven interviewees) working within UPM Raflatac was formed. After that, one-to-one interviews were booked with each interviewee and all the interviewees were informed about interview practicalities time, place and the nature of the interview. Except for one interviewee (interviewee 5, see table 1), the interviewee and interviewer were not familiar with each other prior to the study, which enabled to take an outsider view in the interviews. Two different interview structures were created, and the interview themes and questions were then created based on the recognized research gaps, created research questions, and the theoretical framework. Both interview structures had the same first two themes that focused on the sustainability of the whole company (UPM) and UPM Raflatac business. The questionnaire A (see appendix 1) had additional four themes that focused on different aspects the sourcing and procurement processes and the questionnaire B (see appendix 2) had one additional theme that focused more in-depth to the brand owner's perspective. The brand owner perspective was also included in questionnaire A, as a last (sixth) theme, but in a shorter form. The themes and questions were sent to the seven respondents latest one week before the interviews by email. This was done to encourage the interviewees to contribute to the interview by thinking about relevant examples or making supporting notes before the interview. Additional sub- questions were formed to guide the interview situation if necessary. Depending on the interview and the flow of the questions, the wording of the questions varied. After each 45 interview, the structure and the order of the questions was also modified if needed. All the interviews were organized in December 2022 and were held face-to-face (five interviews) or online via Teams (two interviews), depending on what was the most suitable option for the interviewee and interviewer. All the interviewees agreed that the interviews can be recorded for data analysis purposes. The interview details are demonstrated in the below table (see table 1). Since the study was conducted in an MNC, with personnel working within different countries and with different languages, the language of the interviews had to be considered. Piekkari & Welch (2006, p. 570) recognize language-related challenges when conducting interviews in the field of international business. The authors state that, even though international business is English dominant field of research, it can still be a language that either the interviewer or the interviewee is not comfortable with. Even when conducting research for an international organization, where English is the main working language, it doesn’t automatically mean that the data collected in that language is trustworthy (Piekkari & Welch, 2006, p. 570). All the interviewees agreed to conduct the interview in English, as it is the main working language. The decision on the interview language was made together with the interviewer and interviewee. The interviewer made sure that all interviewees were comfortable with conducting the interview in English. Moreover, Piekkari & Welch (2006, p. 570) state that if English is used as an interview language, it is better if both the interviewer and interviewee are non-native English speakers to avoid the native speaker taking control of the interview situation. In all the interviews conducted for this study both the interviewer and interviewee were non-native English speakers. 46 Table 1 Interview details 3.5 Data analysis Demonstrating that the data has been analyzed precisely and consistently is inevitable in creating trustworthy research (Nowell et al., 2017, p. 1). However, when it comes to analyzing qualitative data there is no standardized approach (Saunders, 2007, p. 478). In this study, the data analysis process began by transcribing the interview data after the interviews, meaning transforming the audio to written text. As recommended by Saunders (2007, p. 476) the transcribing process started immediately after the interviews and each transcription was saved in a separate file. Since the length of the interviews varied, also the length of the transcriptions varied. The shortest transcription was eight pages, the longest 13 pages, and the average length was 11 pages. After creating the first word-for-word version of the transcriptions, the transcribed data was cleaned up by removing expletive and repetitive words, since the study focuses on the content of the interviews and not on the specific language. The transcriptions were further structured by adding the initials of the interviewer and interviewee to the transcriptions to identify the speaker and by separating headings, questions, and answers with different font styles as suggested by Saunders (2007, pp. 476-478). 47 The data analysis of this study follows the four data analysis procedures recognized by Saunders (2007, p. 479), which are categorization, organizing the data into categories, recognizing relationships, and developing and testing the theories. A preliminary analysis of the transcriptions was conducted already after cleaning up the transcripts, by highlighting words, sentences, and sections that were found to be relevant to the research questions. Also, comments were added to the transcriptions. The categorization can be derived from the data or done based on the theoretical framework and should complement the purpose of the research (Saunders, 2007, pp. 479-480). In this study, the main categories were established based on the theoretical framework created for the study and were perception of sustainability, second-tier customers’ sustainability expectations, sustainable sourcing and procurement process, and flow of information. After the main categories were established, each interview transcript was processed again and relevant data regarding each category was identified and color- coded. After that, the data was further categorized into sub-categories by utilizing labels to group the collected data (Saunders, 2007, p. 480). The labels were simplified expressions of the statements that occurred in the interviews. Sub-categories were formed for each main category based on the simplified expressions, theoretical framework, and what was found to be relevant regarding the research questions. The data analysis process, with examples from the data, is illustrated in the below table (see table 2). As the final step of the data analysis process (Saunders, 2007) the gathered data was used to test the existing theories in the field of sustainable sourcing and procurement and develop theories in the field of second-tier customer sustainability expectations which is discussed in section 5. 48 Table 2 Categorization of findings 3.6 Rigorousness of the study Researchers who choose to adopt interpretive approach, face challenges related to determining whether the interpretation can be considered credible and truthful and whether another interpretation could be considered better than another (Schawandt et al., 2007, p. 11). According to Schawandt et al. (2007, p. 12) approach the rigorousness of a study through the following criteria for trustworthiness: credibility, transferability, dependability, and neutrality. The credibility of the research findings can be increased by focusing on reliability; transferability and validity; confirmability (Rolfe, 2006, p. 305). Reliability refers to the consistency of the findings (Saunders, 2007, p. 149). In the context of qualitative research, reliability refers to questioning whether other authors conducting the same study would have received the same results (Saunders, 2007, p. 318). However, it must be noted that in non-standardized research the replicability of the research might not be realistic due to the complexity of the circumstances (Saunders, 2007, p. 319). Saunders (2007, p. 150) defines validity by stating that “Validity is concerned with whether the findings are really about what they appear to be about.”. To increase the credibility of the study the triangulation of data (Schawandt et al., 2007, p. 18) was conducted by utilizing secondary data in addition to the primary data collected via interviews. Additionally, a careful and systematic process was conducted to analyze the interview data. 49 Additionally, Walker et al. (2012, p. 202), have recognized specific methodological challenges that are common in studies focusing on the fields of sustainability and corporate social responsibility. According to the authors, the respondents feel pressured to give a positive impression of their own and the represented company’s activities. This is called the social responsibility bias which is explained by the authors as: “respondents feel a pressure to be perceived in a socially acceptable way with regard to sustainability”. This can create more positive results than what they really are. Consequently, to minimize the social responsibility bias, it was decided that the interviewees will be anonymous. 3.7 Case company description UPM Kymmene is a multinational stock-listed company with 17 000 employees in 46 countries, 11 400 customers, and 200 million end users globally (UPM Kymmene Oyj, 2021, p. 8). The 6 different business areas offer a wide range of products that are based on renewable materials offering a sustainable alternative to products made from fossil- based materials. In 2021, UPM sales were a total of EUR 9,814 million with 1,307 million in profits (UPM Kymmene Oyj, 2021, p. 123). The company has a strong market within Europe, where over half of the sales (63%) were generated in 2021 (UPM Kymmene Oyj, 2021, p. 14). The company positions itself as a sustainability frontrunner and responsibility can be considered one of the building blocks of the Biofore strategy that has guided the performance of the company for over a decade. The company has a strong interest in creating more sustainable solutions. UPM is committed to UN’s 1.5 Celsius climate target and being net zero by 2040 (UPM Kymmene Oyj, 2021, p. 12). The company reports its sustainability performance according to Global Reporting Initiative (GRI) and the reporting is assured by an independent third party (UPM Kymmene Oyj, 2021, p. 116). In 2021 the company joined the Climate Pledge as the first forest industry company (UPM, 2021a). 50