Managing Conflicting Stakeholder Interests: An
Exploratory Case Analysis of the Formulation of
Corporate Social Responsibility Standards in the
Netherlands
Paul T.M. Ingenbleek and Victor M. Immink
The formulation of corporate social responsibility standards must deal with conflicting interests among
stakeholders. The standards formulation process occurs at the junction between market stakeholders
and special interest groups, which implies that it may help increase understanding of the marketing–
society relationship. Drawing on the power and urgency dimensions of stakeholder identification theory
and decision process analysis, this study examines four case studies pertaining to animal welfare
issues in food marketing. The standards formulation processes contain control mechanisms that solve
the potential conflicts between stakeholders by constraining commercial and/or special interests.
These mechanisms vary in the degree to which discussion centers on the relationship between
commercial and special interests, the presence of new parties that may alter the negotiations, the
stage at which special interest groups become involved in the process, and the extent to which
commercial and special interests constrain each other. The findings have critical implications for how
companies and their stakeholders can organize the process of formulating corporate social
responsibility standards.
Keywords: stakeholder marketing, corporate social responsibility, stakeholder identification theory,
legitimacy, standards
orporate social responsibility (CSR) standards rapidly
are increasing their impact on trading practices in
marketing channels. According to institutional theory,
CSR standards are institutions; they emerge from social
pressures to restore or improve the legitimacy of a company’s activities. In Grewal and Dharwadkar’s (2002)
framework of marketing channel institutions, the process of
developing CSR standards represents a validating process
that reflects the interactions between normative institutions
and companies that lead to standards of socially acceptable
behaviors. Specifically, the formulation of CSR standards is
a so-called authorization process that “involves the development of rules or codes of conduct that are deemed appropriate and require channel members to seek voluntarily the
approval of authorization agents” (Grewal and Dharwadkar
2002, pp. 86–87). Examples of these normative institutions
include the Forest Stewardship Council, which develops
standards for sustainable timber production; Utz Certified
and its requirements for environmentally friendly, socially
responsible coffee production; Green Key, which suggests
standards for environmentally friendly tourism; and the
Rainforest Alliance, with its ideas for the sustainable production of various crops in developing and emerging
economies.
Such CSR standards represent the rules that market
actors must comply with to receive licenses to sell, whether
a formal certificate or a designation of “preferred supplier”
for a customer (Ingenbleek, Binnekamp, and Goddijn
2007). These rules may include any type of responsible
behavior, such as the way the company deals with natural
resources (e.g., forests in timber production), waste materials, labor conditions, or social arrangements (e.g., maternity
leave for employees). Companies have increasingly attached
CSR standards to their criteria for safety and quality (Waddock and Bodwell 2004), such as Unilever’s demand of
Rainforest Alliance certification for its Lipton brand from
C
Paul T.M. Ingenbleek is Assistant Professor of Marketing, Marketing
and Consumer Behavior Group, and a marketing researcher, Agricultural Economics Research Institute, Wageningen University and
Research Centre, Wageningen University (e-mail: Paul.Ingenbleek@
wur.nl). Victor M. Immink is a marketing researcher, Agricultural
Economics Research Institute, Wageningen University and Research
Centre, Wageningen University (e-mail: victor.immink@wur.nl). The
research for this study was cofinanced by the Dutch Ministry of Agriculture, Nature and Food Quality, within the frameworks of Program
434, “Space for Natural Behavior and Transparency,” as well as the
KB-3 program on chains and transparency (KB-03-002-LEI-1). The
authors thank the participants of the Knowing Animals Conference,
the two anonymous JPP&M reviewers, and Elisabeth Nevins Caswell
for helpful comments on previous drafts of this article.
© 2010, American Marketing Association
ISSN: 0743-9156 (print), 1547-7207 (electronic)
52
Journal of Public Policy & Marketing
Vol. 29 (1) Spring 2010, 52–65
Journal of Public Policy & Marketing
two million tea farmers. Yet the process of formulating
CSR standards is complex and involves various stakeholders whose interests may conflict. Consider, for example, the
Marine Stewardship Council standards for sustainable fishing and seafood traceability, which required consultation
with 300 stakeholder organizations in a formulation process
that took more than two years.1 Formulating standards for
the Common Code for the Coffee Community (an alliance
between the world’s largest coffee roasters and special
interest groups) required four years to reach completion.2
The marketing literature has not addressed CSR standards directly; yet the topic is relevant to a more complete
understanding of the marketing–society relationship. First,
marketing as a capability can develop and maintain relationships with stakeholders (Maignan, Ferrell, and Ferrell
2006), which suggests that it has something to offer to the
standards formulation process. Second, research on legitimacy emphasizes the role of the institutional environment,
suggesting that firms should fulfill some minimum requirements in the institutional environment to perform effectively in their task environment (Handelman and Arnold
1999). Adopting CSR standards may help firms show that
they are committed to meeting these requirements. Third,
CSR standards can underlie and support companies’ CSR
policies that contribute to firms’ CSR reputations, which in
turn may affect their corporate image and customer satisfaction (Brown and Dacin 1997; Luo and Bhattacharya 2006;
Sen and Bhattacharya 2001).
Fourth, stakeholder interests may conflict with one
another (Bhattacharya and Korschun 2008; Handelman and
Arnold 1999), and public exposure of such disagreements
may damage corporate reputation (Urban 2005). When such
conflicts induce media coverage, they create the inherent
risk of causing some stakeholders to lose face. This threat
may drive these stakeholders further apart and inhibit agreements about solutions to complex social issues. A standards
formulation process can help resolve potential conflicts by
providing a controlled setting in which stakeholders search
for compromises. By joining the process, stakeholders
accept a constrained role, but they also may increase their
chances of achieving at least some of their objectives. The
founders of the Fair Trade coffee scheme, for example,
stated in their memoirs that their initiative initially
prompted great skepticism among both companies (which
often had no meaningful CSR policies at the time) and special interest groups (which remained stuck in a campaignbased tradition). However, with the establishment of the
organization, it provided a platform for discussing stakeholders’ varying interests, so opposition gave way to more
constructive attitudes and faster progress (Roozen and Van
der Hoff 2001).
Through in-depth analysis of four cases pertaining to the
formulation of animal welfare standards in food marketing
in the Netherlands, this study aims to understand how standards formulation processes can deal with potential conflicts of interests among stakeholders. In turn, it makes
three contributions. First, this study increases the level of
detailed understanding of the marketing–society relation1See
2See
www.msc.org and www.idg.com (both accessed March 6, 2009).
www.4c-coffeeassociation.org (accessed March 6, 2009).
53
ship. Brown and Dacin (1997) define CSR as a company’s
obligations toward society. Proponents of the stakeholder
approach (e.g., Clarkson 1995; Smith 2003) suggest that the
notion of society is too general and that companies are
responsible to stakeholders. Subsequent studies have developed CSR models that adopt a stakeholder perspective
(Maignan and Ferrell 2004), analyze the impact of CSR
activities on different stakeholder groups (Sen, Bhattacharya, and Korschun 2006), and study market and stakeholder relationships in the institutional environment (Singh
et al. 2005). Studying the standards formulation process
represents a logical next step because this process takes
place at the junction of the market and society, at which
point stakeholders must agree about the company’s “obligations to society” (Brown and Dacin 1997, p. 68).
Second, this study aims to open the “black box” of the
standards formulation process. Grewal and Dharwadkar
(2004) include standards formulation as a norm-giving
process in their framework of the institutional environment
of marketing channels. Other researchers focus on corporate purchasing processes to which CSR standards may be
applied rather than on the process of formulating the standards (Drumwright 1994; Maignan and McAllister 2003).
In addition, the management ethics literature notes the ethical content of standards and the degree to which market
actors comply with them (e.g., Healy and Iles 2002; Kolk
and Van Tulder 2002). However, research has not yet
focused on the process for formulating standards; to open
this black box, this study maps detailed decision process
charts (e.g., Farley, Hulbert, and Weinstein 1980) that
depict four standards formulation processes. These charts
uncover the key mechanisms that settle potential conflicts
of interest among stakeholders.
Third, this study inductively develops descriptive theory
pertaining to the standards formulation process, with the
acknowledgment that a “one-size-fits-all” solution is
unlikely. Building on stakeholder identification theory
(Mitchell, Agle, and Wood 1997), which suggests that
legitimate stakeholders differ in terms of their power and
the urgency of their claims, this investigation systematically
selects and compares four cases to gain insights into the different solutions to conflicting interests among stakeholders.
After introducing the theoretical background of this
study, we outline the methods and describe the results of
the four cases. A comparison of the cases informs some
theoretical propositions regarding the standards formulation
process. We conclude with implications for managers and
policy makers, as well as directions for further research.
Theoretical Background
In this section, we develop an institutional approach to CSR
standards and build on stakeholder identification theory to
introduce a typology that facilitates the case selection procedure. Next, we briefly discuss the background of the
process for formulating CSR standards.
CSR Standards as Institutions
Standards provide legitimacy, defined as “a generalized
perception or assumption that the actions of an entity are
desirable, proper, or appropriate within some socially con-
54 Managing Conflicting Stakeholder Interests
structed system of norms, values, beliefs, and definitions”
(Suchman 1995, p. 574). According to stakeholder theorists, providing legitimacy to a company’s activities is the
central tenet of a stakeholder (see Mitchell, Agle, and Wood
1997). In general, stakeholder typologies acknowledge that
legitimacy requires influence from a variety of groups
(Henriques and Sadorsky 1999). For example, following
Waddock, Bodwell, and Graves (2002), Maignan, Ferrell,
and Ferrell (2006) distinguish primary (e.g., customers,
employees, investors) from secondary (e.g., special interest
groups, media) stakeholders. We build on this typology, as
well as on institutional theory (Grewal and Dharwadkar
2002; Handelman and Arnold 1999), to define primary and
secondary stakeholders as groups whose interests pertain to
the task environment or the institutional environment of the
company, respectively. Primary stakeholders can provide
pragmatic legitimacy—that is, “self-interested calculations
of an organization’s immediate audiences” (Suchman 1995,
p. 578)—whereas secondary stakeholders provide moral
legitimacy, or judgments that “usually reflect beliefs about
whether the activity effectively promotes societal welfare,
as defined by the audience’s socially constructed value system” (Suchman 1995, p. 579).
Among secondary stakeholders, special interest groups
maintain a central position for providing moral legitimacy
because they are directly embedded in society through
memberships, donations, and other forms of support. Special interest groups engage in political activities on behalf
of their members (e.g., supporting political campaigns;
Grossman and Helpman 2001), and if companies affect
their interests, they can target their activities at those firms
(Hart and Sharma 2004; Maignan, Ferrell, and Ferrell
2006). For example, the wildlife protected by World Wide
Fund for Nature, the natural environment protected by
Greenpeace, and the interests of the poor represented by
Oxfam are all likely to be affected by companies. The more
members or supporters in a society who identify with a special interest group, the more legitimacy the group can provide to companies when it participates in the formulation of
CSR standards. By involving special interest groups, companies become more resistant to criticisms from other
forces in society. For example, this can protect against
accusations of decoupling (Meyer and Rowan 1977)—that
is, when the firm’s visible, symbolic structures mask core
activities that may be perceived as illegitimate. Therefore,
special interest groups participating in the formulation
process have crucial importance for improving or restoring
legitimacy through CSR standards.
Stakeholder Dimensions
The specific roles of special interest groups in the criteria
formulation process may vary (as might the solutions the
process offers for resolving conflicting stakeholder claims).
The concepts of power and urgency from stakeholder identification theory (Mitchell, Agle, and Wood 1997) help
determine those roles. Pfeffer (1981, p. 3) defines power as
“a relationship among social actors in which one social
actor, A, can get another social actor, B, to do something
that B would not otherwise have done.” Stakeholders possess power because they control the resources the organiza-
tion needs (Maignan and Ferrell 2004; Pfeffer 1981). For
special interest groups, these resources include relationships
with primary stakeholders (either direct or through third
parties, such as the media). For example, they might speak
negatively about the company to its members and the
media, in which case they reach primary stakeholders, who
possess vital resources the firm wants, such as consumer
spending (Klein, Smith, and John 2004; Sen, Gürhan-Canli,
and Morwitz 2001). Thus, the power of a special interest
group is related to its ability to influence primary stakeholders, who may threaten to withdraw resources from the firm
(Maignan and Ferrell 2004) and therefore prompt decisions
that the company otherwise would have made differently.
Urgency refers to “the degree to which stakeholder
claims call for immediate attention” (Mitchell, Agle, and
Wood 1997, p. 864) and exists when a claim is both time
sensitive (i.e., delay in attending to the claim is unacceptable to the special interest group) and critical (i.e., important to the stakeholder). External pressures that may harm
reputations, such as media attention to a company’s carbon
footprint or the use of child labor in its supply chain, likely
increase the urgency of these issues for managers. The combination of these two dimensions suggests four different
roles of stakeholders in the standards formulation process
(see Figure 1).3
Special interest groups with low urgency and low power
are “dependent” stakeholders, depending on more powerful
stakeholders or firm management to gain influence. In the
context of standards formulation, dependent stakeholders
rely on the willingness of firms to set criteria higher than
the minimum level, below which they would be considered
illegitimate (Handelman and Arnold 1999). Special interest
groups with highly urgent claims but low power are “discretionary” stakeholders. Companies may respond to the
urgent interests of these special interest groups because
doing so could attach positive associations to their corporate image and/or brand (e.g., Brown and Dacin 1997), but
because special interest groups have relatively little power,
the company probably does not feel obliged to do so.
Groups with high power and low urgency, or “dominant”
stakeholders, have both power and legitimacy and are likely
to develop some kind of formal relationship with the firm
(Mitchell, Agle, and Wood 1997), though they may choose
not to exercise their power because their claims are less
urgent than those of other stakeholders. Special interest
groups seem unlikely to acquire such important positions in
most firms, unless the firm itself is based on CSR principles
in which the special interest group plays a vital role (e.g.,
fair-trade companies) or its legitimacy has sunk so low that
the firm’s very existence is threatened. Finally, if special
interest groups have urgent claims and high power, they are
“definitive” stakeholders and, by definition, already part of
3The power and urgency dimensions are not necessarily orthogonal. In
some cases, the power of a special interest group may increase when the
urgency of its claim increases, such as when the group is part of the dominant coalition with an organization. An increase of urgency then raises the
salience of the stakeholder’s claim over other claims (and, thus, its ability
to get other actors to do things that they otherwise would not have done).
However, such combinations of power and urgency are unlikely when the
special interest group is not part of the dominant coalition. We thank a
reviewer for noting this point.
Journal of Public Policy & Marketing
Figure 1.
55
Typology of Special Interest Groups Involved in Formulating CSR Standards
Power of special interest
group relatively high
Dominant
Definitive
Urgency of the claim of the special
interest group relatively high
Urgency of the claim of the special
interest group relatively low
Dependent
Discretionary
Power of special interest
group relatively low
Source: Based on Mitchell, Agle, and Wood (1997).
an organization’s dominant coalition or the group of most
influential stakeholders (Cyert and March [1963] 1992).
When claims by such stakeholders become more urgent
than those of other stakeholders, they likely gain priority,
and the group becomes (for some time) the most influential.
Standards Formulation Process
Special interest groups are not the only stakeholders with an
interest in the process of formulating CSR standards. As
Handelman and Arnold (1999, p. 34) emphasize in their
introduction of legitimacy theory to marketing, the process
of adopting institutionally accepted practices is not straightforward: “Organizations are presented with a daunting
number of constituencies that have the ability to affect the
long-run survival of the organization.” Stakeholders bring
different norms and values to the standards formulation
process, which eventually has an impact on the precise formulation of the standards (Ingenbleek, Binnekamp, and
Goddijn 2007).
The complexity of balancing claims from primary and
secondary stakeholders in the standards formulation process
resembles the processes described by the behavioral theory
of the firm (Cyert and March [1963] 1992), which conceptualizes the firm as a coalition of stakeholders that all have
an interest in strategic decision making. The result of these
decision-making processes by definition must be a compromise. This theory has inspired researchers to analyze organizational decision systems that involve multiple individuals
and business functions, such as pricing and volume planning (Capon, Farley, and Hulbert 1975; Farley, Howard,
and Hulbert 1971; Farley, Hulbert, and Weinstein 1980).
Decision system analysis can provide a deeper understanding of how to organize decision processes effectively
(Capon and Hulbert 1975). We build on these studies to shed
light on a particular decision process that involves multiple
stakeholders, namely, the formulation of CSR criteria.
Method
To develop a descriptive theory of standards formulation
processes and understand how these processes deal with
potentially conflicting interests, we conducted four holistic,
inductive case studies (Eisenhardt 1989; Yin 2003). This
section describes the selection of the cases, introduces each,
and describes the data collection and analysis procedures.
Case Selection
In our case selection procedure, we attempted to obtain sufficient variance among the cases with regard to the power
and urgency dimensions in Figure 1 and to minimize variance on other dimensions. Therefore, we selected cases
from within one industry and pertaining to one legitimacy
issue. Specifically, we followed a three-step procedure: (1)
We selected an industry, (2) we selected an interest/issue
within that industry, and (3) we selected four cases that fit
the four quadrants of Figure 1.
First, we searched for an industry with clear legitimacy
problems and special interest group involvement. The European agro-food industry fits these characteristics. After
World War II, the agro-food industry featured intensified
production and a focus on output, motivated by the growing
population and a scarcity of food in the postwar years. Over
time, however, the development of industrial agriculture
created environmental and ethical problems.
Second, animal welfare represents a specific issue related
to such problems that is urgent in general for the industry
but also varies sufficiently in terms of its urgency for different companies. In comparison, environmental impact seems
urgent to virtually every company because of the ongoing
56 Managing Conflicting Stakeholder Interests
debate about global warming. Moreover, because animal
welfare is an ambiguous issue, the development of concrete
standards has become more important to legitimize activities.
Third, we searched for cases that could represent the four
quadrants of Figure 1. Following Farley, Hulbert, and Weinstein (1980), we defined a case at the level of the decisionmaking system; therefore, our case selection procedure
focused on cases in which animal interest groups and companies jointly developed standards for animal welfare to
legitimize market offerings. We first developed a sampling
frame, using desk research techniques and interviews with
two experts, to determine standards developments in the
agro-food industries. We restricted our sampling frame to
initiatives that were successful in achieving the level of
legitimacy they pursued and excluded cases in which opinion leaders criticized the standards as mere “window dressing.” From the resultant list, we selected initiatives from the
Netherlands (for practicality) that focused solely on animal
welfare or on animal welfare and other ethical issues. On
the basis of the collected information, we assessed the level
of urgency of the animal welfare issue (i.e., whether there
was direct pressure on the organization to establish or
improve standards for animal welfare) and the power of the
stakeholder that represented the animal interests (i.e.,
whether the animal interest group had decision authority
from the start of the process or played merely an advisory
role). We then assigned initiatives that matched these criteria to the four quadrants in Figure 1 and selected the most
representative case for each type. To validate these selections, we asked three experts (in research, consulting, and
public policy, with knowledge about standards in livestock
industries) to assess the suitability of the choices, considering the objective of the study, the method of selecting the
cases, and the possible alternatives. They confirmed the
appropriateness of the selected cases.
Case Introductions
In the dependent stakeholders quadrant (low urgency, low
power), we examine the standards formulation process
regarding pork purchasing by supermarkets (hereinafter, we
refer to this as the “supermarket platform case”). Most
retailers participate in the same platform, so the standards
are not competitive. Instead, retailers use this initiative to
obtain a minimum level of legitimacy. In the discretionary
stakeholders quadrant (low power, high urgency), we analyze the standards formulation process associated with animal welfare criteria for a new veal brand (hereinafter, we
refer to this as the “veal case”). The focal brand responded
to the pressure of animal interest groups that considered the
husbandry systems for calves the most animal-unfriendly
husbandry in livestock farming. The animal welfare issue
also became particularly urgent for the new brand because a
higher level of animal welfare was central to its brand positioning. However, scientists, rather than animal interest
groups, validated the standards, so the power of the animal
interest group was low at the outset of the process. In the
dominant stakeholders quadrant (high power, low urgency),
we examine the criteria formulation for a new brand of
poultry (hereinafter, we refer to this as the “poultry case”),
during which the Animal Protection Society took a powerful position as one of the founding members of the brand
and clearly communicated its involvement by placing one
of its logos on packaging. By participating in the brand
alliance, the Animal Protection Society aimed to increase
the assortment of animal-friendly food products, though
there was no immediate pressure from society at large to do
so. Finally, in the definitive stakeholders quadrant (high
power, high urgency), the process we examine involves
adding new criteria for an organic pork brand (hereinafter,
we refer to this as the “organic case”). Special interest groups
are the dominant coalition in the organic movement, and
because the pigs’ ability to move became an issue, animal
interests rose to a higher urgency level than other interests,
making the group the definitive stakeholder until the issue
was resolved. In Table 1, we briefly present the background
of the cases and the scope of the standards they developed.
Data Collection and Case Analysis
To acquire information for the cases, we followed the
approaches suggested by case study methodologists (Eisenhardt 1989; Yin 2003), combined with advice from decision
system analysts (Farley, Hulbert, and Weinstein 1980; Hulbert, Farley, and Howard 1972). Therefore, the information
acquisition process consists of structured protocols guided
by six case study concepts (Eisenhardt 1989; Yin 2003), as
indicated in the Appendix. To collect information, we used
desk research, including articles, research reports, lists of
standards, and public sources (e.g., Web sites), as well as
interview techniques. To gain an objective perspective on
the cases, we ensured that our interviewees represented a
range of functions in, or relationships with, the organizations in question (Yin 2003). We conducted, recorded, and
transcribed 20 interviews, 5 for each case, which we then
used to develop decision charts (following the procedures
Hulbert, Farley, and Howard [1972] suggest for selecting,
analyzing, and validating decision charts) and obtained a
holistic perspective of the context of standards formulation
processes.
To facilitate the case analysis, we prepared four extensive case descriptions, including the decision charts and
their explanations. Following Eisenhardt (1989), we analyzed these within-case data independently as stand-alone
entities. We then conducted independent cross-case comparisons to discern any cross-case patterns and compared
and discussed the patterns we observed. Building on these
findings, we formulated and discussed theoretical propositions before systematically comparing the propositions with
the original case data to reconsider the evidence from a new
perspective, through an iterative process (Eisenhardt 1989;
Yin 2003). When we reached theoretical saturation, we
halted the process because reconsidering further evidence
provided minimal incremental insights.
Results of the Within-Case Analyses
In each decision process, we find a control mechanism that
settles potential conflicts of interests between stakeholders
through the structure of the decision-making process.
Depending on the case, these mechanisms protect commercial interests, animal interests, or both. A brief description
of the standardization processes we analyzed in each case,
as well as the stakeholders involved in these processes and
Journal of Public Policy & Marketing
Table 1.
57
Case Descriptions
Position of Animal
Interest Group in
Standard Formulation
Description
Dependent
Discretionary
Dominant
Definitive
Retailers’ purchasing
criteria for pork
New brand of veal
New brand of poultry
Organic pork
Background
The basic objective of
In 1997, a group of
the new brand was to
European retailers
challenge the market
founded an overarching
leader, which had a
alliance with the aim of
substantial larger market
harmonizing all the
share (20% versus 5% of
different requirements
the fragmented European
that supermarkets
veal market). Responding
imposed on their
to legitimacy questions
suppliers. The result
regarding animal welfare
was a set of standards
in calf systems, the brand
shared by several
positioned itself as
supermarket chains.
Over time, the initiative transparent to society, with
animal welfare as a key
grew beyond Europe
attribute in its brand
and became global.
positioning.
Scope of standards
CSR standards on
environmental, social,
and animal welfare
aspects are attached to
standards for food
safety.
CSR standards focus on
animal welfare (innovative
stall systems in which the
calves have more space
than in traditional systems)
but also include advanced
tracking and tracing
systems, enabling
consumers to trace their
veal back to the farm.
a summary of their interests, appears in Table 2. We provide the decision charts in Figure 2.
The Supermarket Platform Case (Dependent
Special Interest Group)
The standards formulation process of the supermarket platform started in 2004, when the supermarket platform
announced its ambition to develop standards for pig farming. As a first step, the supermarket platform allowed an
international sectoral committee (influenced by international special interest groups) to determine which subjects to cover. National teams, consisting of all relevant
stakeholders, subsequently developed their positions on
these standards. The national representatives then came
together with the international sectoral committee to compare their positions and develop a draft document that, after
several rounds of amendments, earned acceptance by the
platform (see Figure 2, Panel A).
The control mechanism in this process is that the supermarkets organized in the platform could veto any proposed
standards formulated by suppliers and their stakeholders.
As one respondent noted, “They just make a global statement and do not join in the discussion, so that they have
their hands free afterwards, and they can still say no.” This
Social criticism of animal Organic agriculture came
welfare in poultry
about as a response to the
farming (in particular,
emergence of the
speed of growth and high bioindustry in the 1920s
mortality of the birds) led and 1930s. After World
the Dutch government to War II, it grew to a larger
investigate the possibility scale, and certification was
of a certified product.
introduced to secure its
The Animal Protection
principles. The Dutch and
Society managed to
European governments
involve business partners
support organic
from various stages of
agriculture. In 1991,
the chain to develop a
organic vegetable
new brand. The brand
production came under
positions itself on both
European Union
animal welfare and price regulations. A supplement
as between brands from
to the existing directive
organic and mainstream
followed for organic
production systems.
animal production in 2000.
CSR standards focus on
animal welfare (e.g.,
race, feeding, space,
lifetime before
slaughtering).
CSR standards are based
on several principles, such
as maintenance of soil
fertility, no use of
chemical pesticides or
artificial fertilizers, and
animal welfare.
mechanism constrains the interests of animal and other special interest groups in favor of the commercial interests in
the task environments of the supermarkets. However, by
including all relevant interest groups in the process, the
retailers ensure a minimum level of legitimacy, without
making any prior assumptions about which claims are more
important than others.
The Veal Case (Discretionary Special Interest
Group)
Initially, the veal company developed standards for housing
calves by itself, to strengthen a new brand that aimed to
challenge the position of the market leader. Early in the
process, the group commissioned a comparative animal
welfare study by ethologists to obtain an external assessment and then adjusted various criteria in light of the report.
After a taste test showed that the new brand scored better on
tenderness than regular veal, the company achieved a sufficient basis to launch the brand, which it did during a symposium to which several stakeholders, including retailers
and the Animal Protection Society, were invited. The successful launch managed to provide a preferred-supplier status to the company for the leading national retailer, and the
company believed that the standards formulation process
58 Managing Conflicting Stakeholder Interests
Table 2.
Results on Standards Analyzed, Stakeholders, and Interests
Standards Analyzed
Introduction of
standards for pork
Stakeholdersa
Supermarket Platform Case (Animal Interest Group in Dependent Position)
Interest group of participating
Secure a minimum level of legitimacy and harmonize purchasing
retailers
standards across supermarkets to increase the number of source suppliers.
Farmers interest organization
Keep new investments that are necessary to comply with the standards
and costs for control as low as possible by making standards similar to
existing schemes in use (e.g., sector codes of conduct).
Commodity board on livestock,
Maintain the current standards of its own set of criteria, which is a license
meat, and eggs
to deliver in export markets, by harmonizing standards with the standards
demanded by retailers.
Animal Protection Society
Maximize animal welfare within the limitations of the framework offered.
Other special interest groups
(if their interests are applicable to
the product category)
Standards development
for the brand
introduction and the
subsequent process of
legitimization and
adjustment of the
standards
Standards development
for the brand
introduction
Development of
additional space
(free range)
standards for pigs
aPrincipal
Stakeholder Interests
Maximize interests (e.g., environment, labor conditions) within the
framework offered.
Veal Case (Animal Interest Group in Discretionary Position)
Innovating veal company
Create sufficient customer value from animal welfare standards to
increase market share but keep the additional costs as low as possible.
Ethologists (from university and
Provide an independent assessment of the level of animal welfare for
research institute)
regular veal versus the new brand.
Leading national retailer (and
Legitimize the societal value of the new brand that will be added to the
foreign retailers)
assortment.
Animal Protection Society
Improve animal welfare in a sector that is considered illegitimate.
Poultry Case (Animal Interest Group in Dominant Position)
Animal Protection Society
Secure the level of animal welfare in the standards and (to improve the
life of as many chickens as possible) maximize the market share of the
brand at the expense of mainstream brands.
Supermarket chains
Add value to their assortments with the new brand by ensuring that the
brand is sufficiently different from the existing brands in the assortment,
meanwhile keeping risks associated with the new brand low.
Farmer interest group
Minimize the investment risks of farmers and secure farmers’ incomes.
Poultry feed company and slaughter Improve legitimacy in an industry that is under attack from society and
and processing company
move early enough to avoid losing a share of the market.
Organic Pork Case (Animal Interest Group in Definitive Position)
Interest group for the organic
Protect the image of the organic industry and ensure its growth.
industry and sector
Association of organic pig farmers
Prevent false competition between commercially and ethically driven
farmers.
Organic body for standardization
Provide correct (unambiguous) formulation of the standards to secure
and control
independent control of organic standards within the legal frameworks.
Animal Protection Society
Secure the fundamental animal welfare principles in the organic criteria.
Environmental interest group
Secure the fundamental environmental principles in the organic criteria.
Ministry of Agriculture
Support organic agriculture as a means to improve environmental
conditions as part of its environmental policy.
stakeholders appear at top, and others follow in the sequence of their appearance in the process.
was complete. However, the market leader responded by
commissioning a second scientific study, which created
confusion and prompted the retailer to consult the Animal
Protection Society for another opinion—as one retail
manager stated, “not because it was unclear that the brand
was better, but primarily because of possible attention in the
press.” The retailer wanted to strengthen its legitimacy with
support from a special interest group that had a strong
foothold in society. The Animal Protection Society judged
that the new system was just a little better, but it also nego-
tiated the right to conduct several farm visits each year as a
control and to determine whether the standards might be
raised further (see Figure 2, Panel B).
The veal case shows that customer power acts as a control mechanism that constrains both commercial and animal
interests. Rather than achieving legitimacy through special
interest group involvement, the veal company searched for
legitimacy from scientists. This effort was insufficient for
the retailer. Thus, the Animal Protection Society suddenly
gained a more powerful position when it received the
Journal of Public Policy & Marketing
Figure 2.
Decision Charts
A: Supermarket Platform
[2]
Presentation
of special
Interest
group
n
[1]
Retailers platform requests
standard
[2] Sector
commission
international
conference
[5]
Draft
document?
Yes
[8]
Standard
No
Yes
No
Yes
[6]
Decision board
retailers
platform
[4]
Positions of each
country?
[3]
Consultation of
national
stakeholders
B: Veal
[1]
Idea
company
No
[3]
Taste
quality?
[14]
Company
experiments
[2]
Ethological
study?
Yes
Yes
Development
standard
[4]
Symposium
support?
No
Yes
No
Yes
[11]
Ethologic
improvements?
[5]
Retailer
interest
?
[6]
Retailer
demand
[7]
Retailer
commitment?
Yes
No
[13] Monitoring
requests experiments
for improvement
[8]
Alternative
ethological study?
No
[9]
Ethological
improvements?
[10]
Retailer asks for
opinion of Animal
Protection Society
59
60 Managing Conflicting Stakeholder Interests
Figure 2.
Continued
C: Poultry
No
Idea animal
welfare
concept
[1] Commission
collects
information
No
[2]
Economic
framework?
No
[3]
Ethologic
framework?
Yes
[4]
Retail
framework?
Yes
Yes
[7] Appoint
project manager
End
[12] Replacement
steering committee
by chain parties
[11] Selection
farmers
No
[10] Retail
agreement?
Yes
[5]
Symposium:
support?
y
[9] Standards
made concrete
Yes
[6] Establish
steering
committee
[8]
Processor?
No
No
[13] Norm
practicable
after one
year ?
Yes
[14]
Norm practicable
after two
years?
No
[15] Advice of
Animal Protection Society
Yes
No
End
D: Organic
[1]
Recognition of
the need for
additional
standards
[2]
Support
sector?
No/?
n
[9]
Decision of
consultative
body
Yes
[8] Consultative
body additional
instruction?
?
y
[4]
Decision
PWG
[3] Issuing for
Instructions?
[10]
[5] Request
additional
instruction
[6]
Decision
TWG
Yes
[7]
Formulate
rule
Official rule
in legislative
framework
No
Standard to
guide interpretation
[11] Ideas
interpretation
No
[13]
Economic
framework?
Yes
No
No
[12]
Ethologic
framework?
Yes
[14]
PWG formulates
concept text
[15]
TWG checks
legal framework?
Yes
Yes
No
[16]
Consultative
body checks
feasibility?
Yes
No
[17]
Decision of the
consultative
body
Journal of Public Policy & Marketing
request to determine whether the new preferred supplier
was more animal friendly than the market leader. In this
example, customer power worked in favor of animal interests. In other examples, it may work in favor of commercial
interests. As the brand manager put it, “Then we negotiate
with those retailers that we can place calves on straw but
that it will add another percent to the price. Then they say:
‘just leave it.’”
The Poultry Case (Dominant Special Interest
Group)
The process to adopt poultry standards was lengthy because
the standards needed to be developed from scratch to support a new brand that wanted to promote an animal-friendly
identity. The standardization process essentially consisted
of three phases. The first phase involved research to determine the minimum conditions for each participating stakeholder; this process lasted three years. The second phase
pertained mainly to the search for retailers and to confirming the minimum conditions and lasted four years. Finally,
the third phase began with the decision to initiate a market
introduction, which would take another 15 months. The
moment had then arrived to make the standards concrete,
and a search began for poultry farmers who were willing to
produce chickens according to the formulated standards
(see Figure 2, Panel C).
The control mechanism incorporated in this process is
the interdependency between commercial and animal interests: The Animal Protection Society needed to take market
share away from mainstream brands to improve the lives of
as many chickens as possible, and retailers required a product that offered a significant contribution to their existing
assortment. In this respect, they demanded substantial animal welfare standards. This mutual dependence resulted
because all stakeholders openly expressed their interests
and respected each other’s viewpoints. For example, they
quickly decided that the additional costs would not exceed
20%. If a stakeholder’s minimum conditions came under
threat, the process halted until they could find a solution
that would reduce the risks for this stakeholder. For example, when two supermarkets that helped initiate the development of the new brand could not bear the risk of the
introduction alone, the process was halted until two more
retailers joined.
The Organic Case (Definitive Special Interest
Group)
This decision-making process started when it became clear
that ethically driven organic pig farmers had different
norms for free-range pigs than their more commercially driven counterparts. Because the Product Work Group (PWG)
of the organic movement is responsible for advising on and
initiating new standards, this group examined whether new
standards were necessary. The Technical Work Group
(TWG; responsible for the judicial feasibility of standards)
argued that new requirements demanded new rules, which
were possible only through official European Union regulation, a process that takes years. Thus, the process reached
an impasse and turned to a third group, the consultative
body, for advice on how to continue. The consultative body
argued that if it were a matter of interpretation, the PWG
61
could formulate standards that would guide interpretations
of the present rules. The PWG developed a proposal for the
consultative body, which assessed the request and offered a
positive recommendation, leading to the implementation of
standards in farming practices (see Figure 2, Panel D).
To deal with potential conflicts, the decision-making
process included a formal legal structure that prevented
commercial interests from overwhelming animal and other
special interests. The organic movement builds strongly on
the involvement of animal and other special interest groups,
protected by the difficulty of changing existing standards.
The differences of opinion between the different bodies
(PWG and TWG) about whether sufficient room existed to
change the standards exemplify this conflict because the
decision-making system invited the participation of a third
body that found an opening in the discussion.
Case Comparison
Four dimensions emerged from the case comparisons and
the iterative process through which we developed theoretical propositions (see “Data Collection and Case Analysis”):
(1) the degree of discussion between commercial and special interests, (2) the presence of new parties that entered
the process and offered new options in the negotiations, (3)
the stage of the process when special interest groups became
involved, and (4) the extent to which commercial interests
and special interests constrained each other (see Figure 3).
The first dimension refers to the degree of discussion
between commercial and special interests. When the animal
interest group has low power, the decision processes are
characterized by relatively low levels of discussion. In the
supermarket platform case, the supermarkets stayed out of
the discussion and claimed the right for a veto at the end of
the process. In the veal case, the company initially tried to
develop standards without the direct involvement of animal
interest groups. In contrast, when animal interest groups
have more power, relatively intensive discussions focus on
the relationship between the commercial and the animal
interests. The decision-making processes then allow these
stakeholders to explore every opportunity to improve animal
welfare, at the expense of decision costs, such as management attention (poultry case) and sometimes commercial
interests (organic case). Thus, we propose the following:
P1: Standards formulation processes are characterized by more
discussion about the relationship between commercial and
special interests if the power of the special interest group is
relatively high.
The second dimension entails the presence of new parties
that enter the process to suggest new options for the negotiations. The organic case required the input of a third party
to advance the discussion; in the veal case, a powerful customer intervened when the company could not legitimize its
standards on the basis of scientific results alone. However,
in the low-urgency cases, such added parties were absent.
Logically, the need for such groups should increase if the
issues to be solved are more urgent. In a high-urgency situation, a negotiation process that fails to move forward will
be detrimental for both the company and society. Therefore,
we propose the following:
62 Managing Conflicting Stakeholder Interests
Figure 3.
Conceptual Framework Derived from Case Comparison
Legal Structure
Presence of
external bodies
Little
discussion
in L
vo a
lv te
em
en
t
Veto
Absence of
external bodies
g
in
in
ra l
st cia ts
on e s
C sp tere
in
Urgency of the claim of the special
interest group relatively low
Much
discussion
g
in
in al
ra ci
st er ts
on m s
C om tere
c in
Interdependency
in E
vo a
lv rly
em
en
t
Power of special interest
group relatively high
Urgency of the claim of the special
interest group relatively high
Customer Power
Power of special interest
group relatively low
P2: Standards formulation processes include new parties that
offer new options in the process if the urgency of the claim
of the special interest group is relatively high.
These two dimensions provide deeper insight into how
unidimensional differences in power and urgency can influence the standards formulation process; the next two
dimensions also suggest that interactions of power and
urgency have consequences. Specifically, the third dimension refers to the stage of involvement of the animal interest
groups. In the poultry case, the animal interest group (high
power, low urgency) was involved from the beginning,
which we can explain logically as a result of the interdependency between the commercial and the animal interests in
this case. Its power makes the animal interest group an
equal discussion partner, and the higher level of urgency
should induce the company’s dependence on the animal
interest group. In the veal case, the animal interest group
became involved at the latest possible stage and eventually
made a difference only when a powerful customer granted
the group the right to make a final judgment about the legitimacy of the standards. This late stage of involvement is
probably a direct consequence of the low power of the animal interest group, combined with the high urgency of the
issue. Thus, we propose the following:
P3: Special interest groups become involved in earlier stages of
the standards formulation process if their positions are more
powerful and their claims are less urgent.
Finally, the fourth dimension refers to the degree to
which commercial or animal interests are constrained by the
process. In the supermarket platform case, the trade-off
clearly favors commercial interests, as indicated by the veto
power of the commercial stakeholders. This power likely
resulted from the low power and low urgency in this case;
the animal interest group was not powerful, nor was its
claim urgent. In the organic case, commercial interests were
constrained by the formal legal structure of the process,
which favored animal and other special interests. Thus, the
constraints were a consequence of the powerful dominant
coalition of special interest groups, one of which had an
urgent claim. In the other two cases, the processes constrained both interests similarly, through interdependency,
and powerful customers may require legitimacy in some
instances and efficiency in others. We propose the following:
P4: Special interests are more constrained in favor of commercial interests in the standards formulation process if the
position of the special interest group is less powerful and its
claims are less urgent.
Discussion
This study strives to understand how standards formulation
processes may deal with conflicting stakeholder interests.
The results from four cases pertaining to the formulation of
standards for animal welfare in food marketing reveal four
control mechanisms that help address conflicting interests
between commercial stakeholders and special interest
groups. By comparing these mechanisms, we derive four
dimensions that together provide insight into the black box
of the standards formulation process. Greater power
obtained by special interest groups prompts more discussion about commercial and special interests. In addition,
urgency influences standards formulation processes, in that
new parties enter the negotiations to suggest new solutions
when the need is urgent and the negotiations stall. In combination, power and urgency lead to processes that vary
with regard to the stage in which special interest groups
become involved and that constrain commercial interests,
special interests, or both. These insights contribute to
knowledge about the management of stakeholder interests
in at least five ways.
First, prior research has proposed authorization processes
as an important element of marketing’s institutional environment (Grewal and Dharwadkar 2002), but our study also
Journal of Public Policy & Marketing
extends insights in this context by highlighting the institutional structure behind differentiation strategies based on
“green” or other CSR attributes (e.g., Reinhardt 1998; Shrivastava 1995). By constraining commercial interests, standards formulation processes can protect the unique differentiating elements of CSR-based differentiation strategies.
The results show that this constraint may take the form of
either interdependency between commercial and special
interests or a formal legal structure that prevents market
interests from gaining the upper hand.
Second, this study suggests that authorization processes
of firms that aim to secure legitimacy at a minimum level,
rather than differentiate themselves on the basis of their
responsible attributes, are relatively efficient. Prior contributions indicate that companies should deal with multiple
claims in their institutional environment (Bhattacharya and
Korschun 2008; Handelman and Arnold 1999), but they
have not identified any mechanisms by which firms might
do so efficiently. The veto model from the supermarket
platform case suggests that firms could economize in the
degree of discussion they undertake during the standards
formulation process, which should lead to relatively lower
costs. However, when implementing a veto model, managers must keep in mind that a low level of urgency may be
a precondition. That is, companies should take a proactive
approach to social issues and initiate the process before the
issues become urgent.
Third, the results suggest that some legitimacy issues can
be solved by customers. Prior studies have indicated that
customers may reject the firm if they no longer perceive it
as legitimate (Handelman and Arnold 1999; Maignan and
Ferrell 2004). We add that customers also can play positive
roles. For example, the veal case suggests that granting special interest groups low power, even when the issue is
urgent, could result in interventions by market stakeholders
that demand legitimate offerings. In accordance with the
findings of Singh and colleagues (2005), our results highlight the interactions between relationships with stakeholders in the institutional environment and relationships in the
market. To the veal company, the intervention of the company was an unexpected event, but other companies could
manage the process by involving powerful customers earlier in the process and letting them decide whose judgment
they consider important (see also Kambewa, Ingenbleek,
and Van Tilburg 2008).
Fourth, the results challenge the clear demarcation that
institutional theory frequently makes between the market or
task environment and the institutional environment. As
Grewal and Dharwadkar (2002, p. 85) stress, “in highlighting the differing emphases (task environment and efficiency
versus institutional environment and legitimacy), it is tempting to categorize the two environments in a dichotomous
manner.” Our findings instead provide an empirical example of their interdependency. In particular, interdependency
is possible if special interest groups are powerful and their
claims are not urgent. In the poultry case, for example, the
special interest group became involved at an early stage, and
its interest depended on the amount of market share that the
new animal-friendly chicken could take from regular chicken.
Fifth, the results provide a clear indication that achieving
legitimate standards is impossible without special interest
group involvement. The veal company was unable to legiti-
63
mize its standards on the basis of scientific research alone,
which confirms the original definition of moral legitimacy
(Suchman 1995); that is, the company’s activities should be
in line with the norms and values that prevail in society.
This case suggests that such norms and values do not
change in response to the latest scientific findings, which
were the bases on which the veal company initially tried to
build the legitimacy of its standards. Thus, the company
needed the support from a special interest group that is
strongly rooted in society.
Implications
The findings suggest that divergent stakeholder interests
can be managed in ways other than conflict and public
exposure. A standards formulation process provides a
promising context in which stakeholders can reach compromises about a company’s specific contributions to CSR
issues by helping it formulate its CSR standards. The nature
of this process may differ for various stakeholder configurations and unique positions of special interest groups, so a
deeper understanding of these processes should help manage stakeholder interests and increase the effectiveness of
CSR policies for the benefit of both companies and society.
Limitations and Directions for Further Research
In our research design, we systematically searched for differences on the dimensions that stakeholder identification
theory proposes. To rule out other potential influences, we
also restricted our cases to a single issue and a single industry. Further research should examine the applicability of our
framework to other issues and industries. In particular, we
suggest four directions for research, each emerging from a
limitation of our study. The first direction pertains to the
question whether different results might emerge in industries with legitimacy issues that are substantially different
from the animal welfare issue—such as climate change
(e.g., oil and automotive industries), obesity (e.g., food
industry), child labor (e.g., fashion and furniture industries),
or local community problems (e.g., heavy industry located
in densely populated geographic areas). Second, we focus
on a setting in which stakeholder platforms are common, so
it would be worthwhile to consider contexts with other normative institutions, such as councils of attorneys or medical
professionals, or government institutions (e.g., public housing, utilities, electricity, water). Further along such a line of
research, investigators could determine whether similar
dimensions appear in contexts that lack platforms to formulate standards.
Third, we focus on claims from secondary interest
groups. It would be worthwhile to investigate whether our
dimensions hold for issues with primary stakeholders, such
as dividend payments to shareholders or wages paid to
employees. A turbulent economic climate makes it particularly important to study such issues. Fourth, research could
examine potentially different methods of managing stakeholder interests in various institutional environments. Do
the same dimensions occur in the development of animal
welfare standards in other countries (e.g., the United States,
Japan)? By answering such questions, researchers could
derive a more generalizable theory of the management of
stakeholder interests. Case study research offers certain
64 Managing Conflicting Stakeholder Interests
advantages for efforts to answer these questions, such as its
ability to incorporate multiple context variables from the
stakeholder network and capture intricate interactions
among stakeholders. In addition to such qualitative methods,
researchers could develop sampling frames of normative
institutions and thus conduct quantitative survey research. In
particular, a multirespondent method that gathers the viewpoints of different stakeholder groups would be worthwhile.
Practical Implications
For companies and stakeholders that aim to formulate CSR
standards, the results imply that the process should begin
with an assessment of the urgency of the issue. Next, they
should determine how much power they want to grant special interest groups. This decision may depend on, among
other things, whether the company aims to achieve a minimum level of legitimacy or wants to use CSR as a basis for
its differentiation. If the special interest group has less
power, the company can develop a decision-making structure that economizes on decision costs, including management attention; lengthy discussions are not the only option
for formulating CSR standards. However, firms must
ensure that they make this determination proactively
because if the urgency level increases, special interest
groups can become decisive regarding whether the standards will be perceived as legitimate. Companies should
consider involving powerful customers in the process, who
then determine the level of legitimacy they desire. If special
interest groups gain high power, the process may work to
protect their interests. If urgency is low, the process could
involve dependence between commercial and special interests (e.g., both hope to take market share away from a large
competitor). If urgency is high, a formalized structure might
protect the special interests from short-term market interests.
Special interest groups should determine in advance
whether they will “sell” their legitimacy to support the
developed standards. To make this determination, they
might consider whether their position is strong enough to
influence the standards sufficiently. If not, they could
instead adopt an advisory role and not communicate their
involvement to the public. This option leaves their hands
clean and enables them to take a critical position toward the
standards and the company that applies them. In contrast,
special interest groups with powerful positions should
assess the extent to which their interests diverge from those
of stakeholders with commercial interests. If the interests
differ substantially, they can use their power to protect their
interests into the future with a formalized decision-making
structure. Such a formal structure, as well as the awareness
of the mutual dependency between commercial stakeholders and special interest groups, may be important to policy
makers and other supporters of initiatives because it helps
protect public causes and the interests of nonprofits’ financial supporters.
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