Contractual Solutions for Food Sustainability
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  • Release Date: 2020-12-18
  • contracts
  • contractual terms
  • governance
  • Transaction Costs Theory (TCT)
  • decision rights
  • discrete choice models
  • sustainability
  • uncertainty
  • Italy
Video Introduction

This video is adapted from 10.3390/su12229441

Societal expectations regarding the environmental impact of food production patterns, as well as issues related to food safety and food security, are increasingly acknowledged by the civil society, now called upon to stimulate a change in food production and consumption patterns [1]. Due to several food scandals worldwide, consumers became increasingly suspicious and reacted with alarm to reports of diseases, or potential diseases, related to food [2][3]. Against this growing demand for transparency of productions related not only to food quality but also to the socio-environmental impact of food production, there is increasing evidence from the literature that firms have started to embed sustainability in their corporate strategy in many different ways, especially in the interaction with other supply chain actors [4][5]. As a consequence, the need for coordination and adaptation along the modern agri-food value chain further arose, and under these circumstances, transactions usually shifted from traditional spot markets to more complex contractual or hierarchical arrangements [6].

The Italian pasta supply chain represents an interesting case study, where several major retailers started providing own-label products to certify origin and to respond to new consumers’ preferences for 100% Italian grains semolina brands that embed the adoption of sustainable production practices [7][8]. Accordingly, contracts aimed to promote sustainability have gained momentum in the pasta sector to ensure typicality, quality, and territorial identity of the final products [9]. A question then arises on how production contracts, as a coordination instrument, can guarantee the socio-economic and environmental sustainability of pasta. This study addresses such a question from a Transaction Costs Theory (TCT) perspective. In this strand of the literature, the adoption of production contract is approached as a governance solution aiming to minimize transaction cost arrangement and organize the production and sales process between farmers and their customers. Thus, an important incentive for farmers to use contracts is to reduce transaction costs, such as search, measurement, and monitoring costs [10][11][12].

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