Working Paper
Firms are increasingly under pressure to reduce greenhouse gas (GHG) emissions not just within their operations but across their value chains. However, value chain decarbonization is typically not a priority for suppliers, and aligning their goals through formal contracts is often also impractical. This study examines the effectiveness of a firm employing relational strategies as a way to address this dual challenge.
In a research collaboration with a Fortune 500 firm seeking to reduce GHG emissions in its agricultural supply chain in India, the authors designed a field experiment to examine the effectiveness of combining decarbonization training for the firm’s supplier farmers with personalized agricultural support to boost the economic value that they derived from their relationship with the firm. Specifically, they examined two interventions that differed in the nature and extent of this personalized support: a lower investment intervention that provided personalized support only for the crop the supplier farmers grew specifically for the firm’s value chain, and a higher investment intervention that additionally provided personalized support for broader agricultural practices relevant for the other crops the farmers grew.
Relative to a control group that was only exposed to decarbonization training and not given any personalized support, both interventions improved the farmers’ adoption of the firm-recommended climate-friendly practices. The higher investment intervention produced greater environmental impact in terms of emissions reduction per farmer as well as emissions reduction per dollar invested, while also leading to better business outcomes in terms of expected retention of farmers in the sourcing program.
Faculty
Professor of Strategy
