An ever-increasing important crop, increasing demand for palm oil is driving the detrimental impact on the environment and the workers in the industry. The Roundtable of Sustainable Palm Oil (RSPO) is a private sector-driven multistakeholder initiative operating in the contested palm oil industry to set industry standards and ensure the sustainability of the commodity through certification. However, as an Amnesty International report from 2016 demonstrated, individual RSPO-members’ actions violated the RSPO’s certification criteria, making the NGO question the efficiency of relying on the RSPO. With the increasing focus on multistakeholder initiatives (MSI) such as the RSPO, this paper tries to evaluate the impact of the RSPO on companies’ risk performance. Previous work on risk management has focused on the relationship between performance and risk, but not on how MSI membership impacts enterprise risk management (ERM) processes. Engaging in an empirical and theoretical approach, this paper seeks to answer whether the RSPO is an effective risk management tool.
Using risk management efficiency calculations to investigate the risk management performance between RSPO members and non-members, it was found that RSPO members seemed to perform slightly better than their counterparts when considering company and industry size. A low- performing RSPO member and a high-performing non-member were chosen as research subjects on which to carry out further analysis. Miller’s (1992) multidimensional risk management framework was then adapted and used to substantiate the empirical analysis by employing different theoretical approaches on a macro-, mezzo-, and micro-level. A PESTLE was performed to highlight macroeconomic conditions which was analysed using the institutional approach, followed by an industry analysis to determine industry dynamics. Finally, a firm-level analysis was carried out by using the resource-based view. The two companies’ approaches to risk management were then related to the generic risk management framework. A discussion regarding risk mitigation and RSPO, external and internal risk management, and theoretical and methodological considerations was undertaken in order to contextualize and offer different theoretical argumentation for the results found in the analysis.
The paper finds that while RSPO members at first seem to perform better in terms risk management efficiency than non-members, the theoretical implications to assessing comparative company performance gives an inconclusive result. What the paper does show is how important different variables are for risk management and company performance. The multitude of variables that impact performance shows the importance of the internal and external environment when assessing the RSPO’s efficiency as a risk management tool. This highlights the need for risk management models to acknowledge the influence of macro-, mezzo-, and firm-level factors, while also acknowledging the cognitive and institutional aspects that can be detrimental to the performance of a company.
|Educations||MSc in Business, Language and Culture - Business and Development Studies, (Graduate Programme) Final Thesis|
|Number of pages||130|