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BUSINESS SOCIETY MANAGEMENT

Dole: Carbon neutral fruits

Table of Contents:
1. PLAGIARISM ................................ ................................ ........... ERROR! BOOKMARK NOT DEFINED. 2. BACKGROUND ................................ ................................ ................................ ................................ ......3 3. DRIVING FACTORS ................................ ................................ ................................ ............................. 3 3.1 INTERNAL FACTORS................................ ................................ ................................ ................................ ......... 3 3.2 EXTERNAL FACTORS ................................ ................................ ................................ ................................ ....... 4 4. LABOR ISSUES AND RESOLUTION STRATEGY ................................ ................................ .......4 5. CARBON NEUTRALITY - IMPACT ON COMPANY ................................ ................................ ...5 5.1 STRATEGY ................................ ................................ ................................ ................................ .......................... 5 5.2 OPERATIONS ................................ ................................ ................................ ................................ ...................... 6 5.3 PRICING ................................ ................................ ................................ ................................ .............................. 6 5.4 MARKETING ................................ ................................ ................................ ................................ ....................... 6 6. VALUE CHAIN ................................ ................................ ................................ ................................ .......7 7. CARBON NEUTRALITY - RECOMMENDATIONS ................................ ................................ .....8 7.1 STAGING................................ ................................ ................................ ................................ ............................... 8 7.2 ARENA ................................ ................................ ................................ ................................ ................................ 9 7.3 DIFFERENTIATORS................................ ................................ ................................ ................................ ............ 9 7.4 VEHICLES ................................ ................................ ................................ ................................ ........................... 9 8. CONCLUSION ................................ ................................ ................................ ................................ ..... 10 APPENDIX ................................ ................................ ................................ ................................ ................ 11 APPENDIX 1 ................................ ................................ ................................ ................................ ........................... 11 REFERENCES................................ ................................ ................................ ................................ .......... 14

2. Background
Founded in 1851, Dole Food Company (Dole) has a long history and rich experience in fruit and vegetable industry that lead themto become world leader in fresh fruit, fresh vegetables and freshcut flowers industry. Focusing on innovation through high investment in research and development activities, Dole successfully promotes their brand worldwide. Dole is also known for their Corporate Social Responsibility (CSR) activities, which they support in all of their operating companies in more than 90 countries around the world. With 80,000 employees all over the world, Dole CSR activity focuses on their employee welfare and surrounding environment. Dole believes that environment awareness is key factor that would differentiate Dole with their competitors.

3. Driving Factors
There are several factors that are impacting the internal strategy and planning of Dole and motivating them to become completely carbon neutral in their production. These factors have been categorized into Internal and External factors as discussed below.

3.1 Internal Factors

Corporate Social Responsibility strategy is one of the major factors, which is driving the carbon neutral strategy for Dole. Dole has always been active in following their corporate social responsibility through enhancing community growth and employee health, providing competitive wages and benefits and protecting the environment. By following the carbon neutral strategy Dole would be further strengthening its position in displaying their dedication towards their CSR strategy and mission. Secondly, by quickly implementing the carbon neutral strategy Dole would be able to create a distinction for their products in the market. As customers are becoming more and more aware about the environmental issues Dole would be able to pioneer the market by differentiating their products in the market from their competitors. Moreover, this can be also profitable in the long-term strategy of the company.

3.2 External Factors


Dole Costa Ricas carbon neutral plan also relates to the Costa Rican governments nation- wide plan to achieve carbon neutrality by 2021. That means that sooner or later company will have to implement carbon neutral strategy but it will be most beneficial from all spheres to implement this strategy as soon as possible. Also, under the various international protocols such as Kyoto protocol countries have to reduce their carbon footprint to a very minimum amount and for which government will further pressurize the organizations to follow this strategy. Additionally, this will not only help Dole get an edge over its competitors but also will enable them better in responding to NGOs criticism about Doles CSR. NGOs have been consistently criticizing Dole about their CSR although they are doing a better job than most of their competitors. So, implementing carbon neutrality will help Dole promote their dedication towards their CSR more effectively. Moreover, with the premium pricing of the fruits, some portion of extra margin can be spared extra for the farmerswages.

4. Laborissues and resolution strategy


For labour issues, Dole already has a strong commitment to ensure that all Doles employees get their rights as stated in Doles company policies. The criticism from NGOs is now majorly focusing about labour rights for contract workers and employees from other plantation that are supplying product for Dole. In this matter, Dole should be responsible and use their financial and bargaining power to make sure that all employees that are related with Doles product get appropriate rights as per Doles policies by introducing an audit system. This strategy of course will be an additional cost
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for Dole, but on the other hand data shows that the demand for fair trade product especially in , Europe,has also increased significantly in the recent year (The Fairtrade Foundation, 2011). So there can be a bigger compensation for Dole if theymanage the demand for fair trade product with increasing labour cost. Dole also needs to consider below strategies to deal with labor issues, so that they can manage their position and brand in better way: Continue Awareness and Internal Action One important strategy that Dole must have is a specific system that should be able to capture the whole picture of the labor issue and then provide a set of actions to improve its operation internally, such as introducing an audit system. This mechanism will help Dole to continuously improve their operation by aligning its internal activity with external dynamic. Along with all this, Dole could also go for an internationally accepted SA8000 certification that would help them reassuring NGOs officially that they are trying to follow the best practices for the labor involved in their operations.

Communication and Education Effective communication with all stakeholders will be the key factor to convince them that Dole already has a specific action to handle labor and environmental issue. Dole also need to increase the awareness of their customer by giving them knowledge what is exactly benefit of fair trade or organic product, not only for customer but also for all people involved in production. Alignment with NGOs For some extend it is also important for Dole to align and communicate with some key NGOs to exactly understand their concern, so Dole can take action and provide those NGO with a balanced information. This strategy also will allow Dole to quickly anticipate any concerns from NGOs and prepare themselves with appropriate action for those concerns.

5. Carbon Neutrality - Impact on company


5.1 Strategy

First and foremost Dole will have to align all their business units and partners with the Corporate Social Responsibility vision of Dole. Without the support from all the suppliers it wont be possible to achieve the target of becoming totally carbon neutral. Also, Dole will see some changes in the organization structure of Dole worldwide to get this idea spread to all units in the best possible way.Secondly, Dole would also need to get a certification to prove authenticityand effectiveness in its efforts towards carbon neutrality.

5.2 Operations
To begin with, Dole would be setting up a method to calculate and verify the total amount of emissions from their operations. This would certainly help Dole to be on track while implementing carbon neutral strategy and help them maintain conformity to the required standards. Initially, Dole would be bearing the extra cost of carbon neutrality but subsequently as the product will gain good reputation among customers Dole would be better able to negotiate with various parties involved on division of carbon emissions cost. Along with movement towards Gold Standard from VCS as Dole progresses in market share with carbon neutral strategy, it would be easier for them then to redefine the cost between all the players involved. Allocation of emissions compensation cost wouldthen be established between Dole and the partners associated with Dole. Dole, shipping company and distributor would then decide on how the costs will be divided between them for following the carbon neutral strategy successfully.

5.3 Pricing
Dole would be able to charge a premium price to its customers for the carbon neutral fruits. This premium price will help in covering the cost increase forcarbon neutrality. Moreover, Dole would also pay a part of premium price to its labors to improve their condition and get an appropriate certification. Details for cost structure are present in Appendix 1.

5.4 Marketing
Its important for Dole to successfully identify the target market for their premium product, as it will be highly priced (up to 15%) than the normal products in the same category. The target market will be described as people with high social consciousness and certain amount of disposable income.After successfully identifying the target market where they will be getting high demand for carbon neutral products, they need to increase customer awareness towards carbon neutral products by conducting campaigns, along with getting high involvement from retailers. Also, there should be

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Multiple roup of stakeholders are involved in the value chain of Banana and ineapple distri ution, and each of them has different economic incentives. the carbon neutral strategy, n implication of this is that in implementing

ole needs to incorporate them by offering new incentives or

motivating them to play a significant role in the social responsibility strategy. ach players major incentives and estimated price allocation in the carbon neutral strategy are as follows.

s seen in the chart above, farm owners and shippers may show negative attitudes toward

oles

carbon neutral strategy if introduction of the strategy would require extra efforts and result in additional costs to them. specially for shippers, they have little incentive to achieve carbon

neutrality, partly because they have not been often exposed to strong exte rnal pressure from governments and s. hipping business involves numerous multinational players, and each

players responsibility for carbon footprint is not yet clarified. Retailers are likely to be reluctant to cooperate in the strategy especially as for Banana, since increase of banana price would lead to a change in Bananas position as loss leaders in stores. Consumer is the trickiest player in the value chain. lthough many studies have shown that more

and more consumers are willing to reduce their environmental impact by paying premium price for environmental friendly products, majority of them are actually price seekers. Consumers change their behavior easily depending on economic situations, social awareness and even mood. evertheless, consumer power has become stronger than ever before so as to drive many companies such as ike to implement social responsible policies.

7. Carbon Neutrality - Recommendations


As Dole is going from becoming a commodity to a premium product they should follow a multilayered strategy to implement carbon neutrality in the Dole. All the parts of the suggested strategy are covered in more detail below.

7.1 Staging
Defining staging is one of the most important steps in implementing the carbon neutral strategy. Dole should implement carbon neutrality for their company step-by-step rather than implementing in one go for whole organization. Dole should first of all implement carbon neutrality completely in their Costa Rica operations and then move further towards other producing plants. This would also help them analyze their approach towards carbon neutrality and revise strategy, if necessary, while implementing to the rest of the company. Timeline for Dole should be as follows.
y y y

First: Complete implementation in banana/pineapple in Costa Rica within 2~3 years Second: Broaden to fresh fruit business segment within 7 years Third: Expand to all products in global market within 10 years

Reasoning of this staging is that Dole should maintain its position as the first mover in their business field, and in reference to the fact that Costa Rican government set a target of achieving carbon neutrality by 2021, Dole should be able to reach an ambitious corporate wide goal in 10 years.
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7.2 Arena
As customer awareness is increasing, demand for carbon neutral/organic/fair trade foods is increasing all over the world. Dole needs to first identify the markets where they can earn maximum profits, as customer is highly aware of carbon neutrality in those places and then move further to markets where customers have lower information on the same. This would help them promote their fruits better in the emerging markets and Dole proper promotions will be a key factor in these markets.

7.3 Differentiators
Dole should be able to create an image of their product in the market as a premium product and not just a commodity. This is very important for the success of Carbon Neutral strategy. Dole can promote their fruits to their customers as healthier food products than other products in same category. Also, Dole should use their approach towards environmental issues for promoting their fruits along with maintaining a fair transparency so that customers can easily distinguish Dole from other products and not consider their approach merely as greenwashing.

7.4 Ve icles
Along with the points mentioned under labor issues i.e. raising awareness, alignment with NGOs and cooperation with partners, which will also help Dole in the carbon neutral approach, Dole should also take care of following vehicles during implementation. Its very important to keep all the stakeholders involved and informed for successful launch of this strategy. Dole shouldfollow some international standardsfor VERs to confirmtheireffective and standardized impact. In our opinion Dole should initially choose VCS standard in their approach and depending upon customer response should further more to Gold standard. Gold standard would further help them building a better branding and consequently a better relationship with NGOs. Dole should also buy carbon credits from the government or other organizations to fulfill the extra production of carbon dioxide, which is out of their control such as carbon dioxide produced during shipping. Moreover, before reaching any decision of how to compensate carbon neutrality cost Dole could also see the cost of planting extra trees. Whichever, of two methods seems more feasible and cost effective should be implemented.

Internal organizational restructure is also important for all the involved bodies in the organization to fully follow the companys vision. To keep the trading partners and other units motivated to follow carbon neutrality, Dole needs to develop a pricing and cost allocation scheme that maintains the partners profit as much as possible.

8. Conclusion
Related to Carbon Neutral strategy, Dole should be able to align and integrate all strategy related with labor and environment in one framework. This framework should be covering all Dole strategy in dealing with labor and environment issues. By putting it all in one framework, it will be easier for Dole to continue developing their brand image and differentiating them from their competitors. This framework will also be one package of Doles planning to communicate and explain internally and externally how their strategy will be in future.

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Appendix
Appendix 1
Carbon Credit Cost Summary of Bananas & Pineapples (VCS) VCS Carbon Credit of Bananas Production Shipping Distribution Total Cost Per Box $0.02 $0.12 $0.01 $0.15 C Cost Per Kg $0.0011 $0.0066 $0.0006 $0.0083
Table 1 Cost per kg increase for Banana

VCS Carbon Credit of Pineapples Production Shipping Distribution Total Cost Per Box $0.02 $0.12 $0.01 $0.15 C Cost Per Kg $0.0017 $0.0100 $0.0008 $0.0125
Table 2 Cost per kg increase for Pineapple

Incremental Cost Carbon Credit & Labor Compensation (USD / kg) Carbon Credit Labor Fund TOTAL Bananas $0.00827 $0.00083 $0.00910 Pineapples $0.01250 $0.00125 $0.01375
Table 3 Total cost increase including 10% increase for labor cost

(Labor Compensation Fund = 10% of Carbon Credit Cost) Dole should as of now use VCS certification to adopt carbon neutrality. Total cost increase per box is 15 cents USD for this level of certification. Kg per box is different for Banana and Pineapple, which is resulting in different costs per Kg. Cost increase per kg is not too high so Dole could implement it easily. Moreover, we have also suggested that Dole should charge 10% extra of carbon neutrality cost to both Banana and Pineapple as that amount will be contributed towards supporting the labor by providing them better housing, education etc. This would also help Dole tackle labor issues more effectively and efficiently. Image on next page displays the total cost increase due to VCS standard adoption including 10% increase for labor cost. As we are not aware of the total Dole percentage in the Costa Rica market, cost increase has been shown for various market share pe rcentage shares depending upon total Banana and Pineapple export from Costa Rica.

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Export mount tons) of Bananas & ineapples by Export Amounts (tons) Costa Rica to Europe (Y2006) Bananas Pineapples 2,200,000 1,194,179

from Costa Rica to Europe)

Dole Costa Rica Export Share % (Costa Rica) 15% 20% 25% 30% 35% 40% 45% 50% Export Amount (tons) Bananas Pineapples 330,000 179,127 440,000 238,836 550,000 298,545 660,000 358,254 770,000 417,963 880,000 477,672 990,000 537,381 1,100,000 597,090 Cost of Carbon Credit (USD) Labor Fund (USD) Bananas Pineapples TOTAL Bananas Pineapples TOTAL 2,728,776 2,239,086 4,967,862 272,878 223,909 496,786 3,638,368 2,985,448 6,623,816 363,837 298,545 662,382 4,547,960 3,731,809 8,279,770 454,796 373,181 827,977 5,457,552 4,478,171 9,935,724 545,755 447,817 993,572 6,367,144 5,224,533 11,591,678 636,714 522,453 1,159,168 7,276,736 5,970,895 13,247,631 727,674 597,090 1,324,763 8,186,329 6,717,257 14,903,585 818,633 671,726 1,490,359 9,095,921 7,463,619 16,559,539 909,592 746,362 1,655,954

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Assumi ha D l acc unts for iff r nt shar of xport from Costa Rica to Europ , w can have ifferent cost of carbon credit summary accordingly. (Refer to below table)

Export Share % (Costa Rica) 15% 20% 25% 30% 35% 40% 45% 50%

TOTAL Incremental Cost (USD) Bananas Pineapples TOTAL

Assuming that total increase in cost done by Dole is as mentioned in above charts for implementing carbon neutrality than below is the overall cost impact till the product reaches the consumer through retail chains.
Cost Impact on alue c ain ( etail Price) of bananas Dole Plantation Plantation Worker Owner 2% 10% 43% International Trading Company 31%

Others Distributor 17% 57% Retailer 40% TOTAL 100% 100%

Incremental Cost Carbon Credit & Labor Compensation (USD / kg) Carbon Credit Labor Fund TOTAL Bananas $0.00827 $0.00083 $0.00910 Pineapples $0.01250 $0.00125 $0.01375

Impact on Price (USD / kg) Dole (43%) $0.00910 $0.01375 Distributor Retail TOTAL (17%) (40%) $0.00360 $0.00846 $0.02115 $0.00544 $0.01279 $0.03198

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3 001 654 4 002 205 5 002 756 6 003 308 7 003 859 8 004 410 9 004 961 10 005 513

2 462 994 3 283 992 4 104 990 4 925 988 5 746 986 6 567 985 7 388 983 8 209 981

5 464 648 7 286 197 9 107 747 10 929 296 12 750 845 14 572 395 16 393 944 18 215 493

Dole Cos

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References
 INCAE Business School, Dole: Carbon Neutral Fruits, June 2009  Dole Food Company, Inc., Annual Report Form 10-K For theFiscal Year Ended December 29, 2007, also accessed http://investors.dole.com/phoenix.zhtml?c=231558&p=irol-reportsannual April 9, 2011  Dole Food Company, Inc., Annual Report Form 10-K For the Fiscal Year Ended January 3, 2009, also accessed http://investors.dole.com/phoenix.zhtml?c=231558&p=irol-reportsannual April 9, 2011  Dole Food Company, Inc., Annual Report Form 10-K For the Fiscal Year Ended January 1, 2011, also accessed http://investors.dole.com/phoenix.zhtml?c=231558&p=irol-reportsannual April 9, 2011  Dole Costa Rica, Standard Fruit de Costa Rica, also accessed http://www.dolecsr.com/DoleWorldwide/DoleFreshFruit/CostaRica/tabid/442/Default.aspx April 8, 2011  The Fairtrade Foundation, Fairtrade sales soar to well over 1bn showing the UK still cares in tough times, February 28 2011, also accessed http://www.fairtrade.org.uk/press_office/press_releases_and_statements/february_2011/fairt rade_sales_soar_to_well_over_1bn_showing_the_uk_still_cares_in_tough_times.aspx April 10, 2011  Bill Vorley, Food, Inc. Corporate concentration from farm to consumer, UK Food Group, November 2003, also accessed http://www.ukfg.org.uk/docs/UKFG-Foodinc-Nov03.pdf April 11, 2011

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