Sustainability transparency in road freight distribution in Sweden

Abstract: Background: An extensive literature review pointed out the limited knowledge on the value of sustainability transparency in road freight distribution. This is researched in the context of non-compliance to current sustainability issues in Sweden. Additionally, the value of sustainability transparency for the procurement activity of a transport buyer was not explored. Purpose: The purpose of this study is to reflect on the value of sustainability transparency in the light of procurement activity of transport buyers. First, the author related sustainability and transparency to road freight distribution. Afterwards, the author used a theoretical model to explain the value of sustainability transparency for transport buyer in two cases. First, during the monitoring of the execution of a distribution service and second to understand sustainability variation on the market. This theoretical model assumes that a higher transparency would lower transaction costs and information asymmetry for a transport buyer. Methodology: A qualitative methodology based on a grounded theory approach was applied in this study. One research question was answered through a literature study. The other two research questions were answered with semi-structured interviews with experts to obtain empirical data. Results: This study suggested that transparency is a signaling activity which could help a transport buyer to differentiate between distribution service providers who “talk the talk” from the ones who “walk the talk” in relation to sustainability. Literature study showed that sustainability transparency creates a value to road freight distribution because it creates a better understanding of the sustainability conditions along outsourced distribution chain. Empirical study showed that most transport buyers do not monitor the sustainability of their distribution service. As a result transaction costs for the transport buyer might be higher than anticipated because of high possibility of opportunistic behavior. Although, a few transport buyers who performed a monitoring activity, argued for the importance of sustainability transparency for a more effective sustainability monitoring. A table of sustainability monitoring techniques is presented as a contribution to the research. Additionally, the empirical study showed a high variation of the sustainability among road freight distribution service providers, which creates information asymmetry for the transport buyer. A table of results is presented and shows how sustainability varies on the market. Finally, it was discussed also how sustainability transparency can facilitate buyers to distinguish easier both sustainable and unsustainable distribution service providers. Importance: A lack of sustainability transparency may result in the development of a bad market and drive legitimate businesses out of existence since transport buyers have very limited information when they select distribution service providers. Consequently, it can affect a local society, government’s income and environment as a whole.