Governance and quality disclosure: the palm oil issue

Abstract

PurposeThis research considers a current problem statement: mandatory indication of palm oil among the list of ingredients (Regulation No. 1169/2011). The purpose of this paper is to analyse the effects of company choices about palm oil on consumer demand and company performance.Design/methodology/approachThe data collection covers two years, 2013 and 2014. Financial data from the AIDA database are matched with information on palm oil certification and replacement. A panel data analysis is conducted to evaluate the impacts of certification and replacement on consumer demand and company performance.FindingsConsidering consumer demand, positive significances have been found in terms of both palm oil certification and replacement. With regard to performance, there are positive significances only for palm oil replacement.Research limitations/implicationsThe research is a first step in the study of palm oil phenomenon. Furthermore, the study takes into consideration only one specific industry that uses palm oil as an ingredient.Practical implicationsThere is a consumer demand expression for these two kinds of disclosures, considered in terms of both environmental (certification) and health (replacement) issues. However, only palm oil replacement leads to improved performance.Originality/valueThis study considers the market effects of the labelling programme through a new empirical application related to the palm oil issue. Starting from palm oil concerns, a new way through which an increase in the provision of information to consumers is likely to impact the behaviour of companies is pointed out.