Far Eastern University – Makati

Zuellig Loop, Makati City, Metro Manila

Assessing Halal Sustainability in the Supply Chain:

A Triple Bottom Line Approach

Submitted By:

Estrella, Elisha Allen V.

Lagumbay, Charmaine O.
Lopez, Abby Gaille R.
Oro, Sheena Rose P.
Sidayon, Anne Marielle D.

Submitted To:

Mr. Raffy Lacaden

BACKGROUND OF THE STUDY

The global economy gained speed in Q3 2017 and expanded by 3.9% year on year. The

growth momentum that many economies experienced in 2017 is forecast to carry on to 2018.

This is because of the continuing improvement of the food business in consumers and business

specific view or notion, recovery in international trade, supportive global monetary policy stance

and reviving investments. It was forecasted that the global GDP will increase annually by 3.8%

in the years 2018 and 2019 ​(Euromonitor International 2018). One of these growing markets is

the Halal business.

The market revenue of halal food, globally, is forecasted to increase from about 1.25

trillion U.S. dollars in 2016 to about 2.57 trillion dollars in 2024. The largest share of the market

value will be coming from the North America. There are some biggest growth opportunities for

the global halal market: (1) branding halal food as healthy and (2) producing organic halal food

(Statista 2018)​. ​The phenomenon could be explained by the increased number of consumer

among Halal products. Recently, the halal market has been developing extensively and food

products has the most share in the market list. Mainly, Muslims are the largest consumers of

Halal food.

As of 2017, there are about 1.8 billion Muslims in the world, according to the Pew

Research Center; together, they make up nearly one-fourth of the world's population, making

Islam the world's second largest religion after Christianity. Within the second half of this

century, Muslims are expected to become the world's largest religious group. The Pew Research

Center estimates that by 2070, Islam will overtake Christianity, due to faster birth rate (2.7
children per family vs. 2.2 for Christian families). As of 2017, Islam is the fastest growing

religion in the world (Lipka and Hackett, 2017). Apart from Muslims, who consumes Halal

product due to religious obligations, it is assumed that non-Muslims have also started consuming

Halal products, especially food items. Halal food products have been perceived as safer, animal

friendly and environmental sustainable (Lee et al., 2016). In the Philippines, Halal industry has

also a huge potential to grow.

With a total of 6,064,744 followers or 6.01% of Philippines' total population, nearly 40

percent of the Muslims in Luzon were in NCR. They occupy 1.20 percent of the total population

of the region. In 2015, only 0.68 percent of the total population of Luzon were Muslims. This

contributes 6.44 percent to the total Muslim population in the entire country. There were 390,472

Muslims in Luzon. Among its 17 cities and municipalities, the Cities of Taguig and Manila

accommodate most number of the Muslims at 4.28 percent and 1.92 percent of their population,

correspondingly. (Philippine Statistics Authority, 2017)

Consumers have become the crucial factor in promoting green designs as the global

awareness of environmental problem has grown (Schischke, 2005). Consumers choices are

increasingly affecting the product offerings and they have become more aware of the

consequences of their consumption decision ( Esper & Mollenkopf, 2009).

The researchers aimed to narrow research gap by focusing on measuring the halal

sustainability in the supply chain using the Triple Bottom Line Approach (TBL). TBL will assess
the performance of different halal restaurants in the supply chain in order to attain sustainability

using the three dimensions or components of TBL.

The objective of this paper is to determine the factors that will directly affect the

sustainability in the supply chains of different halal restaurants when it comes to the

environment, social responsibility, and profitability. This paper will come up with an overall

responses as how they can catch up as the environment changes or how can they maintain or

improve their bottom line regardless of having problems externally.

REVIEW OF RELATED LITERATURE

Halal is an Arabic word which means “permissible.” This refers to the things that are

permissible in accordance to the Islamic Law. ​It is usually used to describe something that a

Muslim is permitted to engage in what they eat, drink, or use (Omar et al., 2012). Al-Qardhawi

(1994) describes the concept of halal as lawful and permissible. Technically, it refers to the foods

that are permitted by Allah SWT, Subhanahu wa ta'ala, the Arabic which means "May He be
glorified and exalted", Muslim honorific, and there is no restriction from any reliable sources in

Islam. There is an opposite word for Halal, namely, Haram which means forbidden in Islamic

belief. Halal food should be prepared, processed and manufactured hygienically so that it is safe

for the consumers to consume and comply with the sharia. These include the process of how they

butcher, stored or reserved, and how it is displayed and prepared the food (Khalek and Ismail,

2015). The bottom line is, Halal food is not just about the food itself but the way they process the

food and how they prepare it.

In Islamic belief, halal food is classified as food that is permitted or lawful. According to

Elasrag, H. (2016), Halal has become a global symbol for quality assurance and lifestyle choice,

thus it is not just an assurance that foods are permitted to Muslims. Furthermore, According to

Wilson (2014), throughout the production process, halal foods should convey several Islamic

requirements which includes slaughtering, storage, display preparation and overall hygiene and

sanitation.

The Bureau of Product Standards (BPS) of the Department of Trade and Industry which

has set the Philippine National Standard for Halal provides the general guidelines for the Halal

Food Industry on the preparation and handling of products and serves as fundamental

requirement for food products and food trade in the country. Also the Republic Act (RA) 10817

also known as “Philippine Halal Export Development and Promotion Act of 2016” were signed

into law in 2016 to establish a comprehensive programme for development and promotion of

Halal exports (Department of Trade and Industry).

 As potentials of the halal industry rise at the global market, the Philippines is making sure

of sailing with it and taking its advantage to uplift the Philippine economy by developing and

promoting the halal business, and contributing to the government’s programs by providing

economic opportunities to marginalized sectors through the halal industry in the country

(Department of Trade and Industry).

According to Arowoshegbe and Emmanuel (2016), sustainability is a big concept like

“justice” or “freedom”, and like these concepts, it is easier to understand than to define it briefly.

However, hundreds of definitions exist and there are times that there are some shared similar

principles or views. One often quoted definition is the Brundtland report, of 1987 which defines

sustainability as the “development that meets the needs of the present generations without

compromising the ability of the future generations to meet their own needs” (Brundtland, 1987).

Global Sustainability has described sustainability as the reconciliation of society’s

development goals with its environmental limits over the long term. (Wilderer, P., Schroeder, E.

and Kopp, H., 2005). According to Arowoshegbe and Emmanuel (2016), if the current and

predicted imbalances will not be addressed, it will adversely affect economic systems and human

quality of life as acknowledged by scientists, economists, governments and businesses and

sustainability is a powerful approach for examining these issues. Thus, it is attracting serious

attention by leaders of nations, industry and communities. The number of

sustainability-related trends like global water needs, global climate changes, and demands in

energy has created an undetermined business environment in which new issues, legislation,

stakeholder expectations, and technologies should be considered.

 One of the important environmental and social subject relating to corporate sustainability

is Supply Chain Management (Ashby, Leat & Smith, 2012). Skjøtt-Larsen et al., (2007) agreed

that organizations are increasingly assimilating sustainability into their SCM practices because of

growing global competition. In addition, closing a long term relationship with the suppliers

became a key factor in competitiveness. Accordingly, SCM concepts have been applied across

organizations to improve operating performance, provide new sources of competitive advantage

while offering better values to consumers, and ultimately develop superior managed

organizations and inter-organizational relationships (Ahi and Searcy, 2015).

Economically, in today’s highly competitive generation, globalized world requires the

organizations and businesses to think differently or distinctly about how they are going to stay in

business industry. Businesses can no longer be able to focus on profits and revenues as their sole

purpose for existence. Otherwise, organizations and businesses must think about the “Triple

Bottom Line” and its possible future effect for their ability to grow their brand, customer loyalty

and profits (Reimers-Hild, 2010).

The inclusion of sustainability in Sustainable Supply Chain Management into the

principles of Supply Chain Management is basically based on the Triple Bottom Line Approach

(Elkington, 1998) which calls for equal consideration of all three pillars of sustainability,

namely, economy, ecology and society. According to Seuring and Müller (2008), while taking

goals from all three dimensions of sustainable development, such as economic, environmental

and social, into account which are derived from customer and stakeholder requirements, SSCM
refers to the management of material, information and capital flows as well as cooperation

among companies along the supply chain.

There is a direct relationship between sustainability and TBL performance outcomes of

the organizations (Maloni et al., 2009). The application of Elkington’s TBL in SC is meant to

ensure that organizations operate sustainable supply chains, Carter and Rogers (2008).

According to Carter and Rogers, the aim of TBL is not to suggest that firms should identify and

engage in social and environmental activities not likely to harm economic performance but

instead it guides managers to identify activities which improve economic performance and

dictates the avoidance of social and environmental activities that lie outside of the intersection.

Majority of the research papers is concerned with the climate change and emission

problem when it comes to the environmental dimension or perspective within the Triple Bottom

Line Approach (Klumpp, 2018). Environmentally, in the Philippines, there is a huge problem

with the climate change and emission because of the pollution of the surroundings. However,

halal food industry talks about the cleanliness of the food. Therefore, the sustainability regarding

Halal food in the Philippines is being measured.

Research shows that mostly consumers want is to spend their money on the products that

they really need or which are necessary because they are very conscious about spending their

own money. Therefore, it is important for any organization, whether large or small, profit or

non-profit, to develop strong relationships with each of their customer in order to build trust and

brand loyalty (Reimers-Hild, 2010). Organizations must think about one of the dimensions the

Triple Bottom Line which is the economic perspective. Consumers, specifically Muslims, are
conscious when it comes to food they are eating and where to buy it. Therefore, Halal restaurants

should develop a strong relationship towards their halal consumers in order to have the trust they

wanted. Organizations should innovate and maintain their supply chain. They cannot ignore the

importance of the society in this matter.

According to Alhaddi (2015), the social perspective of the Triple Bottom Line refers to

the beneficial and fair business practices to the labor, human capital, and to the community. The

idea is that these practices provide value to the society and “give back” to the community. Aside

from the moral aspect of being “good” to the society, disregarding social responsibility can affect

the performance and sustainability of the business. The social performance focuses on the

interaction between the community and the organization and addresses issues related to

community involvement as well as employee relations.

RESEARCH METHODOLOGY

This section discusses the research framework, population, sample of population, area of

study, sampling technique, instrument for data collection, and method of data analysis of the

paper.
 The researchers used a quantitative approach in measuring the sustainability of Halal

food supply chain by sending online questionnaires with a likert scale to different Halal certified

companies in the Philippines. The respondents are managers of Halal certified companies who

are assumed to has a better grasp on the implemented intentions of the company based on the

triple bottom line dimensions. The questionnaires consist 3 divisions, the environmental, social,

and economic dimension which are the basis for the triple bottom line approach. The

independent variables such as facility resource conservation, water recycling and reuse, land

management and social sustainability will be assessed in the outcomes based on triple bottom

line dimensions, namely, environmental dimension, social dimension and economic dimension

as shown in figure 1.1. The mean and standard deviation is calculated based on the likert scale of

questionnaires. A regression analysis is also conducted by the researchers.

Figure 1.1