1 Chapter I Introduction I.1 Background Indonesia is an agricultural country, which means that the agricultural sector plays an important role in the overall national economy (Mubyarto, 1989). This is evidenced by the large number of people in Indonesia who work in the agricultural sector as many as 38.70 million people or 30.46 percent of the total working population of 127.07 million people (Central Statistics Agency, 2018). Agriculture has a strategic role in the development of the national economy, among others, as a provider of food, raw material suppliers, provide jobs, sources of foreign exchange earnings from commodity exports, and contributors to the national gross domestic product. According to data from the Central Statistics Agency from 2016 to Quarter III 2019, the agricultural sector is in the top four business sector that produce the largest gross domestic product (GDP) after construction sector, the manufacturing industry and wholesale and retail trade. Based on Figure I.1, the total GDP of the agricultural sector in 2022 up to the fourth Quarter of 2022 was IDR 2,428,900.50 billion. This means that the agricultural sector is one of the major forces in sustaining the national economy. Figure I.1 Indonesia GDP Growth by industry sectors (BPS,2018) 0% 5% 10% 15% 20% 25% 14%14% 20% 11% 14% 6% 5%5% 2% 3%3% 1% 2% Indonesia's GDP based on Sector (2022) 2 The population of Indonesia is predicted to increase from 255,6 million to 318,9 million in 2045. With a very large population growth, food availability becomes an important issue. Agricultural systems that support food security require large amounts of chemicals that are known to cause a decline in quality of soil. To overcome this problem, a new agricultural concept emerged that sought to minimize the supply of chemicals with the aim of preventing environmental pollution. This concept is known as the concept of sustainable agriculture (Erbaugh et al., 2019). According to Rose (2019) sustainable agriculture aims is to balance the aspect of farming economically, socially, and environmentally and in the end will create resilience to the farming system in long-term. Some characteristics of sustainable agriculture include: (1). able to maintain soil loss below the tolerable soil loss, (2). increase farmers' income, (3). accepted by the community especially in the application of technology (4). development of cropping patterns, storage of food supplies and (5). increase the level of diversification to ensure the flexibility of planting (Dankelman and Davidson, 1988). The concept of sustainable agriculture is based on three pillars: economic, social, and ecological. the concept of sustainable development is oriented to three dimensions of sustainability, namely: (1) The economic dimension is related to the concept of maximizing the flow of income that can be obtained by at least maintaining productive assets which are the basis for obtaining such income. The main indicators in this economic dimension are the level of economic efficiency, and competitiveness as well as the magnitude and growth of value added, including in terms of profit and economic stability. (2) Social dimension is a people's orientation, this is related to the community's need for social welfare which is reflected by a harmonious social life that is preventing the occurrence of social conflict, preservation of cultural diversity and socio- cultural capital, including in terms of protection of ethnic minorities. (3). The natural environment dimension emphasizes the need for stability of natural ecosystems that includes biological living systems and natural materials. In this case includes the preservation of biodiversity and biological flexibility or genetic resources, water and agro-climate resources, soil resources, and environmental 3 health and comfort. All three aspects must be considered thoroughly. These three aspects are complementary to the creation of a sustainable agricultural system. The concept of sustainable agriculture has become an issue in most developing country such as Indonesia. Agriculture approach in Indonesia still using the conventional approach. Conventional agriculture is based on an industrial approach with a large-scale agribusiness orientation, capital intensive, technology innovation intensive, uniform planting of superior seeds / varieties spatial and temporal, and dependency on production inputs, including the use of various types of agrochemicals (fertilizers and pesticides), and agricultural machine tools (Rivai, 2011). This approach does bring big benefits economically, but it also has a negative impact especially on environmental conditions. Another constrain in application of sustainable agriculture in Indonesia is the social issue. The agriculture system in Indonesia often neglected the social issue, such as work condition, health, and safety issue, etc. This social issue creates a concept of socially responsible agriculture. This concept will ensure that people who work in the agriculture sector gain their right to a better quality of life. The problem of food availability and food security is not only limited to the question of how to ensure that food is always available, such as soil rejuvenation, good breeding, scheduling planting, harvest harvesting, and post-harvest but also concerns how the food can be distributed well to the whole community. This has resulted in the emergence of agribusiness (Behzadi, 2017). The processes in agribusiness involve multi-echelon parties, ranging from farmers as food producers to end-consumers. Figure I.2 shows the agribusiness supply chain network (Kureski, 2015). In other words, agribusiness will form a supply chain. Lambert & Cooper (1997) define the supply chain as the integration of key business processes from end users through original suppliers that provide products, services, and information that add value to customers and other stakeholders. This definition is also and simultaneously used by the Global Supply Chain Forum (GSCF) in 2000. In a simple understanding, supply chains are a series of flow of goods/physical, information and processes used to send products or services from source locations 4 (suppliers) to the destination location (customer or buyer). Figure I.2 Agribusiness Supply Chain Network (Kureski, 2015) The primary activity in the Supply chain consists of procurement, production, transportation, distribution, sales, and services (Rich and Narrod, 2010). All activities in the supply chain will provide value for each supply chain actor, but on the other hand, some supply chain activities also have a negative impact, especially on the environment, such as transportation activities, production waste and so on. Supply chain practices have a significant influence on changes in our environment (Gong et al., 2019). In addition to environmental issues, awareness also arises over the social (Morais, 2014; Bubicz et al., 2019) and economic aspects of this food availability problem (Kamble et al., 2020). Because of that, a concept called sustainable supply chain emerged. One framework for measuring the sustainability of a problem is by looking at three aspects known as the Three Bottom Line (TBL), namely economic, social, and environmental (Elkington, 1994). According to UN Global Compact, Sustainable supply chains (SCS) are environmental, social, and economic management, and promote good governance practices for the entire cycle of goods and services.