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Dr. Julia KoplinSupply Chain Management Center
Sustainability in Supply (Chain) Management –
Integrating environmental and social standards
-Julia Koplin
-Institute for International Integration Studies-Trinity College
-Dublin, January the 25th, 2006
Dr. Julia KoplinSupply Chain Management Center2
Content
1. Introduction
2. Research Question
5. Methodology: Action Research
4. Theory: Conceptual Basics
6. Empiricism: Research Project and Results
3. Structure of the Thesis
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Supply Management Globalisation – complex supplier networks Company performance depending on supplier performance
Image and Reputation Responsibility acceptance by focal companies Risk through unknown suppliers along the chain
Sustainable Supply Chain Stakeholder requirements – information about production standards Environmental and social standards
Introduction
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Research Question
What could a structured sustainability concept look like for integration and monitoring of environmental and
social standards into the strategic supply (chain) management?
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Structure of the Thesis
Automotive industry
Research project: sustainability in supply chains
Volkswagen AG
Sustainability: environmental and social standards
Strategic supply (chain) management
Research fields and criteria pattern
Green and sustainable supply management
Action research
TH
EO
RY
Concept for sustainable supply management
ME
TH
OD
SE
MP
ER
ICIS
M
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Sustainability as a regulative idea Corporate development and learning process
Position of enterprises – responsibility Mission, sustainability principles and operationalisation
Environmental and social standards Standard systems
Stakeholder approach
Sustainable Development
“Sustainable Development is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (The World Commission on Environment and Development 1987)
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Sustainable Development: Triple Bottom Line
SOCIAL
ECONOMICENVIRONMENTAL
Maximum Potential Social Improvements
Scope
Scop
e Scope
Maximum Potential Economic
Improvements
Maximum Potential Ecological
Improvements
Minimum Potential Ecological
Improvements
Minimum Potential Economic
Improvements
Minimum Potential Social Improvements
Empacher/Kluge 1999.
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Sustainable Development: GlobalisationWorldwide expansion of economic, environmental and social
business activities supply and consume markets Production plants
Development of information and communication technologies More transparency and public control because of connected media Unlimited availability of information for stakeholder groups
Change from political national power to market related power Increase of responsibilities for companies New positioning as part of a world society Spread of international values and standards
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Environmental and Social Standards I
Standard Environ-mental
Social Product Process Behaviour Certificate Basics
AA 1000 x x
OHSAS 18001 x x x
EMAS x x x
Global Compact x x x
GRI-Richtlinien x x
ICC-Charta x x
ILO Conventions x x
ISO 14001 x x x
OECD Guidelines x x x
SA 8000 x x x x
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Environmental and Social Standards II
Environmental requirements Implementation of
environmental management systems
Active handling of environmental challenges
Prevention of environmental and health damages
Development of products and processes with minimum use of resources
Waste prevention and recycling Employee training
Social Requirements Implementation of environmental management systems No discrimination, No forced labour No child labour Adequate remuneration Working hours control Health and safety
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Process of Supply Management
SupplierEvaluation
Bargaining
EnquiriesControl of Order
and Supply
SupplierEvaluation
Supplier Search
SupplierSelection
Quotations
Supply Process
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Levels of Supply Management
Harland 2002.
DemandAnalysis
Risk Analysis
SupplyMarketResearch
VarietyManage-ment
Cost Control
Supplier DevelopmentContractPerformance
SupplierPerformance
Reconciliationand Financial Reporting
BudgetManagement
Specification and Cost Estimate
Requisition
Authorisation
CatalogueCheck
Tender/Quotations
Evaluation
Contract Award
CheckAvailability
Place OrderOrder
Promise
OrderFulfilment
Expedite
Schedule
DeliveryArrangement
Receive(DeliveryNote,GoodsReceivedNote)
SupplierInvoice
InvoiceVerification
Pass for Payment
Enter PurchaseLedger
Payment
Supply Policy
SupplyStrategy
SupplyManagement
SupplyOperations
OutsourcingStrategy
Single vs.MuliSource
Variety StrategyRisk Strategy
InternationalSourcing Strategy
Environmental Policy
Value for Money Policy Ethics Policy
Relationship Strategy
NetworkStrategy
TransparencyPolicy
ComplianceRegulation
Product/ ServiceDevelopment
LogisticsManage-
ment
LogisticsStrategy
InnovationStrategy
InformationStrategy
InternationalPolicy
SourceDecision and
IdentityReqiurement
DemandAnalysis
Risk Analysis
SupplyMarketResearch
VarietyManage-ment
Cost Control
Supplier DevelopmentContractPerformance
SupplierPerformance
Reconciliationand Financial Reporting
BudgetManagement
Specification and Cost Estimate
Requisition
Authorisation
CatalogueCheck
Tender/Quotations
Evaluation
Contract Award
CheckAvailability
Place OrderOrder
Promise
OrderFulfilment
Expedite
Schedule
DeliveryArrangement
Receive(DeliveryNote,GoodsReceivedNote)
SupplierInvoice
InvoiceVerification
Pass for Payment
Enter PurchaseLedger
Payment
Supply Policy
SupplyStrategy
SupplyManagement
SupplyOperations
OutsourcingStrategy
Single vs.MuliSource
Variety StrategyRisk Strategy
InternationalSourcing Strategy
Environmental Policy
Value for Money Policy Ethics Policy
Relationship Strategy
NetworkStrategy
TransparencyPolicy
ComplianceRegulation
Product/ ServiceDevelopment
LogisticsManage-
ment
LogisticsStrategy
InnovationStrategy
InformationStrategy
InternationalPolicy
SourceDecision and
IdentityReqiurement
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Sustainable Supply Management I Environmental aspects – forms of green supply:
Greening the supply process: Comprehension of environmental standards into decisions along the supply process
Product-based green supply: improvement of environmental impacts of purchased products
Aggregation in three practices:
Practices Regulation
Supply of environmentally friendly products/services
• Total declaration of ingredients for complex products,• Review of recycling questions before purchasing a product,
Consideration of environmental protection during the form of contract
- Definition of supplier requirements inside the supply policies and quality conventions,
- Obligation of suppliers to substitute problematic ingredients
Evaluation of environmental performance of business partners
- Integration of environmental requirements into the supplier evaluation and selection,
- Implementation of supplier audits, supplier qualification and Involvement of suppliers in environment initiatives
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Sustainable Supply Management IISocial responsible buying
Consideration only in comparison with environmental dimension Assumptions: person-oriented organisational structures, guidance by top
management, initiatives of employees, stress of competition
Environmental and Social standards in supply chains Questionnaires to observe requirements – certification request Evaluation and monitoring of supplier behaviour by on-site audits –
categorisation Cooperation with suppliers by partnering or, rather, mentoring
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Resulting Research Levels
1. Normative Level Definition of normative requirements (supply policy) for a sustainable
supply management
2. Early Detection Creating new information and communication systems for the in-
house and the interfirm dimension
3. Supply Process Adaptation of existing supply structures for the implementation of the
normative requirements
4. Monitoring and supplier qualification Developing adequate independent measuring, evaluation and
monitoring systems, including appropriate incentives and awards as well as quality systems
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Assumption Analysis of social systems requires a specific approach related to the
originalities of the systems
Basic concept Stronger cooperation between theory and practice Solutions for problems of concrete corporate (social) needs Interpretation of human actions out of the own context from the
researched people
Specifics Double purpose: theory development practical interventions Process supporter (external model) active part of the
researched systems (internal model) participating moderator Collective operation system between science and practice Authority-free communication with a discursive character
Action Research: Objective and Specifics
Lewin 1946; Moser 1975, Coughlan/Coghlan 2002.
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Action Research Process
Coughlan/Coghlan 2002.
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Period: January 2003 – August 2004
Participants: Volkswagen AG and University of Oldenburg
Objectives for the Volkswagen AG: Early identification and avoidance of risks and problems Additional competitive advantage in business relations Positioning of Volkswagen as responsible group no parallel structures and processes, effective and at optimal cost global solutions across the group
Research phases:
1. Preliminary scientific analyses
2. Project team meetings and workshops
3. Survey of VW
4. Integration of suppliers
Research Project:Sustainability in Supply Chains
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VW-Research Project:Overview of the Structure
Supply ManagementEnvironment Strategy Science
SCMC
Supplier Survey to
Environmental and Social Standards
Interviews with Experts
Review of the VW-situation: structures/processes, identification of potential problems/solutions
Preparative analysis: chances/risks, environmental-and social standards, Best Practice Approach
1. Workshop: Introduction, Sustainability, Standards and Best Practice Examples
2. Workshop: definition of the objectives,selection of a realisation strategy
3. Workshop: developing the concept,evaluation of the supplier survey
4. Workshop: discussion of the final concept, analysis of on-site visits of suppliers
Supplier-workshop: critical assessment of external stakeholders, suggestions for improvement
5. Workshop: presentation of results of the project,final discussion
Company
Operational Safety
Supply Management
Works Council
Environment Strategy
HR-Management
Quality Assurance
Technical Development
Environment Planning/Audit
Government Relation
VOLKSWAGEN
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Research Project:Course of the Process (25.08.05)
Preparation phase Pilot phaseDevelopment stage
2003 2004
1. Workshop
4. Workshop
3. Workshop
2. Workshop Results 2: Weak points VW
Results 1: Situation VW
Results 3: Solutions and Options
Final report
Results 4: Design concept
Presentation at K-BG
5. Workshop Results 5: Concept proposal
Supplier survey
KSKU
Final Workshop
Results 6: Concept
AudiBLPL
Supplier Workshops
Preliminaryanalyses Survey of VW
Zeit
2005
Participants:
- Procurement: K-BG- Quality Assurance: K-QS-1 und K-QS-42- Technical Development: EAS- Environment Protection: K-EFUU und K-EFUW:- Occupational Health and Safety: K-EFUA- Human Resources: K-SZ und K-SL- Works Council: GBR
- External Consulting: University of Oldenburg
- Audi: Research Group Sustainability
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Integration of environmental and social standards into the supply process across the group pilot project
Main issues: Definition of purchasing requirements for sustainability applied for
internal purchasing decisions Early detection of risks along the supply chain Transparency about achievement of the purchasing requirements by
business partners during the supply process Monitoring and supplier qualification
Addressed to first-tier supplier Start with purchasing of serial parts, successive implementation for
each new supply process
Research Project: Results
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Phases Organisational Changes
NormativeLevel
VW-requirements for sustainability in business partner relations; basis for VW-internal purchasing decisions
Integration into existing VW-regulations (organisational guidelines, VW-Norms, manuals)
Early Detection
International issue-screening (media + internet)
Business units: reporting obligation to central department
Expert-Team for evaluation of supplier information
Supply Process
Site-related self-disclosure via supplier platform “VW Group Supply.com”:- For each new supply process (successive),- Completion by specific VW-information (on-site plausibility check by QS, requests),
Supplier Classification (Rating system: traffic lights)-GREEN: absolute fulfilment of all qualifications,-YELLOW: some lack in qualifications; should start qualification process,-RED: mainly lacking in qualifications; must start qualification process,
CSC-Meeting: integration of sustainability ratings into purchasing decision
Monitoring Revision of statements from self-disclosure and qualification process as imposed sanction, case and problem related audits
Supplier Qualification
Qualification and development process of suppliers, proof obligation for RED-suppliers-Information to environmental and social standards via Internet, technical support
VW-Concept: Purchasing Automotive Serial Parts (Stand August 5th, 2004)
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Research Project: Organisational Changes I
Levels Status before Concept Status after Concept
Normative Level
Product based environmental supplier requirements
Product and production based environmental and social supplier requirements
ISO 9000 as prerequisite ISO 9000 & ISO 14001 as prerequisite
Early Detection
International environmental issue-screening
International environmental and social issue-screening with additional focus on suppliers
No reporting obligations for divisions
Reporting obligations for all divisions to a central department
No cooperation between divisions, no expert-team
Expert-Team (human resources, environment protection, procurement, quality assurance) to evaluate supplier information
Supply Process
No environmental and social supplier information
Site-related self information via supplier platform (environment + social)
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Research Project: Organisational Changes II
Levels Status before Concept Status after Concept
Supply Process
No evaluation and classification of suppliers
Environmental and social supplier evaluation based on a classification system
Ratings from quality assurance, research & development and logistics
Additional inclusion of environmental and social evaluation in the sourcing decision (no specific “sustainability” ratings)
Monitoring Quality audit with some environmental questions
Added case oriented revision of environmental and social standards
Supplier Qualification
No information about environmental and social aspects for suppliers
Provision of information on the supplier platform via Internet,
Duty for supplier qualification
Support to suppliers with environmental problems
Support to supplier with environmental and social problems
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Conceptual Approach to Sustainability in Supply (Chain) Management
Supply Process
Self-Disclosure via Supplier Website
Plausibility Check
Environmental / Social Evaluation
Normative Requirements
Setting Purchasing Requirements for Sustainabilityin Business Partner Relations
Monitoring + Supplier DevelopmentCase-by-Case Revisions
Duty for Supplier Qualifications
Information / Technical Support
Early Detection
International Issue-Screening
Reporting Liability of Business Units
Analysis of Problematic Cases
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Operationalisation of corporate sustainability Consideration of basic sustainability elements (search and learning
process, triple bottom line, environmental and social standards, stakeholder approach, regional adaptation
Concept for a sustainable supply management Structured concept to integrate sustainability aspects as extension and
summary of existing elements from different solutions – integrative regulations
Generalisation of result by using action research Situation specific with the objective to extrapolate on other settings –
scientific requirements
Research Findings I
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Thanks a lot for your attention!
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Back-Up Slides
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VW-Project: Action Research Process I
Frohman/Sashkin/Kavanagh 1974.
Phases Predominantly Content Research Project
Investigation Research First orientation and pre-decision about the following cooperation
Meetings on July 5th/September 19th, 2002:
Development of a project description with shared objectives
Entry Action Development of a common work relation and a contract; first problem orientation; selection of methods for data collection and feedback
Meeting on February 20th, 2003:
Reformulation of the project plan – specification of several steps, identification of appropriate research methods and feedback cycles, preparation of the first workshop
Data Collection
Research Analysis of organization variables and processes
Preliminary analysis January to June 2003:
Environmental and social standards, chances and risks for enterprises, best practice concepts
Data Feedback Action Return of the prepared data basis to the client system for discussion and diagnostics
Workshop on July 10th, 2003:
Introduction, definition of problems and objectives, review of internal situation, discussion and next steps
Diagnostics Research Access to the situation, the problem and deficits of the systems
Interviews on August 18/19, 2003:
VW-internal interviews with experts about purchasing structures, processes, weak points and options for solutions
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VW-Project: Action Research Process IIPhases Predominantly Content Research Project
Action Planning
Action Development of specific action plans, includes decisions about who will achieve the plan and how the success can be measured
Meeting on September 3rd/9th, 2003:
Evaluation of the as-is-situation, analysis of weak points, formulation of possible objective dimensions and options for solution strategies
Implementation Action Management of acquired changing strategies
Back coupling to data feedback:
2nd Workshop (September 29th, 2003):
Discussion of weak points, objective dimensions and solution strategies, following involvement of affected employees for
3rd Workshop (November 24th, 2003):
Concept development, evaluation of supplier survey, VW-declaration for suppliers
4th Workshop (January 28th, 2004):
Discussion of final concept and VW-declaration, evaluation of several on-site audits
5th Workshop (March 16th, 2004):
Presentation of project results and discussion
6th Workshop August 30th, 2004:
Final report and closing discussion
Evaluation Research Evaluation of the effectiveness/ineffectiveness for the implementation – continuation the project is possible
Taken from Frohman/Sashkin/Kavanagh 1974.
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VW-Project: Used Research Methods
angelehnt an Moser 1977.
Absence from the panel Presence at the panel Surveys of the panel
Facts • Statistical enquiry of socio-economical data• Standardized/open questionnaires• Analyses of content• Quasi-experiment• Informal tests
• Quasi-experiment• Structured/unstructured observation
• Standardized/open interviews• Survey of experts• Analyses of content• Analyses of literature• Analyses of sources• Analyses of documents
Events • Analyses of content for repeating events• Interviews for rating of events by self/external assessment
• Recording of processes with media for observation• Protocols• Process reflection with fixation in written form• Crisis experiment
• Survey of affected people’s assessment• Survey of experts• Analyses of documents• Analyses of literature• Interpretations of sources
Norms/ rules
• Sociometry• Analyses of content• Quasi-experiment• Standardized/open questionnaires• Semantic differential
• Structured/unstructured observation• Quasi-experiment• Crisis experiment• Group-dynamic reflection• Role-playing
• Standardized/open interviews• Rating of experts• Role-playing• Analyses of literature• Interpretations of sources• Analyses of documents
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Action Research: Quality Criteria I
Taken from Gruschka 1976.
Condition Quality Criteria Content Research Project
Communication Empathy Understanding of other people or situations
Purpose of internal understanding
Formation of a common core project team made of researchers and practitioners
Mutuality Accepting of exchange and mutual dependency situation
Concernment by action or no action
Continuous workshops with all participants
Rationality Realisation of subjective purposes by social actions or using public standardised instruments
Legitimization/ justification of decisions
Collective decisions of the researcher and the research partners
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Action Research: Quality Criteria I
Taken from Gruschka 1976.
Condition Quality Criteria Content Research project
Intervention Ability for intervention
Involvement into real situations and validity of own responsibility
Analysing the existing outsourcing structures
Feedback Quickest possible back coupling of information and interpretations to all parties
Continuous workshops with all participants
Recognition Validity and acceptance of results because of communication process
Consideration of internal research results
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Action Research: Quality Criteria II
Gruschka 1976.
Condition Quality Criteria Content Research Project
Transparency Controllability Comprehensibility of scientific theories, communication and interpretation
Explanation of all used research methods
Comprehensibility Publication of methods, rules, approaches and individual steps
Discussion of single steps in the project with the research partners
Changeability Possibility for revision of existing orientations
Workshops as a platform for change proposals
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Action Research: Quality Criteria II
Gruschka 1976.
Condition Quality Criteria Content Research Project
Relevance Relevance of the situation
Subjective interests of the parties for theories, communication and interpretation
Research objects are directly struck by the structural changes
Relevance of the objective
Relevance of the scientific orientation for the realisation of the aimed target system
Connectivity of the integration concept
Relevance of the practice
Ability of transfer by scientific methods and approaches into a target perspective
Looking for the practicability when developing the concept
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Generalisation of the ResultsGeneralisation of the results by using action research
Scientific Requirements Realised in the Research Project
Exact description and documentation
Internal final project report of the Volkswagen AG
Initiation of changes -Sustainability Concept with elements of change for supply (chain) structures and processes
Relation to reality -Inclusion of different OEs of the Volkswagen AG which are affected by changes after the implementation
Development Theory -Sustainable development of the Volkswagen AG by Integration of environmental-/social standards into supply (chain) management
Stepwise change process -Minimum elements of an overall sustainability concept for supply (chain) management as a guideline for possible changes according to requirements
Assessment guidelines -System of criteria for assessing the VW-Concept based on sustainability objectives
Westbrook 1995, Coughlan/Coghlan 2002, Näslund 2002, Eisenhardt 1999.