Dr. Julia Koplin Supply Chain Management Center Sustainability in Supply (Chain) Management – Integrating environmental and social standards - Julia Koplin.

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


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


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?


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


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)


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.


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


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


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


Process of Supply Management

SupplierEvaluation

Bargaining

EnquiriesControl of Order

and Supply

SupplierEvaluation

Supplier Search

SupplierSelection

Quotations

Supply Process


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


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


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


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


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.


Action Research Process

Coughlan/Coghlan 2002.


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


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


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


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


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)


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)


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


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


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


Thanks a lot for your attention!


Back-Up Slides


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


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.


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


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


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


Action Research: Quality Criteria II

Gruschka 1976.


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


Action Research: Quality Criteria II

Gruschka 1976.


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


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.

Dr. Julia Koplin Supply Chain Management Center Sustainability in Supply (Chain) Management – Integrating environmental and social standards - Julia Koplin.

Documents

thesis slide

research question

social business activities

monitoring of environmental

sustainability principles

stakeholder groups

supplier performance

international values