Sustainability in Supply (Chain) Management – Integrating environmental and social standards

1. Sustainability in Supply (Chain) Management – Integrating environmental and social standards Julia Koplin Institute for International Integration Studies Trinity College Dublin, January the 25th, 2006

2. Content 1.Introduction 2.Research Question 3.Structure of the Thesis 4.Theory:Conceptual Basics 5.Methodology: Action Research 6.Empiricism:Research Project and Results

3. Introduction • 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

4. 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?

5. Action research Structure of the Thesis Sustainability: environmental and social standards Strategic supply (chain) management THEORY Green and sustainable supply management Research fields and criteria pattern METHODS Automotive industry Volkswagen AG Research project: sustainability in supply chains EMPERICISM Concept for sustainable supply management

6. Sustainable Development • Sustainability as a regulative idea • Corporate development and learning process • Positionof enterprises – responsibility • Mission, sustainability principles and operationalisation • Environmental and social standards • Standard systems • Stakeholder approach “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)

7. Sustainable Development: Triple Bottom Line SOCIAL Maximum Potential Social Improvements Minimum Potential Social Improvements MinimumPotentialEcological Improvements MinimumPotentialEconomic Improvements Scope Scope Maximum Potential Economic Improvements Maximum Potential Ecological Improvements Scope ENVIRONMENTAL ECONOMIC Empacher/Kluge 1999.

8. Sustainable Development: Globalisation • Worldwide 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

9. Environmental and Social Standards I

10. 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

11. Process of Supply Management Supplier Evaluation Supplier Search Supplier Evaluation Control of Order and Supply Enquiries Supply Process Quotations Supplier Selection Bargaining

12. Levels of Supply Management Harland 2002.

13. 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 threepractices:

14. Sustainable Supply Management II • Social 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 insupply 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

15. Resulting Research Levels • Normative Level • Definition of normative requirements (supply policy) for a sustainable supply management • Early Detection • Creating new information and communication systems for the in-house and the interfirm dimension • Supply Process • Adaptation of existing supply structures for the implementation of the normative requirements • Monitoring and supplier qualification • Developing adequate independent measuring, evaluation and monitoring systems, including appropriate incentives and awards as well as quality systems

16. Action Research: Objective and Specifics • 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 concretecorporate (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 • Lewin 1946; Moser 1975, Coughlan/Coghlan 2002.

17. Action Research Process Coughlan/Coghlan 2002.

18. Research Project:Sustainability in Supply Chains • Period: January 2003 – August 2004 • Participants: Volkswagen AG and University of Oldenburg • Objectivesfor 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

19. Supply Management Environment Strategy Company Science Preparative analysis: chances/risks, environmental- and social standards, Best Practice Approach SCMC VOLKSWAGEN 1. Workshop: Introduction, Sustainability, Standards and Best Practice Examples Operational Safety Supply Management Works Council Environment Strategy HR-Management Quality Assurance Technical Development Environment Planning/Audit Government Relation Review of the VW-situation: structures/processes, identification of potential problems/solutions Supplier Survey to Environmental and Social Standards Interviews with Experts 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 5. Workshop: presentation of results of the project, final discussion Supplier-workshop: critical assessment of external stakeholders, suggestions for improvement VW-Research Project:Overview of the Structure

20. 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 Zeit 2005 Research Project:Course of the Process (25.08.05) Preparation phase Pilot phase BLPL KSKU Audi Development stage Final Workshop Final report Supplier Workshops Results 6: Concept Presentation at K-BG Results 5: Concept proposal 5. Workshop Results 4: Design concept 4. Workshop Results 3: Solutions and Options 3. Workshop Results 2: Weak points VW 2. Workshop 1. Workshop Results 1: Situation VW Preliminary analyses 2003 2004 Survey of VW Supplier survey

21. Research Project: Results • Integration of environmental and social standards into the supply process across the group pilot project • Main issues: • Definition of purchasing requirements forsustainability 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

22. VW-Concept: Purchasing Automotive Serial Parts (Stand August 5th, 2004)

23. Research Project: Organisational Changes I

24. Research Project: Organisational Changes II

25. Normative Requirements Setting Purchasing Requirements for Sustainabilityin Business Partner Relations Monitoring + Supplier Development International Issue-Screening Early Detection Reporting Liability of Business Units Case-by-Case Revisions Analysis of Problematic Cases Duty for Supplier Qualifications Information / Technical Support Supply Process Self-Disclosure via Supplier Website Plausibility Check Environmental / Social Evaluation Conceptual Approach to Sustainability in Supply (Chain) Management

26. Research Findings I • Operationalisation of corporatesustainability • Consideration of basic sustainability elements (search and learning process, triple bottom line, environmental and social standards, stakeholder approach, regional adaptation • Concept for a sustainablesupply 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

27. Thanks a lot for your attention!

28. Back-Up Slides

29. VW-Project: Action Research Process I Frohman/Sashkin/Kavanagh 1974.

30. VW-Project: Action Research Process II  Taken from Frohman/Sashkin/Kavanagh 1974.

31. VW-Project: Used Research Methods angelehnt an Moser 1977.

32. Action Research: Quality Criteria I Taken from Gruschka 1976.

33. Action Research: Quality Criteria I Taken from Gruschka 1976.

34. Action Research: Quality Criteria II Gruschka 1976.

35. Action Research: Quality Criteria II Gruschka 1976.

36. Generalisation of the Results • Generalisation of the results by using action research Westbrook 1995, Coughlan/Coghlan 2002, Näslund 2002, Eisenhardt 1999.