Sustainability and innovation in the supply chain

Transcription

1 Sustainability and innovation in the supply chain A collaborative research project with BAM, CRH, UvT and UT This report is intended exclusively for employees of the client. Its distribution, quoting of its contents and reproduction complete or in part for the purpose of conveying it to a third party requires the prior written consent of Universiteit Twente. The text and graphics summarised here have been used in the course of a presentation; they do not represent a full documentation of the event _HS_PH_HV_BV Page 1

2 The project increases the sustainability of BAM s and CRH s supplier- and customer portfolio s Project proposal Rationale and problem CSR / sustainability issues have come to the agenda from multiple directions and are particularly relevant in the construction sector Construction industry is a challenging setting, because organisations like BAM, which do not produce materials themselves, face particular hurdles: Sustainability targets can only be accomplished with the help of adequate supply chain partners BAM s supplier CRH sees sustainability effort as one way to retain an important customer Many suppliers are unable to comply and thus will hamper the focal organisation s efforts to achieve a higher standard in sustainability Research and implementation approach The issue arises how to best select suppliers for leveraging sustainability (and innovation)? The project will first assess the sustainability of the existing supply base, then identify drivers of sustainability by following a maturity approach, make suggestions and an improvement plan and finally measure the increased sustainability of the optimised supply base after implementation _HS_PH_HV_BV Page 2

3 BAM s and CRH s supplier portfolio will become more sustainable due to portfolio alignment measures and due to an perpetual inclusion of sustainability and innovation criteria in the supplier evaluation system Target Results of meeting Sustainability matrix Targeted project outcomes: Target: Tools for successful selection of sustainable suppliers Identification of criteria for sustainable supplier selection (will complement the supplier evaluation system with BAM/CRH) Final result: Increase sustainability in the chain Seed for fully fledged qualitative supplier evaluation system! innovativeness supplier supplier sustainability supplier Shift of PVO form hopeless to excellent suppliers, options for active or passive supplier development in the area of choice _HS_PH_HV_BV Page 3

4 Open issues in CSR and supply chain research What needs to be done? Confusion exists as to how CSR should be defined, but existing definitions are largely congruent One solution fits all definition for CS(R) should be abandoned, accepting various and more specific definitions matching the development, awareness and ambition levels of organizations 1) CSR definitions are describing a phenomenon, but fail to present any guidance on how to manage the challenges within this phenomenon 2) With CSR goals, communication between supply chain partners is even more important Not only in dyadic relationships, but In particular across the whole supply chain 3). Most research however focuses on buyer-supplier relationships, creating a mismatch between academic and practical relevance Innovating for sustainability requires the active involvement of a broader and more diverse network of actors 4) The innovation sustainability link needs more detailed investigation: what about supplier s maturity? Innovative suppliers are also the sustainable ones ( Porter-Hypothesis ). Without power of innovation organisations cannot change processes and products to become more sustainable. But: empirical results are mixed, innovativeness may only be a necessary condition Suppliers may first need to have reached a sufficient maturity level in order to address sustainability 1) Van Marrewijk, 2003, p ) Dahlsrud ) Seuring & Müller, ) Van Kleef & Roome, 2005, p _HS_PH_HV_BV Page 4

5 Developing a quick maturity test for supplies will allow to identify those suppliers with whom successful collaboration in sustainability is possible Conceptual approach to solution Research approach Suppliers need to first have reached a sufficient maturity level in order to address sustainability (e.g. with a firm having excessive maverick buying, no green procurement policy can work). It is not efficient to invest effort in immature suppliers This research project tests the innovationsustainability link. We introduce supplier maturity as moderating factor. In this way it will be able to effectively predict which suppliers have a potential to become partners for sustainability programmes We will provide suggestions on how to measure and eventually increase sustainability and innovation of the supply base, resulting in an evaluation tool to assess supplier s innovativeness and sustainability. Subsequently, suggestions will be deducted on how suppliers can differentiate itself towards customers Sustainability Sketch of concept Maturity Innovativeness Mature innovative suppliers are expected to be the sustainable ones Source: Porter / Kramer (2006), Lovett et al. (2009), Kibbeling / van Weele (2010), Wagner (2009, 2010), Schiele (2007) _HS_PH_HV_BV Page 5

6 An in depth qualitative analysis allows to identify sustainability drivers, which will be tested on a larger scale with a subsequent quantitative survey Project plan (1/2) 1. Development assessment model 2. Identification of sustainability drivers with suppliers Concept adaptation to the BAM / CRH situation Selection of commodity groups and suppliers for assessment In depth analysis of 2 or 3 BAM-CRH chains to find possibly relevant criteria for supplier sustainability and innovativeness evaluation Literature study to find additional relevant criteria for the evaluation tool Detailed plan next phases Roll-out of the model with BAM and possibly CRH suppliers (i.e. survey based assessment of their maturity, innovativeness and sustainability experience) A and B (large) suppliers to be assessed in + those subjectively considered important Knowing drivers helps to identify hopeless suppliers and those which can improve AS IS sustainability assessment of the current supplier portfolio s with survey Assessment model and detailed roll-out plan known Characteristics of sustainable suppliers known _HS_PH_HV_BV Page 6

7 Based on the understanding of sustainability criteria, improvement measures can be implemented and the results measured Project plan (2/2) 3. Implementation 4. Harvesting Action points for improvement of suppliers can be derived Recommendations portfolio alignment (reducing purchasing volume with hopeless suppliers) (passive) supplier development (agreeing on areas for improvement with suppliers) Plan for implementation (to be executed by BAM and CRH) The model should be tested on another similar firm Development generalizable tool for sustainability assessment and improvement (output for NEVI) Sustainability programme implemented (output for BAM and CRH) Write min. 3 papers (output for universities) Implementation plan Tool, papers, higher level of sustainability with BAM and CRH _HS_PH_HV_BV Page 7

8 In-depth qualitative analysis is in progress Current status Current status of project Concept adaptation to the BAM CRH situation is finished - Broad view on sustainability/csr - Ambition levels defined Identification of 3 specific BAM-CRH chains, interviews (semi-structured, inductive) in progress: - Bricks (more detail later on) - Concrete - Isolation Literature study in progress: - Criteria for supplier sustainability and innovation evaluation (e.g. capabilities to develop alternative business models) - Specific measures for sustainability in purchasing departments (e.g. diversity, safety) Elkington s Tripple P bottom line Relevant aspects of business management People: impact on the social environment Planet: impact on the ecologic environment Profit: the economic results Van Marrewijk s ambition levels Compliance -driven Profit-driven Caring Synergistic Holistic Sources: Van Kleef & Roome (2007), Carter & Jennings (2004), Elkington (1997), van Marrewijk (2003) _HS_PH_HV_BV Page 8

9 Important additional stakeholders emerged in the surroundings of the project Baby Lisa BUT: 32 students are currently at BAM/CRH _HS_PH_HV_BV Page 9

10 Multiple sustainability development projects can be found within and between BAM and CRH, both product and process related Examples of sustainability projects Waste-project Beeksteen Examples of sustainability projects Brickshield Smart-housing Etc. Originally, facing bricks had to have several construction characteristics (e.g. strength) => that function is now covered by the inner sand-lime brick, leaving facing bricks with the function of a raincoat => the beeksteen is developed based on that idea The idea emerged in the MT of CRH-ccs, in collaboration with finance, operations and marketing _HS_PH_HV_BV Page 10

11 The beeksteen is a good example of an innovation that has sustainability benefits across the whole supply chain, but it seems not really adopted yet Examples of sustainability projects - Beeksteen Traditional (Waal)bricks are 10 cm wide, a beeksteen is 6,5 cm wide, yielding several sustainable benefits 35 % reduction in amount of clay needed CO 2 emission (energy contains % of the cost price so this is very attractive) transport storage capacity Less mortar needed Lighter foundation needed More inner space, possibly used for isolation Easier to lay (back-protection of worker) Advantages for bricks producer, wholesaler, construction company, architect, property developer, contractor, bricklayer, customer, and more in general: people, planet and profit Nevertheless, this innovation cannot seem to find its way to the market through the supply chain The product is not cheaper than other facing bricks => most of the cost-advantages are indirect (although easy to calculate) Disadvantages: - More isolation is more expensive - More wall-ties needed on the construction site Unknown, unloved: construction is a very traditional industry => young, trendsetting architects can make a difference, but this is not the case (yet) Oftentimes the choice for a specific (Waal)brick is made early in the process: a 10 cm brick in the specifications cannot be changed easily => contact with the customer/architect in an early stage seems crucial! _HS_PH_HV_BV Page 11

12 Inductive analysis of the bricks-chain shows a strong link between BAM and CRH in the joint venture De Amstel, solely established for delivering bricks to BAM First chain - Bricks 50/50 Joint Venture between CRH-BMH and BAM De Amstel Wholesaler Royal BAM group CRH clay supplier CRH CRH Clay Solutions Production of bricks CRH bouwmaterialenhandel Wholesaler BAM Utiliteitsbouw Commercial and industrial buildings BAM woningbouw Houseconstruction End customer Government, property developer, etc. Other clay suppliers Other bricks suppliers Production of bricks Other wholesalers Wholesaler Other Construction companies Other suppliers e.g. isolation _HS_PH_HV_BV Page 12

13 The bricks-chain is a very decentralized chain with a strong but not singularrelationship between both companies First chain Bricks, some characteristics 50/50 Joint Venture De Amstel Wholesaler Royal BAM group Clay suppliers CRH CRH Clay Solutions Production of bricks CRH bouwmaterialenhandel Wholesaler BAM Utiliteitsbouw Commercial and industrial buildings BAM woningbouw Houseconstruction End customer Government, property developer, etc. Some characteristics Both companies are very decentralized Project-based very context-specific environment De Amstel is an administrative company: it allows BAM to buy directly at the producers and bricks are transported directly from the fabric to the construction-site BAM is sole customer of De Amstel, but De Amstel is not sole supplier for BAM, nor is CRH sole supplier for De Amstel Many CSR/sustainability projects can be found in this chain, both product as process related _HS_PH_HV_BV Page 13

14 Semi-structured, inductive interviews with multiple persons in the chain give a good first impression about sustainability development in the bricks-chain First chain Bricks, persons interviewed Commercial Manager CRH-BMN, Manager De Amstel Purchasing Manager BAM woningbouw, Manager De Amstel (scheduled) Product Technologist Royal BAM (scheduled) Director Sustainability CRH corporate 50/50 Joint Venture De Amstel Wholesaler Royal BAM group Director CSR Royal BAM Clay suppliers Operations Director CRH-ccs Director Kooy baksteencentrum CRH-ccs (scheduled) CRH CRH Clay Solutions Production of bricks Commercial Manager CRH-BMN CRH bouwmaterialenhandel Wholesaler Product Manager CRH-BMN, Manager De Amstel Purchasing Manager BAM Utiliteitsbouw, Manager De Amstel (scheduled) BAM woningbouw Houseconstruction BAM Utiliteitsbouw Commercial and industrial buildings CPO Royal BAM End customer Government, property developer, etc. Manager Knowledge-centre sustainability BAM Utiliteitsbouw _HS_PH_HV_BV Page 14

15 Success factors are mainly related to a strong motivation, a focus on relationship continuity and transparency & early involvement across the whole supply chain Some first observations - supportive Focus on relationshipcontinuity Sustainability and CSR is not only regarded as being green, but also means continuity in the relationship between companies regardless of the project-based market environment Explicit declaration of both companies of wanting to work together on sustainability/csr issues (BAM preferred customer of CRH) Both companies have a very transparent cooperation, leading to trust and commitment Strong motivation Strong believe that CSR and being sustainably is the only possible way to stay competitive Together with an intrinsic motivation to do good at both companies Transparency and early involvement across the whole supply chain Capability to deal with a wider variety of actors is crucial Early involvement across the whole supply chain leads to better performance on sustainability issues Transparency, crystallized as a complete open book policy, leads to more trust, commitment and possibilities to work on sustainability/csr options _HS_PH_HV_BV Page 15

16 Challenges around assessing and improving a supply chains sustainability revolve around a lack of knowledge, related measuring difficulties and performance Some first observations - obstacles Lack of knowledge There is a lack of knowledge on products and production processes higher in the supply chain, resulting in an hesitation in assessing these suppliers Sustainability and CSR goals of upstream companies are not asked for due to distrust: window-dressing is expected if these companies do not explicitly and proactively state their sustainability and CSR goals Measuring difficulties Lack of knowledge leads to difficulties in assessing products and production processes higher in the supply chain Indices to measure sustainability exist (e.g. GPR calculations, BREEAM), but new products can oftentimes not be found in the database, leading to an avoidance of these products by architects and customers Mismatch sustainability goals and KPI s Companies that state explicit sustainability goals oftentimes do not formulate matching performance indicators, both internally as externally Communicating sustainability goals internally sometimes seems very difficult to achieve, especially in very decentralized companies _HS_PH_HV_BV Page 16

17 What is to come Future actions Finish analysis of BAM-CRH supply chains Leading to an overview of possible success- and fail factors related to sustainable supply chain management => based on that, a first draft of the needed evaluation criteria can be made, together with suggestions on how to improve their relationship related to sustainability goals Finish literature study Find complementary criteria needed for evaluation and improvement suggestions Testing the evaluation model Test the evaluation tool on a larger scale, with a large part of the supply base of both companies to empirically validate our model and, based on the findings, improve the designed evaluation & development tool Test Porterand maturityhypotheses In addition, based on the findings, test the Porter-hypotheses and elucidate the influence of supplier maturity on reaching sustainability goals in the supply chain _HS_PH_HV_BV Page 17

18 Backup This report is intended exclusively for employees of the client. Its distribution, quoting of its contents and reproduction complete or in part for the purpose of conveying it to a third party requires the prior written consent of Universiteit Twente. The text and graphics summarised here have been used in the course of a presentation; they do not represent a full documentation of the event.

19 Specific measures exist for the sustainability of purchasing departments Backup The five most common dimensions found in CSR definitions Social dimension relationship between business and society Economic dimension socio-economic or financial aspects Voluntariness dimension - actions not prescribed by law CSR dimensions Stakeholder dimension stakeholders or stakeholder groups Environmental dimension the natural environment Sources: Dahlsrud (2006) _HS_PH_HV_BV Page 19

20 Specific measures exist for the sustainability of purchasing departments Backup A broad perspective on purchasing sustainability The environment Safety Diversity Purchasing sustainability Philantrophy / community Human rights Sources: Carter and Jennings (2004) _HS_PH_HV_BV Page 20

21 CS(R): voluntary company activities demonstrating the inclusion of social & environmental concerns in business operations and stakeholder interactions Interpretations / ambition levels Compliancedriven CS Providing welfare to society, within the limits of regulations from the rightful authorities. Motivation: CS is perceived as a duty and obligation, or correct behavior Profit-driven CS Integration of social, ethical and ecological aspects into business operations and decisionmaking, provided it contributes to the financial bottom line. Motivation: CS as a business case, i.e. promoted if profitable Caring CS Balancing economic, social and ecological concerns, which are important in themselves. Goes beyond legal compliance and profit considerations. Motivation: human potential, social responsibility and planet care are as such important Synergistic CS Search for well-balanced, functional solutions creating value in the economic, social, and ecological realms of corporate performance. Motivation: sustainability is important in itself; it is the inevitable direction for progress. Holistic CS Fully integrated and embedded in every aspect of the organization, aimed at contributing to the quality and continuation of life of every being and entity. Motivation: sustainability as only alternative. Source: Van Marrewijk, _HS_PH_HV_BV Page 21

22 This report is intended exclusively for employees of the client. Its distribution, quoting of its contents and reproduction complete or in part for the purpose of conveying it to a third party requires the prior written consent of Universiteit Twente. The text and graphics summarised here have been used in the course of a presentation; they do not represent a full documentation of the event.