measuring impact of supply chains_cascsr2009_sabineehrler_rev

8/2/2019 Measuring Impact of Supply Chains_CasCSR2009_SabineEhrler_rev

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Thesis, Certificate of Advanced Studies

in Corporate Social Responsibility

June 2009

Sabine Ehrler, [email protected]

Faculty of Economics and Social

Sciences, Geneva, Switzerland

Submitted to: Dr. Michael Hopkins, Director of MHC International

and Professor at Middlesex University of London,

[email protected]

Measuring Sustainability of

International Supply Chains

The Impact of Multi-National Enterprises in Developing

Countries


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2 CAS in Corporate Social Responsibility

Contents

Images and figures .............................................................................................................................. 3

Acronyms and abbreviations............................................................................................................... 3

Abstract ............................................................................................................................................... 4

1. Introduction .................................................................................................................................... 5

1.1 Context and issue of the study...................................................................................................... 5

1.2 Research question and goals......................................................................................................... 6

1.3 Methodology and structure of the study...................................................................................... 7

2. Measuring sustainability impacts in international supply chains................................................. 8

2.1 Sustainable supply chain as a concept.......................................................................................... 8

2.2 Measurement frameworks............................................................................................................ 9

2.3 Stakeholder interest in sustainable supply chains ........................................................................ 9

2.4 Why we need to measure supply chain impacts......................................................................... 11

2.5 Methodology and frameworks for measurements..................................................................... 13

3. Case studies................................................................................................................................... 15

3.1 Oxfam and Unilever measure social impact in Indonesia........................................................... 15

3.2 H&M maps stakeholders within their supply chain .................................................................... 17

3.3 Giving a voice to woman banana workers of Chiquita................................................................ 20

4. Sustainable supply chain impacts in tourism............................................................................... 24

4.1 Measuring sustainability of supply chains in tourism ................................................................. 24

4.2 Establishing a process for measurement .................................................................................... 25

5. Conclusions and Outlook .............................................................................................................. 27

4.1 The content: lessons learned and recommendations................................................................. 27

4.2 The methodology: work ahead ................................................................................................... 28

Literature........................................................................................................................................... 30


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Measuring Sustainability of International Supply Chains 3

Images and figures

IMAGES

Image title page: House Boat in Kerala, India part of the supply chain in tourism,

Sabine Ehrler

FIGURES & TABLES

Fig. 1: Processes and methodology for a measurement system, p13

Fig. 2: FMCG case study of Unilevers supply chain, p16

Fig. 3: Textile case study of H&Ms supply chain, p19

Fig. 4: Food production case study about Chiquitas women banana workers, p22

Fig. 5: Mapping stakeholders of international supply chains in tourism, p24

Tab. 1: Establishing a process for measuring supply chain impacts in tourism, p25

Acronyms and abbreviations

CSO Civil Society Organization

CSR Corporate Social Responsibility

FMCG Fast-Moving Consumer Goods

MNE Multi-National Enterprise

NGO Non-Governmental Organization

UI Unilever Indonesia


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Abstract

Multi-National Enterprises (MNEs) have a considerable sustainability impact in

developing countries, particularly through their international supply chains. The

impact of MNEs is not restricted to their own employees and direct suppliers only.Managers buying practices, negotiating power and scaling up opportunities can have

a signal effect for business practices in the whole sector, in national markets and in

networks of affiliated companies. Researchers have not yet addressed

measurements, particularly of sustainable supply chain impacts, in much detail. I

believe that data into these issues are much needed, not only for improving

sustainable management of supply chains by companies, but also to find solutions for

the overarching, pressing issues of todays world such as poverty, climate changeand water scarcity. Discussions about new roles of businesses, governments and

CSOs need to be based on in-depth insights of supply chains.

In this study, I look at frameworks for measuring sustainability impacts of MNEs in

their international supply chains. After clarifying some core definitions, I elaborate

different stakeholders interest in international supply chain development and reasons

for measurement. I outline basic methodological steps for measuring impacts and try

to distinguish them in different case studies. I look at one case study each of fast-

moving consumer goods (FMCG), textile industry and food production. Finally, I also

outline what measuring sustainability impacts of supply chains in tourism could look

like. I conclude with challenges of content and methodology in measuring

sustainability impacts of international supply chains.


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1.Introduction

1.1 Context and issue of the studyGlobalization, Millennium Development Goals, public-private partnerships These

are only some of the buzzwords that have been discussed when looking for solutions

of sustainable development and poverty alleviation in developing countries. In this

context, Corporate Social Responsibility (CSR) and sustainable supply chain

management as concepts have gained ground. More and more, multi-national

enterprises (MNEs), civil society organizations (CSO) and governments consider

working together to achieve similar goals and solve these pressing issues of todays

world. I see international supply chain management of MNEs as a potential field for

positive influence on sustainable development of markets.

Hopkins1 estimated that, in 2005, MNEs create about one out of seven or eight jobs

worldwide directly or indirectly. Furthermore, he argues that pressure is brought

about to increase both the quality and pay of labour related to MNE operations.Jobs

within MNEs might not create the big bulk of employment, but tend to set standards

and bring discussions about working conditions to a next level.

In this thesis, which I am writing for my Certificate of Advanced Studies in Corporate

Social Responsibility of the University of Geneva, I will therefore particularly look at

international supply chains and how one can measure their impacts in terms of

sustainability.

Managing supply chains in a sustainable way has been considered as most

challenging: Managing supply chain so as to maximise buying power, flexibility and

efficiency, while at the same time upholding any commitments to responsible supply

chain management that companies may have made can, therefore, be a substantial

challenge2. However, my underlying assumption or belief is that business can

contribute to a more sustainable development. The question is more about how the

private sector can contribute and how tasks can be divided between governments,

civil society organizations, the communities themselves and the private sector.

1 2007, p1532

Insight 2004, p3


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Increasing pressure on MNEs and the need to plan, value, evaluate and improve

impacts of businesses in developing countries also increases the need for more

concrete measurements about their supply chains impacts.

1.2 Research question and goals

In the course of evolving CSR concepts, companies face enormous challenges: they

need to quantify the link between corporate actions and environmental, social and

financial performance. () Appropriate measurement systems provide the proper

tools for feedback and corrective actions.3 In this study, I want to look particularly at

existing measurement frameworks for sustainable supply chain impacts. I will try to

integrate them into a new framework and elaborate how I would use the framework to

contribute to a more detailed insight into this issue, and subsequently its contribution

to more sustainable development. In the course of this study, I will answer my

research questions:

1. What research methodology and framework exist to explore sustainability

within international supply chains of MNEs, and how have they been put into

practice?

2. How can I integrate my findings in a conceptual framework for measuring

sustainability impacts in international supply chains in tourism?

3. What content and methodological issues need to be addressed in future in

order to elaborate more comprehensible studies of sustainability impacts in

international supply chains?

These research questions already implicate that the findings should lead to a more

in-depth study about measurement frameworks for supply chain impacts. I will comeback to this point in my conclusions.

Although frameworks may be not entirely adapted to real situations and measures

may be imprecise, I agree with Epstein4 saying, it is still relevant. () Currently,

most companies do not include extensive measures of social and environmental

impacts in their decision-making processes and ignore what are potentially significant

3 Epstein 2008, p1644

Epstein, 2008, p197


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effects. Therefore, researchers must elaborate measures that are more detailed.

Business managers can link these findings to strategy, and CSOs, governments and

other institutions involved in developing countries, can introduce new forms of

collaborations between them and the private sector.

1.3 Methodology and structure of the study

Due to limited resources and scope of this study, conducted to achieve a certificate of

advanced studies in Corporate Social Responsibility, I mainly focus on existing

literature and state-of-the-art studies in the research area. However, I also gathered

some own data during a professional mission to India, looking at the touristic supply

chain of the Kuoni Travel Holding Ltd, my employer. During the field mission, I talked

to more than a dozen people: some of them were employed within the Kuoni Group;

others are representatives of our supply chain.

In chapter two, I will clarify definitions I use, elaborate the driving stakeholders

interest in this issue, analyze existing frameworks and go more into detail why

measurement of impacts is useful. I will also look at different components of a new

methodology for measurement. In the third chapter, I will look at different case

studies, drawing one example each of fast-moving consumer goods, textile industry

and food production. In chapter four, I will outline what such a study could look like

for measuring supply chains in tourism. In my conclusions, I will focus on content

opportunities detailed research would provide. Finally, I will outline the need for a

more comprehensive and well-founded methodology for measuring sustainability in

international supply chains.


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2.Measuring sustainability impacts in

international supply chains2.1 Sustainable supply chain as a concept

According to Porter5, every firm is a collection of activities that are performed to

design, produce, market, deliver, and support its product. All activities together form

the firms value chain, which is embedded in a larger stream of actors and activities.

Furthermore, suppliers not only deliver a product but can also influence a firms

performance in many other ways

6

. The supply chain, therefore, cannot be seen asan independent externality to a firm, but is an integral part of the value chain, also in

terms of sustainability performance. In this study, I only look at international supply

chains of MNEs, particularly in developing countries.

Sustainability performance includes the triple bottom line it looks at economic, social

and ecological implications. The most frequently quoted definition is that of the

Brundtland Report 1987: Sustainable development is a process of change in which

the exploitation of resources, the direction of investments, the orientation of

technological development; and institutional change are all in harmony and enhance

both current and future potential to meet human needs and aspirations7.

Within companies, sustainable supply chain management is part of the CSR strategy.

Here, I use Hopkins definition of CSR: Corporate Social Responsibility is concerned

with treating the stakeholders of a company or institution ethically or in a responsible

manner. Ethically or responsible means treating key stakeholders in a manner

deemed acceptable in civilised societies. Social includes economic and

environmental responsibility. Stakeholders exist both within a firm and outside.8

When I talk about measuring impacts in this study, I refer to the often-used concept

of input, output and outcomes9. For example, a company makes an input of

5Porter 1985, p36

6Porter, 1986, p36

7

Brundtland Commission 19878

www.mhcinternational.com9

Epstein 2008, Woods 1991


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workforce and budget to do code training for employees (output). However, the

outcome, i.e. the change of behaviour of employees, would be the most interesting

impact to measure. Currently, companies focus mainly on input and output

measurement in their sustainability reporting. This covers what companies want to

disclose10, and what they feel capable of disclosing.

2.2 Measurement frameworks

Researchers and CSR professionals have proposed different frameworks for

measuring CSR, mainly looking at all different aspects of CSR. Donna Woods11

theoretical framework about CSR proposes three layers of components: principles of

CSR include legitimacy, public responsibility and managerial discretion; processes of

responsibility look at business environment scanning, stakeholder engagement and

issues management; finally, outcomes include issues such internal stakeholders,

external stakeholders and external institutional effect. Sustainable supply chains

represent only one specific sphere of influence. According to Woods model, here I

look at one of the external stakeholders within the third layer of outcomes of CSR.

When looking for measuring frameworks that specifically elaborate on sustainable

supply chains, existing frameworks such as the one of Donna Wood do not provide

in-depth standards. Many frameworks are developed to evaluate CSR of a company

in general and do only give little guidelines about measuring impacts of supply

chains. Measurement of sustainable supply chain impact is at its very early stage of

elaboration and I will try to contribute to this debate in the following study.

2.3 Stakeholder interest in sustainable supply chains

Different actors in the field of sustainable development are interested in sustainability

impacts in international supply chains of MNEs. They have become driving forces of

discussions about business role in developing countries. I will briefly look at interests

of civil society and the private sector, although there are other stakeholders with

different interests again.

10Hopkins 2007, p161

11Woods 1991


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Stakeholders from private sector and civil society organizations (CSOs) generally

acknowledge that international business activities and investments in developing

countries have the potential to create positive or negative impacts.12

Oxfam, an internationally renowned organization for development cooperation, on the

one hand believes that the private sector can be an important engine of

development (). Foreign direct investment has been seen as being key to pro-poor

development for what it brings in terms of wealth creation, employment, technology

transfer and other components of poverty alleviation.13 On the other hand, civil

society organizations fear that poor peoples interaction with international companies

puts them in a vulnerable condition, due to indirect relationships, prize pressure and

short-term contracts in MNEs supply chains.

Companies face real ethical challenges associated with using supply chains in these

[developing] countries, particularly with respect to labour standards abuses in

suppliers operations. As many companies have recognised, failure to respond

effectively to these challenges as they move into less developed markets can give

rise to significant operational and reputational risks that can threaten to undermine

any potential gains from doing so.14 Businesses therefore have an inherent

reputational and operational interest in ensuring good sustainability performance in

supply chains, particularly in high-risk developing countries.

Businesses have taken action that cover key labour issues and usually include codes

of conduct, risk assessments, training of staff, improvement plans and reporting15.

However, buyers tend to be appraised on price, buying margin, cost saving, etc.

They receive plaudits for introducing hot new ranges and exciting products at low

cost. They are not encouraged to take a broader or longer view, to visit supplier

factories or consider long-term intangibles, such as trust or company reputation.16

This places enormous challenges on professionals working with sustainability in

supply chains, in the private sector as well as within CSOs. Overall, there might be

differences in values and underlying assumptions between CSOs and businesses17,

but still there are common goals to work towards in joint action.

12 Clay 2005,p12

13 Clay 2005, p8

14 Insight 2004, p315

Hopkins 2007, p15516

Insight Investment Management Limited (2004), p32, cited in Hopkins (2007), p150.17

Clay 2005


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2.4 Why we need to measure supply chain impacts

There are of course various reasons that make organizations consider corporate

social responsibility. These include regulations, customer and environmentalist

pressure, brand image or competitive advantage. Regarding sustainability in supplychains, I will not be able to elaborate a comprehensive list of arguments in the course

of this work because arguments are too plentiful. However, I still intend to cover

some core motivations:

Firstly, measuring supply chain impacts is an essential part of the management

process. Without a clear analysis of data, managers will not be able to develop a

vision and adopt clear targets. After having established a sustainability policy,

gathering information about suppliers performance is key to understanding

compliance, risks and finally impacts of business. Only according to this fundamental

basis, managers can develop recognition and support measures, such as awards

schemes, training, technical assistance or also sanction systems.

Secondly, The Insight report18 on buying practices in international supply chains

shows that quite often pressure is put on suppliers needlessly: Pressure that

influences supplying negatively result simply from bad buying practices

inefficiencies, indecision, badly designed incentives and a lack of trusting business

relationships19. Measurement of sustainability issues and examination of supply

chains in this regards should add to a better understanding of impacts and

opportunities on how to do better, particularly in extensive, high risk, developing

country supply chains.

Thirdly, many social and environmental impacts may appear to have no market

consequences and no financial effect, but many of the externalities are internalized infuture periods and do affect the operations and profitability of the firm in the long

term.20 In order to consider suppliers long-term needs, profitability and

sustainability, companies need a comprehensive understanding of how stakeholder

and supplier relations work. Only by making the business case for social and

18

200419

Insight 2004, p420

Epstein 2008, pp163-164


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environmental performance can managers truly integrate social and environmental

aspects into their business strategies.21

Fourthly, we need to evaluate the trade-offs and decide which sustainability projects

provide the largest net benefit to both sustainability and financial performance22.

Measuring the impacts of social and environmental standards systems will provide

the evidence to justify continued support for standards programs. Scaling up of these

systems will create feedback loops to strengthen their effectiveness.23 In order to

acknowledge benefits, it is necessary to measure and communicate specific details

about those benefits.

Fifthly, a well elaborated measuring process can make poor people a visible and

integral part of the analysis of the net impacts of a companys operations.()

considering the whole value chain.24 This is not only important from a business

perspective, where the most vulnerable need to be considered for risk and

reputational reasons, of course, but it is also inherent for the people affected

themselves.

Finally, professionals in this field need to raise awareness about the potential

impacts of () business choices and operations and thereafter need to identifysome potential for real change.25 I believe that measurement about current CSR

activities and impacts are core to look back and evaluate and to look forward and

plan sustainability impacts in international supply chains or in other words go for

real change.

21Epstein 2008, p164


23

www.isealalliance.org/impacts24

Clay 2005, p825

Clay 2005, p9


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Theoretical

Framework

2.5 Methodology and frameworks for measurements

A methodology of measurement consists of different processes. The measurement

needs to be built on a theoretical framework, which forms the basis for the issues we

want to explore, and how we will explore them26

. Subsequently, measurementindicators have to be identified and a research methods (e.g. surveys, secondary

data, interviews) need to be developed.

Fig.1: Processes and methodology for a measurement system.27

Firstly, a theoretical framework is fundamental to clarify principles of understanding28.

For example, it defines how we perceive reality do we see the world as a reality in

itself, or do we rather see it as a constructed and perceived image of human beings?

Do we look at single realities? Or do we rather cover multiple realities of different

stakeholders29? Furthermore, do we concentrate on interactions between different

actors? Do we want to discover new data in an inductive process, or are we aiming at

verifying hypothesis in a deductive procedure? These principles of how to look at the

world will also largely influence the set-up of the whole measurement processes.

Epstein30 states, Collecting these data differs from obtaining traditional financial

measures from a cost accounting system since organizations must first identify

multiple stakeholders and understand their objectives. Furthermore, relevant

measures might rely on methods more typically used in statistics, sociology, social

psychology, and economics, and which are only now being applied to management

decision-making. I believe that researchers have not yet intensively explored

theoretical frameworks for measurement of sustainable supply chain impacts, but I

will further elaborate this issue in chapter three.

26Curtin & Busby 1999

27Flick 2006, Long 2001

28

Flick 2006, p5129

Long 2001, p5130

2008, p144

Issues Indicators

Research

Methods


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Secondly, we need to go from theoretical framework to issues. It defines the scope

and area of measurement, the goals, and the focus of research. Today, different

frameworks for measuring sustainability impacts exist, even though they do not focus

on supply chains only. GRI is probably the most prominent framework or at least

tends to be used most often by companies for their reporting structure. The Dow

Jones Sustainability Index also includes a comprehensive set of economic,

environmental and social criteria. I have already introduced Donna Woods

measuring framework in one of the former chapter. Even though all of them

emphasize internal and external stakeholders, none really gives a more detailed

guideline on how to approach or measure impacts within supply chains.

Thirdly, the framework is translated into concrete indicators and operationalmeasures. What indicators to use is a critical question as it also defines and shapes

results. Specific and appropriate measures that reflect the sustainability strategy are

essential to monitor the key performance drivers (inputs and processes) and assess

whether the implementation of the sustainability strategy is achieving its stated

objectives (outputs) and thus contributing to the long-term success of the corporation

(outcomes)31. Finally, it is a matter of putting the indicators into practice in order to

collect data. Concrete data collection methods such as focus groups, interviews,surveys or others need to chosen. Here, most commonly a triangulation of methods

is adopted32. Thereby, different research methods such as the ones mentioned

above are used in order to reach the most appropriate representation of reality.

In the next chapter, I will look at these steps from a more practical point of view.

While reviewing some case studies about measurement of sustainable supply chains,

I will also try to identify former successes and future opportunities for a profound

measurement methodology.


32Epstein 2008, p190; Denzin 1989, pp26-27


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3.Case studies

3.1 Oxfam and Unilever measure social impact in IndonesiaUnilever and Oxfam designed and rolled out a joint research study in 2005, exploring

the links between international business and poverty reduction, looking particularly

into the entire value chain and impacts of business of Unilever Indonesia. In this

research, they covered impacts on the macro-economic level, employments policies

and practices, Unilever Indonesias (UI) value chain impacts from suppliers to

distributors, UIs interactions with poor consumers and UIs wider impact in the

community, on the business sector and government in Indonesia.

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FINDINGS OF THE STUDY

Looking at Unilevers supply chain in Indonesia, the joint research team provides four

findings or insights into its value chain impact: Firstly, Unilever Indonesias supply

chain works based on high-volume, high-technology and high-value-added34 and

therefore boosted product development in terms of technology and quantity for local

suppliers. Secondly, producers of raw material at the very beginning of the supply

chain tend to get less shares of Unilevers return. However, producers of the niche

product of black soy beans benefit more from working with Unilever because the

alternative supply chain they have established removed intermediaries and allowed

producers of raw material to count on a better prize. On the other hand, they are put

in a lower negotiating power position due to UIs strength. The study also shows that

there is only a limited business case for alternative supply chains such as the one

described above. Thirdly, they found that Unilever Indonesia also has a large impact

in distribution chains approximately 1.8 Million small stores and street vendors sell

UI products35. Oxfam and Unilever argue that impacts of the distribution channel are

understood even less than impacts of the supply chain36. Finally, they have made an

attempt to calculate overall impact of the value chain in terms of full-time equivalent,

33Clay 2005, p13

34

Clay 2005, p1635

Clay 2005, p1836

Clay 2004, p18


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but also in terms of the total value generated in monetary terms, which is

conservatively estimated at US$ 633 million.37

In their conclusions, Oxfam and Unilever find that there is still little understanding of

sustainability impact in supply chains of MNEs. They appreciate the large potential to

generate employment and income and the importance of product-delivering, wealth-

creating, skills-transferring role38. They also understand that businesses are only

one participant alongside other business, governments, international institutions, and

civil-society organizations and emphasize that there are quite large differences

between business sectors. They therefore suggest that, for example, extractive

industries and highly integrated fast-moving consumer good (FMCG) companies

must be studied in different research projects39

.

EVALUATION & COMMENTS

This study covers the following steps from theoretical framework to issues, indicators

and research methods, as the methodology has been elaborated in the former

chapter:

Fig. 2: FMCG case study of Unilevers supply chain

37

Clay 2005, p1838

Clay 2005, p2239

Clay 2005, p21

Theoretical

Framework

There is no evidence for a theoretical framework.

IssuesThis study looks mainly at pro-poor issues of a supply chain in a developing country.

Thereby, it focuses on social impacts of the supply chain on different stakeholders.

IndicatorsThey look at quantitative indicators such as number of suppliers, monetary value

generated and the distribution of benefit in percent. They also include qualitative

measures including a stakeholder mapping, case studies about the most vulnerable actors

in the supply chain and network that develop through alternative supply chains.

Research

Methods

Data was gathered from interviews with more than 400 individuals, representing different

stakeholder groups such as management, suppliers, distributors and organizations related

to Unilever Indonesia.


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I truly acknowledge the value of this research study as being one of the few that look

at development impacts of an MNE in a comprehensive way. Looking at their supply

chain impact, they have probably touched issues and measures that have not been

looked at in this detail before and have therefore contributed to a much better

understanding of supply chain mechanisms of an MNE. However, I would criticise

that conceptual, underlying assumptions of this research have not been looked at in

more detail before setting up the framework for measuring impacts. The joint

research team have taken the following conceptual conclusions after they have

conducted their study: In the future a stronger rights-based approach, more gender-

differentiated data, and a more people-centred methodology would enhance our

findings greatly.40 Furthermore, they found that they rather should look at different

stakeholder perspectives equally instead of investigating different issues mainly from

looking at the supply chain from the companys point of view. I believe it is very

important to clarify the theoretical framework at the beginning of a study, and to

review this theoretical understanding during the course of research as well. It matters

if you want to talk about reality or perceptions of reality, or if you want to include

gender and the notion of power. These methodological implications might change the

whole framework including indicators and research methods.

3.2 H&M maps stakeholders within their supply chain

H&M included quite detailed information about CSR activities addressed at their

suppliers and about their supply chain impact in their Corporate Social Responsibility

Report 200741.


They have included information about different stakeholders in their supply chain,about their code of conduct, control mechanisms and sanctions:

- Their suppliers must meet H&Ms code of conduct, which includes core ILO

fair labour standards, health and safety, working hours, etcetera. Their code of

40Clay 2005, p8

41www.hm.com


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conduct is also available on their website42, which adds a lot of transparency

to their policy-making process.

- H&M has also set up clear management structures, which allows them to

integrate supplier compliance and procurement management. This, for

example, includes placing orders correctly without last-minute changes in

order to prevent bad working conditions43.

- Internal auditors control compliance against the code of conduct and H&M

subsequently reinforces their code through a clear sanction system. They

audit and monitor almost 100% of their suppliers. Furthermore, they make

publicly available that controllers follow an inspection check-list containing

over 100 points. They state that state that they interview the suppliers

management, inspect all factory premises, check documentation such as

payroll reports and time cards and when necessary also interview staff at the

factories.

- H&M attempts to quantify all CSR activities within their supply chain: The CSR

managers report, for example, the number of audits and points checked within

this audit. They also disclose the number of violations against the code andthe number of trainings conducted in order to improve capacity building within

their supply chain.

- Finally, these actions are also supported by external organizations such as the

FLO, which H&M is working together with. For specific issues such as

influencing international and national policies, conducting trainings or capacity

workshops, H&M is also collaborating with NGOs.


The CSR Report of H&M introduces a slightly different approach to measuring

impacts in supply chains. However, it is an approach used by companies quite often.

I included H&Ms CSR Report in my thesis for two reasons. On the one hand, I

believe that H&M is relatively advanced in its measurement its impacts, particularly in

developing countries where its production centres are. On the other hand, this CSR

42 H&M (n.n.)43

H&M 2007, p8


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report clearly shows the limitations of measuring supply chain impacts from within a

company. More research is needed to clarify the following processes: firstly, the

theoretical framework of the planned research project could be looked at in more

detail. Secondly, a joint venture between an uninvolved party and H&M could also

give a broader insight into different stakeholder perspectives, which might not also be

obvious and accessible for a company. Finally, a more detailed analysis would

include a much-needed triangulation of methods, such as interviews, focus groups

and other research methods.

Fig. 3: Textile case study of H&Ms supply chain.

The H&M CSR Report 2007 gives a good example of monitoring, reporting and

disclosing knowledge and data about sustainable supply chain impacts of a multi-

national enterprise. H&M shows that they have been implementing the code of

conduct within their supply chains for quite some time and do relatively well on these

issues. They have started mapping their supply chain and identifying important

stakeholder groups within those. However, I believe that they could do even better in

this matter by adopting an approach that focuses on relations and networks instead

of just extracting single stakeholders. In this process, there is a need for capturing

power relations, dependency structures and other parameters that highly influence

actors within a supply chain. Furthermore, their attempt to quantify their CSR outputis extremely important. However, there are still gaps to fill. For example, it would be

Theoretical

Framework

There is no evidence for a theoretical framework.

IssuesThe CSR Report of H&M maps out their suppliers, looks at codes of conduct and their CSR

activities addressed at suppliers.

IndicatorsH&M uses quantitative and qualitative indicators. The former include, for example,

number of production offices, number of audits, and number of violations against the

Code of Conduct. The latter include trends identified as well as description of capacity

development and joint initiatives, where numbers are more scarce.

Research

Methods

Data was gathered through audits. Other methods and data creation systems are not

indicated.


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interesting to see how exactly the implementation of the code has changed working

conditions for factory-workers in productions sites.

Even though CSR measures and activities for H&Ms supply chains are quite

advanced, the report still shows that there are limitations to measuring sustainability

impacts of supply chains, if the research is being done from within the company. As

mentioned above, companies do disclose the issues that they find most interesting.

In general, these themes are linked closely to core business, or to core stakeholders.

However, they do not necessarily focus on stakeholders that are affected the most by

companies. In order to overcome this dichotomy, a more integrative research

approach, which is based on fundamental theoretical considerations, is needed. For

the reasons explained above Figure 3, I believe that this research needs to be donewith partnering CSOs, research think tanks, or by research institutes in the ideal

case.

3.3 Giving a voice to woman banana workers of Chiquita

Marina Prieto is a specialist in CSR and womens rights and did a doctoral study on

CSR in Latin America - Chiquita, Women Banana Workers and Structural

Inequalities 44. In her work, she looks at the implementation of Chiquitas code of

conduct within the supply chain from the perspective of Chiquita management and

the women banana workers of suppliers. Furthermore, she addresses structural

inequalities, mainly regarding gender, within the banana sector and outlines how

these influence working conditions of women in Nicaraguas banana fields45.


Prieto congregates her study around three main conclusions. Firstly, she finds that

women banana workers in Nicaragua do not know their rights. Neither Corporate

Responsibility initiatives nor the Code of Conduct of Chiquita are known to them.

Furthermore, women workers face discrimination and harassment at their work

place.46

44

Prieto 200645

Prieto 200646

Prieto 2006, pp87-88


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Secondly, the researcher states that Chiquita has quite a good policy, but

implementation lags behind. She explores the perspective of Chiquitas CSR

manager and summarizes the challenges he comes across. From this point of view,

Chiquita has some considerable problems with implementing CSR measures due to

being a large multinational company, where control is not always applicable.

Furthermore, they have many independent suppliers, which makes it even more

difficult to have a positive influence. Finally, there is a lot of price pressure from

retailers, which in turn reduces margins and budget for investment in sustainability.47

Thirdly, she looks at the political economy of the banana sector, and uncovers

structural pressures and inequalities. There are environmental stress factors such as

hurricanes that have a negative influence on sustainable development of allbusinesses involved in the banana sector. She also elaborates buying policies of

retailers and pricing practices to be a structural, rather negative element of influence.

Finally, she includes the gendered nature of the banana sector and looks at societal

perception of sexual harassment and unequal employment opportunities for men and

women. She finds that these inequalities are widely accepted within society.48

In her conclusions, Prieto recommends that Chiquita managers initiate training

programmes for men and women banana workers, but also for upper management

staff of suppliers. In order to improve the situation of women banana workers in

particular, different stakeholders involved need to listen to women banana workers

voices and provide women-specific benefits such as safety on the way to work or

maternity leave. However, Chiquita managers themselves can solve not all problems.

To tackle structural problems, a sector-wide approach should be implemented.

Governments, international companies and their competitors, suppliers, CSOs and

regulators need to work together to solve these underlying structural problems of the

banana sector.49

47

Prieto 2006, pp88-8948

Prieto 2006, pp90-9149

Prieto 2006, pp92-93


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The study contributes to the discussion about measuring supply chain impacts in

several ways.

Fig. 4: Food production case study about Chiquitas women banana workers

Prieto based her research and findings on a theoretical framework, congregated

around participative action-research methodology and feminist approaches to

sociology.50 Due to the academic background of the research, she addressed these

issues not only in a thematic, but also in fundamental ways. I particularly appreciate

that she has chosen a participatory action-research approach, where people and

their perceptions of reality are put before the actual notion of reality.

Her study makes us better understand how management processes actually affect

people on the ground, particularly women. This leads her to practical

recommendations about implementation and development of CSR. She also raises

questions about structural problematic of business sectors at the national or even

global level. In my opinion, this adds another dimension to CSR, as it acknowledges

the limits of initiatives of single enterprises. Hereby, she truly takes account of

problems that are too great for a company alone, and therefore have to be tackled by

50Prieto / Bendell 2002

Theoretical

Framework

Prieto applies two theoretical frameworks: participative action-research methodology

and feminist approach to mainstream social science

IssuesThis study focuses on perceptions of Chiquita management and women banana workers

as well as underlying structural characteristics of the banana sector in Nicaragua.

Indicators

Prieto analyses documented policy papers such as the code of conduct and its dispersion

(i.e. knowledge of workers about the code). She includes indicators such as mappingstakeholders, awareness rising programs and stakeholder dialogue, but also looks at

perceptions of discrimination and harassments. Furthermore, she explores external

indicators such as environmental stress, buying policies and gender issues.

Research

Methods

Apart from doing research of Chiquitas documents, Prieto focuses on qualitative field

research methods such as focus group discussions and interviews.


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joint initiatives of a sector. Furthermore, this also raises new questions about the role

of businesses, and how responsibilities can be shared between governments, CSOs

and the private sector.


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4.Sustainable supply chain impacts in tourism

4.1 Measuring sustainability of supply chains in tourismIn tourism and CSR (where I am working), measuring impacts of supply chain

activities has even been less an issue than in many other sectors. Research has

mainly focused on manufacturing rather than the service sector. Nevertheless, tour

operators are dependent on a large supply chain in destinations, including

accommodation, excursion and transport providers. Due to their buying power,

purchasing policies and practices, they can influence suppliers and thereby facilitate

sustainable development of destinations.51 Acknowledging that tourism has had a

profound and irreversible effect on many destination areas52 is not new to tourism

professions. On the contrary, numerous sustainability labels53 give evidence about

the tour operators, CSOs and customers interest in selling and buying products

known to be more green, more social, more community related. Labels in tourism,

which measure sustainability performance of suppliers, usually cover accommodation

providers only. However, international supply chains of a tour operator look a lot

more complex:

Fig. 5: Mapping stakeholders of international supply chains in tourism

51Font 2006, p1

52 Curtin/Busby, p13553

www.fairtourismsa.org.za,, www.travelife.eu

Restaurants

and bars

Excursison

providersProducers of

food and goods

Local service

providers, e.g.

laundr

Transport

services

Destination

Management, e.g.

in IndiaBusiness

support

providers

Governmental

service, e.g.

waste

Tour operators

Customers

Country

representatives

Guides

Local

communities

Hotels


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4.2 Establishing a process for measurement

Considering the findings of the former chapters, I would look at the following steps for

measuring sustainability impacts of international supply chains:

Methodological

process

Descriptions

Defining a

theoretical

framework

Considering participatory, actor-related network approaches, which treat all

stakeholders responsibly

Defining core

issues &

identifying

indicators

The following issues could be addressed and measured by indicators

distinguished for each issue:

Setting the scene describing the main stakeholders

- Mapping the main stakeholders in tourisms supply chains

- Exploring how these stakeholders are related to each other, e.g. in

terms of power structures, influence, negotiation practices

Looking at focus areas:

- Economic benefit: quantitative measures about income generation,

divided by governments, international companies, local suppliers,

local people and other stakeholders

- Environmental footprint: analyzing consumption and trends in

energy and water consumption, waste generation, land use, carbon

emissions, waste water disposal and other environmental measuresin hotels, by excursion providers and transport companies in supply

chains

- Working conditions: exploring how different stakeholders within

the tourism supply chain perceive their working conditions.

Additionally, comparative research of different countries might be

interesting.

- Benefit to communities: measuring how communities benefit, and

perceive to benefit from tourism. Indicators might include cultural

awareness and exchange, monetary benefit, and others.

For an internationally operating tour operator, it would be particularlyinteresting to investigate the following questions:

- Which incentives will convince suppliers to increase their

sustainability performance?

- How are buying practices of a tour operator influencing

sustainability in its supply chain?

- Where can the tour operator use its influence most effectively?

Defining

research

methods

All of these indicators could be investigated through triangulated methods,

looking at written internal and external documents, conducting interviews

with single stakeholders and doing focus group research.

Tab. 1: Establishing a process for measuring supply chain impacts in tourism


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The goal of such research is to find potential for short-term, medium term and long-

term change and more sustainable development in supply chains of the tourism

sector.


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5.Conclusions and Outlook

5.1 The content: lessons learned and recommendationsIt needs to be recognized that reality, or the construction of reality, is hugely complex

therefore is not entirely comprehensible and measurable. However, I believe that

there are proxy figures such as different stakeholders perceptions that seem to be

valuable approaches for exploring sustainability impacts in supply chains. As Clay

has said, I believe that even though they [the measurement indicators] are only

indicative, the figures are still enlightening54.

Due to these complex settings, sector specific indicators and measurement are

needed for public-policy discussions amongst governments, CSOs, and businesses.

Most important, however, is to acknowledge that businesses cannot be the only

solution to sustainability in supply chain impacts. On the contrary, there are structural

problems55 that need to be identified and tackled by industry-wide initiatives56, or

even by governments, CSOs or other institutions involved57.

In order to collect and manage a good data basis, I believe that not only companies

should be measuring their supply chain impacts. I suggest that also researchers of

academic institutions engage into these issues. They can contribute valuable

information about theoretical approaches, perceptions of less heard voices and

structural problems. A goal of such research could be to distinguish between

business opportunities, but also to explore areas where there are incompatible views

and values to businesses and social and economic problems of a developing

country58. For example, companies might not tackle problems of the most vulnerable

actors. In contrast, CSOs or governmental institutions must then address these

issues. Research can help elaborating potential of businesses in providing more

sustainability in value chains, but also elaborating future needs of governmental

regulation and CSO support.

54Clay 2005, p80

55Prieto 2006

56Clay 2005, p85

57 Prieto 2006, p9358

Clay 2005, p112


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Finally, it is important to ensure that research is followed up by, for example, a

strategic business evaluation, and collaboration between CSOs, businesses and

governments. The goal is not to hinder the private sector in doing economically

sustainable business, but to do it in a better way. This includes social and ecological

aspects and takes into account different stakeholder perspectives of international

supply chains.

5.2 The methodology: work ahead

As we have seen from the few case studies, there are significant gaps in

methodological guidelines for studying sustainability impacts of international supply

chains. A lot of work is needed for exploring a suitable theoretical framework, and its

practical implication. There is also no clarity about which issues should be measured

and how they can be translated into concrete indicators. Finally, it is also necessary

to investigate further on how to collect and capture data.

When establishing a methodology for measuring sustainability in international supply

chains, I suggest that the following points are considered:

- A theoretical framework is important to clarify what we are looking at, and what

we are looking for. I suggest that in this complex field with its many

interactions, stakeholders are not considered as single entities. Research

should rather focus on networks, relations, power structures, fields of

interaction and communication channels.

- Participative stakeholder dialogue must be an integral part of research. Before

getting started, a detailed analysis of stakeholders is necessary in order to

broaden contextual understanding of the issue. I believe it is important to

include not only businesses and direct suppliers, but also sub-suppliers,

CSOs, governments and other involved actors in this dialogue. Particularly

important is to identify most vulnerable stakeholders and include them in the

discussion, even if they are not initially considered as stakeholder of influence

by the business concerned.

- It needs to be evaluated if research should measure sustainability impacts in

general, or if this issue must be broken down into smaller thematic

frameworks. For the former counts that sustainability issues usually are very

much related and linked. Therefore, one could argue that one thematic issue


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alone cannot be understood without looking at others as well. On the other

hand, the latter would allow a researcher to go deeper into one particular issue

of sustainability in supply chains.

- I also suggest that research captures data through quantitative and qualitative

methods. Quantitative approaches can contribute to finding underlining proxy

figures. This data is important for discussions about the business case and

management consultation. Qualitative data, on the other hand, allows

researchers to conduct an explorative approach to new stakeholders. It helps

discovering perceptions of different actors and diversifies understanding of the

stakeholders involved.

Due to the complexity, but also the necessity of a methodological thinking, I assume

that researchers should get more involved in measuring supply chain impacts of

MNEs. It cannot be the task of businesses themselves only. However, a close

collaboration between CSOs, businesses and research teams is indispensible.

Shared ownership of research results can lead to easier processes for putting some

of the findings into practice. Therefore, researchers should not only consider a

participatory approach, where different views and goals are appreciated. They should

additionally plan a diplomatic roll-out of the research project and really take into

account desires and affinities of different stakeholders within the supply chain.

I hope that future research does contribute to a better understanding of sustainability

in international supply chains of MNEs, and its potential to contribute to pressing

issues of todays world such as climate change and poverty reduction.


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