Measuring Sustainability of International Supply Chains

The Impact of Multi-National Enterprises in Developing Countries

Thesis, Certificate of Advanced Studies in Corporate Social Responsibility June 2009 Sabine Ehrler, sabine_ehrler@yahoo.de Faculty of Economics and Social Sciences, Geneva, Switzerland Submitted to: Dr. Michael Hopkins, Director of MHC International and Professor at Middlesex University of London, mjdhopkins@mhcinternational.com

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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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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 CSR FMCG MNE NGO UI Civil Society Organization Corporate Social Responsibility Fast-Moving Consumer Goods Multi-National Enterprise Non-Governmental Organization 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 change and 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 fastmoving 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 study
Globalization, 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 2

2007, p153 Insight 2004, p3

6 CAS in Corporate Social Responsibility 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 come back 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 4

Epstein 2008, p164 Epstein, 2008, p197

Measuring Sustainability of International Supply Chains 7 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 chains

2.1 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 ways6. The supply chain, therefore, cannot be seen as an 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
5 6 7 8 9

Porter 1985, p36 Porter, 1986, p36 Brundtland Commission 1987 www.mhcinternational.com Epstein 2008, Woods 1991

Measuring Sustainability of International Supply Chains 9 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.

10 11

Hopkins 2007, p161 Woods 1991

10 CAS in Corporate Social Responsibility 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, p3
15 16 17

Hopkins 2007, p155 Insight Investment Management Limited (2004), p32, cited in Hopkins (2007), p150. 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 supply chains, 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 in future 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 19 20

2004 Insight 2004, p4 Epstein 2008, pp163-164

12 CAS in Corporate Social Responsibility 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 identify some 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.

21 22 23 24 25

Epstein 2008, p164 Epstein 2008, p164 www.isealalliance.org/impacts Clay 2005, p8 Clay 2005, p9

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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, measurement indicators have to be identified and a research methods (e.g. surveys, secondary data, interviews) need to be developed.

Theoretical Framework Issues Indicators

Research Methods

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.

26 27 28 29 30

Curtin & Busby 1999 Flick 2006, Long 2001 Flick 2006, p51 Long 2001, p51 2008, p144

14 CAS in Corporate Social Responsibility 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 operational measures. 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.

31 32

Epstein 2008, p166 Epstein 2008, p190; Denzin 1989, pp26-27

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3. Case studies
3.1 Oxfam and Unilever measure social impact in Indonesia
Unilever 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.33 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,

33 34 35 36

Clay 2005, p13 Clay 2005, p16 Clay 2005, p18 Clay 2004, p18

16 CAS in Corporate Social Responsibility 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, wealthcreating, 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:
There is no evidence for a theoretical framework.
Theoretical Framework

Issues

This 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.

Indicators

They 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. 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.

Research Methods

Fig. 2: FMCG case study of Unilevers supply chain

37 38 39

Clay 2005, p18 Clay 2005, p22 Clay 2005, p21

Measuring Sustainability of International Supply Chains 17 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 genderdifferentiated 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.
FINDINGS OF THE STUDY

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

40 41

Clay 2005, p8 www.hm.com

18 CAS in Corporate Social Responsibility 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 and the 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. EVALUATION & COMMENTS 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 43

H&M (n.n.) H&M 2007, p8

Measuring Sustainability of International Supply Chains 19 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.
There is no evidence for a theoretical framework.
Theoretical Framework

Issues

The CSR Report of H&M maps out their suppliers, looks at codes of conduct and their CSR activities addressed at suppliers.

Indicators

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

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 multinational 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 output is extremely important. However, there are still gaps to fill. For example, it would be

20 CAS in Corporate Social Responsibility 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 done with 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. FINDINGS OF THE STUDY 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 45 46

Prieto 2006 Prieto 2006 Prieto 2006, pp87-88

Measuring Sustainability of International Supply Chains 21 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 all businesses 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 48 49

Prieto 2006, pp88-89 Prieto 2006, pp90-91 Prieto 2006, pp92-93

22 CAS in Corporate Social Responsibility EVALUATION & COMMENTS The study contributes to the discussion about measuring supply chain impacts in several ways.
Theoretical Framework

Prieto applies two theoretical frameworks: participative action-research methodology and feminist approach to mainstream social science

Issues

This 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 mapping stakeholders, 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. Apart from doing research of Chiquitas documents, Prieto focuses on qualitative field research methods such as focus group discussions and interviews.

Research Methods

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
50

Prieto / Bendell 2002

Measuring Sustainability of International Supply Chains 23 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.

24 CAS in Corporate Social Responsibility

4. Sustainable supply chain impacts in tourism

4.1 Measuring sustainability of supply chains in tourism
In 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:
Customers Tour operators Country representatives Destination Management, e.g. in India Governmental service, e.g. waste Hotels Restaurants and bars Local Producers of food and goods Excursison providers Transport Local service providers, e.g. laundry Guides services communities Business support providers

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

51 52 53

Font 2006, p1 Curtin/Busby, p135 www.fairtourismsa.org.za,, www.travelife.eu

Measuring Sustainability of International Supply Chains 25

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 Defining a theoretical framework Defining core issues & identifying indicators Descriptions

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

Defining research methods

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 measures in 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 particularly interesting 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? 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

26 CAS in Corporate Social Responsibility The goal of such research is to find potential for short-term, medium term and longterm change and more sustainable development in supply chains of the tourism sector.

Measuring Sustainability of International Supply Chains 27

5. Conclusions and Outlook

5.1 The content: lessons learned and recommendations
It 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.
54 55 56 57 58

Clay 2005, p80 Prieto 2006 Clay 2005, p85 Prieto 2006, p93 Clay 2005, p112

28 CAS in Corporate Social Responsibility 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

Measuring Sustainability of International Supply Chains 29 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.

30 CAS in Corporate Social Responsibility

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