Mehtap May Isen
Developing a sustainable procurement strategy for Fashion Buyers in the German retail
sector
ISBN: 978-3-8428-3137-7
Herstellung: Diplomica® Verlag GmbH, Hamburg, 2012
Zugl. University of Plymouth, Plymouth, Großbritannien, MA-Thesis / Master, 2010
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University of Plymouth
Acknowledgements
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ACKNOWLEDGEMENTS
Without the assistance of several people this research would not have been
as instructive and multifaceted as it turned out to be.
First and foremost, I would like to thank Dr. Shaofeng Liu for the supportive
and helpful meetings, for her interest in my work and the journals and useful
documents she provided me with. It cannot be taken for granted that one will
find such support.
Special thanks go to the 5 experts of the sustainable conference meeting
who agreed to meet me and who answered all my questions.
Ultimately, I would like to dedicate this report to my mother. When I first told
her that my plan was to study a MSc. in Operations & International Supply
Chain Systems in order to gain in-depth knowledge in Buying, she was rather
worried: She did not see the point why bother studying if I want to become
what I already am, as per her a "shopaholic". We
ll see...
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Superstructure
V
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SUPERSTRUCTURE
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Abstract
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ABSTRACT
Sustainable purchasing including green purchasing practices have
significantly gained acceptance within companies. This trend is expected to
grow. However, recent studies investigate that many purchasing
professionals lack in developing a systematic and holistic approach towards
fostering sustainable development. Especially Fashion Buyers and their
purchasing practices are increasingly examined through a magnifying glass.
To the author's best knowledge, this study is the first in developing a
sustainable procurement strategy for Fashion Buyers. The purpose of this
study is twofold:
Determining purchasing policies with the greatest economic
value and with the ability to (a) increase social equity and (b)
decrease damage to the environment
Transfer those best practice policies into a holistic sustainable
purchasing plan for German Fashion Buyers
Other researchers' and practitioners' studies regarded sustainable
purchasing practices fragmented or disconnected from strategy. Contrary to
those studies, this research takes a more holistic approach. It considers
social and environmental practices at the intersection of the economic bottom
line.
The data were collected from semi-structured face-to-face interviews with five
experts to achieve an in-depth knowledge about sustainability and the
fashion retail chain in Germany.
The findings of the present study suggest that two of the three hypothesised
paths have been substantiated. The study highlights, that in order to increase
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Abstract
VII
Mehtap Isen
social equity, Fashion Buyers are not recommended to solely rely on social
auditing as there is a risk of audit frauds. Also, results indicate that audits
fails in improving labour practices in six of nine key areas. Contrary, a multi
stakeholder approach develops more credibility among all stakeholders and
goes beyond simple labour practice improvements: results indicate that
getting guidance from multi stakeholder initiates will increase motivation of
workers, increase productivity, decrease absence of personal and finally lead
to a decline in labour costs. Accordingly, it can be concluded that a multi
stakeholder approach leads to economic advantage. Finally, to decrease
damage to the environment, the analysis of the data indicates that Fashion
Buyers should source sustainable cotton. Similarly to multi stake holder
initiatives, sourcing sustainable cotton would go beyond decreasing
environmental damage. It would enhance the reputation of the retailers,
create a green image and attract new customers. It would also offers better
trading conditions to disadvantaged small farmers and workers by offering
minimum prices. Finally, sourcing organic cotton would also lead to an
economic advantage.
First and foremost this study contributes to German Fashion Buyers that aim
to develop a common understanding of sustainable fashion buying. However,
it might also contribute to other cotton using industries such as the carpet or
home and furniture industry. Second it is written for researchers and
academicians that aim to understand the link between Fashion Buying and
sustainability issues in a more holistic approach.
Time constraints did not allow the author to consider all sustainable fabrics.
Future research could give more weight to distinguish between alternative
sustainable fibres used in the fashion industry. Also, a similar research
approach could be used for Purchasing Managers in other industries.
University of Plymouth
Table of Contents
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MSc. Business and Management
TABLE OF CONTENTS
Acknowledgements ... IV
Superstructure ... V
Abstract ... VI
Table of Contents ... i
List of Tables ... iv
List of Figures ... v
Abrevations ... vi
Introduction ... 1
1.1
Subject and background ... 1
1.2
Reason for choice of subject ... 2
1.3
Research objectives... 2
1.4
Proposed research structure ... 3
1.5
Contribution to industry ... 3
1.6
Limitations of the research ... 3
Literature on sustainable procurement ... 5
2.1
Supply Chain Management (SCM) ... 5
2.1.1
Procurement ... 6
2.1.2
Conventional Procurement ... 6
2.1.3
Development shift in procurement ... 7
2.2
Sustainability and the triple bottom line (TBL) ... 7
2.3
Sustainable Supply Chain Management (SSCM) ... 9
2.3.1
Drivers of SSCM ... 11
2.3.2
Barriers of SSCM ... 13
2.4
Sustainable Purchasing ... 15
2.4.1
Definition of Sustainable Purchasing ... 16
2.4.2
Environmental issues of SP ... 17
2.4.3
Social issues of SP ... 18
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MSc. Business and Management
2.5
The Fashion industry ... 19
2.5.1
The German textile and clothing industry ... 20
2.5.2
The fashion supply chain ... 20
2.5.3
Sustainability and the fashion retail chain ... 22
2.5.4
Shortcomings of existing research ... 25
Methodology ... 27
3.1
Research philosophy ... 27
3.2
Research approach ... 28
3.3
Research strategy ... 30
3.4
Sampling strategy ... 31
3.5
Method of data collection ... 33
3.6
Research ethics ... 33
Conceptual model ... 35
4.1
Defining the conceptual model ... 35
4.2
Hypotheses deduction ... 35
Empirical results and discussion ... 38
5.1
Hypothesis 1 ... 38
5.2
Hypothesis 2 ... 42
5.3
Hypothesis 3 ... 45
Sustainable Procurement strategy ... 51
6.1
Analysing risks and opportunities ... 51
6.2
Acting within direct scope of influence ... 53
6.3
Strengthening stakes ... 53
6.4
Multi stakeholder approach ... 55
6.5
Raising sustainability standards ... 56
6.6
Performance Management ... 57
6.7
Concluding remarks ... 58
Critical appraisal ... 59
7.1
Reliability and validity ... 59
7.2
Constraints and implications ... 60
7.3
Recommendations for future research ... 61
References... 62
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MSc. Business and Management
Appendix 1. Interview guidelines ... 69
Appendix 2. Interview topics ... 70
Appendix 3. Invoice Conference ... 71
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List of Tables
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MSc. Business and Management
LIST OF TABLES
Table 1: Time schedule ... 4
Table 2: Environmental purchasing benefits ... 17
Table 3: Social purchasing benefits ... 18
Table 4: Expert groups and specific professional field ... 32
Table 5: Hypothesis box ... 37
Table 6: Progress of social auditing & compliance monitoring ... 41
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List of Figures
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MSc. Business and Management
LIST OF FIGURES
Figure 1: Conventional procurement ... 6
Figure 2: Sustainability: the TBL ... 8
Figure 3: Apparel industry categorisation ... 19
Figure 4: Traditional apparel & textile Supply Chain ... 21
Figure 5: The global fashion supply chain ... 22
Figure 6: Social and environmental impacts of fashion ... 23
Figure 7: The research 'onion' ... 28
Figure 8: Conceptual model ... 36
Figure 9: Outcome hypothesis testing 1 ... 42
Figure 10: Outcome hypothesis testing 2 ... 45
Figure 11: Outcome hypothesis testing 3 ... 50
Figure 12: Options to source sustainable cotton ... 52
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Abrevations
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MSc. Business and Management
ABREVATIONS
CS Corporate
Sustainability
CSR
Corporate Social Responsibility
EMAS
Environmental Management and Auditing Systems
ETI
Ethical Trading Initiative
FB Fashion
Buyer
FLA
Fair Labour Association
FLO
Fair Labour Organisation
FWF Fair
Wear
Foundation
GP Green
Purchasing
ILO International
Labour
Organisation
ISO
International Standards Organization
MSI
Multi stakeholder initiative
NGO
Non Governmental Organisation
SAI
Social Accountability International
SC Supply
Chain
SCM
Supply Chain Management
SP Sustainable
Purchasing
SSCM
Sustainable Supply Chain Management
TBL
Triple Bottom Line
UN United
Nations
WCED
World Commission for Environment and Development
WFTO
World Federation of Technology Organization
WRC
Worker Rights Consortium
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Introduction
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INTRODUCTION
1.1 Subject and background
The global economic situation by its ever-changing business dynamics, such
as ambiguities about the market, fierce competition, consumer behaviour and
their changing preferences significantly increases Business Management
responsibilities. Today as never before people are concerned with the
environment and social issues; rapidly rising oil prices, increasing
transparency and consumer interest in how products are made and where
they come from, pressures Business Managers to create a more transparent
and sustainable industry. Especially Purchasing Managers play a key role in
using their procurement function to foster sustainable development.
Referring to an international study that was carried out by Capgemini
Consulting, sustainability efforts constitute the second important business
driver on multiple supply chain agendas for 2010 (Haarman et al., 2009).
Companies are rapidly adopting the term into their business or corporate
social responsibility (CSR) reports. However, a review of the literature will
show that the tem sustainability has been inconsistently defined. More
specifically, most of the recent sustainability research has examined issues
such as environment, human rights and safety in a standalone fashion
(Seuring et al., 2008).
Especially Purchasing Managers fail to take the emerged challenge of
sustainability into a more integrative perspective: They often limit their
purchasing policies on environmental considerations only. More precisely,
there does not appear to be a corporate strategy that integrates
environmental and social issues together into one purchasing plan. Hence,
the sustainability challenges pressures Purchasing Managers to take the
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Introduction
2
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2
effect of their purchasing actions on the triple bottom line (TBL) into account,
which refers to people, planet and profit.
1.2 Reason for choice of subject
The clothing and textile industry is massive. It is worth over US$1trillion
worldwide, and contributes to 7% of world exports and employs nearly 26
million people (Tokatli, 2007). Paying a greater attention to fashion retailers,
the high street dynamic pushed the retail prices for clothing extremely down.
Sadly, consumers are demanding more of low price clothing and
consequently fashion becomes more and more disposable. In lieu thereof
silent sounds approach mainstream retailers; sounds from degrading working
conditions in manufacturing facilities and threatening environmental impacts
of conventional fabric production. Retailers are facing this crisis and look for
actions to take. Especially Fashion Buyers are pressured to develop a holistic
view on sustainability, which goes beyond integrating environmental
considerations into their procurement policies. Hence, being in an
outstanding position to impact sustainability practices, Fashion Buyers are
asked to participate in activities that improves both environmental and social
aspects of sustainability. The German fashion industry was chosen because
the ability of gaining access to experts was regarded to be higher if the
researcher's native language could be applied.
1.3 Research
objectives
Overall the research aim of this study is to examine purchasing policies that
consider environmental and social aspects of sustainability with the greatest
strategic value. More precisely, the researcher aims at identifying social and
environmental practices that intersect at the economic bottom line, thus
leading to economic advantage. Special attention is given to the
consideration of the TBL approach as it suggests that undertaking social and
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Introduction
3
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3
environmental initiatives at the intersection of the economic bottom line will
result in an economic and thus a competitive advantage.
1.4 Proposed research structure
Once the literature on sustainability and sustainable purchasing was critically
studied, a research subject was chosen. Reviewing the literature offered in-
depth insights into the latter defined topics. The literature review was then
used to gain knowledge about the recent research status. Based upon
reviewing literature, a conceptual model was constructed and three
hypotheses were determined. Subsequently, the methodology of semi-
structured phase-to-phase interviews was selected and used to collect
qualitative data from five experts. The results from data collection were first
analysed and then transferred into the development of the purchasing
strategy.
1.5 Contribution to industry
This research on hand is intended to be valuable to German Fashion Buyers.
First and foremost it is written to Fashion Buyers that have little systematic
approach towards incorporating sustainability issues into purchasing
decisions, because they "tend to think of sustainability in generic ways", with
existing approaches to social and environmental initiatives fragmented and
disconnected from strategy. Second it is written for researchers and
academicians that aim to understand the link between Fashion Buying and
sustainability issues in a more holistic approach.
1.6 Limitations of the research
In addition to budget and access constraints the major limitation of the
research was a restricted time horizon of four months leading to a tight time
schedule (Table 1).
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Introduction
4
WEEK NUMBER
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18
ACTIVITY
Work in Germany
Work in UK
Choice of topic
Determine objectives
Literature study
Write literature review
Finalize objectives
Set interview questions
Internet research on sustainabilty conferences
Contact of potential experts
Hold interviews
Transcribe interviews and analyse data
Write report
Print and Bind
Hand in
Table 1: Time schedule
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Literature on sustainable
procurement
5
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5
LITERATURE ON SUSTAINABLE PROCUREMENT
2.1 Supply Chain Management (SCM)
The roots SCM can be traced back to the late 50s, when (Forrester, 1958)
investigated: "company success depends on the interaction between the
flows of information, materials, money, manpower, and capital equipment".
The first time the terminology supply chain management also appeared in
literature was in the early 80s, describing organisations' multiple steps taken
to procure and manage supplies (Mentzer, Myers & Stank, 2007). Although
many researchers in the late 80s provided definitions on SCM, their scope
was reduced to reengineering the chain in order to meet customer
requirements and improve the service level (Lee, Padmanabhan & Whang,
1997). During the late 90s further attempts were made to integrate different
frameworks and views of SCM and, thereby, better define the domain of
SCM. Asking for a more holistic and detailed definition of SCM than those put
forward by literature to date, following definition is acceptable:
The efficient management of the end-to-end process of designing, planning
and forecasting, sourcing through complex supplier networks, manufacturing,
and distributing products from raw material to the end customer, and the final
disposal of the product by the customer (Chan & Lee, 2005).
Despite the fact that multiple and different definitions on SCM are present
and a universally valid definition has not evolved yet, researchers,
academicians and practitioners commonly agree that successful SCM the
leads to competitive advantage. It also understands and copes with changing
consumer preferences and efficiently handles the pressure on cost.
Furthermore it accepts the necessity of collaboration between the multiple
Supply Chain (SC) echelons (Gammelgaard & Bang Mathiasen, 2007;
Ireland, Crum & Management, 2005).
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Literature on sustainable
6
procurement
Recently, the growing need for integrating sustainable sound choices into
SCM has led to sub categories within it and new terminologies such
sustainable supply chain management (SSCM) evolved. Within this
subcategory a further subsection such as sustainable purchasing (SP) arose
and will be explicitly outlined in the forthcoming paragraphs. However before
defining the SSCM and SP, the evolution of the conventional procurement
function will be explained, followed by a definition of sustainability and its
importance nowadays.
2.1.1 Procurement
Over the past decade considerable changes on a macro-level such as
globalisation, a shift towards sourcing, changing consumer preferences,
revolutions in internet based systems and particularly the increasing
awareness of corporate social responsibility (CSR) and sustainability has
significantly changed the business environment (Tassabehji & Moorhouse,
2008). Those influential drivers called for a developmental shift and certainly
affected the conventional procurement function. However, before assessing
the impacts, a brief introduction into the responsibilities of the conventional
procurement function will be given.
2.1.2 Conventional Procurement
Figure 1: Conventional procurement
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Literature on sustainable
procurement
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7
As can be deduced from Figure 1, the procurement function has greater
responsibilities than the purchasing function: The procurement role entails
not only operational activities but also strategic responsibilities and can
hence be seen as an indispensable partial process of the SC of a firm
(Virolainen, 1998). Additionally, the functional role of procurement covers all
process steps from internal customer to supplier (Figure 1).
2.1.3 Development shift in procurement
As it was earlier acknowledged, the changing and dynamic environment
forces procurement professionals now to operate in an era that calls for a
development shift. Similarly, (Zheng et al., 2007) affirm that this call for a
development shift has led to challenges for the procurement function within
companies and public sectors, which are well documented in the literature.
To keep in line with those changes, the procurement functions are called to
operate on a more strategic level rather than from a tactical perspective
(Cousins & Menguc, 2006). Even though (Cox & Chicksand, 2005) affirms
that the evolution of procurement to the status of a strategic and critical
function is not yet complete in real world, organisations have already
accepted the merging need for change. In applying more "proactive value-
focused rather than passive cost-focused procurement strategies" Mehra and
Inman (2004) state that organisations will gain competitive advantage.
Especially the new challenge of `sustainability' that forces organisations to
reassess their SC activities has also pressured procurement professionals to
adapt their procurement practices to those changing dynamics.
2.2 Sustainability and the triple bottom line (TBL)
The concept of sustainable development was firstly introduced in the late
80s' closing report of the World Commission for Environment and
Development (WCED) in which sustainability was described as the
"development that meets the needs of the present without compromising the
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