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Environmental management in Danish transnational textile product chains
Michael Sogaard jergensen, Ulrik jergensen and Kare Hendriksen DTU Management Engineering, Technical University of Denmark (DTU), Kongens Lyngby, Denmark
Department of Development and Planning, Aalborg University, Aalborg, Denmark
Henrik Holmlund Thomsen
Vanlese, Denmark, and
Ernst & Young Denmark, Seborg, Denmark
Purpose - The purpose of this paper is to analyse environmental responsibility of companies from industrialized countries when they source materials and products in countries with less environmental protection.
Design/methodology/approach - The paper is a study of corporate environmental management in the Danish textile and clothing sector, with 13 cases based on interviews and material from reports and websites. The criteria for choosing the cases were variety of size and market segment, and a mixture of companies that take environmental initiatives and companies for which it was not known whether they take environmental initiatives.
Findings - Several different environmental practices were identified: some companies were early which got sustained initiatives, and some early and not sustained initiatives; some companies were late with sustained initiatives, and some late and not sustained initiatives; and finally, some have a practice without environmental initiatives. Dominating types of initiatives are cleaner technology, environmental management systems and cleaner products. Driving forces are governmental regulation, customer demands, market expectations and protection of corporate brands. Some companies focus on capacity building at the suppliers in developing countries, while other companies seem to focus the complex activities at domestic suppliers. Two new facilitating actors in environmental management in product chains were identified.
Research limitations/implications - The focus on one sector in one country limits the number of variables in the analysis. It enables comparisons among the analysed companies, but limits the possibilities for comparison across sectors and countries.
Originality/value - The paper has value as a study of the development of environmental management in a number of companies within the same sector over a number of years, whereby changes in management focus and the embedding of initiatives can be analysed.
Keywords Denmark, Environmental management, Supply chain management, Textile industry, International business
Paper type Research paper
The product chain - the chain of interacting suppliers and customers that together make up the activities connected to a product, from raw material extraction to handling of waste - plays an important role in shaping and managing the environmental aspects connected with production and consumption of a product - for example, a piece of clothing.
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The point of departure for the article is that more and more product chains are transnational:
• Many companies are sourcing materials or products from countries with lower levels of environmental protection than the countries where they previously manufactured or purchased materials and products.
• The product chains are often lacking transparency due to the complexity and
physical distances in the product chains.
The background for sourcing from other countries is either access to special materials (like cacao beans for chocolate, exotic wood for furniture, etc.) and/or lower costs (manufacturing of shoes, textiles, etc.). However, in some cases, it is also a question of being present at the market in the country where sourcing takes place. An example is a Danish fashion company, which in addition to sourcing clothing in China for several years has set up clothing shops in China (IFU, 2005). According to the Multilateral Investment Guarantee Agency (2007), potential and flexibility of labour and environment, quality of infrastructure, availability of real estate and access to local markets are among the so-called site selection factors for foreign investments in developing countries.
The sourcing companies are of very different kinds - even within the same product area, such as textiles and clothing, which is the empirical focus of this article. Some sourcing companies are small and medium-sized companies with their base in one country while sourcing in a few other countries, and selling their products in their home country and maybe a few neighbouring countries. In some cases, all earlier manufacturing activities have been outsourced, and the company now mainly bases its activities on design, sourcing and distribution (Stranddorf et al., 2002). Other types of sourcing companies are big multinational companies with activities in a large number of countries and with sourcing and sales in some countries and only sales in others. Some of these companies do not have and have not had manufacturing activities themselves (like the retail clothing chain, Hennes & Mauritz (H&M)) (Stranddorf et al., 2002).
Since it can be expected that environmental management may depend on the country of origin and the type of industry - and in order to limit the number of variables that need to be considered in the analysis - the focus of the article is limited to companies from the same sector (textiles and clothing) with headquarters in the same country, Denmark. The aim is to analyse the driving forces and changes in the environmental management strategies within a sector where transnational product chain relations play an important role, including the similarities and the differences among companies in the sector.
2. Theoretical framework for the analyses of environmental management in transnational product chains
This section presents the theories and approaches used in the article for the characterization and analysis of environmental management in transnational product chains, including an analysis of the relations between public regulation, market forces, industrial structures and corporate practice.
2.1 Typology of suppry chain relations
The relations between customers (the sourcing company) and suppliers within a product chain can be very different. In the analyses of the product chain relations and
their interaction with environmental management practice, Schary and Skjett-Larsen (2002) and Cox (2004) provide the background for the characterization of customersupplier relations in product chains. According to Schary and Skjott-Larsen (2002), product chain relations can be found on a continuum between market conditions and hierarchies. Market conditions imply that materials, services, etc. are bought from time to time on the basis of the best price, and hierarchies imply that a company takes over or integrates a certain competence into its own organization. In between these extremes are a number of so-called hybrid forms where some competence is held by the supplier and some specificity of the materials, services, etc. offered by the supplier.
Table I gives an overview of different types of relations between customers and their supplier. The strategic importance of the relation increases from top to bottom in the table. The overview is based on Cox's typology for relations to suppliers and for sourcing approaches (Cox, 2004; Schary and Skjett-Larsen, 2002).
According to Schary and Skjett-Larsen (2002), it should be expected that the closer a certain competence of a supplier is to the core competence of a company, the more likely it is that this competence becomes integrated into the dominating company in the product chain. Hall (2000) uses the notion "channel power" about the ability of a company to raise demands to its suppliers.
2.2 Concepts of environmental management in transnational product chains
Hansen (1999) uses the term "cross border environmental management" about environmental management in transnational product chains by transnational corporations. With reference to UNCTAD, among others, Hansen argues that transnational environmental management will typically have at least the following elements (Hansen, 1999):
• General principles for the environmental activities of the entire corporation.
• More specific policies and programmes applicable throughout the corporation.
Type of relationship to supplier
Characteristics of the relations to the supplier
Ongoing supplier selection
Frequent "shopping" among potential suppliers based on price comparison between the suppliers. Demands multiple potential suppliers and stable market conditions
More long-term contract periods with a limited number of suppliers and some exchange of planning information Supply by a single supplier for a period for a certain good or service. Relevant with goods and services linked directly to the core competencies of the company. If there is more than one supplier within an area, the practice is called "parallel sourcing"
Focus on voluntary arrangements with exchange of staff, sharing of information and/or co-development of goods and services. Relevant with high specificity of demands for goods and services or when suppliers complement the customer's capabilities
Single or parallel sourcing
Note: The strategic importance of the relationship increases from top to bottom in the table Source: Based on Schary and Skjett-Larsen (2002, pp. 183-93); Cox (2004)
Typology of relationship to suppliers
• A cross-border environmental management system with procedures for monitoring and controlling the practice of the foreign affiliates.
• Training, education and information exchange programmes and activities.
• A formal organization, where responsibilities and functions are delineated and allocated between different entities and persons - for example, between headquarters, affiliates and suppliers.
________ Hansen (1999) argues that corporate environmental management practice in
transnational product chains falls within the range from adaptation to local regulation and the practice in developing countries to global integration where a company is practising the same level of concern and responsibility as in the home country (Hansen, 1999). Hansen (1999) refers to two types of product chains: management of controlled affiliates and management of non-controlled foreign entities (organized through franchising, licensing, subcontracting or strategic alliances). With reference to Bartlett's and Ghoshal's ideal types of cross-border organization in transnational corporations (see e.g, Ghoshal and Bartlett, 1990), Hansen (1999) describes four ideal types of cross-border environmental management: decentralized environmental management, international compliance, centralized environmental management and globally integrated environmental management. The most elaborated and environmentally ambitious cross-border environmental functions are seen in the centralized and globally integrated types. Table II gives an overview of the four types.
According to Hansen (1999), the forces that shape the environmental management in the transnational product chains between local adaptation and global integration
Decentralized Centralized integrated
environmental International environmental environmental
management compliance management management
Environmental Local Host country Home country Internationally
management adaptation legislation legislation oriented company
focus (country where (country of standards
facility or headquarters)
subsidiary is and global
Concept of Environmental Affiliates Environmental Initiatives for new
environmental management around the regulation of measures from
management is the world take the the home different facilities
responsibility necessary country as in the company.
of local measures to the basis, Networking
managers. operate in regardless of among local
May take accordance with the local environmental
advantage of laws and requirements. managers.
weak imple- regulations of Fear that the Adaptation to
Table ll. mentation of the host regulation of local conditions
A typology of corporate local countries the host allowed, within
environmental environmental countries is the corporate
management in regulation not sufficient principles
chains Source: Based on Hansen (1999) seem to be regulatory forces, market forces, industry-specific forces and companyspecific forces. These types of forces are understood as described in the following:
• Regulatory forces: the type of environmental regulation shaping the cross-border practice: international regulation, home country regulation and host country regulation.
• Market forces: the role of price, quality, environmental orientation, etc. of the markets and the product chains.
• Industry-specific forces: the product chain structure and the strategies for influence and control, and the types of competition and collaboration in the specific type of industry.
• Company-specific forces: the corporate strategy, the environmental history of
the home country, the international orientation of the specific company.
Hansen (1999) points to the following forces as supporting local adaptation and fragmentation in cross-border environmental management: absent or weak enforcement of regulation and standards, high price competition and low focus on quality and environment on the market. On the other hand, focus on first mover advantages and anticipation of future regulation, potential consumer backlash due to high focus on environment, and quality and export to leading markets draw in the direction of global integration in the cross-border environmental management.
2.3 Regulation in transnational product chains
Based on his literature study, Hansen (1999) concludes that international and national legal frameworks only directly regulate the environmental aspects of companies' transnational activities to a limited extent. Hansen (1999) points to the limited role of the single nation state in cross-border environmental management. Building on Scholte (2000), Crane and Matten (2004) who discuss globalization as de-territorializing social, economic and political action, thus weakening the role of the nation state and moving governance into a global context with a number of new governance strategies. These are based on:
• Co-operation among governments (e.g. ED initiatives).
• Business initiatives (e.g, Responsible Care, organized by the international business organization for the chemical industry).
• Government-business initiatives (e.g. ISO 14001 series).
• Business-civil society initiatives (e.g. Forest Stewardship Council (FSC) and Marine Stewardship Council (MSC)).
• Government-business-civil society initiatives (e.g. OECD Guidelines for Multinational Enterprises or UN Global Compact).
The following sections summarize the types of regulation mentioned by Hansen (1999) as background for the case studies discussed later in the article.
2.3.1 International regulation of transnational product chains. Rather few international regulatory forces put direct pressure on transnational corporations' environmental management. International regulation is provided by the Montreal protocol, which prohibits companies from relocating CFC production to developing countries, where production applying CFCs was allowed for a longer period (Hansen,
1999). The Basel convention restricts the export of hazardous wastes (Basel Convention, 2007). In relation to textiles and clothing, the ED bans some azo dyes in textiles and clothing sold in ED, which implies that these restrictions also have to be obeyed by imported products. The German government's ban on azo dyes was the background for an ED ban of 22 azo dyes that can release aromatic amines (some of which are carcinogenic) at concentrations higher than 30 ppm (policy Research Center for Environment and Economy, 1999).
WTO (World Trade Organization, 2003) restricts the possibilities for national and international environmental demands on activities in other countries unless the activities influence the product and its impacts in the country or countries raising the demand. These restrictions are a consequence of the Agreement on Technical Barriers to Trade (TBT Agreement), which requires all members of the WTO to inform other members of their proposed technical regulations and conformity assessment procedures (Fisher, 2001; Peel, 2002). Eco-labelling schemes have been a topic for discussion and disagreement in WTO. The background is that the governments of some countries claim that the criteria concern processes and production methods (socalled PPMs) in the manufacturing country, which is not eligible in WTO unless the criteria also improve the impact on the consumer or the environment in the country where the product is sold. The ED has changed its eco-labelling scheme in order to make it more eligible in a WTO context by allowing companies outside ED to apply for a license. The eco-label has been awarded to several non-Elf companies.
The ISO 14001 standard contains a number of demands to the certified company, but core elements of the standard also demonstrate a weakness by opening up for a large degree of interpretative flexibility in how the standard is implemented (Behrndt, 2002, here cited fromjergensen, 2003). These open, and at the same time weak, elements eoncern:
• The scope or boundaries of the activities covered.
• The identification of environmental aspects and impacts of company activities.
• The legal requirements to be recognized by the company.
• The policy priorities of the company.
• The focus in relation to suppliers, products and design.
These issues become even more complex when they are analysed as part of the dynamics in transnational product chains with different national cultures and regulatory systems and levels of environmental and social awareness and responsibility.
ISO 1400l is rather weak in its demands to companies' management of environmental issues upstream (and downstream) in product chains.
In section 4.3.1 (ISO, 2004) about procedures for identifying environmental aspects, it is stated: "The organization shall establish, implement and maintain a procedure(s) a) to identify the environmental aspects of its activities, products and services within the defined scope of the environmental management system that it can control and those that it can influence taking into account planned and new developments, or new or modified activities, products and services."
This paragraph leaves it more or less up to the company to define its environmental scope, since it may decide to say that it cannot control or influence suppliers' or users' activities. In section 4.4.6 (ISO, 2004) about operational control, it is stated:
The organization shall identify and plan those operations that are associated with identified significant environmental aspects consistent with its environmental policy,
objectives and targets, in order to ensure that they are established under specified conditions, by [ ... J c) establishing, implementing and maintaining procedures related to the identified significant environmental aspects of goods and services used by the organization and communicating applicable procedures to suppliers, including contractors.
This paragraph requires a company to focus on environmental aspects related to the activities of its suppliers. However, through section 4.3.1, the company may decide that it does not find it possible to control or influence suppliers and contractors, and it may leave these aspects out in their choice of aspects to focus upon.
2.3.2 Home country regulation of transnational product chains. There are also rather few national regulatory forces that restrict the cross-border practice of companies with headquarters in a country which could be called the home country of the transnational corporation (Hansen, 1999). Some European countries require companies to report on foreign subsidiaries' environmental performance. In Denmark, the Industrialization Fund for Developing Countries requires companies receiving funding for projects in developing countries to observe certain environmental and ethical standards (Hansen, 1999).
2.3.3 Host country regulation of transnational product chains. As one of the main problems of environmental protection in many host countries (understood here as developing countries or countries under transition in which companies from industrialized countries have facilities or are sourcing products and materials) is the lack of effective enforcement rather than the lack of environmental rules and regulations, a corporate commitment to comply with all rules and regulations regardless of location might be of some consequence (Hansen, 1999). Forces which tend toward weak local regulation include the efforts of developing countries to attract foreign corporations through the establishment of so-called industrial free zones (IFZ), export processing zones (EPZ), free trade zones or just free zones. In such zones, certain local regulation may not be enforced, or trade unions not allowed to operate, or tax and customs exemptions are given (Multilateral Investment Guarantee Agency, 2007).
2.4 The focus of the article
Some studies of environmental management in product chains have included cases within the textile and clothing sector, including Kogg (2002) and Roberts (2003), but no studies apart from those which are the basis for this article (Stranddorf et al., 2002; Kawansson and Roy, 2002; Jorgensen, 2006; Thomsen, 2007) have analysed several companies within the textile and clothing sector and included the aspects of transnational product chains. By combining these four studies, this article contributes to the discussion about environmental management in transnational product chains, especially within the textile and clothing sector, by discussing changes over time in the shaping of environmental management in companies within a specific sector, including whether initiatives are sustained or not and whether companies within the same sector in the same country develop similar or different practices.
The article answers the following questions:
• What types of responsibility can be observed in environmental management in transnational product chains in the Danish textile and clothing sector, such as the type and level of protection, and the limits to the responsibility in terms of time and space?
• How is environmental management in transnational product chains shaped?
What are the roles of governmental regulation, international standards, market considerations and customer demands, etc.?
• How does environmental management in transnational product chains seem to influence the environmental competence in the product chain, including the ability to address and reduce environmental impacts in developing countries and countries under transition?
The empirical basis of the article is 13 case studies of textile and clothing companies with their origin and their headquarters in Denmark and with sourcing and/or sales activities in developing countries or countries under transition, Eastern Europe or newly industrialized countries (so-called NIC countries) like China.
The material for the case studies was collected through a research project financed by the Danish Environmental Protection Agency (Stranddorf et al, 2002), a case study about the textile sector within an EU-funded project about impact of waste management and governmental regulation (lergensen, 2006) and two master thesis projects at Technical University of Denmark (Kawansson and Roy, 2002; Thomsen, 2007).
The cases in the four studies cover a variety of companies in terms of size and market segment. The companies include a mixture of companies known to have taken environmental initiatives and important companies in the sector for which it was not known whether they had taken environmental initiatives. The long-term embedding (sustaining) of the activities identified at the companies analysed in Stranddorf et aL (2002) has been analysed specifically as part of the background for the article.
Data were collected through interviews with persons in the companies and with some of the suppliers (only as part of Stranddorf et al., 2002) and from annual reports, websites, etc. of the companies. In the article, the companies are made anonymous and characterized by size and type of company, e.g. "big, fashion clothing company".
4. Environmental management practice in Danish textile product chains This section presents systematized data about environmental management in 13 Danish textile and clothing companies that are part of transnational product chains, and their environmental management activities. The 13 companies represent a number of different types of companies within the Danish textile and clothing sector, in terms of:
• The parts of the product chain they operate within: design, manufacturing, wholesale, retail (retail clothing, supermarket chain, mail order).
• The product segment they operate within: clothing (baby, kids, men, women, workwear) and home textiles.
• The size of the company (micro, small and medium-sized, big).
The characteristics and the environmental management practice of the 13 companies are summarized in Table III, where each case is described according to the following themes:
• Type of company: such as size and market segment, and main activities such as production, retail, etc.
• Development of sense-making in environmental management: understood as the driving forces behind taking and maybe afterwards cancelling - or not
Characteristics and environmental management practice of 13 Danish textile and clothing companies
v 0.. 0..8
taking - environmental management initiatives. The text on each company is written chronologically from the top down in cases where there have been changes in the sense-making.
• Suppliers' geographical location: with the details that are known about the company.
• Supply chain relations: describes how much focus there is on short-term or longterm relations to suppliers, on few suppliers, on co-operation with suppliers, etc.
• Changes in environmental impacts: in the product chains describes how the impacts seem to have been affected by the environmental initiatives of the company.
• Tools and organizational structures in environmental management: describes how the environmental initiatives have been organized, what tools (e.g. ecolabelling) have been used.
5.1 Changes in the environmental management practice in the companies
The analysis of the 13 companies gives a picture of the recent 15 years of environmental regulation and environmental management within the textile and clothing sectors in Denmark. The analysis identifies five overall types of companies with respect to environmental management practice:
(1) Companies that early took preventive environmental initiatives and still have a practice with this focus (case nos 1, 2, 8, 9, 10 and 12).
(2) Companies that early took preventive environmental initiatives but have cancelled these initiatives (case no. 13).
(3) Companies that took preventive environmental initiatives later and still have a practice with this focus (case nos 4,5 and 7).
(4) Companies that took preventive environmental initiatives later, but later again cancelled these the initiatives (case nos 6 and 11).
(5) Companies that have not taken any environmental initiatives (case no 3).
The textile manufacturing companies with wet treatment (like case nos 9 and 13) were the first type of Danish textile companies to be regulated. This was due to their emissions of hazardous chemicals with the wastewater, and later on also due to the air emissions of formaldehyde due to its carcinogenic effect. These companies are regulated by the municipal environmental authorities. Later on, in the mid-1980s voluntary regulation within cleaner technology emerged (case nos 9 and 13), and later again, implementation of environmental management systems (also case nos 9 and 13). Finally, towards the end of the 1990s product-oriented regulation was institutionalized with the formation of a co-operative sector policy network, a so-called product panel, funded by the Danish Environmental Protection Agency as part of the productoriented environmental policy, and with members from the textile and clothing industry (case nos 9 and 13), retail chains selling textiles and clothing (case nos 1 and 2), a consumer NGO, and a NGO focusing on allergy (Remmen and Rasmussen, 1999; Stranddorf et al., 2002; Forman et al., 2003). The product panel had a strong focus on eco-labelling as a market-oriented environmental strategy. The product-oriented environmental policy initiatives also attracted some more reactive companies in terms
of environmental management such as case nos 6 and 11. Both these companies later skipped their eco-labelling, case no. 6 because building a more cooperative relationship with suppliers was found to be too complicated (Kawansson and Roy, 2002), and case no. 11 because it was too complicated to explain to retail customers why only some products were eco-labelled and why non-labelled products were still being produced.
Later, this public-private sector initiative ceased when public funding ended. It is not clear how this has influenced the companies' environmental management. One more company has skipped their eco-labellicense (case no. 13), but the reason seems to be the new owners' new market strategy and not linked to the cessation of the sector initiative.
Recently, also after the cessation of the public-private sector initiative, two new types of companies have developed a market-oriented environmental strategy: fashion companies and companies within workwear clothing. Case nos 4 and 5 are fashion companies that have chosen to market eco-labelled products due to the increased focus in the media on the environmental impacts of textile production in developing countries. Earlier, they had seen eco-labelling as being in contradiction to focus on a fashion brand, whereas their new strategies seem to see eco-labelling more as a prerequisite to a brand's survival (Thomsen, 2007). With respect to case no. 4, the labelling strategy is a kind of second-generation environmental management, since they feel that due to the increased media attention, they now need to make their environmental management more visible. The other fashion company (case no. 5) has chosen to introduce organic cotton products and co-operate with the company MADEBY, which has developed a concept that makes the supply chain more transparent. At the same time MADE-BY helps present suppliers be certified for organic production and facilitates contact between the fashion company and some already existing certified suppliers when necessary (Thomsen, 2007). Case nos 4 and 5 claim that they have not taken these initiatives because of activities of their competitors (Thomsen, 2007); however, it seems that some of the competing strong brands such as Levi's (CSRwire.com, 2006) and Hennes and Mauritz (Thomsen, 2007) have also recently chosen a more market-oriented environmental strategy based on eco-labelling and organic cotton.
Case no. 7, which has recently developed environmental management, is a workwear manufacturer. Its main market share is from the private and public professional market. The company has expectations of higher market shares among private and public companies that have developed environmental management and also want their suppliers to practice environmental management. The company experiences that more and more tenders for workwear include environmental criteria (Thomsen, 2007).
The cases include only one company that has not taken environmental initiatives (case no. 3). This does not imply that this company is the only Danish textile and clothing company without an environmental policy and the goal of reducing environmental impacts. On the contrary, this company represents a large share of the consumer clothing market, where environmental concerns do not seem to playa role in competition, but rather a combination of fashion and medium-level prices (Thomsen, 2007).
5.2 Overview of the driving forces shaping environmental management
The case studies show that whether and how a company chooses to address environmental issues depends on a number of factors, including product chain
relations and the possibilities of integrating the environmental issues into the business strategy. The shaping factors include:
• Governmental regulation of chemicals and materials (case nos 1 and 13)
• Governmental regulation as public-private sector-based dialogue forum (case nos 1, 2 and 13)
• Governmental funding, including funding for joint development projects with suppliers in developing countries (case no. 11)
• Public debate about environmental impact of the manufacturing of textiles and
clothing (case nos 4,5 and 9)
• A wish to reduce risks to corporate brands (case nos 4 and 5)
• Customer demands (case nos 7 and 12)
• Expectations for market opportunities (case nos 4, 5, 6, 7, 8, 9, 10, 11 and 13)
• International economic structures, such as currency rates and trade quotas
(case no. 11).
As this overview shows, the shaping of the environmental management in some companies is influenced by more than one factor - e.g. case nos 4 and 5, which are motivated by a combination of reduction of risks to corporate brands and expectation of market expansion, based on an increased media and NGO focus on the reduction of environmental impact from textile production. Expectations regarding future market conditions seem to be a more important driving force than actual customer demands. This conclusion seems to fit with the findings of Foster and Green (2000), who conclude on the basis of an analysis of the greening of innovation in a number of British companies that active marketing of "green products" directed to customers by supplying companies could be a stronger greening strategy than customer demands. A Danish study of environmental management in product chains shows that companies' market expectations based on future public green procurement do not seem to be met, since no or only very limited public demand develops for the greener products developed by the companies (Bauer and Ettrup, 2002).
5.3 The role of supply chain relations
A company might have different supply chain strategies and different environmental management practices in relation to different suppliers, depending on the importance of the supplier and the difficulty involved in changing suppliers. The case studies show that the more the importance factors other than lowest possible price, such as good quality and a certain level of environmental protection, have in supply chain relations, the more the sourcing company tends to develop more long-term and strategic supplier relations based on fewer and more partnership-like conditions (Stranddorf et al., 2002). One of the companies (case no. 13) mentioned as the argument for focusing on fewer suppliers and developing more strategic relationships with them that they found it too time consuming to develop confidence and interaction with new suppliers too often. Another company (case no. 10) focuses on fewer suppliers in order to cover so much of a supplier's capacity (around 20 per cent) that it is likely that the supplier is willing to establish a certain, more environmentally friendly practice in order to have them as a customer (Stranddorf et al., 2002).
5.4 Structures and actors in transnational environmental management
Two new types of stakeholders, with which some of the Danish companies co-operate, have developed within environmental management in transnational product chains in recent years: the Business Social Compliance Initiative (BSCI) (case nos 1 and 2) and MADE-BY (case no. 5). These two new actors can be seen as an indication of the growing importance of environmental management in transnational product chains.
BSCI is a business-driven platform for the improvement of social compliance (which includes environmental aspects) in supplier countries in relation to consumer goods, including environmental protection. The emergence of BSCI can be seen as an indication of such a widespread use of demands to suppliers and audits that it is becoming a constraint to the sourcing companies and to the suppliers as well. The members of BSCI comprise more than 80 retailers, manufacturers and importing companies from ten countries. Through pooling efforts and resources, BSCI claims that members promote a common monitoring and factory development system (Business Social Compliance Initiative, 2007). The initiative is said to show that these companies take responsibility for the improvement of especially the working conditions under which the goods they purchase are produced. The pooling efforts and resources created by the BSCI are supposed to put the member companies in a stronger position to require their suppliers to improve conditions in the sourcing factories. The BSCI claims to advocate a development-oriented approach, enabling the companies and their suppliers to work together on practical solutions to achieve the required standards (Business Social Compliance Initiative, 2007). Members of BSCI have access to audits of suppliers made by other members. The idea is to reduce the amount of resources demanded for auditing by both the sourcing companies and the supplying companies, through making similar auditing criteria and exchanging audit reports (Business Social Compliance Initiative, 2007). Two case companies are members of BSCI: one company (case no. 1) is itself a member, while another case company's (case no. 2) joint international procuring company is a member. Both companies have mentioned their own time and competence constraints in relation to visiting and auditing suppliers as a barrier for developing management of environmental issues in the transnational product chains (Stranddorf et al., 2002; Thomsen, 2007).
Another new type of stakeholder within environmental management in transnational product chains is MADE-BY, which is a company and label developed by a Dutch NGO, Solidaridad. As mentioned earlier, MADE-BY acts as a facilitating company between sourcing companies and potential suppliers within organic cotton and textile manufacturing on the basis of organic agriculture organizations' criteria for textiles. MADE-BY claims to enable a garment to be sustainably produced throughout the whole life cycle. Solidaridad and MADE-BY work on this together with local social organizations and the fashion brand companies co-operating with MADE-BY. The company described as case no. 5 co-operates as already mentioned with MADE-BY, because MADE-BY can ensure not only organic cotton, but also sustainable manufacturing (Thomsen, 2007). The fashion brands take care of the collections, and Solidaridad and MADE-BY make sure that the production of the clothing is "fair and clean". One way of doing this is to support producers in obtaining social certification, while another is to set up organic cotton projects (Solidaridad, 2006). MADE-BY describes their activities as follows (MADE-BY, 2005):
(1) The creation of a consumer preference
(2) Involving as many garment brands as possible with MADE-BY
(3) Building a network of certified suppliers
(4) Creating chain of transparency and guarantee of origin as part of supply chain
The emergence of MADE-BY can be seen as an indication of the constraints experienced by some companies when they want to find sustainable suppliers as part
of environmental management in product chains. These constraints make the relations, which some fair trade organizations have with suppliers capable of supplying sustainable materials and products, a resource in developing more sustainable -----~-sourcing in transnational product chains. At the same time, the focus of MADE-BY on
also mediating sale of cotton under the transition to organic agriculture indicates the
development of an environmental management strategy that acknowledges the need
for engaging in the transition process. This transition strategy seems to be more
responsible than the short-term transition strategies criticized by the Ethical Trading
Initiative (ETI) - a joint initiative between retailers, trade unions and environmental
NGOs in the UK. A report from the ETI members' meeting on 16 November 2006
describes several problems with certified management systems experienced by
companies sourcing in transnational supply chains. The problems seem, in some cases,
to be based on limited auditor skills, and in some cases on fraud from supplying
companies when they try to hide their real practices (ETI Forum, 2006). The analysis of
the background for the problems also indicates that the practices of the customer
companies (the sourcing companies) themselves are part of the problem. If a customer
company demands a very short lead time (the time from placing an order to the time for
requested delivery), it is said to be more difficult for a supplying company to have time
necessary to adapt to the conditions required by the customer, and the risk of fraud
becomes greater (ETI Forum, 2006).
ISO 14001 seems to playa limited role in the recent development in transnational environmental management in the Danish textile sector. Only three of the case companies (case nos 9, 12 and 13) have developed their supply chain management based on ISO 14001, and these companies are among the first "wave" in terms of environmental management in the sector. The more recent entrants into environmental management (case nos 4, 5 and 7) seem to have a more product- and market-oriented approach to environmental management. The fact that these companies have not implemented ISO 14001 could be seen as an indication of a weak role of ISO 14001 in the development of environmentally friendly products and management of supply chain relations in an environmentally sustainable way.
Case no. 9 is one of the three companies that have implemented ISO 14001 as part of their environmental management. This company has an environmental profile which has focused from the beginning on reducing exposure to chemicals. Initially, the focus was on reducing the use of hazardous chemicals in dying textiles, which a supplier offered the company. Later, the focus on chemicals included reduction of worker exposure to pesticide residues in the manufacturing of the clothing (Stranddorf et al., 2002). The company started early to outsource the sewing of "green cotton" products made from organic cotton to different Central and Eastern European countries with lower labour costs - and as wages have increased, it has been changing the sourcing country from Poland to the Baltic countries and later Ukraine. The company has established a joint venture around a refurbished facility in Ukraine (Novotex, 2001). When the company started outsourcing the sewing activity, they developed a supply chain management system, based on ISO 9001 and ISO 14001 (earlier BS7750), which
aims at a gradual and continual development of the suppliers' management of quality, environment and work environment. The annual action plans are made in dialogue between the Danish environmental manager and the supplying companies (Stranddorf et al., 2002; Forman andjergensen, 2004).
5.5 The focus of environmental management in time and space
374 Environmental initiatives in the case studies' product chains focus on different parts of ________ the product chain and for different reasons. Some sourcing companies are concerned about the conditions at the suppliers' facilities, while others are concerned about how the supplier's practice affects the conditions at their own facility, during product use or during post-consumer waste management. This latter type of concern may also imply demands to suppliers in order to prevent problems in other parts of the product chain (for example, setting limits on farmers' use of pesticides in order to reduce the exposure of the firm's own employees who are sewing t-shirts knitted from this cotton; case no. 9) (Stranddorf et al., 2002; Forman and jorgensen, 2004). The two identified types of concerns in the textile sector are:
(1) Demands on conditions at suppliers' facilities:
• buying organic cotton in order to reduce environmental impacts from cotton growing (case nos 5, 9 and 10); and
• restrictions on chemical use by suppliers (in order to fulfil requirements for eco-labelling or environmental management) (case nos 4,7,9 and 12).
(2) Demands to suppliers in order to improve conditions at the supplier's (customer's) own plant:
• buying organic cotton in order to improve occupational health and safety in the supplier's own plant (case no. 9);
• demanding supply of less hazardous chemicals (in order to live up to requirements from local environmental authorities about the environmental load of the waste water) (case no. 13); and
• substituting PVC products (in order to avoid the complications in accounting and reporting the sales of PVC products to governmental authorities) (as part of the Danish governmental regulation of PVC products) (case no. 1).
The companies have different practices in relation to the type of cross-border environmental management, according to the model developed by Hansen (1999).
The two supermarket chains (case nos 1 and 2) seem to organize the more demanding environmental initiative, eco-Iabelling, together with Danish suppliers, and seem not to engage in initiatives aiming at improving the environmental aspects in developing countries and countries under transition. Their focus in sourcing, for example, in South East Asia seems to be on social issues like child labour. Their crossborder practice should probably be characterized as international compliance.
On the other hand, other companies (case nos 4, 5, 7, 9, 10, 11 and 12) have engaged in activities aiming at reduced environmental impact from manufacturing in developing countries and countries under transition. Some of these cases (nos 4, 5,7, 10 and 12) show elements of both centralized environmental management and global integration, with criteria based on customer demands and/or international schemes and criteria, but the environmental practice is developed in co-operation with the
suppliers (Stranddorf et al; 2002; Thomsen, 2007). In case nos 9 and 11, the type of cross-border environmental management seems to be global integration - in case no. 9 based on the earlier mentioned supply chain management system, where targets for the coming year are set at annual meetings, and in case no. 11 based on an up-graded project initiated by the customer but jointly planned and co-financed by the supplier and a Danish private-sector development aid programme (Stranddorf et al., 2002). This case shows at the same time the vulnerability of transnational supply chain relations to international trade conditions, in this case changes in currency exchange. Due to a change in the exchange rate between US dollars and Danish crowns, the products became more expensive, and with short notice the sourcing companies moved 90 per cent of their sourcing from this company to a supplier in the Middle East, where the products could be purchased in euros (Stranddorf et al., 2002).
The analyses shows the usefulness of Hansen's (1999) model in framing the analyses of cross-border environmental management so that national and international regulation, market conditions, structure of the product chains and the business strategy of the individual companies are seen as interacting aspects in shaping the environmental management in transnational product chains. With respect to regulation, the case studies show the role of international regulation, e.g. the EU ban against certain azo dyes and the EU eco-labelling scheme, and the role of home country regulation of the companies, e.g. the restrictions on the use of PVC and chemical emissions in waste water. Host country regulation (in the country where the sourcing takes place) seems to play no role in the transnational environmental management involving sourcing of Danish textile companies.
The cases show that the market within a sector such as the Danish textile and clothing sector consists of different market segments. One division is between different consumer segments (babies/children, men/women, professional workwear and home textiles). The cases show how the focus in the earlier phase of environmental management was on clothing and textiles for babies and kids, and that more recently it has developed towards including professional workwear and fashion clothing. The analyses of the cases also show that the mainstream market for men's and women's clothing still has no focus on environmental management.
The product chains in the sector are often long and seem difficult to gain an overview of and to influence. The emergence of the joint business initiative BSCI reflects the growing importance of auditing of suppliers as part of international sourcing and the need for strategies to limit the resources customers and suppliers have to use on auditing. The emergence of a facilitating company like MADE-BY reflects the difficulty sourcing companies have in identifying suppliers with a more sustainable practice, and the need for new actors who can facilitate the transition phase for conversion to organic cotton.
The cases also show the difference in business strategies among companies within the same market segment. Although more preventive and responsible transnational environmental management has emerged in some companies, the mainstream market segment for men's and women's clothing still has no preventive environmental strategy. However, for some fashion brands, the visibility of environmental management on the market in terms of an eco-label seems to have developed from being a constraint that interfers with marketing the brand to a prerequisite for reducing the risks of damage to the brands' image.
The analysis has shown that the management of an environmental issue in transnational product chains demands capacity in terms of knowledge resources and structures for the translation and evaluation of environmental concerns and for the management of the transition process towards changes in corporate practice. The cases show how parts of such capacities can be built within a number of different stakeholders and structures:
• The company itself.
• The product chain as a kind of partnership between suppliers and customers.
• Joint business initiative for sourcing companies (BSCI).
• Entities facilitating contact between suppliers and customers (MADE-BY).
• International institutions (EU).
• Multi-stakeholder initiatives (e.g. ETI and a similar Danish initiative that is
There is need for more analyses of the shaping and embedding of environmental management in transnational product chains, including more knowledge about the interaction between different types of stakeholders and different national and international schemes, labels, etc. Furthermore, there is a need for capacity development projects with focus on how national and international schemes, labels, etc. could play a bigger role in the development of more preventive and pro-active environmental management in transnational product chains. Some initiatives could be:
• Stronger demands for transparency in product chains, including the potential role of the development of national and international registers of emissions from companies, based on the demands in the Arhus Convention, which was developed by the European chapter of the United Nations regarding access to information, public participation in decision-making, and access to justice in environmental matters.
• Stronger national and international guidelines and standards such as ISO 14001, with more focus on the level of responsibility that companies should practice in sourcing and in product stewardship.
• Better education of auditors and better control of their practice and use of local NGOs to audit transnational product chains.
• A more efficient use of green public procurement as driver in market development for more environmentally sustainable products.
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About the authors
Michael Sogaard Jorgensen has an MSc in Chemical Engineering (1981) and has a PhD in Technology Assessment (1988). He is the Co-ordinator of the Science Shop at Technical University of Denmark and an Associate Professor in User Participation in Technology Assessment and Technology Development at DTU Management Engineering. He is the author of around 130 publications within environmental management in companies and product chains, sustainable transition, technology assessment and technology foresight, developmental work, organic food production and consumption, and food system innovation. He is the chairman of the Society of Green Technology within the Danish Society of Engineers and a member of the Danish Board of Technology. Michael Segaard Jorgensen is the corresponding author and can be contacted at: firstname.lastname@example.org
Ulrik jergensen has an MSc in Electronics Engineering (1979) and has a PhD in Innovation Economics (1986). He is Head of the Danish Research School for Design and Innovation and Professor (docent) in Technology Assessment at the DTU Management Engineering. He is the author of a number of publications in the field of management and regulation of technology and environment, as well as studies of technical change in the fields of energy systems, consumer electronics, transportation, user centred design, and studies of engineering practice and education. He is a member of the editorial board of the new journal for Engineering Studies and of the board of the Greening of Industry Network.
Kare Hendriksen is Master of Environmental Management and has more than 20 years' experience within environmental and occupational health and safety (work environment) research and consultancy. During 2005-2008 he was a leading assessor at the Danish accreditation body primarily responsible for accreditation of OHSAS 18001 and other schemes regarding health and safety. He is now a PhD student at DTU Management Engineering.
Stig Hirsbak has an MSc in Technological and Socio-economic Planning, University of Roskilde (RUC) (1978). He is an independent Consultant and Associate Professor within Sustainable Consumption and Production at Department of Development and Planning, Aalborg University. He is Danish member of the PREPARE network (preventive Environmental Protection Approaches in Europe). He is head of the Danish delegation of ISO TC 207 (Environmental Management) and is heading an ISO task force, which will perform a strategic review of the ISO standards on Eco-labelling, He has published articles about environmental product declarations and cleaner production.
Henrik Holmlund Thomsen is an Environmental Technologist (1998) and Master of Environmental Management (2007). Since 1999 he has worked at the municipality of Frederiksberg, 1999-2008 as Environmental Inspector primarily at repair shops, graphic industries and construction sites. At the same time he was a member of working groups at IfS Lynettefrellesskabet (a wastewater treatment plant), which primarily focus was on wastewater from hospitals and bacteria resistant to antibiotics. Since 2008 he works as Waste Adviser to trades and industry, to citizens and to public.
Nils Thorsen has an MSc in Technological and Socio-economic Planning, University of Roskilde (RUC) (1980) and since 1996 he has been Senior Manager for Environment and Sustainability Services in Ernst & Young. He has 28 years of experience with environmental problems and regulation, including previous experience with legislative power (Ministry of Environment) and executive power (responsible for waste management and environmental inspection in City of Copenhagen and regulated companies, and environmental auditor in the company Novo Nordisk).
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