Sustainable supply chain management in automotive

industry- Supplier company relationship and Integration

management challenge
Masoud Zafarzadeh, Master student of production and Logistics, Malardalen
University Sweden, School of Innovation Design and Technology,
mzh10001@student.mdh.se,+46-760604659
Hariram Vedapatti Ranganathan, Master of Science in production and Logistics,
Malardalen University Sweden, School of Innovation Design and Technology,
hvi10001@student.mdh.se,+91-9597000846
Martin Kurdve, PhD student, Malardalen university Sweden, School of Innovation
Design and Technology, martin.kurdve@Swerea.se, +46-31706 6132

Abstract
Growing competition in automotive industry has forced companies to have serious
attention towards the sustainability concept. Obviously environmental, social and
economic challenges do not only happen inside companies, but rather involves the
whole supply chain process. Most of the practical efforts are focusing on
manufacturing phase and less attention has been paid to supply and distribution areas.
However, it is not possible to achieve a sustainable supply chain unless the current
situation is accurately mapped and long term policies toward a sustainable future state
are defined. In this respect, the authors consider two major challenges, first supplier
coordination with sustainability requirements and second investigating the alliance of
current managerial policies. In theory, the paper aim is to represent sustainable
supply chain management by focusing on supplier company relations. Integration as a
vital element to meet sustainable supply chain is discussed by exploring the
coherence of lean and green with sustainability. In practice, three leading automotive
companies Sustainable Supply Chain Management (SSCM) systems (TOYOTA,
VOLVO and Volkswagen) are investigated in order to figure out their
perspective toward SSCM.
Key words: Sustainability, Supply chain management, Automotive Industry, Supplier,
Integration, Environment, Lean

1. Introduction
Economy, ecology and socio-policy are three main elements in field of global
challenges; air pollution, recent financial crisis and social movements are examples
for these challenges. Developing countries like China and India with about 40% of
world population tend to become more industrialized and due to that the pressure on
world resources, ecosystem and societies culture and economy is increasing (Seliger
et al., 2008). In such situation, companies sustainability depends on how they face
with barriers and enablers in their supply chain process (Walker and Jones, 2012).
Additionally, sustainability and social responsibility count as competitive assets and
according to Wagner and Svensson (2010) A study revealed that 60% of firms have
adopted sustainable practices that strengthen brand names or differentiate their
products (Wagner and Svensson, 2010, p.177)
Research shows that during 1998-2008, manufacturing activities price had a dramatic
raise 43 % worldwide which is an ignorable example of these motivations. (UN
Statistics divisions). On the other hand most of opportunities and risks in the holistic
point of view of production and consumption lie in the supply chain phase and the
consumption phase but most of practical efforts are focusing on manufacturing phase
and less attention is paid to supply and distribution areas.
Because of the automotive production nature which deals with sustainability
challenges across their chains, it would be crucial to study leading automotive
companies in order to have clear picture of sustainable supply chain management in
automotive industries (Seliger et al., 2008).

Sustainable development is often defined according to the Brundtland definition from

1987: "Development which meets the needs of current generations without
compromising the ability of future generations to meet their own needs" (UNECE,
Sustainable development). When it comes to environmental considerations it
concerns the protection of natural resources from pollution or over exploitment of
resources. One common way to measure the impact on the natural resource base (or
simply on the environment) is by the use of life cycle assessment. This is common
practice and most automotive companies have performed life cycle assessment of
their products. It is clear that the main impact of automotive business comes from the
use phase, mainly from their fuel use, and thus it is important to design the vehicles
for low fuel consumption. How the supply chain impact on the design is thus crucial.
However with lighter products and cleaner and more renewable fuels the impact of
the production and end-of-use phases are increasing, thus the life cycle phases
including extraction of material and all of the processes in manufacturing components
and finally assembly to a vehicle are important. Clearly this involves all the suppliers
in the supply-chain companies. This leads us to evaluating two main issues:
1. For suppliers who take part in the design phase how are the requirements of
the design stated
2. For all suppliers how are requirements of sustainability included in the
SCM
In addition to the above it can be concluded that certain sub processes such as process
chemicals (for metalworking and cleaning), paint processes and energy and waste
management carries a large share of the total environmental impact from production
and thus suppliers of these processes or services could have special requirements.
To formulate what mentioned, following research questions are addressed in this
paper:
How do leading automotive companies handle their relationships with
suppliers in a sustainability context?
How do leading automotive companies integrate current managerial policies
(e.g. lean philosophy and green supply chain management) with
sustainability requirements?
To answer the research question, in advance to do literature review it is needed to
investigate leading automotive companies approach toward SSCM.

2. Materials and Methods

2.1 Methodology
This paper will follow an abductive approach which start point of research is prior
theoretical knowledge and then goes to investigate what happen in reality. The aim of
an abductive approach is to develop new understanding in order to suggest direction
for future. Considering previous knowledge in Sustainable SCM, this study explores
the practices of leading automotive companies in sustainable SCM through studying
sustainability reports and companies official websites.

2.1.1 Case companies

Three companies have been used as examples to show their view of integrating
sustainability in their supply chain management;
-Toyota is one of worlds leading automotive companies are renowned for their lean
production philosophy integrated into their supply chain. It is one of the most
researched companies in the automotive industry by technological and economical
academic fields.
-Volkswagen is chosen as they are known as the largest automaker in Europe in 2011.
Volkswagen is one of only three automobile companies listed in the Dow Jones
Sustainability World Index. Due to wide variety of brands and companies which are
known as Volkswagen group, this case is chosen to figure out how a company can
achieve sustainability while trying to maintain unity and individual identities.
-Volvo Group is a manufacturer of heavy vehicles (not cars) and has been chosen for
their known commitment to safety and environmental issues, also two of the authors
have worked closely with Volvo in previous studies.
The three companies own statements of how they work with sustainability in their
supply chain are assessed, compared and discussed on the basis of the theories in
literature.

3. Supplier-company relationship in SSCM

Previous research reveals that automakers have various approaches into cooperation
structure with their suppliers. According to Alez-Aller and Longs-Garca, (2010,
p315); The realization by automakers of just how much mutual dependence there is
in their relations with their suppliers affect companies strategy toward their
suppliers. In such a situation the level and depth of relationship is a strategic decision.
(Simpson et al.,2007) Nawrocka et al., (2009, p1441) designed a survey which
concluded a closer relationship with suppliers is benecial both for environmental
outcomes of projects and as a facilitator for environmental work. A sustainability
model for closer relations where the business is based on function rather than volume
of sales is Product-Service-Systems(Mont et al 1998) where economical incentives
are aligned. (figure 1). This is particularly common for supply of chemical process
material and paint to the automotive industry. However as shown in Kurdve (2010)
the gain is not automatic, the business model and responsibility allocation has to be
aligned with the products and services supplied.

New approach
Aligned Incentives

Traditional model
Conflicting Incentives
Service
provider

Customer

Service
provider
Life cycle costs

Material (cost, volume)

Wants to
Increase

Customer

(material, labor, waste

management)

Wants to
decrease

Wants to
decrease

Wants to
decrease

Change in the supplier compensation model: the source of

environment and economical gains

Figure 1customer supplier relationship model adopted from Kurdve(2010) model

In Sustainable supply chains, firms tendency is to have long term relationship with
suppliers to yield their services for multiple functions or evolve close service with
consumers (Tseng and Chiu, 2010). In contrast Lee et al.(2009) argue that firms
should avoid close relation with their suppliers in uncertain environments in order to
be able to switch to other partners when necessary. Gunasekaran et al., (2008)
developed a model to characterize the responsive supply chain concept as an
important element to succeed with sustainable improvement along the supply chain.
Model consists following elements:
-Strategic planning: Corporate and Business Strategies, Global Outsourcing,
Strategic alliances,
technology, and Continuous Improvement
-Knowledge and information technology management: Partnership based on Core
competencies, Distributed network of partners, Integration by IT, Learning
organization, Strategic alliances
-Virtual enterprise: Automation and IT including E-commerce , Strategy
formulation and Tactical management, Training and education, Learning
organization, Information technology, Flexible workforce considering continuous
changing customer demand.
Sometimes customer should be responsible to develop its suppliers. Supplier
development refers to any activity undertaken by a buying rm to improve supplier
performance, supplier capabilities, or both, so as to meet the buying rms short and
long-term supply needs. (lee et al.,2009, p195)

4. Integrating management systems requirements upstream in

the supply chain
Automotive firms with multiple suppliers and customers and stakeholders often have
separate groups of experts focusing on three bottom lines of sustainability, but it is

crucial that these groups work coherently considering mutual understanding of the
practicalities. Based on Jrgensen et al., (2006) integration of quality, environmental
and occupasional health and safety management systems should be considered on
strategic, management and subsystems levels. The integration level is highly
dependent on the current management system complexity and integration
motivations. In automotive industry there is often an extraordinary attention on
quality issues. However regarding product and process quality, environment and
safety features may be seen as required features, consequently it is possible to
consider quality management as a basic need in all management systems.
While ISO 9001 stipulates to, e.g. evaluate suppliers and manage core processes like
product development and communication, ISO 14001 only makes this mandatory if
the companys analysis shows that these processes are environmentally significant.
Thus, it is almost impossible to implement a quality management system according to
ISO 9001 and not integrate it in the companys core processes.

4.1 Lean, green - efficient and sustainable production processes

Lean supply arrangements demand high levels of information sharing, rapid
performance improvements with suppliers and minimal transaction costs (Dyer, 1997)
(Lamming & Hampson, 1996). This type of relationship may provide the incentive
firms need to bridge the lean and environmental supply chain practices of their
suppliers. Improvements in manufacturing systems can lead to direct and indirect
benefits for environmental management, usually in the form of waste reduction
(Simpson & Power, 2005).
Lean and green practices are becoming essentials practices / activities in the supply
chain to sustain the market by responding to demand, meeting the regulations etc.
Lean which tries to give satisfy the customer and the green which makes it
environmental responsible when combined together makes more sustainable chain of
supplies.
Bergmiller and McCright (2009), in research on Parallel Models for Lean and Green
Operations, compare Lean manufacturing systems models with Green systems models
to determine the degree of similarity that exists between the two sets of models and
conclude, by suggesting a model that integrates the two into one comprehensive
program focused on reduction of all wastes (those targeted by Lean systems and those
targeted by Green systems), that can be an effective and efficient path to long-term
organizational sustainability as shown in Figure 2.

Lean/Green
Management systems
Leadership
Empowerments
Environmental
Management system
Years
ISO14001
Certified

Lean and Green Waste reduction techniques

Vision and strategy-Innovation
Partnerships-Alliances
Support functions
Process and product design
Disassembly-Substitution
Reduce-Recycling-Remanufacturing
Consume Internally-Prolong use
Returnable packaging
Spreading risks
Creating markets
Waste segregation

Lean / Green Business

results
Quality-Cost delivery
Cust. Satisfaction
Profitability
Lead time
Market position
Reputation
Product design
Process waste
Equipment benefits
Intl Sales

Figure 2 Comprehensive Lean and Green Model (Bergmiller and McCright, 2009)
According to Bergmiller and McCright (2009), many leading companies have
implemented Lean Manufacturing Programs which yield increased efficiency,
reduced costs, improved customer response time, and more. Others have adopted
Green Programs resulting in reduced energy consumption, waste generation, and
hazardous materials usage. Models for both Lean and Green systems all include
management systems, waste identification, and implementation of waste reducing
techniques (WRT) to achieve desired business results. Studying known Lean
companies, we confirmed that strength of management system correlates with WRT
implementation which correlates with business results for both Lean and Green
Programs. Our results indicate that Lean and Green Programs lead to improved
business results.
Wal-Mart has recognized that aligning green and lean practices across the supply
chain drives the financial performance of the firm and earns respect from customers
(Friedman, 2008). As a bottom line, integrated lean and green practices make a better
chain of supplies and flows with good and balanced Environmental Performance
(Environment Friendly), Financial Performance (Financial Stability) and Social
Performance(Social responsibility).

5. Case studies
Toyota, Volkswagen and Volvos official statements as published in requirements,
policies and yearly reports have been analyzed.
Table 1 represents the three companies specification considering production
capacity, sale, financial result and employee number. All cases are famous in
automotive industry by producing cars and heavy vehicles like buss and construction
equipment.

TOYOTA

1. Production
(Units)
2.Vehicle sale
(Units)
3. Employee
(Nos)
a) 7,308,000
b) 7,169,000
c) 69,125
(Consolidated:
317,716)

Volkswagen
Group

a) 8,494,280
b) 8,361,294
c) 501,956

VOLVO Group

Comp
any

Facility

Financial highlight

50 overseas
manufacturing
companies in
26 countries
and regions

Net Revenues:
18,584 Billion Yen
Operating Income:
356 Billion Yen

44 production
sites in 19
countries

Sales Revenue:
159,337 Billion
Operating Income:
11,271 Billion

a) 238,000
trucks,
Net sales:
84,000
65 production
310,367 Million SEK
Construction facilities in 20
Operating Income:
machines
countries.
26,899 Million SEK
b) NA
c) 98,162
Table 1 case studies information in year 2011

Reputation

The largest
automakers
in the
world
(2011)
The largest
automaker
in Europe
(2011)
One of the
largest
heavy
automaker
in the
world

5.1 VOLKSWAGEN
Volkswagen developed a model for sustainable development in 2002. This is a long
term cooperation policy based on three core values:
lasting balance of economic, ecological and social systems and the aim for a
long-term balance of divergent interests
responsibility for own actions at the regional, national and global level
Transparent communication and fair cooperation
VW established a CSR office, responsible for sustainability management. The CSR
office work is based on a structure defined by the VW-group, top management shown
in figure 3.

Group
Group Management
Management

Group
Group environmental
environmental committee
committee
management:
management: Research
Research

Brand
Brand group
group Brand
Brand group
group
Volkswagen
Audi
Volkswagen
Audi
Brand
Brand group
group
environment
environment
committee
committee

Ecology
Ecology
committee
committee

Volkswagen
Volkswagen
commercial
commercial
vehicles
vehicles
Regions
Regions
North
North
America,
America,
South
South
America,
America,
Africa,
Africa, Asia
Asia
pacefic
pacefic

Sustainability
Sustainability committee
committee
Management:
Management: External
External
Relations
Relations
Research,
Research, General
General secretary,
secretary,
investor
investor relations,
relations,
communication,
communication, human
human
resources,
resources, environment,
environment, works
works
council
council

Sustainability
Sustainability
workshop
workshop

Sustained
Sustained
financial
financial
markets
markets work
work
group
group

Figure 3 Sustainability organizational structure at VW

Source: Sustainability in Supplier Relations at Volkswagen Group Research,
Environment, October 2006
The main activities are within the sustainable supply chain concept, which is
presented as follows:
Close relationship with suppliers regarding supplier relations, VW has established the
"Sustainability in Supplier Relations" concept. The concept consists of six main
modules, presented below.
Supplier Requirements for
Sustainability
Early Detection to minimize
Risks

Contact Point for

Sustainability

Monitoring and supplier

development

Environmental protection (consist of five

elements),following employees rights, providing
ISO14001certificate or the European Eco
Management and Audit System (EMAS)
A second step is the installation of an internal and
external early detection system for risks. This allows
the identification and avoidance of future
environment-related
With the aid of an explanation in the form of a
questionnaire, suppliers can carry out a self-check to
determine their current status with regard to fulfilling
sustainability requirements.
Permanent checking of supplier alliance with
principles and helping supplier to overcome
sustainability difficulties in form of direct contact or
training

Communication via B2BSupplier Platform

Supplier Programme
Priority A

In order to have efficient relation with suppliers VW

established B2B platform.
Extra training for suppliers to raise the level of
environmental and sustainability kowledge through
holding workshops and seminars

Table 2 supplier relationship modules at VW

Source: Sustainability in Supplier Relations at Volkswagen Group Research,
Environment, October 2006
Figure 4 represents the conceptual framework of integrating sustainability into supply
management
Normative Requirements
Setting Purchasing requirements for sustainability in
Business partners relations

Early Detection
International Issue-Screening
Reporting Liability of Business units
Analysis of Problematic cases

Monitoring + supplier development

Case by case revisions
Duty for suppliers qualifications
Information/Technical Support

Supplier Process
Self disclosure via supplier website
Plausibility check
Environmental/Social evaluation

Figure 4 conceptual framework of integrating sustainability into supply management

Source: Sustainability in Supplier Relations at Volkswagen Group Research,
Environment, October 2006
Volkswagen practice waste elimination and continuous improvement under the title
of Volkswagen way which aim is to have comprehensive optimization of all company
process. The main focus is on process optimization. So in advance to quality, stability
is a matter of concern.

5.2 TOYOTA
Sustainability issues have forced Toyota to establish the CSR (Corporate Social
Responsibility) Committee as the body responsible for sustainable development.
Toyotas overview of sustainability is based on sustainability bottom lines and
represented in form of a model which contains environment, safety, resource/ energy
sources, comfort and convenience sections.
The main elements in Toyotas concerning supplier relationship are defined in their
Supplier CSR Guidelines. Based on these Toyota explains their basic management
philosophy to achieve sustainability in following way:

Monozukuri based on Genchi-Genbutsu: (focusing all corporate activity on

the actual needs in the marketplace and on conditions in the workplace.
Toyota practice Genchi Genbutsu, go to the source to find the facts to make
correct decisions, build consensus, and achieve goals at our best speed)
Relentless Kaizen Efforts explain Kaizen (~continuous improvement)
Two-way Communication
Creation of Work environment based on Respect for our Employees
Toyota expects its suppliers providingProducts and Services to undertake five main
expectations as safety, quality, delivery and production, cost, technological
capabilities.
Further Toyota's Expectations of Suppliers in the Process of Developing "Products
and Services: Legal Compliance, Human Right/Labor, and Local/Global Community
Waste elimination (lean philosophy) as main issue in Toyota production system has
influence on sustainability activities. Toyota lunched the guideline to manage waste
and conducted training sessions for suppliers. Facilitating energy saving activities for
interested suppliers to help them identify ways to reduce energy is what Toyota does
for waste elimination. Toyotas parent company in Japan has challenged plants
worldwide to send zero waste to landfill. Toyota set a target to achieve near-zero
waste to landfill. Zero landfill metric is driven by the Toyota Production System,
where the elimination of waste, in all aspects of business is a main objective.
Continuous Improvement as one of the pillars of Lean philosophy is considered by
Toyota group to develop environmental action plan. In North America, Toyota
Implements different kinds of Kaizens to reduce energy use at manufacturing plants
and logistics sites. There are regular meetings to share Kaizens and ideas and review
current waste regulations.
Toyota established green purchasing guidelines in order to clarify its approach toward
sustainability, and expects Toyota business partners to follow it.
On the other hand Toyota established Toyota's Green Supplier Guidelines emphasize
that Toyota expects its suppliers to be in compliance with applicable laws, regulations
and social norms. Suppliers are also asked to go beyond legal and social requirements
and to undertake activities that support Toyota's environmental goals. (Toyota,
Environmental Report, 2008)

5.3 Volvo Group

Volvo are, in its value chain practices, trying to be more responsible of what they
produce, how they produce it and how they act, than competitors in the market. Volvo
aims at obtaining sustainable value chains and present a belief that this approach is
essential for building lasting relations with customers, employees, suppliers and other
stakeholders.

Focusing on the Sourcing process, Volvo practices responsible sourcing by deploying

the same requirements on suppliers when it comes to environmental standards,
business ethics and social performance as they place on own operations.
The Volvo Groups vision is to become the world leader in sustainable transport
solutions.
The Volvo Group believes there is no contradiction in running a financially viable
business while contributing to sustainable development. A strategic CSR (Corporate
Social Responsibility) approach is increasingly important for the Volvo Groups
competitiveness by e.g. improving brand image, reducing cost, creating new business
opportunities and building stakeholder relationships.
A detailed framework of sustainability is provided below in table 3.
Managing risks and promoting responsible behavior in long-term relationships, in
order to continuously evolve and sustain.
-

Integrating expectations in formal agreements with suppliers (For instance,

quality, environmental, work ethic expectations)
Development in close cooperation by exchanging knowledge, Joint programs,
aiding suppliers during hardships.
Strategic sourcing program which integrates key suppliers in the product
development process.
Local sourcing and risk assessments - to ensure efficient flow into the
production.
Avoiding usage of black list materials and limiting grey list materials.

Set
sustainability
objectives

Employee
welfare &
Safety
Define
important
Challenges
& addressing
them

To Reduce energy consumption and departure from energy from

fossil fuels in production processes
To develop alternative drivelines and vehicles operating on
renewable fuels
To decrease carbon dioxide emissions from internal transports.
To reduce the total amount of carbon dioxide emitted by trucks,
construction equipment and buses manufactured in the Group
through 2014 by more than 30 million tons, compared with
vehicles manufactured in 2008.
Cut the emissions by half from a typical Swedish long-haul
transport operation by 2020 compared with 2005.
Global policy for health, workplace safety and wellbeing (medical
examinations, rehabilitation support, ergonomics, different health
promotion programs)
Identify the potential challenges in order to keep the pace.
Population growth, urbanization and megacities
Climate change, oil resources and alternative fuels
Shortage of natural resources and raw

Safety and security

Skilled employees
Strong and visible leadership in this area
Accountability and responsibility within our sphere of influence
Performance is measured and followed up
Resource efficiency
CSR and
Sustainable
Transparency; reporting shall be conducted transparently based on
Development
the international standard Global Reporting Initiative (GRI)
To engage stakeholders and take their expectations into account
Work proactively and focus on potential risks
Partnerships and cooperation.
Table3 Volvo Group CSR and Sustainability report 2011
Evaluating Performance
Suppliers performance are evaluated against requirements in order to verify that the
assessment process yields the expected results which are used to enhance guidelines
on assessment, development of the process and training material.
LCA Life cycle analysis:

Life Cycle Analysis (LCA) to map a products environmental impact in order

to make informed decisions in the development process. LCA broadens the
perspective and provides insights which show approximately 90% of the
environmental impact results from the use of the products.

Figure 5 Creating Value Chains for Sustainability

Source: Volvo Group CSR and Sustainability Report, 2011
Environmental Product Declaration (EDP)
Volvo for many of its products gives EPD, based on the results from the LCA. This
helps the customer to understand the environmental impact of the product which
helps them to make better choices when choosing a vehicle.
Production
Use
End of
Life

It provides information about energy consumption, emissions and waste

during the production of products
This presents fuel consumption, emissions and spare parts utilization
during the use phase of our products
It deals with the scrapping and recycling of our products

Table 4 Three components of Environmental Product Declaration

Source: Volvo Group CSR and Sustainability Report, 2011

6. Analysis and Discussion

Sustainable development applied on production should be the creation of goods and
services using processes and systems that are non-polluting; conserving of energy and
natural resources; economically viable; safe and healthful for employees,
communities and consumers; and society and creatively rewarding for all working
people according to Massachusets University.
The reported results and indicators used in the research companies reflect the general
trend toward sustainable development. TOYOTA and VOLVO have used lean type
waste elimination integrated with green activities to meet sustainability. VW focus on
waste elimination in context of VW way. Also continuous improvement is seen as
effective way in TOYOTA, VW and VOLVO to meet sustainability targets. These
policies are integrated with sustainability policies through guidelines and clear
organizational structure and process.
In more details, environmental indicators reveal that TOYOTA and VOLVO reports
constant in absolute measurements and improvement in absolute numbers.
Volkswagen has had growth in production volume and environmental indicators only
shows positive improvement when calculated per vehicle. Economical indicators for
VW represent positive growth and shows more profit in 2011 compare with last year.
VOLVO also shows growth in net sale and operating income. TOYOTA, highly
affected by Japan earth quake does not show this trend instead net revenues and
operating income decreased in 2012 compared with 2011. Considering social
activities all companies have various projects toward society, but no comparable
measurement was revealed in this study.
Regarding integration of the sustainability along the supply chain the companies
approach may be further discussed. In order to meet sustainability throughout the
supply chain, all abovementioned elements of sustainable production should be fit

into the supply chain from raw material to end customer. The three companies state a
long term relationship based on mutual benefits attitude towards suppliers. This is
highlighted in the companies sustainability reports. Based on table 5 all cases have
tried to form clear policies to their suppliers regarding sustainability and mentioned
specific requirements. This is reflected in their guidelines and modules. Suppliers in
all part of chains are asked to follow International standards like ISO 14001 and
special requirements regarding chemical management and waste management are
highlighted.
VW

Suppliercompany
relationship

Toyota

Volvo
- Sustainability based
long term relations

-Sustainability based
relationship

- CSR based
supplier relations

-Sustainability in
Supplier Relations"
concept

-Clear supplier
guidelines

- Involving key
suppliers in product
development

- Aids suppliers during

hardships

Supplier
training

Sustainability
training

Supplier waste
management
training

Knowledge Exchange
and joint development
programs

Supplier
monitoring

Digital mandatory
monitoring

Periodical audits
based on two main
elements, quality
and delivery

Monitoring based on
code of conduct

Virtual
connection

Supplier Portal

Supplier Portal

Supplier Portal

ISO 14001 or EMAS

ISO 14001 or a
Supplier
certificate
similar
Environmental - Develop an early
certification
requirements
warning system for
risk minimizing
Requirements
on supplier
designs

- Life cycle
assessment
consideration

Lean and
efficient
sustainable
production

- Waste elimination
-Continuous
improvement (KVP)

- Lean Waste
reduction
-kaizen in supply
process

ISO 14001 or EMAS

certificate

- Life cycle assessment

- Insights to reduce
environmental impacts.

- Lean waste reduction

processes

Green and
efficient
sustainable
production
processes

Special
requirements
on Suppliers
of chemicals
energy or
waste
management

-Water
recycling/reduce soil
erosion in supply
and upstream
process
-Resource efficiency

- Green
purchasing
guidelines
- Suppliers
promotion to use
eco friendly
materials by
adopting
Ecological
material
-Reduction in use
of substance of
concerns

-Specific
environmental
standards regarding
chemical suppliers
-Waste and
recycling
management

-Special
requirements
regarding
substances of
concerns
-Considering
chemical ban list

- Self sustainable in
water resource (through
water recycling and rain
water harvesting)
- Reduce energy
consumption and stop
using energy from fossil
fuels.

- Special Chemical
requirements
- Green energy at
several countries,
- Avoids usage of
materials in black list
and limits materials in
grey list.

Table 5. Companies approach toward sustainability in supply chain and upstream

management
VOLVO and TOYOTA clearly requested their suppliers to consider chemical
management and waste reduction from their suppliers and VW has released a series of
internal standards regarding substances of concerns and mentioned these standards
include all VW group and business partners. TOYOTA and VOVLO that have
specified requirements in design phase from developing suppliers through training is
emphasized by TOYOTA and VW. VOVLO focus on Knowledge exchange to meet
supplier development. All cases consider Internet as an effective tool to enhance
relationship with suppliers through launching specific. It is not clear how much
support for knowledge and information sharing the companies give in reality. The
situation can depend on strategic concerns of risk of leaking inter organizational
information or lack of effort to define a clear supplier information sharing strategy.

7. Conclusions

Two main challenges are addressed in this paper regarding supplier company
relationship and integration in current managerial policies like Lean and green with
sustainability requirements. Case investigation shows that:
The three companies stated the importance of the sustainability issues in the
supply chain management
They have incorporated sustainability into the brand image of their
companies and use sustainability as added value for the customer
The companies focus on long term relationships with suppliers, practicing
support like training and IT support
Requirements and guidelines for cooperation with business partners address
sustainability
Supplier development is a matter that companies have almost different
approaches. VW has a specific program for training. It seems VOLVO is the only
case cooperates with Supplier in product development. In practice TOYOTA has
so many examples of supplier training and information and experience
transferring. VOLVO also mentioned about Knowledge exchange with suppliers.
Regarding supplier requirements, it seems depends on case specification,
companies focus on special issue. For instance VOLVO has clear demand on
chemical management; TOYOTA focuses on quality as a highest priority. VW
ask supplier for early risk detection systems to avoid further difficulties.
Practically all companies are using the benefits of lean, green activities to meet
sustainability but tin theory none of the companies publish guidelines or strategies to
integrate their lean and green activities with sustainability requirements for suppliers.
Authors believe that investigating the effect of supplier involvement in initial phases
on sustainability is an interesting area for further research. Additionally integrating
lean green activities with sustainability requirements in form of theoretical frame
would be an interesting issue for future research.

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