Sustainable Supplier Management - DiVA portal

IN DEGREE PROJECT TECHNOLOGY,FIRST CYCLE, 15 CREDITS

, STOCKHOLM SWEDEN 2021

Sustainable Supplier ManagementHow can Telia Company develop the Sustainability Performance in their Supply Chain with a Supplier Code of Conduct?

ALEX KASPO

KTH ROYAL INSTITUTE OF TECHNOLOGYSCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

Abstract

Sustainability has become a strategic and high priority focus area in today’s society.

Responsible Business is an important part of the work towards a sustainable society, and

Telia Company is one of the companies that actively works to take that responsibility.

What is important when it comes to sustainability work in organizations is to look at

a longer perspective than just the internal organization. Telia Company has a complex

network of suppliers that extend around the world and influencing their sustainability

work is therefore critical in order to be able to take that responsibility.

This qualitative study was carried out in collaboration with Telia Company with the

aim of investigating how the company’s sustainability work in the supply chain can be

developed with a code of conduct for suppliers. Today, Telia Company has a process for

responsible sourcing where one of the cornerstones is their Supplier Code of Conduct

document with requirements agreed and signed by suppliers and followed up by Telia

Company continuously. The study’s questions were answered by performing mainly two

analyzes. The first analysis is an Industry Peer Benchmarking. Based on the analysis

of their sustainability processes within the supply chain, the results show that Telia

Company in comparison has good and responsible sustainability work in place in its

operations to manage risks in the supply chain. In the second part, an analysis is

performed on a selection of Telia Company’s customers to examine how the company

meets their set sustainability requirements. The results show that the company meets

customers’ requirements in an overall way and that requirements are also in place to

pass on these expectations to subcontractors. Previous research and studies also show

a paradigm shift where digitalization and new trends are growing in society and affecting

customers’ awareness. Accordingly, the measures that is proposed to Telia Company

for further development of its supplier requirements are to perform trend analysis and

market analysis continuously to meet the stakeholders’ requirements both today and in

the future.

Keywords

Bachelor Thesis, Sustainability, Supply Chain, Supplier, Supplier Code of Conduct, Telia

Company

Abstract

Hållbarhet har blivit en strategisk och högt prioriterad fråga i dagens samhälle.

Ansvarsfullt företagande är en viktig del i arbetet mot ett hållbart samhälle, och Telia

Company är ett av de företagen som aktivt arbetar med att ta det ansvaret. Det som är

viktigt vad gäller hållbarhetsarbete i organisationer är att se till ett längre perspektiv än

enbart den interna organisationen. Telia Company har ett komplext nät av leverantörer

som sträcker sig världen över, och att påverka deras hållbarhetsarbete är därför kritiskt

för att kunna ta sitt ansvar.

Denna kvalitativa studie utfördes i samarbete med Telia Company med syftet att

undersöka hur bolagets hållbarhetsarbete i försörjningskedjan kan utvecklas med en

uppförandekod för leverantörer. Idag har Telia Company en process för ansvarsfulla

inköp där en av byggstenarna är deras Supplier Code of Conduct dokument med krav

som godkänns och skrivs under av leverantörer och följs upp kontinuerligt av Telia

Company. Studiens frågeställningar besvarades genom utförandet av huvudsakligen två

analyser. Den första analysen är en Industry Peer Benchmarking. Utifrån analysen av

deras hållbarhetsprocesser inom försörjningskedjan visar resultatet att Telia Company i

jämförelse har ett bra och ansvarsfullt hållbarhetsarbete på plats i sin verksamhet för att

hantera risker i leverantörskedjan. I den andra delen utförs en analys på ett urval av Telia

Company’s kunder för att undersöka hur bolaget uppfyller deras ställda hållbarhetskrav.

Resultatet visar att bolaget möter kundernas krav på ett övergripande sätt och att

krav även finns på plats för att föra vidare dessa förväntningar till underleverantörer.

Tidigare studier visar även ett paradigmskifte där digitalisering och nya trender växer

i samhället och påverkar kundernas medvetenhet. De åtgärder som därför föreslås till

Telia Company för vidareutveckling av sina leverantörskrav är att utföra trendanalyser

och marknadsanalyser kontinuerligt för att möta intressenternas krav både idag och i

framtiden.

Nyckelord

Kandidatexamensarbete, Hållbarhet, Försörjningskedja, Leverantör, Supplier Code of

Conduct, Telia Company

Acknowledgements

This thesis work has been very rewarding forme personally. I want to extendmy gratitude

and appreciation for the support I have received from The Royal Institute of Technology

(KTH) and from Telia Company. A special thanks to Per Lundqvist, Fabian Levihn and

Safira Figueiredo Monteiro from KTH, and Raúl Blanco and Mehrdad Fahami from Telia

Company for their valuable feedback and guidance throughout the writing process.

It is with great appreciation I hand over this report to the Royal Institute of Technology

and Telia Company AB.

Stockholm, May 2021

Alex Kaspo

Contents

1 Introduction 11.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.2 Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1.4 Delimitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Theoretical Background 52.1 Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2.1.1 Sustainability in the Business World . . . . . . . . . . . . . . . . . . 5

2.1.2 Sustainability in Supply Chains . . . . . . . . . . . . . . . . . . . . 6

2.1.3 Supplier Code of Conduct . . . . . . . . . . . . . . . . . . . . . . . . 7

2.1.4 Trends and Future Expectations . . . . . . . . . . . . . . . . . . . . 8

2.1.5 SWOTAnalysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2.2 Telia Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.2.1 Telia Company History . . . . . . . . . . . . . . . . . . . . . . . . 11

2.2.2 Telia Company Sustainability Strategy . . . . . . . . . . . . . . . . 11

2.2.3 Telia Company Stakeholders’ Interests . . . . . . . . . . . . . . . . 12

2.2.4 Telia Company Supplier Code of Conduct . . . . . . . . . . . . . . 14

2.2.4.1 Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.2.4.2 Labor Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2.2.4.3 Workplace Health and Safety . . . . . . . . . . . . . . . . 15

2.2.4.4 AntiBribery and Corruption . . . . . . . . . . . . . . . . . 16

2.2.4.5 Environment . . . . . . . . . . . . . . . . . . . . . . . . . 16

2.2.4.6 Responsible Sourcing of Minerals . . . . . . . . . . . . . . 16

2.2.5 Telia Company Responsible Sourcing Process . . . . . . . . . . . . 17

2.2.5.1 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . 17

2.2.5.2 Compliance and Audits . . . . . . . . . . . . . . . . . . . . 18

2.2.5.3 Joint Audit Cooperation (JAC) . . . . . . . . . . . . . . . . 18

2.2.5.4 Responsible Sourcing in Telia Company Current Status . 19

3 Methodology 203.1 Research Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

3.2 Research Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

3.2.1 Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

3.2.2 Selection Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

3.3 Data Collection and Analysis Procedures . . . . . . . . . . . . . . . . . . . 23

3.4 Methodology Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

4 Result 254.1 Results from Industry Peer Benchmarking . . . . . . . . . . . . . . . . . . 25

4.1.1 Telefónica S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4.1.1.1 Responsible Sourcing Process . . . . . . . . . . . . . . . . 25

4.1.1.2 SCoC Deviations . . . . . . . . . . . . . . . . . . . . . . . . 25

4.1.1.3 SWOTanalysis . . . . . . . . . . . . . . . . . . . . . . . . 27

4.1.2 Deutsche Telekom AG and Orange S.A. . . . . . . . . . . . . . . . . 27

4.1.2.1 Responsible Sourcing Process Deutsche Telekom . . . . 28

4.1.2.2 Responsible Sourcing Process Orange . . . . . . . . . . . 29

4.1.2.3 SCoC Deviations . . . . . . . . . . . . . . . . . . . . . . . . 29

4.1.2.4 SWOTanalysis . . . . . . . . . . . . . . . . . . . . . . . . 30

4.1.3 Vodafone Group Plc . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

4.1.3.1 Responsible Sourcing Process . . . . . . . . . . . . . . . . 30

4.1.3.2 SCoC Deviations . . . . . . . . . . . . . . . . . . . . . . . . 31

4.1.3.3 SWOTanalysis . . . . . . . . . . . . . . . . . . . . . . . . 32

4.2 Results from Customer Requirements . . . . . . . . . . . . . . . . . . . . . 33

4.2.1 Client A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

4.2.1.1 Supplier Requirements in SCoC . . . . . . . . . . . . . . . 33

4.2.2 Client B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33


4.2.3 Client C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33


4.2.4 Client D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34


5 Discussion 355.1 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

5.1.1 Telefónica . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

5.1.2 Deutsche Telekom AG and Orange S.A. . . . . . . . . . . . . . . . . 36

5.1.3 Vodafone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

5.1.4 Customer Requirements . . . . . . . . . . . . . . . . . . . . . . . . 39

6 Conclusions 406.1 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

6.2 Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

References 42

1 Introduction

1.1 Background

Every year the significance of sustainability areas and the climate crisis is getting higher.

The focus has been around for a long time, but the definition of what and what is not

sustainable has changed. Sustainability has received more attention particularly in the

political agenda. As the society is getting further involved in the issues, it has also

become critical for companies to take their responsibilities. Today, people talk about

Corporate Social Responsibility (CSR), a key concept that not only includes environmental

aspects in the business but also to take responsibility for the society and its development.

Sustainability work has mainly been done on a voluntary basis, but today a great deal of

this work has been converted into legal obligations that companies have towards society.

In addition, it is today critical for companies to prioritize issues raised in sustainability

areas as it has become a decisive factor for competitiveness. A sustainable businessmodel

creates trust and interest for consumers and workers as well as for shareholders and the

general public (Kotler & Lee, 2004).

Telia Company AB is a business that since 1853 has provided customers with telecom

services and is Sweden’s largest mobile telephone operator with a turnover of SEK 89

billion 2020. Today, Telia Company has nearly 21,000 employees and delivers services in

everything from landline telephone and internet services, to TV and entertainment. The

company operates throughout the Nordic region and in the Baltics and is also listed on

Nasdaq with close to 500,000 shareholders. Being a previously stateowned authority,

the largest owner today remains to be the Swedish state, currently with 39.5 percent of all

shares (Telia Company, 2020).

Society and consumers in general now demand that companies work sustainably, and

this also applies to Telia Company. Organisations are critically reviewed by external

stakeholders, e.g. media, and the risk of ending up in scandals is large if it is shown

that there is a lack of social responsibility. Companies that violate society’s values of

responsible operations, risk damaging their legitimacy. The process of rebuilding the

legitimacy is both costly and timeconsuming. In addition, there is a risk of permanent

damage to the brand. Working with CSR and sustainability therefore requires not only

internal responsibility, but also that the entire value chain is based on these foundations.

Making demands on suppliers is hence an important part of responsible business. By

placing demands on external actors, companies can thus take greater responsibility and

control the sustainable impact of the entire supply chain. In addition, it leads to increased

1

incentives among other parties to work more sustainably in their own chains, which in

turn increases sustainability work in each tier’s value chain.

1.2 Problem

For several years, Telia Company has been successful in its sustainability work, aligned

with their global sustainability strategy. However, in order for Telia Company tomaintain

its strong position in the competitive market, it is necessary to constantly evaluate its

value chain and make appropriate improvements. In particular the supply chains have a

major impact on the company’s value creation, as suppliers can both strengthen but also

counteract the company’s sustainability work. Thanks to today’s technology, companies

like Telia Company often have larger andmore complex supply chains that extend around

theworld. It is therefore critical that they can investigate the chains andmake appropriate

demands on their suppliers, not only in terms of production and quality, but also in terms

of CSR and sustainability.

Many of the suppliers and subcontractors that Telia Company relies on are located in fields

with challenges in human and labor rights, environmental issues, and unethical practices

and corruption. This emphasizes the importance of performing due diligence throughout

the supply chain to avoid and minimize the associated risks. External parties that Telia

Company rely on may be in violation with the company’s core beliefs and sustainability

vision. By using various tools to ensure sustainability work in the supply chain, Telia

Company can minimize the risks and instead work towards a more sustainable supply

chain.

One of the tools that Telia Company uses to check the sustainability of the supply chain

is the Supplier Code of Conduct (SCoC). The document helps them communicate the core

beliefs of Telia Company and put effective requirements on the suppliers. The company

must therefore carefully consider what requirements are appropriate and effective to put

on the suppliers. In order for this document to have any significance and effect on the

supply chain, Telia Companymust also implement, monitor and audit the suppliers’ work

on an ongoing basis. By examiningwhat requirements should be set by the group, how the

document should be used in the operations, and how it should be audited, Telia Company

can minimize the risk of potential misconduct by the suppliers and instead ensure that

the suppliers are operating in a responsible manner.

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1.3 Purpose

The work aims to investigate how requirements for suppliers can be set in the best way

with the help of Telia Company’s document “Supplier Code of Conduct” (Telia Company,

2018). Furthermore, the work aims to identify potential improvement measures for the

document and its processes. As the SCoC document is a common method for companies

to report on their sustainability requirements for suppliers, an Industry Benchmark will

also be performed on four other similar companies in a peer group for the market and

identify similarities and differences in content and processes. The aim of the degree

project is to contribute to the development of Telia Company’s sustainability work in its

operations.

The purpose can be answered with the following research objective (RO):

RO: The aim of this study is to identify best practice for Telia Company’s Supplier Code

of Conduct.

The research objective is answered in turn with the following subobjectives (SO):

SO1: Make a general description of the SCoC and how it is implemented and monitored

in the business.

SO2: Analyze and describe the market and see how the requirements for suppliers are

set by industry peers.

SO3: Identify customers’ requirements for Telia Company’s sustainability work related

to the SCoC.

SO4: Analyze how future societal changes and trends can be taken into account in the

document.

SO5: Suggest eventual improvements to Telia Company.

1.4 Delimitations

In order to be able to carry out the study and answer the questions within the time

frame, delimitations have been made. The study is limited to the telecommunication

industry and the company Telia Company AB. The study does not include calculations to

analyze the financial relationship between sustainability and profitability in the industry.

In addition, the work only focuses on supplier requirements within the framework of

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sustainability and not other requirements imposed on suppliers with regard to e.g.

contractual provisions on quality and prices. The analysis has been made from Telia

Company’s perspective and comparisons have been made to their process to further

develop the work. Accordingly, the SWOT analysis have been performed with a focus on

the strengths and weaknesses that Telia Company can learn from, rather than how each

company can improve its own documents.

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2 Theoretical Background

2.1 Sustainability

2.1.1 Sustainability in the Business World

Society continues to strive for a sustainable future where people take care of the

planet’s resources and humanity, and Sweden has long been a pioneer in that journey.

Nevertheless, this is a great responsibility that individuals, the state and not least

companies must take. The idea that companies should have a social responsibility has

existed for over a hundred years (Smith, 2003), but it was not until the 1950s that the

demands from society began to really take off (Bowen, 1953). Companies have a strong

political influence both nationally and internationally and have therefore an obligation to

be involved and secure a sustainable future. Sweden has, based on the United Nation’s

(UN) Global Compact and Guiding Principles on Business and Human Rights, and the

OECD (Organization for Economic Cooperation and Development) developed guidelines

for sustainable business. The guidelines deal not only with climate issues, but also labor

law, anticorruption and human rights (Government offices of Sweden, 2016). As a

consequence, CSRwork is highly prioritized, especially among large global and influential

companies, as good work leads to a stronger brand, but also economic competitive

advantages and a better working environment. It is also in the interest of stakeholders

that the company should achieve longterm sustainability in order for the company’s value

to increase and gain more customers and a larger market share (Hoeffler & Keller, 2003).

For this reason, companies that do not incorporate CSR into their operations expose their

brand and reputation to major risks (Dawkins, 2004).

In Sweden, sustainability reporting has beenmandatory for stateowned companies since

2007, and the country was therefore the first in the world to make such a requirement

(Government offices of Sweden, 2007). Simultaneously, Sweden has higher requirements

for sustainability than the EU directive in general (CSR Europe GRI, 2017). Since 2017,

sustainability reporting is also mandatory for all large Swedish companies according

to Årsredovisningslagen (SFS1995:1554 Riksdagsförvaltningen, 1995). There are no

requirements on how the report should be designed, but it is mandatory for stateowned

companies to have their sustainability report audited by an auditor (Eklöv Alander, 2019).

However, sustainability reporting is difficult to assess and checking that it is in line with

reality is not an easy task. Criticism has been raised against the sustainability report in

companies asmany claim that it only has a selffulfillingmarketing role for the companies

5

rather than a real impact on developments in the world (Michelon et al., 2015). The

problem is that the reports can be angled in favor of the companies and thus not show the

whole reality. Today, many reports are prepared based on the Global Reporting Initiative

standards (GRI), which address both positive and negative aspects of the report. As

the commitment to sustainability increases among companies, including private ones,

standards, rules and practices will emerge and the assessment will thus be similar to

the financial statements. The design and content become clearer and then also easier

to compare between companies (Eklöv Alander, 2019).

2.1.2 Sustainability in Supply Chains

In order to have effective sustainability work, it is necessary to look at the entire supply

chain and not just the internal operations. The UN’s Global Corporate Sustainability

Report (United Nations, 2013) highlights the importance of integrating suppliers in

sustainability work, as they can often be an obstacle to development. Through Sustainable

Supply Chain Management (SSCM), you can control the flow of materials, information

and capital andworkwith suppliers in the chain to amore sustainableway ofworking. The

work with SSCM is critical to achieve the company’s sustainability strategy and achieve

the social, ecological and economic goals that the company’s stakeholders expect. It is

also important to set requirements and follow up the work of suppliers to ensure that

the supply chain becomes more sustainable (Seuring & Müller, 2008), Larger companies

have more stakeholders and a greater social responsibility and have therefore begun to

make greater demands on suppliers. This in turn has led to something similar to a chain

effect where suppliers place demands on their suppliers, and sustainability work is spread

further (United Nations, 2013).

When talking about a sustainable supply chain, the term Triple Bottom Line (TBL) often

appears. With TBL the focus is on the entire business, internally and externally, and the

model deals with performance within the three aspects environment, profitability and

social aspects (Elkington, 1999). By considering the three P:s from the model, Profit,

Planet and People, one can use the model as a good tool to achieve the organization’s

sustainability goals (Slaper, 2011). In order to achieve the goals, the suppliers are

an important part and should therefore be chosen carefully. Today, consumers value

corporate social responsibility very highly andmay consider payingmore for the products

if it contributes to the social dimension (Faisal et al., 2017). A company’s social

responsibility is, among other things, about good and fair working conditions, human

rights and, in general, about human needs, development and culture (Ammenberg, 2012).

6

Outsourcing various processes in the operations or having suppliers in e.g. developing

countries can lead to lower costs in the value chain, but there are also risks. Using such

suppliers is often at the expense of workers’ rights (Conway, 2018). Through the ILO

conventions and other national and international laws, companies can be given guidelines

to reduce the risk of such types of human rights violations.

Due to the risks involved with suppliers acting unethically, it is important to monitor

and evaluate the supply chain regularly. Through certifications, codes of conduct and

audits, companies can develop the supply chain and monitor the suppliers. To handle

these demands that stakeholders and society place on the business and to achieve the

sustainability goals, a good way is to introduce codes of conduct, both internally and

externally (Ammenberg, 2012). With a Code of Conduct for Suppliers, a Supplier Code of

Conduct (SCoC), one can in this document communicate the responsibility expected of the

suppliers. Through a code of conduct, companies can show that they take responsibility

and that they value the ethical aspects highly. The certifications are also a good tool when

choosing suppliers. They are often global and exhibited by third parties and are intended

to reflect the demands that society expects from activities. The suppliers’ sustainability

work must continuously be examined even after the selection. By auditing their work and

seeing that certifications and requirements continue to be met, it can be ensured that the

supplier contributes to a sustainable supply chain. After an audit, the auditing company

can analyze any shortcomings in the work and based on that take appropriate measures

depending on the seriousness of the shortcomings and risks (Najjar et al., 2018).

2.1.3 Supplier Code of Conduct

A Code of Conduct is a policy that contains various requirements that an organization

places internally on employees and processes. The requirements are in line with the

organization’s social, environmental and ethical core values. The document sets the

standard in the business on how to and how not to act on various issues. The policy

is available in different formats and under different names, but the areas in which the

requirements are set are mainly working conditions, environmental policy, ethics, and

followup of the requirements.

In order to also set requirements for suppliers, there are Supplier Code of Conducts

(SCoC), which are instead aimed at external parties. There, the company can

communicate its requirements and values to suppliers in a formal policy. The document

establishes a code of conduct and the liability of the supplier towards the company. In

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this way, a SCoC acts as a guide for suppliers to relate to the buyer’s core values in

their processes, and the buyer can thus reduce the risk of shortcomings in sustainability

throughout the value chain (Preuss, 2009).

2.1.4 Trends and Future Expectations

The sustainability work changes with each passing day. Supply chains are becoming

more complex, requirements are increasing, and methods are becoming more efficient.

Increased awareness from consumers and stakeholders has contributed tomany new laws

and areas ofwork for sustainability. Workers’ rights,means of transport and animal rights

are just some of the areas that consumers demand. From 1 January 2022, the EU’s new

taxonomy regulation will be introduced, affecting many companies in the market, both

directly and indirectly. Among other things, companies in Sweden with more than 500

employees must annually report the proportion of green income in their annual reports

(Jakobsson & Wallenberg, 2021).

Customer integrity and privacy have become increasingly important in debates around

the world. Companies have large amounts of valuable data about their users, and it is

important that it is handled carefully. Data should be protected against loss, unauthorized

distribution, misuse and other forms of damage. The EU General Data Protection

Regulation (GDPR) (European Union, 2016) came into force in 2018 and is an example

of what laws and regulations we can imagine in the future. With the digitalization, the

development of the Internet of Things (IoT) and artificial intelligence (AI), larger amounts

of data are being handled in more devices, and an increase of laws to protect that data is

expected. Moreover, businesses are replacingmore of their physical processes with digital

services, e.g. cloud services and virtual meetings (Anthony et al., 2021).

Other areas are also becomingmore important to society in general. Increased awareness

from consumers and stakeholders has led to, among other things, diversity and inclusion

in organizations becoming more important. SHE Index is an example of a tool that was

introduced in 2020 and measures company inclusion and diversity on a scale of 0100

(Ernst & Young, 2020). A report from McKinsey & Company also states that various

teams have higher profitability than less diverse teams in many cases. Several companies

are working on this today, but more work can be expected in the future (McKinsey &

Company, 2020).

New laws are also being discussed in the coming years from the EU for mandatory supply

chain due diligence, including review of suppliers. Companies will need to work actively

8

for the environment, human rights and ethical corporate governance. They are also

expected to annually document and publicly communicate their work with due diligence

in a special document (European Parliament, 2021).

New technologies are also emerging and developing in society. One wellknown

technology is Blockchain, which can be used, among other things, to follow the products’

manufacturing process, from the extraction of raw materials to final delivery to the

customer. With the help of blockchain, you can, among other things, get realtime

tracking, reduce fraud and increase transparency in the value chain. The technology can

for example be used for due diligence processes in companies, to supplement the currently

timeconsuming processes for audits and due diligence. With the help of blockchain,

there is potential for time andmoney savings. With the increased efficiency, opportunities

are expected to open up for more audits performed despite retained manpower (OECD,

2019).

2.1.5 SWOTAnalysis

ASWOTanalysis is a good analytical tool in strategywork as itmakes it possible to identify

different measures and actions by performing an analysis of the company’s strengths,

weaknesses, opportunities and threats (Gürel, 2017). The tool is often used to measure

the strategic position of a company in amarket (Piercy & Giles, 1989). The purpose of this

model is to analyze the internal and external factors that the company have to consider

in their strategy. The internal factors, the strengths and weaknesses, are under the

company’s control and they can therefore influence them. The external factors, however,

are outside the company’s control and can be seen as opportunities and threats that exist

in the environment.

Although the external factors cannot be controlled directly by the company, it is of great

importance that these factors are identified and turn the threats that they may face into

opportunities (Knee & Walters, 1990). The purpose of such an analysis is to anticipate

important events thatmay affect the company and develop an action program to be able to

work proactively (Kotler et al., 2019). Changes in the business environment, for example

socioeconomic variations, can either be in favor or disfavor of the company. based

on how these socioeconomic changes affect the company in question, one can identify

opportunities and threats (Knee and Walters. 1990). what, on the other hand, must

be considered is that opportunities need not only be an opportunity for the company in

question but also for its competitors (Kotler et al., 2019).

9

The structure of the SWOT analysis enables the company to match strengths and

weaknesses with the external factors. Matching a strength with an opportunity create

an ability in the company. On the other hand, a strength adds no value to the company if

it cannot be matched with an opportunity. Nor does an opportunity add anything if the

company does not have matching strengths to take on the opportunity. Thus, in order

to be successful, a company must transform weaknesses into strengths and threats into

opportunities (Ferrell, 1994).

Figure 2.1: Telia Company SWOT matrix

10

2.2 Telia Company

2.2.1 Telia Company History

The Royal Electrical Telegraph Administration was founded in 1853 by the Swedish state

as a telephone monopoly. It became the basis for what is today called Telia Company,

a company that has gone from telegraph to smartphones, and from copper to 5G. In

1953, 100 years after the foundation, the business was transformed into Televerket. Over

time, the public service corporation began to face competition from several international

private players who entered the Swedish market. At the same time, technological

development in the industry accelerated and Televerket’s strategy and technology became

more outdated around the 1980s. 1993 was therefore the start of the new Telia AB, which

would compete with the other private players and become a strong player early after the

reorganization. The European telecommarket becamemore liberalized in the 1990s, and

several countries in theNordic regionwent fromhaving stateowned telecomcorporations

to new commercial enterprises (Telia Company, n.d.a).

Telia was listed on the Stockholm Stock Exchange in June 2000, and new opportunities

for the business opened up. The main opportunity was the merger in 2002 between Telia

and the Finnish telecom company Sonera, which had also gone from being a stateowned

telecom corporation to being listed on the stock exchange in 1998. Following the merger,

the new companywas nowTeliaSonera, with the Swedish and Finnish states as the largest

owners, with 46 and 19 percent of the shares, respectively. The company played a strong

role in the Nordic market, but also in the Baltics (Telia Company, n.d.d).

TeliaSonera’s business grew and in 2009 the company launched the world’s first

commercial 4G network in Stockholm and Oslo. In 2016, the company changed the name

of the group to Telia Company, and a reorganization was done. Today, the company is one

of the market leaders in the Nordic and Baltic countries and has continued strong growth

with several new acquisitions. One of the major acquisitions was completed in 2019,

where Telia acquired the Nordic region’s leading media company Bonnier Broadcasting,

with products such as TV4 and Cmore (Telia Company, 2020). Today, Telia Company is

39.5 percent owned by the Swedish state, and the remaining part is other shareholders,

this after the Finnish state sold its last shares in 2018 (Phillips, 2018).

2.2.2 Telia Company Sustainability Strategy

The telecom industry is not at the forefront in terms of sustainability compared to other

industries, but in the industry Telia Company has a strong environmental, social and

11

governance performance (ESG) compared to its competitors. Since the start, the company

has been ranked 1st in the telecom industry (B2C) in the Sustainable Brand Index and

was certified in Sweden with the environmental management system ISO14001 as early

as 2001. Among many other performances, they have an AAA rating in MSCI’s ESG

and are ranked within the Top 20 in World Benchmarking Alliance’s Digital Inclusion

Benchmark. At the same time, Telia Company is the only telecom operator in the Nordic

region to sign the EU Code of Conduct for energy consumption. Today, the amount of

data used in Telia’s Swedish network is 40 times greater than in 1990, but electricity

consumption is nevertheless lower than in 1990, which reflects the sustainability work

that Telia Company has worked with. By 2020, the company became climateneutral in

its operations, and the goal is that by 2030 there will be no carbon dioxide emissions and

a net zero emission for the entire supply chain. These two main goals, and many other

subgoals, are sciencebased environmental goals that have been developed according to

the Science Based Targets initiative. To achieve these goals, the suppliers are of great

importance andTelia Company thereforeworks closelywith its suppliers for the transition

to climateneutral value creation throughout the business.

With regard to social sustainability, Telia Company works actively with digital inclusion

in society in relation to integrity and security. The company’s products and services

help to connect the disconnected and include them in society and today’s digital life.

This helps more people to explore and share knowledge with each other and in turn

promote global development. The distance to loved ones is reduced and the conditions

for globalization and flexible workplaces increase. Telia Company has launched several

initiatives to increase security and accessibility in society. Initiatives such as ”Become

digital” help companies develop their digital skills, and ”alonetogether” offering older

customers over 65 a free surfing pot to increase the opportunities for video calls to friends

and family during the Covid19 pandemic. Thereby they worked to reduce the physical

meetings and the risk of spreading the infection in society (Telia Company, 2020).

2.2.3 Telia Company Stakeholders’ Interests

In the work towardsmore sustainable business, Telia Company has identified which areas

the various stakeholders prioritize the most. This was presented in the Sustainability

Report 2020 (Telia Company, 2020) and can be seen in Figure 2.2.

12

Figure 2.2: Telia Company Stakeholders’ Interests (Telia Company, 2020)

13

2.2.4 Telia Company Supplier Code of Conduct

The following section summarizes the Supplier Code of Conduct version 3 approved on

the 12th of June 2018 as described by Telia Company (Telia Company, 2018).

Telia Company’s Supplier Code of Conduct (Telia Company, 2018) is a document used

frequently in the business operations. It is used among others by the purchasing

departments in agreements with suppliers, by the sustainability departments in the

development of sustainability work, by the sales department to meet customers’ changing

requirements, and by the marketing department to showcase the sustainability work in

the business. With the complexity and risk of Telia Company’s global supply chain,

the document is needed to maintain the ethical standards and conduct business in a

responsible way.

The code applies to all Telia Company suppliers conducting business with or on behalf

of Telia Company. When signing the SCoC suppliers commit at a minimum to comply

with all applicable laws and regulations set out in the supplier code. It is also expected

that suppliers work through their own supply chain to develop and improve measures to

comply with the SCoC. What is worth noting is that the requirements in the SCoC are not

meant to replace or change the suppliers’ current ones, but rather supplement them.

Telia Company are committed to international standards and expect the same from

their suppliers. The requirements in the SCoC are therefore aligned with the following

standards:

Issued by Document

United Nations Universal Declaration of Human Rights

International Labour Organization The Core Conventions of the International Labour Organization

OECD The OECD Guidelines for Multinational Enterprises

United Nations The UN Guiding principles on Business and Human Rights

United Nations The UN Global Compact Principles

Unicef, UN, Save the Children Children’s Rights and Business Principles

Based on above mentioned standards, the requirements have been set and divided into

six areas, presented in Figure 2.3.

14

Figure 2.3: Telia Company Requirement Areas (Telia Company, n.d.c)

2.2.4.1 Human Rights

The section about Human Rights requires Telia Company’s suppliers to respect human

rights based on the UN Guiding Principles on Business and Human Rights. This includes

treating employees with respect and dignity in alignment of fundamental human rights.

Requirements include providing a workplace free from discrimination and harassment,

promote diversity and having a policy and due diligence processes in place. Physical,

sexual and verbal abuse, humiliation, intimidation and threat is prohibited, and privacy

rights of employees and customers should be respected.

2.2.4.2 Labor Rights

The section about Labor Rights requires Telia Company’s suppliers to respect labor rights

and have work aligned with ILO’s International Labor Standards. The suppliers are

required to uphold good labor standards for employees and provide a productive work

environment with decent work in conditions of equity, freedom, security and dignity. This

includes providing a living wage for all employees, a written employment agreement, and

a workweek not exceeding 48 hours. The document also put requirements on the supplier

to maintain an effective and confidential grievance system and have specific rights for

young workers.

2.2.4.3 Workplace Health and Safety

Workplace health and safety is the section that process the health and safety of employees.

Requirements are aligned with international standards for occupational health and

safety. Telia Company suppliers should provide a good workplace for their visitors and

employees, but also contractors and subcontractors working on the supplier’s behalf. This

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includes having a health and safety management system in place, including satisfactory

hazard and risk management. A system for reporting any Telia Company related severe

incident, accident or fatality in the workplace is also required. Requirements also include

providing sanitary facilities, access to drinking water and emergency preparedness on a

regular basis.

2.2.4.4 AntiBribery and Corruption

The section that focuses on Antibribery and Corruption strives to minimize the risks for

unethical business practices. This includes corruption in all its forms, unfair competition,

conflicts of interests and bribery. Suppliers providing products or services to Telia

Company commit to conduct business operations in an ethical manner and not tolerate

corruption. The suppliers should preserve a culture of transparency and compliance

towards Telia Company. Requirements include not offer, request or receive any gifts,

payments or benefits directly or indirectly to obtain benefits in any form. The suppliers are

also required to perform internal controls to prevent and detect corruption, perform due

diligence of third parties and disclose important information about government relations

with supplier and conflicts of interests between the parties.

2.2.4.5 Environment

The most common section when talking about sustainability is the environmental

requirements. Here Telia Company require the suppliers to operate in an environmentally

responsible manner efficiently. This includes having an environmental management

system in place to measure and develop the environmental performance, managing waste

and recycling and work towards a life cycle perspective in the business operations. Other

requirements include transportation modes, emissions and usage of substances with

uncertain environmental impact.

2.2.4.6 Responsible Sourcing of Minerals

The section for responsible sourcing of minerals requires Telia Company suppliers to

manage theminerals used in the supply chain andmake sure they are responsibly sourced.

Armed conflicts, environmental risks, human rights abuses and corruption are some of

the risks associated with conflict minerals. Telia Company recognizes these risks and

expect the same from their suppliers. This includes requiring suppliers to have a policy for

mineral sourcing and due diligence in place, promoting practices that minimize the risks

for unresponsible sourcing of minerals, and identifying unsustainably sourced minerals

in components, materials and products throughout the supply chain.

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2.2.5 Telia Company Responsible Sourcing Process

Telia Company has a good but complex network of suppliers. The purchases account

for a large part of the costs and it is therefore critical that Telia Company evaluates

and selects its suppliers with careful consideration. There are mainly three documents

used to ensure suppliers’ sustainability requirements. First and foremost, it is the 9

page SCoC document that presents all general requirements for sustainability, followed

by two supplementary documents that are also used to to manage supplier risks. The

Supplier Security Directive is an 11page document with security requirements, and the 8

page document for Prohibited substances (”black and gray”) lists with requirements and

restrictions in production. Figure 2.4 presents Telia Company’s Responsible Sourcing

process, containing five different steps for responsible procurement (Telia Company,

2020).

Figure 2.4: Telia Company Responsible Sourcing Process (Telia Company, n.d.b)

2.2.5.1 Due Diligence

Suppliers to Telia Company are carefully selected after an upfront risk assessment is

performed. Suppliers are categorized depending on several factors, including operating

region, products and services provided, and the position of dependence Telia Company

has on the supplier. Suppliers are classed and highrisk triggers are identified to prepare

for further risk mitigation activities. The triggers can be incidents related to corruption,

privacy violations or other potential highrisk incidents. This analysis is hence performed

before contracting but is also complemented with other activities that are carried out,

including a supplier selfassessment. The mentioned due diligence activities are not

only performed before contracting with a supplier, but are rather upheld throughout

the relation, with onsite audits and followups. The due diligence steps are performed

with help from local sourcing teams and experts and have a riskbased approach. This

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means that highrisk suppliers are subject tomore processes and an indepthduediligence

process due to the potential risks involved for Telia Company. After identifying a high

risk supplier, information is reported to the Group Sourcing Management team at Telia

Company for further investigation. Depending on the risks and results from audits, the

management team suggest appropriate actions and mitigating activities based on the

decisionmaking.

Suppliers to Telia Company can report suspected violations of the SCoC or other laws

and regulations in different ways. For the situations where the whistleblower is not

comfortable with speaking to a Telia Company representative, the company also provides

a secure and confidential way to report violations. Via Telia Company speakup line

suppliers or employees can call in and express concerns and questions confidentially

(Telia Company, 2020).

2.2.5.2 Compliance and Audits

In order to maintain good relations with suppliers and at the same time ensure that the

supplier requirements are met, it is important to continuously evaluate the supply chain.

By performing supplier audits, you can identify the suppliers who succeed in meeting the

requirements, but mainly those who do not meet the requirements. After each audit, a

report is compiled by the audit teamwhere conformities and nonconformities against the

requirements are presented. During the audit anddue diligence processes, Telia Company

aim to uphold a continuous dialog with the suppliers and contribute to the education

and improvement of the suppliers’ sustainability issues. The audit report therefore also

states measures developed jointly with the supplier in the Corrective Action Plan (CAP)

to remedy the noncompliance (Telia Company, 2020).

2.2.5.3 Joint Audit Cooperation (JAC)

The Joint Audit Cooperation (JAC) is an association of 17 telecom operators with the

purpose to improve the implementation of CSR in the telecom sector. Some of the

association’smembers include Telia Company, Deutsche Telekom, Orange and Vodafone.

As one of the brands, Telia Company work with the other operators to develop the

global ICT supply chain and its various sustainability practices. By sharing the same

requirements in five different areas (Labor rights, Health and Safety, Ethics, Environment

andManagement systems) they work effectively to achieve best practice in supplier audits

(Joint Audit Cooperation, n.d.).

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2.2.5.4 Responsible Sourcing in Telia Company Current Status

The Responsible sourcing department at Telia Company manage the company’s

sustainability in the supply chain by performing audits, due diligence and developing

tools for improving suppliers’ sustainability performance. By working proactively and

setting expectations on the suppliers and subsuppliers, they can minimize the risk of

noncompliance with the requirements.

In 2020 Telia Company improved its CDP rating of supplier assessment, from aB in 2019

t an A. Around 300 employees were trained in supplier due diligence and around 2,500

supplier risk assessments were performed. Of theses 2,500 supplier risk assessments,

around 1,100 were indepth assessments, whereof around 6 percent were classed high

risk suppliers. Most of the highrisk suppliers were assessed the profile due to issues

related to corruption, privacy and labor rights. Due to the Covid19 restrictions issued

by governments, a new audit process was developed by Telia Company to adapt to the

new situation and continue the work. Offsite audit processes were introduced as a

complement to the standard onsite audits, and the company performed a total of 106

on and offsite audits in 2020. The results of the audits were good for most sections, but

shortcomings were found in implementing Telia Company’s SCoCrequirements in their

own supply chains. The results strengthen the need to perform checks and audits even

longer than tier 1, which was the group mainly audited during the year.

As part of the Joint Audit Cooperation (JAC) with a total of over 120,000 workers, Telia

Company together with the other members performed an additional of 78 audits in 2020.

The activities in 2020 are thus in line with the goals set for 2022. Goals include carrying

out a minimum of 100 supplier audits annually, participation in audit collaborations,

renewed supplier agreements aligned with the due diligence process, and regular training

for the sourcing managers (Telia Company, 2020).

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3 Methodology

3.1 Research Strategy

This qualitative study was conducted at the Royal Institute of Technology (KTH) in

cooperation with Telia Company AB. The study is built on a project initiated by Telia

Company to update its version 3 of the Supplier Code of Conduct, and data from the

project was used to answer the objectives. The abductive reasoning set in this study was

based on previous research to get an understanding of how codes of conduct are best

designed and applied on external parties.

The companies included in the industry benchmarking analysis are four large publicly

listed companies in Europe. Such large companies are considered to have higher

quality of the data provided since they have a greater responsibility to act transparently.

Smaller companies are not taken into account since they do not have the same degree of

responsibility to develop and use codes of conduct internally and externally. Analyzing

smaller companies would therefore limit the availability of relevant data and information

for this study.

The case studied is Telia Company’s sustainability in supplier management with the

help of a Supplier Code of Conduct. This case study is based on primary data from the

content analysis of the companies ’codes of conduct on external parties. By including

several companies in the case study, comparisons were made between their documents

and their supplier requirements. Each company was primarily studied individually, and

then compared with each other to increase understanding of the document’s design and

structures around supplier relationships that can be used to develop theory.

3.2 Research Design

3.2.1 Comparison

This research can be carried out in mainly two different ways. The first strategy is the

quantitative strategy, where focus is on quantifying data and hypothesis tests against

theory instead of analyzing text. The qualitative strategy instead focuses on text and

communication and is more about interpretations and perceptions rather than numbers

(Bryman et al., 2013). This study is of a qualitative nature as the purpose is to present and

identify best practice for Telia Company’s SCoC by analyzing and comparing differences

and similarities between the content of Telia Company’s SCoC and the four selected peers,

and also if the document meet the selected customers’ requirements.

20

To perform the industry benchmarking analysis, two main methods will be used. In the

first part, a qualitative analysis will be made of the various SCoC processes for the five

companies in order to break down the requirements and documents into different parts

and identify deviations and differences between the companies. This will be followed by a

SWOT analysis that will be performed of the five different responsible sourcing and SCoC

processes to identify each company’s strengths, weaknesses, opportunities and threats.

Based on the results of the industry benchmarking analysis, a comparison will be made

with Telia Company’s own process for sustainability in the supply chain and any identified

improvement measures will be proposed to Telia Company.

In the second part of the work, the customers’ supplier requirements related to the

Supplier Code of Conduct will be examined and an analysis will be done to see if Telia

Company meets these requirements and if it is passed on to subcontractors to Telia

Company. By breaking down the four different customers’ SCoC into different parts, a

comparison between the customers’ requirements and Telia Company’s set requirements

for their own suppliers is made possible. Based on this analysis, any noncompliance will

then be identified and, if applicable, improvement measures will be proposed to Telia

Company.

Finally, the conclusion provides an overall picture of how Telia Company’s sustainability

requirements for suppliers look and what strengths and weaknesses their processes have

compared with themarket. Based on the above analysis, eventual improvementmeasures

are also presented in the conclusion for Telia Company to be able to further develop or

maintain its position in the market.

3.2.2 Selection Method

In order to give a fair picture and a credible answer, it is required that the selection of

customers and peers is representative of Telia Company’s relationships. In the study, two

sampling techniques can be selected, probability sampling and nonprobability sampling.

In probability sampling, all individuals in the population have an equal probability of

being selected and the sample thus becomes representative. In a nonprobability sample,

there are mainly three methods to use. Convenience sampling, which means that the

individuals who are available are selected, snowball sampling, which means choosing a

number of individuals who in turn invite additional individuals, or quota sampling, which

means that individuals are selected as similar to the population as possible to get a good

reflection (Bryman et al., 2013). In this study, a nonprobability sample is used to study

21

the companies, mainly with a combination of convenience samples and quota samples.

Various requirements have been set as selection criteria to get suitable companies to

analyze in the study.

Selection criteria Peers:

• Operating in the Telecommunication industry

• Work with supplier relationships

• Listed public company

• Have a public SCoC

• Current version of SCoC from 2018 at the earliest

Selection criteria Customers:

• Operating on the Swedish market

• Work with supplier relationships

• Be customers of Telia Company

• Have a public SCoC

• Current version of SCoC from 2018 at the earliest

The peers that met the criteria are listed in a summary below with the selection

criteria presented. Due to confidentiality reasons the names of the customers cannot be

disclosed.

Peers (Statista, 2020)

Company Name HQ Revenue 2020

Telefónica S.A. Spain €43.076 m

Deutsche Telekom AG Germany €101,0 b

Orange S.A. France €42.270 m

Vodafone Group Plc UK €44.974 m

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Customers

Client A Automotive

Client B Automotive

Client C Electrical equipment

Client D Public sector

3.3 Data Collection and Analysis Procedures

In order to assimilate the information and the data collected, it was critical to structure

the information in a useful and understandable way. The analysis was carried out

continuously during the data collection and the writing process has been based on a

combination of empirical data with previous research. The case study takes place as

a continuous process for processing the material, both empirically and theoretically

(Eisenhardt, 1989). Data for the survey have been collected from mainly two different

sources. Partly information from Telia Company (texts, discussions, etc.) and partly from

external documents and literature.

3.4 Methodology Evaluation

As the case study is of a qualitative nature, it cannot be attributed to an entire population.

The validity is limited to Telia Company and should not be applied in other general

situations and environments (Lecompte & Goetz, 1982). Instead, the study creates

an understanding of how Telia Company can best guide its suppliers to work with

sustainability and take responsibility based on Telia Company’s set requirements. By

presenting the studied companies’ characteristics of the sustainability management in

supplier relationships, an attempt at analytical generalization has been made (Yin, 1994).

The case study can therefore identify the processes that are characteristic of the context in

which the study has taken place, which enables the generalization of theoretical proposals

that can be used further.

To assess the credibility of the qualitative study, there are four subcriteria to take into

account. Internal validity, internal reliability, external validity, and external reliability

(Lincoln & Guba, 1985). Internal validity is about the degree to which the result

corresponds to reality, while external validity is instead about how generalizable it

is. Internal reliability, on the other hand, means that the researchers agree on the

interpretations made in the study, while external reliability accounts for the extent to

which the study can be repeated. This study thus has a good internal validity, while the

23

external validity is not high as it is a case study performed for Telia Company. The internal

reliability is good since the analysis and study has been carried out by a single individual,

and the same applies to the external reliability as the study can be carried out several

times.

There are also quality measures for qualitative research: credibility and authenticity.

Credibility is divided into reliability, transferability, confirmation and dependability

(Bryman et al., 2013). To ensure the credibility of the study, Telia Company, as a partner

in the study, has taken part in the results and confirm that the perception of the study

is correct. However, the requirements for reliability are not fully met as no contact

with external companies that have been the object of the study has been made. At the

same time, the transferability within Telia Company is high, but not externally to the

same extent as the study has been carried out and adapted to the company in question.

Throughout the analysis, the process has been reported and the dependability is therefore

good. Furthermore, all personal values and orientations have to a very high degree

been avoided from the report to avoid affecting the result, which in turn supports good

confirmation.

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4 Result

4.1 Results from Industry Peer Benchmarking

4.1.1 Telefónica S.A.

4.1.1.1 Responsible Sourcing Process

The risk management process of suppliers at Telefónica is similar to Telia Company’s.

Telefónica works with a process where suppliers at least need to meet the requirements

in their SCoC. However, the suppliers are encouraged to do more on their own. Based on

the suppliers that meet the put requirements, the suppliers that in various ways can be

classified as highrisk suppliers are identified. This can, among other things, be due to

geographical location or work with different minerals. Telefónica use different tools for

monitoring suppliers, one of which is the EcoVadis tool for selfassessment of suppliers.

The third step is to assess the performance of these identified suppliers. Finally, in what

they count as the fourth step, audits of various kinds are performed. Many audits were

done by Telefónica 2020, with 767 onsite audits and 209 administrative audits. In

addition, audits were conducted via Allie’s programme and JAC, and the total number

of social and environmental audits in 2020 thus amounted to 16,105, of which 589 were

completed with improvement plans (Telefónica, n.d.a).

The document for supplier requirements at Telefónica is a 12page document that goes

by the name Supply Chain Sustainability Policy Telefónica Group. It is structured in

a similar way with different sections, but also has a section for definitions of concepts

and conflict minerals. There are also two more documents that suppliers must approve.

Partly the General conditions for the supply of goods and services, and partly The Anti

Corruption Policy (Telefónica, n.d.b).

4.1.1.2 SCoC Deviations

Some of the requirements differ in definitions and structure in relation to Telia Company’s

SCoC. The interesting requirements that were identified were, among other things, that

suppliers must respect the Right of Digital Disconnection for employees outside working

hours, but also that suppliers must maintain a good relationship and cooperation with

trade unions. Suppliers are expected to introduce incentives to promote various teams

in the organization and in different ways work with antidiscrimination by for example

allowing workers to practice their religions. There are also requirements regarding

privacy that stand out. Personal data must be handled in accordance with Telefónica’s

instructions and may not be processed for any purpose other than agreed. In addition,

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suppliers working with Artificial Intelligence (AI) must meet Telefónica’s requirements

for AI. According to the document, all data must be handled ethically and securely. It is

also expected that suppliers will assign a senior Manager who will be responsible for the

workplace’s Health and Safety.

When it comes to the environmental aspects, the document design and requirements

differ from Telia Company’s SCoC. The list contains a number of requirements that

suppliers must meet. Among them, suppliers are required to act sustainably throughout

the full life cycle of the value chain, review energy consumption in its operations and

reduce the use of Single Use Plastics (SUP). In addition, suppliers are required to quantify

specific targets and have data to reduce its greenhouse gas emissions over the next three

years. Telefónica also has an EcoRating system that suppliers must use to ensure that

different sustainability requirements are met. This must be done for all mobile products

provided to Telefónica. With regard to environmental sustainability work, Telefónica’s

processes against Conflict Minerals is based on section 1502 of the DoddFrank Wall

Street Reform and Protection of Consumer Law, and is included in the SCoC document

(Telefónica, 2020).

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4.1.1.3 SWOTanalysis

Figure 4.1: SWOTanalysis of Telefónica’s Responsible Sourcing process

4.1.2 Deutsche Telekom AG and Orange S.A.

In 2011, Deutsche Telekom AG (DTAG) and Orange S.A. that they would form a 50:50

procurement joint venture, BUYIN. Through the collaboration, they have gained amarket

advantage in procurement and sustainable purchasing. The aim is to achieve synergy

effects, resulting in savings of time and economic resources (Deutsche Telekom AG,

2011).

This means that both parties’ procurement processes and supplier Code of Conduct

documents are equivalent. The results in 4.1.2.3 SCoC deviation and the SWOT

analysis for Deutsche Telekom and Orange have therefore been merged together.

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4.1.2.1 Responsible Sourcing Process Deutsche Telekom

At Deutsche Telekom, the documents for sustainability requirements are divided

differently. Here are three general documents used. The first is the 3page standard

document for SCoC, where all sustainability requirements are imposed on suppliers.

This document is supplemented by a newer document, the Code of Human Rights

Social Principle, which contains more requirements related to the inclusion of human

rights principles. The suppliers that provide services related to artificial intelligence

(AI) also need to meet the requirements in the document Guidelines for Artificial

Intelligence.

The risk management process of suppliers at Deutsche Telekom is divided in five steps.

The first step, classification, is the stage where suppliers register to become suppliers and

are classified by Deutsche Telekom in different categories. Suppliers are classified on risk

and opportunity analysis, e.g. risk of noncompliance or opportunity for reduced energy

consumption. In the second step, the selection, the suppliers approve the requirements

set in the SCoC, and Deutsche Telekom analyzes the suppliers’ sustainability work.

Depending on how the requirements are met, but also what other sustainability work

is done, the suppliers’ ratings can receive a weighting of 10 percent in the selection

process.

The third, assessments, includes sustainability reviews of selected suppliers. This can

be done with external tools, such as the EcoVadis ESG questionnaire or the RepRisk

Rating, but also internal and anonymous mobile surveys. Depending on the supplier

and risk level, different tools are selected. If suppliers show noncompliance in their

work, measures are defined. If measures are not taken within a certain time frame, the

agreement can be terminated. The fourth and fifth steps include supplier monitoring

and development. Here, Deutsche Telekom, together with the suppliers, build on the

sustainability work and various incentives and projects are managed. The purpose of

these steps is to train and contribute to a longterm benefit for all parties, but also to

reduce potential risks of breaches of contract. Deutsche Telekom performed 76 audits

in 2020, of which 63 percent were tier 24 suppliers, i.e. subcontractors and indirect

suppliers (Deutsche Telekom AG, 2021).

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4.1.2.2 Responsible Sourcing Process Orange

Orangeworkswith responsible sourcing in a similar way asDeutsche Telekomdue to their

joint cooperation in BUYIN. To monitor their direct and indirect suppliers and ensure

that the requirements are met, three tools are mainly used. The first is the joint SCoC

document produced together with Deutsche Telekom. It sets the various requirements

within sustainability that suppliers and subcontractors must follow. The second tool is

to state clear clauses for sustainability and CSR in contracts and other agreements with

suppliers. Finally, this is followed up through various evaluations and audits. In cases

where suppliers do not meet the requirements, any measures that the supplier must work

with are defined.

In 2019, 124 audits were performed on suppliers. Orange uses a system to manage high

risk suppliers and performs assessments with the external EcoVadis system and with on

site audits performed by external experts (Orange, 2019).


The SCoC document is short and contains very general requirements. The document

includes specific requirements for data processing and AI Algorithms based on the

European Fundamental Values. There are also requirements that the suppliers must

provide clean and safe homes for workers and their families in cases where it is

relevant. There are requirements regarding anticorruption between suppliers who are

also customers of DTAG/Orange, and special requirements for sponsorship. In terms of

environmental sustainability, suppliers are expected to develop products and services that

are energyefficient and low CO2 emissions throughout the life cycle (Deutsche Telekom

AG, 2019) (Orange, n.d.).

29


Figure 4.2: SWOTanalysis of DTAG and Orange’s Responsible Sourcing process

4.1.3 Vodafone Group Plc

4.1.3.1 Responsible Sourcing Process

In Vodafone’s risk management process of suppliers, all contractors go through a

qualification process to see if Vodafone’s sustainability requirements are met. Suppliers

are followed up regularly and those who have been identified as highrisk suppliers

undergo further audits. In addition, every two years, all suppliers need to sign Vodafone’s

supplier sustainability policies again.

For Vodafone, priority is also given to digital inclusion in society, and requirements are

therefore placed on accessibility standards based on WCAG and other global industry

standards. All suppliers commit to implementing Vodafone’s Code of Ethical Purchasing

in their own supply chains. In 2019, Vodafone performed only 6 onsite audits on its own,

while 79 were performed by JAC (Vodafone, n.d.a).

30

In 2020, the company presented a new supplier selection criterion that will weighmore in

the selection of suppliers. Suppliers who have good diversity and environmental work will

receive a higher rating in the selection, as 20 percent of the criteria are now covered by

these areas (Vodafone, 2020). There are close to 10 policies that suppliers must approve,

including supplier expenses, sanctions and export control and law enforcement, but the

most important in terms of sustainability is the 6page SCoCdocument, A2Code of Ethical

Purchasing, together with the 3 onesided A1 Business Principles and the 18sided A3

Health, Safety & Wellbeing (Vodafone, n.d.b).


When it comes to requirements for workplace health and safety, Vodafone stands out

with its 18page document with concrete and specific requirements placed on suppliers.

Among other things, there are requirements to control alcohol and drug use among

drivers, that no lifting over 100 kg may take place without machines and that pickup

trucks may not carry workers or other passengers in the back seat. It is also explained

what consequences can arise if the requirements are not met, e.g. Yellow and Red card

(Vodafone, n.d.c).

With regard to the environmental section, suppliers should reduce their use of limited

resources, e.g. water and raw materials. In addition, suppliers will reduce their energy

consumption and Greenhouse Gas emissions (GHG). They are expected to identify and

monitor the CO2 emissions in their business in terms of transportation and travel

(Vodafone, n.d.d). Simultaneously, suppliers are expected to prioritize video and web

conferencing, and only travel when no other option is available (Vodafone, n.d.e).

31


Figure 4.3: SWOTanalysis of Vodafone’s Responsible Sourcing process

32

4.2 Results from Customer Requirements

4.2.1 Client A

4.2.1.1 Supplier Requirements in SCoC

Client A has an SCoC similar to Telia Company’s. The same areas are dealt with in the

document and equivalent requirements are set. The formulations are different, and some

requirements may differ. Requirements regarding the disclosure of sensitive information

are also dealt with in the document and suppliers are expected to keep all business

critical information confidential in dialogue with client A’s competitors and other actors.

Suppliers are also expected to actively engage in dialogue with client A regarding their

sustainability work and developments in it.

4.2.2 Client B


This SCoC document by client B is similar to the structure of Telia Company’s SCoC. The

requirements are set in similar sections but with different formulations. Among other

things, this requires that suppliers to client B must have special committees that work

with health and safety in the workplace and have employee representation within them.

Suppliers must work to identify load ergonomic risks in the workplace, e.g. risky physical

lifting and repetitive movements. Employees should be represented and involved in the

work and in the development of solutions.

Suppliers are also expected to act in an environmentally friendly manner and reduce the

use of resources, such as packaging materials. Contractors must also introduce their own

documents and policies to work with sustainability, e.g. via a SCoC, and the document

must be available to all workers in the local languages used in the workplace.

4.2.3 Client C


Client C has a slightly different approach to managing supplier sustainability. In addition

to using a SCoC, it is supplemented with a clear and comprehensive handbook with

concrete proposals on how the requirements should be implemented in operations. The

manual contains pictures, clear illustrations, examples, and explanations of how the

requirements must be met by the supplier and how they will be followed up by Client

C.

33

Apart from the detailed requirements and information in the handbook, the original

SCoC document contains overall requirements that are in line with Telia Company’s

requirements. Requirements that are also addressed are the risk management of the

suppliers with regard to the exposure of Client C to security threats. This is, for example,

about pandemics, natural disasters and crime.

4.2.4 Client D


The supplier requirements put by client D are in line with Telia Company’s requirements.

No special requirements were identified and the design is similar. The requirements

are formulated very generally and definitions of different terms are included. The

requirements are also based on, among others, The Eight Fundamental Conventions of

the International Labor Organization and The UN Convention on the Rights of the Child

and the UN Convention against Corruption.

34

5 Discussion

5.1 Discussion

All in all, we can conclude that the processes for responsible sourcing are equivalent in

the different companies. All of the analyzed companies set requirements in an SCoC,

identify highrisk suppliers based on various factors, and monitor these suppliers during

the relationship. Furthermore, they perform supplier selfassessments, audits and use

various tools to manage the entire process. They are all also members of the JAC

and perform several audits together every year, which saves both time and financial

resources.

5.1.1 Telefónica

As for Telefónica, one could argue that they have an overall good process for

responsible sourcing. They perform hundreds of audits on their own, both onsite and

administratively, and in addition perform even more audits together with JAC and Allie’s

program, reaching over 16,000 audits by 2020. This increases their control over the

suppliers and the supply chain. Through collaborations and a larger number of audits,

the company can ensure compliance with a larger part of the suppliers. However, what

may not be considered as good about this quantity is that not all audits are performed

based on the same areas of requirements. This means that some companies are examined

within human rights, while others are examined within environment, consequently, the

risk of an unfair outline increases. As an example, good work with human rights does not

necessarily mean good work with anticorruption. Accordingly, this risk can lead to their

sustainability statistics and KPIs being misleading and presenting better results than the

reality.

The requirements imposed on suppliers are mainly found in SCoC, but are also

supplemented with two documents, one of which is an anticorruption policy. From

examining the documents, one could consider the requirements well explained. In

addition, some requirements can be perceived as innovative and meeting today’s needs

in society. As an example, the requirement where workers must have the right to digital

disconnection is a requirement that meets both the challenges of increased digitalization,

but also the COVID19 pandemic tracks where numerous employees work at home. It

is therefore important to set clear limits on what is working life and what is leisure.

Arguably, requiring suppliers to allow their employees to be disconnected in their free

time, can contribute to better health for the employees.

35

Suppliers are also required to handle the ethics and privacy of data and artificial

intelligence (AI). Today, AI is playing a bigger role in society and data management is

constantly increasing. By ensuring that suppliers work with data security and ethical

processing of data, Telefónica can ensure that customers’ integrity is in safe hands. In

addition, Telefónica is acting on climate change by encouraging, among other things,

reduced energy and plastic consumption. There are also systems in use for EcoRating of

their products, and specific targets are also required to be set by the supplier for how they

will work to reduce greenhouse gas emissions over the next 3 years. If the suppliers or their

subcontractors donot complywith these requirements, the supplier is fully responsible for

the noncompliance and Telefónica has the right to claim compensation for any damage

that may have been caused. These requirements and responsibility may be considered

good as it encourages active work on the issue and puts pressure on the suppliers’ work to

have a real impact and effect.

5.1.2 Deutsche Telekom AG and Orange S.A.

Considering the procurement joint venture between Deutsche Telekom and Orange,

the companies are likely to have a good collaboration and process for responsible

sourcing and risk management. The procurement process is saving time and resources

in negotiations, audits and requirements when a lot of synergy effects arise. They have

slightly different approaches in the processes, but they have a common document for

SCoC. Orange focuses on introducing sustainability clauses in contracts and agreements,

while DTAG uses a separate document for Artificial Intelligence. In addition to the SCoC’s

AI and data management requirements based on the European Fundamental Values,

the complementary document contributes to setting requirements that meet the future

development of AI in society, similar to Telefónica. When selecting suppliers, future

opportunities are also taken into account in the selection process, where the supplier’s

potential in sustainability work is taken into account. For example, suppliers are required

to have a circular economy approach where products are to be seen from a life cycle

perspective and based on how that work looks and what opportunities there are, it can

weigh into the decision.

In the last step of the risk management process, DTAG works together with its suppliers

to find potential development opportunities and introduces various incentives to increase

sustainability work in their own supply chains. Work is also being done to contribute to

the sustainability of players further down the supply chain. For example, the majority of

all audits in 2020 were performed on tiers 24. One can argue that this is beneficial as it

36

addresses one of the major challenges that companies have in sustainability, namely that

indirect suppliers do not meet the requirements placed on direct tier 1 suppliers. What is

not really in line with this, however, is that in their SCoC they express that subcontractors

are only responsible for meeting the requirements in the document to the extent that they

deliver products and services to DTAG / Orange, which can make the requirements for

indirect suppliers more vague.

The SCoC document is structured in a short and concise way, with general and

comprehensive requirements. This may be effective in the sense that it gives a higher

degree of acceptance by the suppliers, as less pressure and demands are placed on them.

Although there is also a chance that it may lower the impact and effect when the same

clarity and requirements do not exist. The requirements that are set are based on external

conventions and documents, and not much in the SCoC document are own requirements

set by DTAG / Orange. While the external documents and conventions are good and

based on wellconducted research, some may perceive that DTAG / Orange are not as

sustainable in the market as they may not have invested as much time and work as their

peers. This is because other players, such as Telia Company, Telefónica and Vodafone,

set their own requirements in addition to the external ones, which can be considered as a

more sustainable approach.

5.1.3 Vodafone

Vodafone has approached the responsible sourcing process slightly differently. Most

documents contain specific requirements for the suppliers’ work, and the documentsmust

be resigned by suppliers every two years. An 18page document for workplace health and

safetywith specific rules regarding lifting and ergonomics is one of theways that Vodafone

impact suppliers. The concrete requirements can contribute to Vodafone being clear with

their work and with what they want to achieve, and as a result have better control over

their suppliers and ensure the safety of their employees. Moreover, they explain what

factors they base assessments from and what effect noncompliance can have. Arguably,

this can be good way of showing how the process actually works and helps the suppliers

understand the consequences of not complying with the requirements.

The environmental requirements that Vodafone put in the SCoC document, includes

requiring suppliers to reduce the use of limited resources, which is in line with a large

part of society’s environmental expectations regarding the life cycle approach and the

preservation of our resources. In addition, they have guidelines for expenses and travels

37

and, among other things, require that video andweb conferences andmeetings be chosen,

unless travel is the only possible option. This can be perceived as a good way of adapting

to what the society look like now with the effects of the pandemic, where the web

conferencing tools have developed drastically. Digital and hybrid meetings are integrated

in the majority of today’s companies, and the need for travel has therefore decreased,

which results in environmental benefits. Making these demands on suppliers is a way

to take advantage of those tools and reduce greenhouse gas emissions in society. In its

supplier selection processes, Vodafone also prioritizes suppliers with good environmental

work, but also diversity. By weighing 20 percent of the criteria in the selection process,

Vodafone can be portrayed as a business that prioritizes these issues and thus they may

be market competitive in these specific areas. The risk is that the other issues and areas

will have less significance, but Vodafone has clear and welldocumented policies within

these areas that may compensate for this risk somewhat.

Other requirements set by Vodafone include the right to disclose suppliers’ compliance

with the requirements and publicly report progress in their media. Although this can

have unintended consequences, where there is a risk of lost business given that companies

do not want to publish businesscritical information and do not want to end up in the

spotlight in the event of noncompliance, it can be a goodmethod for having transparency

in their value chain. More consumers demand transparency when buying products and

services andwant to see how they aremanufactured, and it is thus a goodway forVodafone

to comply with its customers’ requirements.

The advantage of having several documents is that each department with relevant

expertise can approach each area of requirements and put in qualitative work to comply

with the requirements. At the same time, stakeholders may perceive that Vodafone

invests a lot of time and resources in producing and monitoring these requirements

and documents. The risk is, however, that due to the large number of requirements

and documents, it can be difficult for suppliers to comply with the requirements, but

also difficult for Vodafone to review compliance. Suppliers can also choose to present

the relevant document and requirements only to the relevant department to save time

and delegate responsibility. However, one consequence may be that a form of silo

effect arises where each department focuses on its own sustainability requirements, and

other requirements can thus unconsciously be violated, and productivity, joint work and

compliance may suffer as a result. Yet another risk of having so many documents and

requirements is that it can have other unintended consequences. Legal departments at

suppliers have more to do as several complex requirements must be met. At the same

38

time, many suppliers may need to make major changes to meet the requirements, and

too much time and effort is put, resulting in the cost outweighing the benefit. Although

these requirements are increasing and are set by the majority of companies, there may be

a risk of lost business in some cases. However, one may perceive that the risk is covered

by Vodafone ensuring that suppliers are fully aware of the requirements that Vodafone

wants to set and can thus screen out many of the suppliers who had potentially damaged

Vodafone’s brand in the event of a contractual breach.

5.1.4 Customer Requirements

In the other analysis part, the four clients’ supplier requirements have had the samedesign

and requirements overall. In the analysis of Client A andClientD, no special remarkswere

identified. Telia Company takes into account all requirements in the comprehensive term.

The difference ismainly thewording and the level of requirements. Telia Company’s SCoC

has requirements that are on a more general level to make it more appropriate to apply to

all suppliers. Some requirements are irrelevant to suppliers and thus Telia Company has

chosen to have general requirements that cover larger parts. For example, Client B has a

requirement for suppliers to identify load ergonomic risks in the workplace with regard

to physically heavy lifting, while one of Telia Company’s requirements for its suppliers is

instead that they must provide a safe and healthy workplace in general.

Client Chas anothermethod for supplier requirements, where they in addition to the SCoC

have a handbook with detailed requirements and instructions on how implementation

and followup takes place in each area. One may argue that this is good for suppliers

as they not only receive a document with requirements, but also receive instructions

on how they can apply the requirements in their operations. This may contribute to

Client C having a greater impact on its suppliers and their sustainability work. Moreover,

Client C also has requirements for security and preparedness with regard to, among other

things, pandemics and terrorism. This can also be perceived as a good requirement as

it partly contributes to the suppliers being able to be prepared and ensure delivery and

production of Client C’s products and services, but also as it ensures the company’s safety

and reputation in that events.

39

6 Conclusions

6.1 Conclusions

In the final analysis, one can conclude that Telia Company’s responsible sourcing process

is doing well in the market. The Supplier Code of Conduct document takes into

account all the requirements set by the analyzed customers, and the work is under

constant development. The document is designed in a comprehensive way with general

requirements that enable the application of the policy to all suppliers. Simultaneously,

the document encourages passing on the requirements to subcontractors and other tiers.

However, one may argue that it might be good to perform a larger number of audits on

subcontractors or take part in audits performed by suppliers on their own suppliers, in

order to be able to keep track of the supply chain and identify noncompliance. This

can be done either by Telia Company or by joint cooperation or other collaborations.

Collaborations such as the Allie’s programme and JAC are good for achieving synergy

effects in audits and due diligence. It is timesaving and requires less resources from

Telia Company, and it should not affect Telia Company’s competitiveness either as audit

cooperation do not harm the market.

Be that as it may, constantly keeping track of customer requirements is critical for

Telia Company. If the requirements increase, which we can expect in the future as

the trend goes in that direction, Telia Company must partly meet it internally, but also

set the requirements for its own suppliers. In figure 2.2 on page 13 , we can see

that the company’s consumers today prioritize, among other things, children’s online

safety, privacy and recycling. At the same time, Telia Company’s policy makers prioritize

issues such as AI ethics, diversity, environment and digital inclusion. By taking this into

account in the development work of the SCoC and the responsible sourcing process, the

requirements of the future can be met in advance and Telia Company can prove to be a

pioneer and market leader in these areas.

Telia Company can also expect new laws from authorities regarding due diligence in

the supply chain, but also other expectations regarding audits and transparency from

consumers and other stakeholders. Among other things, the methods for audits and due

diligence can change as new technology and tools emerge, e.g. blockchain technology. The

environmental issue is also most likely to continue increase in importance. It is therefore

important that Telia Company develops its requirements within the environmental

requirement area, which today does notmeet the same level as all its peers and customers.

Although general requirements can be good, it may also be appropriate to set additional

40

requirements for relevant suppliers in order to strengthen their sustainability work in the

supply chain. Not all requirements can be applied to all suppliers and should neither be, as

it can lead to unnecessary risks for lost business if the suppliers do not comply with these

requirements today. If a potential supplier feels that the benefits of complying with Telia

Company’s requirements do not match the costs, there is a chance that they will avoid the

deal. In conclusion, having general requirements like Telia Company, and supplementing

them with additional requirements for suppliers working in certain relevant areas, e.g.

conflict minerals, can improve compliance and target the suppliers concerned.

All things considered, Telia Company should continue to be vigilant about what trends

and demands customers may make tomorrow, but also beyond that. They should also

performmarket analysis to ensure that they do not lose their sustainability position in the

market. Through analysis and continuous updating of supplier management processes

such as the Supplier Code of Conduct document and its compliance, Telia Company can

continue to strengthen its sustainability performance in its supply chain and become a

competitive leader in the market.

6.2 Future Research

To further develop the study, further analysis and research can be performed by

Telia Company or external parties. To strengthen the conclusion and increase the

understanding of surrounding factors, research can be built on through various studies.

Suggestions for further research can be studies of what requirements may be critical

within a few years, and how audits of suppliers can be carried out in a more efficient

manner, but other areas can also be of great benefit.

41

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