Sustainable asset management

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UNIVERSITY OF GRONINGEN

Sustainable asset

management

Author: Vosselman, Bas 6/26/2017 Mail: b.vosselman@student.rug.nl Student number: S2144360 First Supervisor: Dr. Ir. W.H.M. Alsem w.h.m.alsem@rug.nl Second Supervisor: Dr. N.D van Foreest n.d.van.foreest@rug.nl

Acknowledgements: I would like to thank Dr. Ir.W.H.M. Alsem with guiding me through writing my

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Abstract

Aim: Providing a way so that sustainability can be integrated in the design phase of an asset instead just

focusing on lagging economic sustainability indicators. Therefore, this research comes with a framework which helps designing a sustainable asset.

Methodology: This research looked at a plant in the food processing manufacturing industry. The

research was performed by doing a design science method.

Findings: This research found several points which needed to be improved/ or considered to design a

sustainable asset, these points where integrated within a framework.

Relevance/ Contribution: This research let to a framework where all parts of the management system

were integrated to assure that after the design phase the asset will be sustainable in the following phases. This research bridged a gap between theory and practice of how to integrate sustainability.

Keywords: Sustainability, Economic-, Environmental-, Social Sustainability, Management System

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Table of

1. Introduction

Many organizations face challenges like climate change, globalization, public health and waste volumes (Abdul-Rashid, Evans, & Longhurst, 2008; Jovane et al., 2008), these can be categorized into three types of challenges: environmental, economic and social challenges. These challenges form the dimensions of sustainability, which need to be managed in the manufacturing industry (Abdul-Rashid, Sakundarini, Ghazilla, & Thurasamy, 2017; Jovane et al., 2008). Sustainability for instance means invest in natural resources, by replacing toxic for non-toxic and non-renewable for renewable resources (Abdul-Rashid et al., 2008). For instance, before a windmill is placed it needs to fulfill a few requirements; the windmill should generate enough energy to cover all costs of all life-phases of the windmill and preferably more (economic), the noise, the safety risks and drop shadow should not harm people living close by (social), and the materials for installing (but also for all its’ maintenance) should be preferably environmental friendly (currently the blades are made of composite material, which is not environmental friendly). Organizations often struggle with integrating all aspects of sustainability in their organization (Jayal, Badurdeen, Dillon Jr, & Jawahir, 2010), partly, because they still do not realize the importance of operating in a sustainable manner, and mainly they focus on cost savings (Schuman & Brent, 2005). Sustainability in manufacturing industries has received a lot of attention in literature over the years (Abdul-Rashid et al., 2017). It has been found that sustainable manufacturing is a way for manufactures to gain a competitive advantage (Porter & van der Linde, 1995; Ramayah et al., 2012). Most initiatives that were taken to make these industries sustainable, besides in the economical scene, only involved reducing energy usage, waste and CO2 emission (Despeisse, Mbaye, Ball, & Levers, 2011; Fang, Uhan,

Zhao, & Sutherland, 2011; Jayal et al., 2010).

Most literature describes that each separate aspect of sustainability has a positive influence on the asset performance (Abdul-Rashid et al., 2017), but only a few describe that integrating all three aspects simultaneously has a more positive effect on the asset performance (Figge, Hahn, & Schaltegger, 2002). The problem is that industries feel stakeholder pressure to become sustainable, but on the other hand do not see how to implement sustainability and still remain (cost) efficient. Literature also does not describe how sustainability can be embedded in a management system; the management system serves as an enabler for implementation. The contribution of this research to theory is that it explains how to integrate sustainability rather than consider the separate aspects by incorporating it in asset management and the management system.

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system to answer this question, without it the effect cannot be measured. In addition, an asset has multi-life cycle phases (Blanchard and Fabryscky, 1998), so also each effect on the different multi-life cycles needs to be understood. To limit the scope of this research, it focuses by answering the following research question:

How could environmental and social sustainability be embedded in the management system next to economic sustainability during the design phase of an asset in the food processing industry?

This research is performed by empirically analyzing a food processing organization that was faced with the decision how to continue with one of their assets/ machines.

This research is structured as following, first the reader will be provided with a theoretical background in chapter 2. Followed by explaining how this research will be conducted in the methodology section in chapter 3. Then, the findings of the research will be presented in a structured manner in chapters 4 up till 7 and then discussed in chapter 8 in the next section followed by a conclusion in chapter 9.

2. Theoretical Background

Because there are fundamental changes in the structure of the manufacturing industry, asset management has become more important than ever, the traditional way of cutting cost is almost exhausted (Schuman & Brent, 2005). Simultaneously, sustainability has become one of the “hot” topics in the manufacturing industry (Abdul-Rashid et al., 2008).

This chapter is structured as following; First sustainability will be discussed; secondly, sustainability in asset management; thirdly, the role of the management system and its influence on asset management and integrating sustainability will be discussed; lastly, the role of long-term asset planning (LTAP) within integrating sustainability within an organization will be discussed, since a LTAP is the vehicle that records how the implementation of sustainability in assets is going.

2.1 Sustainability

2.1.1 Introduction into sustainability

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areas comply with the model of sustainable performance by Elkington (1994), also called the triple bottom line. Aspects such as environment and social belong traditionally to the risks, which need to be managed by an organization. For that, organizations use an Enterprise Risk Management (ERM), in order to manage risks coherently and comprehensively (Bromiley, McShane, Nair, & Rustambekov, 2015).

2.1.2 Drivers of sustainability

As one of the three pillars of society, organizations are responsible for operating in a sustainable manner (Labuschagne & Brent, 2005). Since climate change emerged as a public policy issue, top management like that of Ford Motor Company cannot go around implementing climate change in their corporate strategy (Epstein & Roy, 2001), the only question they have is how they should balance environmental, social and economic needs of both the society’s as the company’s. One could say that there are several societal problems like: climate change, population growth, urbanization, consumption patterns and income changes (Herrero et al., 2010; M. Wagner & Llerena, 2008). The model of Labuschagne & Brent (2005) shows that drivers for organizations can be divided into four categories, as can be seen in figure 2.1. Push drivers are factors that need to be fulfilled by an organization to exist, pull drivers are factors that need to be fulfilled to sell the product, the pressure indicators are factors that needs to be fulfilled to have a license to operate and support drivers that determine what role the organization want to play in the world.

2.1.3 Sustainability operationalized

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the potential to increase the profitability in the long-term (Hansen, Grosse-dunker, & Reichwald, 2009). These two parts are the basis for a good cash-flow, profit and Return-on-Investment (ROI). Economic outcomes can be operationalized in the following measures: improved market share (Eltayeb et al., 2010; Pagell, Klassen, Johnston, Shevchenko, & Sharma, 2015; Rao & Holt, 2005), improved company image (e.g. company is seen as a green company) (Rao & Holt, 2005), improved company’s position in the marketplace (Rao & Holt, 2005) and increase in profitability (Wagner, 2005). The second part of economical sustainability is determined by operational outcomes (Eltayeb et al., 2010). This part has directly to do with operational performance (Hansen et al., 2009) and thus with the asset performance. These operational outcomes could be operationalized to the following measures: decrease in material purchasing cost (Eltayeb et al., 2010), decrease in utility bills (Porter & van der Linde, 1995), decrease in waste treatment fees (Porter & van der Linde, 1995), decrease in waste discharge fees (Porter & van der Linde, 1995), reduction of environmental accident cases (Geyer & Jackson, 2004), reduction of manufacturing costs (Carter, Kale, & Grimm, 2000), improved product quality (Rao & Holt, 2005) and improved order delivery and flexibility (Vachon & Klassen, 2006).

Secondly, environmental sustainability is the type of sustainability that is perhaps the most known type of sustainability. Performing in an environmentally friendly way could be operationalized into the following measurements: reduction of CO2 emissions, reduction of wastewater (Evans, Bergendahl,

Gregory, & Ryan, 2009; Sarkis, 2001), reduction of solid waste (Sarkis, 2001), reduction of energy consumption (Yang, Hong, & Modi, 2011; Yusuf et al., 2013), decrease in production of toxic/ harmful/ hazardous/ flammable substances (Veleva, Hart, Greiner, & Crumbley, 2001), decrease in material usage (Jeswiet & Kara, 2008) and improved compliance with environmental standards (King & Michael, 2001). There are six parts that are crucial for environmental sustainability: recycling, proactive waste reduction, remanufacturing, environmental design, specific design targets and surveillance of the market on environmental issues (Montabon, Sroufe, & Narasimhan, 2007).

The third part of being sustainable is dependent on the social performance of a firm (Abdul-Rashid et al., 2017). By manufacturing in a sustainable way the organization could have two major benefits, making profit and do not suffer from social degradation due to non-sustainable activities (Tsai, Chou, & Hsu, 2009). These outcomes can be operationalized in the following measures: improved relationship with the community and stakeholders (Falck & Heblich, 2007; Hutchins & Sutherland, 2008; Klassen & Mclaughlin, 1996), improved work safety (Geyer & Jackson, 2004), improved work environment (Geyer & Jackson, 2004) and improved living quality of surrounding community (Holmes, Power, Walter, Holmes, & Power, 1996; McElroy, Rodriquez, Griffin, Morrow, & Wilson, 1993).

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Organisational (TECCO) (Ruitenburg et al., 2016) are approaches that aim for sustainability, the 3R’s and 6R’s mainly focus on promoting green technologies and the TECCO approach focuses on managing risks. When integrating sustainability all these types of different approaches must be considered at once. All these aspects of these approaches are also mentioned in some form in one of the three aspects of sustainability plus a combination of elements which also contributes to sustainability which could not be placed in one of the three aspects (Alsem, 2017) (as can be seen in table 2.1).

Table 2.1 only shows results of outcomes and does not show how the effort/ processes that have been undertaken to come to these scores. This is also the difference between leading and lagging performance indicators as stated by (Muchiri, Pintelon, Gelders, & Martin, 2010). This complies with the High Reliability Theory (HRT) as stated by (Mazdeh & Hesamamiri, 2014), this theory states that it is important to maintain and execute failure free operations instead of the outcome of organizational invariance. This indicates that true reliability of an organization is not reflected by outcome/ lagging indicators but by leading indicators.

2.2 Asset Management

2.2.1

The development of asset management

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for all aspects that are involved within an asset (for instance: asset design, planning, implementation, maintaining). According to the ISO 55000 standard, asset management can be defined as: “coordinated activity of an organization to realize value from assets” (Hastings, 2014, p.10). Earlier, Brent and Schuman used the following definition of asset management: “a strategic, integrated set of comprehensive processes (financial, management, engineering, operating and maintenance) to gain greatest lifetime effectiveness, utilization and return from physical assets (production and operating equipment and structures)” (2005, p. 567). Though, there are multiple definitions of asset management and risk management, a single definition for sustainable asset management is still missing.

The gross of articles in literature state that though asset management has really been developed over the last 40 years, it only still has one main objective, which is maximization of profit or cost minimization (Jayal et al., 2010). While some authors like Despeisse et al. (2011) show that the economic challenges are just one of three key challenges in asset management (Economic, Environmental and Social). This directly shows the relation with sustainability and asset management. Sustainability needs to be implemented within asset management to have a significant effect on the organizational processes.

2.2.2 Asset Life Cycle

Assets move through different life cycles. Blanchard and Fabryscky came in 1998 with a traditional system life cycle, figure 2.2. Basically, this model is divided in two main phases, the acquisition phase and the utilization phase and it seems rather simple. It is challenging for managers to manage an asset during its entire life cycle, because each sub-phase has its own specific costs (Schuman & Brent, 2005) and each sub-phase, one should take the four essential elements of operational reliability into consideration. Reliability is the main objective of asset management and consists of: human reliability, process reliability, equipment maintainability, equipment maintainability (Duran, 2000), where also sustainable operations form an aspect of reliability. Most organizations fail to sustain their performance, because they are not able to manage their processes mindful (Mazdeh & Hesamamiri, 2014). The reason lies within the focus on outcomes/ lagging indicators instead of leading indicators (Mazdeh & Hesamamiri, 2014; Muchiri et al., 2010).

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just financial cost. This table is divided in cost for the company, user and society, the user is the organization that make use of the asset. Society must pay for certain choices a firm makes, which represents any negative impact, such as choices that affect the environment or public health. This model does not include any positive impact or added value a company might have, though it should include this because when an organization is sustainable it has a positive influence on society and receives benefits/ value because of it.

2.2.3 Design phase

To understand why and how most of the costs of an asset are determined in the design phase, this phase needs to be understood. The design phase consists out of the conceptual design, preliminary design and development, and the detailed design and development according to Blanchard and Fabryscky (1998). All characteristics of the design phase are summarized in table 2.3. This table consists out of four columns; the first column shows the different steps that need to be taken to get through the design phase, these steps are performed in a loop, it could occur that an organization goes over these steps two or three times. The next column consists out of three points that need to be planned for the whole lifecycle of an asset, this prevents the sudden occurrence of cost on the areas like training of employees. At the end of the design phase of the asset a lot of things need to be clear before purchasing and using the asset, all these points are mentioned in column three of table 2.3. One of these things is the Environmental Management plan to make sure that the asset will be environmentally sustainable. Another important aspect which is often overlooked is the interaction between the asset and people. The paper of (Tayal, 2013) does not describe the planning of the end-of-life time. Taking the end-of-life time treatment in consideration in the design phase has multiple advantages like an increased added value of the products and lower maintenance costs during the whole life cycle (Sabaghi, Mascle, & Baptiste, 2016). Since, in the design phase the largest part of the performance is determined, it is important to incorporate sustainability as soon as possible in the decision-making process.

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2.2.4 Performance measures of an asset

Asset performance needs to be measured during every life cycle stage, but these measurements could be best set during the design phase (Chen & Small, 1994; Gold, 1988), with these measurements the appraisal techniques can be checked for effectiveness and subjectivity can be removed (Chan, Chan, Lau, & Ip, 2001). Chan et al. (2001) came with a list of six key performance indicators (kpi’s) that could be broken down into more specific measurements; these six kpi’s are: Performance, Cost, Flexibility, Quality, Delivery, and Innovativeness. Table 2.4 shows these six kpi’s broken down into more specific measurement, this model of Chan et al. (2001) is chosen because it gives a good representation of performance measures generally used by organizations. These measurements have the purpose of operational reliability. It is defined as: “a flexible process that optimizes people, processes and technology, and thereby enabling companies to become more profitable by maximizing availability and value addition of producing assets” (Duran, 2000 in Schuman & Brent, 2005, p. 570), the elements of this approach ensures a comprehensives approach during the whole life cycle of an asset.

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2.3 Management system

Asset management is only a part of the entire management system. A management system functions as a mean that helps coordinating the interaction between necessary functional units within an organization (ISO 55000). A management system is thus responsible for steering the organization in the right direction, without this system functional units could work separately and thereby not work efficiently. Implementing change in organizations often leads to failure due to several reasons, one of them is the lack of support from the top leadership (Gilley, Dixon, & Gilley, 2008). Leadership and its support is just a small part of the whole management systems that drives and organizes the organization. All these aspects define an organization. These aspects for instance determine the kpi’s of asset performance mentioned in section 2.2.4.

Table 2.5 parts of a management system

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Making any change in the organization, like integrating environmental and social sustainability alongside economical sustainability, needs alterations to the management systems. Without taking the management system into account, the change shall not be lasting since it is not integrated in the organization. How these parts are linked can be found in figure 2.3.

Strategy

Leadership and Commitment

Risk management Implementation and

Procedures Audits

Culture and Compentence

Figure 2.3 Interaction Management system

2.3.1 Aspects of a Life Time Asset Plan (LTAP)

The ISO 55000 describes the LTAP to be a plan that contains all resources and activities needed to meet the management asset objectives, so this is a tool for the management system to manage their assets on the long-term. Consequently, this plan is important for the asset since it describes what is needed and what needs to be done at which moment to meet the objectives. Therefore, understanding about which aspects are important of an LTAP is needed for setting objectives (integrating sustainability in this research). Additional, LTAP is described to make the approach towards an asset holistic (Zantinge, 2016) and thus also the management system.

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Figure 2.4 Aspects of a LTAP mapped

2.4 Conceptual framework

Figure 2.5 shows the conceptual framework of this research. This framework connects the three aspects of sustainability, as stated by Elkington (1994), via a management system, to the asset performance during the design phase as state as stated by Atling (1993). In most organizations, the economical sustainability has already been embedded in the management system and is thus the economic part of the asset performance is already being managed. This framework is new since it also aims to achieve environmental and social sustainability. This has an impact on the management system which again influences the asset performance. Literature already stated that there is a positive link between being sustainable in all aspects and the asset performance (e.g. Eltayeb et al., 2010a). The influence of the management system within this relation has not been researched yet. The management system in being influenced in turn by the LTAP, this plan allows a more holistic approach (Zantinge, 2016). This thus helps focusing on all sustainable aspects instead of only focusing on the economic part. This research focuses on coming with a framework that includes the three aspects of sustainability, the management system and the long-term asset plan.

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3. Methodology

3.1 Case Study

This research is done by performing a qualitative research. The aim of this research is to come up with a framework for implementing sustainability within asset management for both BottleFood and the food processing industry. For practical problems, as this one, a design study is a good method to develop means for the desired propositions (Holmström, Ketokivi, & Hameri, 2009). BottleFood wants to find out how both sustainable environmental and sustainable social performance could be integrated alongside sustainable economic performance during the design phase of the life cycle of the de-humidifier and what intermediating effect the management system has. The focus was on the design phase for the following reasons: first 70 to 80% of all the costs of an asset are determined by choices made in the design phase (Goh et al., 2010). Second, the time window for this research is rather limited, researching all phases would have been at the cost of quality.

With this knowledge, the product of this research was a framework that shows how sustainability could be established within the management system, to be used in the long-term asset planning. A lot of research has been performed on sustainability as part of an organizations performance, but the intermediate role of the management system has not been researched in depth. Design science has the purpose to come up with a solution and then refine it (Holmström et al., 2009). So, in this research the purpose is to create a framework for sustainable asset management and check with the stakeholders if they think the framework will work. Wieringa (2009) came with a framework which helps performing a design study (figure 3.1).

The framework consists out of four steps; Problem investigation, solution design, solution validation and solution implementation. For all steps questions are asked in section 3.3 of this paper. By answering these question the research question of this paper could be answered.

This research makes use of a single in-depth research; this has the advantage of greater depth of the research (Voss, 2009). That is why this research focused on one asset/ machine in a nutrition producing plant in the Netherlands. Because this research focused on an asset within a food processing plant, and the food processing industry is one of the largest and most important industries over the world, so causal relationships found in thin research could be generalized for the whole industry and literature.

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Since the economic aspect of sustainability has already been established within the management system (Jayal et al., 2010), the unit of analysis of this research are the environmental and social aspects of sustainability in a management system; which can also be derived from the research question.

3.2 Case Context

Looking at the conceptual framework this research focused on the manufacturing industry, because in this industry the biggest improvements for environmental sustainability can be obtained in the manufacturing industries (Abdul-Rashid et al., 2008). In this industry, the focus has much been on the economic aspect and less on environmental and social sustainability (Jayal et al., 2010).

Organisations itself are responsible on how they perform on the environmental, social and economic aspects of sustainability and have role to perform in a sustainable manner (Labuschagne & Brent, 2005). With customers becoming more involved with the effects of production of products they buy (e.g. carbon footprint) (Fang et al., 2011), it is becoming more important for these manufacturers to produce in an environmental-, social- and economic sustainable way to fulfil the wishes/ requirements of the customers. The side benefit of manufacturing in a sustainable way is an organisation which assures both its existence and the preservation of the world.

This research focuses on the food manufacturing industry, since nutrition itself is one of the basic needs for life. Around 2000 there was big shift noticeable in the food manufacturing industry, changes to automated processes, quality control by testing final products to a more sophisticated quality assurance, more proactive towards demand and there has been a shift in power from manufacturers to retailers (Fellows, 2000). Because retailers/ customers are more involved in all these aspects it is in the best interest for manufacturers to produce in a sustainable way.

3.3 Case selection

This research made use of a single case. Due to confidentiality reasons the organisation researched is called “BottleFood”. Research was performed in a plant in the Netherlands, but this plant is part of a much larger network of plants worldwide. The organisation is one of the largest in the food processing industry. The plant was founded a decade after the Second World War and went through major changes, both with respect of changing ownership and in product mix

The machine that was chosen for the focus of this research will be installed in August 2017. This machine is responsible for de-humidifying the air in a dry tower. This asset could expand the capacity of the tower with 10%. Since the design phase is recently closed all information about processes and method is very accessible.

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which states that employees must make fact based decisions. This only can be done if there is hard data available. Therefore, employees keep track of a lot of kpi’s through the machines’ software.

Because of earlier experience with BottleFood, access and communication lines were already (partly) established which was beneficial for the gathering process of data.

Within this case nine sub-questions were stated to answer the research question. Combining the answers of these nine questions will help answering the main research question. The nine questions that are stated can be found in table 3.1.

3.4 Data collection

All the data of the asset that has been researched was available via primary or secondary data. Al lot of data was gathered through semi-structured interviews (appendix 11.5) with the principle informant (initiative taker for this research from BottleFood), in this case the person in control of maintenance of assets within BottleFood. It is useful to understand who the stakeholders are in this case, to know who to interview and which questions to ask to which persons. Figure 3.2 shows the stakeholder map of BottleFood

.

Figure 3.2 stakeholder map BottleFood.

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missing or needed to be structured differently, this made sure that the information was complete and correctly structured.

Using multiple sources helps to prevent a bias (Calantone & Vickery, 2010). All interviews were semi-structured as proposed by (Voss et al., 2002). The use of interviews, machine data and literature enhanced the internal validity of this research, since using multiple data sources is a form of triangulation which improves validity (Yin, 2003).

The nine sub-questions were divided into the four steps of design science. For each step, different types of data were used. The complete division of sub-questions and ways of gathering data per step can be found in table 3.1.

3.5 Data analysis

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4. Problem investigation

4.1 Stakeholders

To get a better understanding where the stakeholders are positioned in the organization an organogram of BottleFood is presented in figure 4.1. The boxes with the dotted line indicate the stakeholders (that should be) directly involved in the design phase of an asset. Looking at the Front-End-Planning (FEP) (figure 4.2), shows the process of designing an asset at a high level.

General Management Team

Divisional Management Team Divisional Management Team

Divisional Management Team

Site Management Team Site Management Team Site Management Team

Operators Purchasing Department Maintenance Department

HR department

Engineering Department Finance Department

Operation Excellence

Department Planning Department Forecasting team

EHS Managers

Purchasing Department

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4.1.1 Stakeholders goals and sustainability

Table 4.1 Responsibilities linked with sustainability per stakeholder

Table 4.1 shows the responsibilities different stakeholders have that are coupled to sustainability. The general management team (GMT) mainly focuses on the value of the shares and dividend (the GMT is thus indirectly concerned with the sustainability at the plant since this has an impact on the share value), one of the interviewees claimed that one of the GMT members had said, that he did not care how sustainability was managed, but that is was taken care of and in such way that it would not harm the share value. That is why the DMT (subordinate of GMT) has targets for several parts of sustainability, but these targets are not thoroughly drafted. The aim of the DMT is that all plants produce in zero-waste-to-landfill, which means that their production processes do not harm the environment. The targets are focused on reducing emission while producing, but also targets exist for worker safety. The focus of sustainable assets mainly is on assets in the production phase and not in the design phase (so responding on lagging indicators).

The SMT is partly focused on getting new assets; therefore, the SMT tend to underestimate the exploitation costs of a new asset to receive a “go” for a new asset, for example four years ago the plant installed a new machine and the SMT had a budget for maintenance for the machine for the coming ten years, that budget is currently already been exceeded by 250%. The SMT starts most improvement projects based on outcomes (so lagging indicators like a high utility bill or long change overtimes) instead of going into these points during the design phase and design a good training so that operators are well trained in changeovers before the production phase of an asset/machine. The SMT tend to do this for most aspects (as presented in table 2.1) of sustainability. For example, after the asset has been installed, they aim to reduce the emission or reduce the energy consumption.

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regulations concerning safety. The parts of sustainability like safety are seen as mandatory by operators, while they may have an influence on sustainability. An operator can for example change the temperature in a room/ office, but an increased temperature could affect the amount of cooling (power) an asset needs or the quality of the product.

The purchasing department is responsible for procuring all necessities for producing. The department takes the wishes of the customer into account, but the purchasing department could also look for materials that fulfill the wishes of the customer and have less impact on the environment. A good example is one of the bottles BottleFood uses for a product, the customer wishes that these bottles can be easily squeezed into a smaller size after usage. The purchasing department buys these bottles with a certain wall thickness, while other persons within the department are aware that the same supplier can provide another bottle of a lot thinner material that can be easily squeezed after usage and the prices for these bottles are the same. For this bottle, less material is used and the production is the same as for the other bottle type. This means that less material is needed to produce the thinner bottle. The purchasing department did not chose this thinner bottle because they do not see/ understand the need for changing the contract with the supplier.

The EHS managers are responsible for reductions of energy and emission of machines that are already are in the production phase, they must make sure that assets that will be designed comply with the EHS checklist and they must update the safety for the employees. When coming up with ways to reduce the energy, they should consider that the investment for such target must have a pay-back time (PBT) shorter than 2.2 years and have a Return of Investment (ROI) of 25%. All projects that will make the site, processes or assets more sustainable and that take longer than 2.2 years to achieve need to be financed out of a tight budget (projects that take less PBT than 2.2 years and fulfill the ROI always will be financed). This budget is too small for all projects possible for improving sustainability. This means that a lot of sustainable initiatives cannot be carried out, because thy initiatives must have a ROI of 25%. The EHS managers struggle to achieve sustainability completely, but they are often holdback by the ROI and economic decisions by their superiors.

The maintenance department only joins the design process of the engineers in a late stage of the process. Wishes about certain types of materials/ parts can therefore not be considered. This sometimes leads to higher costs for spare parts and longer maintenance times than necessary. This will possibly lead to materials/ parts are bought that could be changed easily to more sustainable parts in the design phase, since the late involvement of the maintenance department, the life time maintenance cycle is very limited.

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Table 4.2 shows the problems, its underlying cause and the desired state for the problem of each Stakeholder. One of the largest problem is that the stakeholders are silo thinking. Silo thinking is not good when one wants to improve its whole supple chain, or in the context of this research, sustainability in the design phase. Every department needs to work together (so think outside their silo) to reach complete sustainability. The management system should enable the organization to get out of the silo thinking (one can think of the culture and leadership for example). Momentarily, the organization does not have any procedures that have the purpose of improving cooperation between departments. An example is that an operator came with an idea that would save half a million for the plant, but multiple departments were needed to assist for realizing the saving. One department did not directly benefit from the saving and therefore did not prioritize it for more than two years. By going directly to the plant manager, the operator finally received support needed from other departments and the savings were realized.

Table 4.2 Stakeholder problems, underlying causes and desired states

4.2 Design phase within BottleFood

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overview of a FEP can be found in figure 4.2. Within this FEP the landed costs and exploitation cost are calculated. 1. Forecast team foresees increase demand 2. Divisional Management team starts process of new asset design

3. Site management/

engineering calculate landed cost (FEP gate 1).

4. Site with lowest landed cost will further workout design 5. Preliminary asset design finished 6. Asset will be installed Initiation Phase

Initiation Phase Feasibility PhaseFeasibility Phase Concept PhaseConcept Phase Preliminary design phase

Preliminary design phase

Gate 1 Gate 2

Frond End Planning BottleFood

Gate 3

Figure 4.2 Front End Planning

Table 4.3 shows all categories which are being assessed during a gate review, per gate review it shows what is expected at the end of each phase in the FEB process of an asset. After gate 2 the subsidiary is selected which will install the new asset.

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Table 4.3 FEP detailed overview

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Table 4.4 Uptime activities BottleFood

In the financial procedure list, it is written that the landed cost at BottleFood should be calculated by adding the freight cost, installation cost and sales taxes. Other capital expenditures (Capex) and operational expenditures (Opex) costs that should to be considered are shown in table 4.5.

Table 4.5 Exploitation cost

In literature, modules are found that where based on ten top expert panels, these experts claim that the landed costs can be divided in six different modules: price, transport, customs, inventory, overhead and risk (Young, Swan, Thomchick, & Ruamsook, 2009). An example of these modules can be found in figure 4.3. These modules are much more complementary than the landed costs and Capex and Opex costs BottleFood uses. This indicates that a lot of modules (not only for sustainability) are missing in the design phase at BottleFood.

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4.3 Sustainability in practice

When looking at asset management within BottleFood, one list exists for making an asset environmentally sustainable. This is the Utility excellence checklist; this lists focuses especially on energy usage and the environment (see appendix 11.2 for content overview of this checklist). There is a second list that focuses more on environment and part of the social sustainability; this is the Environmental, Health and Safety Checklist. For economical sustainability, there is not a checklist, the economic sustainability is monitored by looking at the same lagging indicators as mentioned in chapter 2.2.4. The plant being researched, mainly focuses on operation outcomes, one of the important measures is the Overall Equipment Efficiency (OEE). With this OEE the managers can look for ways to optimize their processes and the use of the asset and by doing so reduce cost (economic). Reducing cost does not directly lead to an improved financial position for the site, the savings go to the account of the organization and not to the sites’ account.

The utility excellence checklist is built-up by 18 sections. The different sections of this checklist can be found in the appendix; each section has multiple sub-sections. This checklist has the purpose to reduce the energy usage of the asset after installation and to reduce the environmental impact the asset will have after installation. The checklists start with eight legitimate reasons why a sub-section should not be considered and is followed by demanding that a Return-on-Investment (ROI) of 25% in ten years for this checklist (or the life of the asset whichever shorter) is fulfilled. Each subsection needs to fulfill these demands; else the adjustment during the installation will not be made. So, adjustments on the assets that improve environmental sustainability are only carried out when they have a ROI of 25%, so the driver for these adjustments is not to be environmental sustainable but about being economically sustainable. The second list for sustainability is the EHS checklist. While the EHS checklist is a good complement on the topic of environmental sustainability to the utility checklist, it is not mandatory to use. This checklist also looks at the more ergonomics part of an asset (think of operator safety and operator physical strain), which could be considered part of the social component of sustainability.

4.4 Sustainable management system

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Within BottleFood all employees tend to do no more than is assigned to them by the leaders. In most of the interviews it was said by the employee of BottleFood that leaders should take the lead in becoming more sustainable. Employees do not want to take the initiative, since striving for sustainability will take a lot of time and effort, time and effort that employees do not have when performing their core business. This indicates that when the leaders do not show leadership and commitment towards sustainability, employees also do not commit to sustainability.

According to the questionnaire/ scorings list and interviews (see table 4.8 and appendix 11.7), sustainability is embedded in the culture to some degree. People are not focusing on sustainability and do not talk about sustainability and relations with their job. Within BottleFood there are no visible artifacts (shirts, posters, etc.) that sustainability is taken into the culture. BottleFood has the slogan: “Zero waste to landfill”, but this slogan can only be applied to their own core businesses (production) and not for all their processes. This slogan can be seen as a behavioral norm, which BottleFood tries to live up to. The underlying assumption, when it comes to sustainability, is that it needs to have a positive (economic) effect on the short-term for the shareholder. Following this assumption, sustainability should have the purpose of short-term profits instead of long-term gains.

A strategy is a roadmap to reach the long-term goals for an organization. To become sustainable, an organization needs to make sustainability a long-term goal, with separate goals for economic, environmental and social sustainability. BottleFood has not the aim of becoming completely sustainable in the long-term. BottleFood however, have in their strategy the slogan: “Zero waste to landfill”, with which they refer that their core processes should bring no harm to the environment. The other non-core businesses processes (such as asset design, procurement and delivery) do not have a sustainability goal. One of the members of the site management team said that the whole sustainable strategy deployment is not clear. He refers to the fact that there are no concrete targets for the site for sustainability and thus there are no plans for implementation.

Table 4.7 Examples of long-term sustainable strategy

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The risk management within BottleFood is rather limited (see appendix 11.4 for risk assessment table and key). BottleFoods’ risk assessments are mainly based on technical failure of an asset, purchasing and supply chain costs. How organizations deal with the risks is a grey area (Martin & Voulvoulis, 2009), organization determine in their risks management policy how they want to deal with these risks. But a lot of the actions (both precautionary and after incidents have occurred) could be done in a sustainable way; for example, do not just ditch a contaminated batch in sewer, first filter out the water that could be used for toilet flushing.

BottleFood uses the Define, Measure, Analyze, Implement and Control (DMAIC) as structure/implementation model for implementing a change (see appendix for all tools). So, each time a problem will be tackled, they have a standard procedure how to tackle the problem. This DMAIC structure is currently used for changing existing systems and processes and is not yet used for the design phase. For this phase BottleFood uses the FEP. By going through three gateways a project will be executed or not. This whole process is also electronically monitored via a program, in this program there are checklist that help the executor making sure his/ her change is complete per step of the DMAIC structure.

Within BottleFood there are both internal audits by for example the divisional management team, but also external audits to receive the license for ISO 50001. The plant is involved in preparing the plant for these audits. Everyone in the plant has the mentality of: “not passing these audits is not a possibility”. Currently there are audits for worker safety and energy (re)usage, so environmental and social sustainability audits besides economic operational outcomes audits.

All the aspects of the management system are relevant in the case of implementing environmental, social and economic sustainability within an organization. Some are critical to get the actual implementation others are important to control and sustain the implementation. The criticality for implementing sustainability per aspect of the management system can be found in table 4.8. This table shows the currently scoring (based on scorings list and interviews) versus what score is needed for each management system aspect.

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4.5 Problem conclusion

Within BottleFood the management system is not an enabler. Because of the poor functioning management system, problems like silo thinking and not involving people in processes at the right time have occurred. When aiming for sustainability all these problems need to be solved, thus the management system itself must work properly to design a sustainable asset. All problems in relationship with the management system within BottleFood and their solutions are summarized in table 4.6. All problems with the stakeholders and its underlying causes are summarized in table 4.4. The current FEP does not integrate all parts of sustainability that should be integrated for complete sustainability. The checklists that are used for the FEP state that they have the purpose for environment, but it mainly focuses on economic (ROI and PBT are strict rules within the document). These are all problems that cause the focus only to be at the economic part of sustainability rather than at all three parts.

5. Solution Design

5.1 Sustainable asset plan in the design phase

When looking at the design steps of an asset, sustainability can impact the asset plan in roughly two ways: physical (asset construction) and non-physical (procedures, training) (Zantinge, 2016). How these affect the asset plan will be discussed in this section.

When integrating sustainability in the design phase of an asset it includes integrating sustainability on the initial investment decision, concept development, engineering and design and actual construction as the installation method (all parts of the FEP). First, the purpose of the asset must become clear (what is the main purpose of the asset). Secondly, it must be clear how the asset will fulfill its purpose (so in what way does the asset going to be used). Here sustainability must be considered, since the purpose of the asset must be fulfilled in a sustainable manner. The asset must be economic-, environmental-, and social sustainable. To achieve complete sustainability the asset itself does not only need to be subjected to sustainability but also all other aspects that influence the sustainable practices of the asset. Aspects that influence the asset are the aspects of the management system.

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Table 5.1 Economical sustainability checklist

Economic sustainability plays only a partial or even secondary role in becoming sustainable, financial decisions must be inferior to strategy (Cooremans, 2011). To achieve this, the organization should keep some cost as low as possible (see table 5.1), but also sometimes seemly high expenditures (in for example environmental sustainability) must be done to satisfy the stakeholders. The asset also needs to produce high quality products since these tend to have more value for the organization, but at the same time the asset must be able to deliver when planned and be flexible so that costs are not fixed when the production plan is changed.

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Table 5.2 Environmental sustainability according Montabon et al. 2007 and combination of table 2.1

An asset is social sustainable when it fulfills both the non-physical factors as the predominant physical factors (Dempsey, Bramley, Power, & Brown, 2011). The complete list of factors can be found in table 5.3. All the factors must be considered when designing the asset, this has the advantage for the organization that it is prepared for risks, thought things over and safe unforeseen costs that else may arise later (e.g. training is more expensive or a lot harder than expected).

When looking at the bottom of table 4.3, one could think all parts named in chapter 5.1 are integrated within the FEP, while taking a deeper look revealed that only economic factors are integrated.

5.2 Characteristics of a sustainable framework in the design phase

When aiming for a sustainable asset, sustainability should be integrated within the assets’ design phase. All elements of a framework of the design phase that are sustainable can be found in figure 5.1. The framework has the same structure as the FEP as BottleFood uses, but with additions and changes. Table 5.4 shows which stakeholder to involve in which step. All the characteristics per element of the framework will be presented in tables 5.5 and 5.6.

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Page | 33 1. Asset need identification 2. Purpose of Asset 3.6 Social Requirements 3.2 Economic Requirements 3.5 Environmental Requirements 3. Asset requirements 3.10 Training 3.4 Leadership Commitment 3.1 Strategy/ Milestones 3.9 Culture adaption 3.8 Risk management 3.3 Implemen-tation/ Procedures 4. Conceptual design Gate 1 Gate 2 5. Preliminary design 4.1 LTAP/ Projects Schedule 4.6 Social Checklist 4.7 Environmental Checklist 4.5 Economic Checklist 4.3 KPI’s 4.4 Layout 4.2 Risk management 4.8 Training plan 5.3 Detailed training plan 5.4 Control plan 5.2 Detailed layout 5.1 LTAP/ Detailed project schedule Gate 3 3.7 Maintenance requirements

Table 5.4 Stakeholder involvement in figure 5.1

Figure 5.1 A framework for designing in a sustainable manner

Stakeholder Involvement phase

DMT 1 & 2

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Table 5.5 characteristics per element

Phase Step Name Characteristics

1. Asset Need identification

-Asset Need

identification - Determine what caused the need for the asset 2. Purpose of

Asset - Purpose of Asset - Determine how the asset should fulfil the need - Determine if asset fits in long-term strategy - Determine the time frame for the asset - Determine which KPI are affected by the asset - Determine landed costs see all procedures in chapter 4.2.1

- Determine all economic parts that are listed in chapter 5.1

- Determine if the asset makes profit, breaks-even or will lose money

- Determine the amount of funding needed - Identify stakeholders (and its goals) - Determine who needs to be involved when - Determine priority of asset

- Work according the DMAIC structure

- Determine what kind of leadership is necessary (Mintzberg, 1973)

- Determine the human capital needed

- Determine in which ways the asset could affect the environment and how this could be avoided

- Determine the internal EMP (see 5.1) - Determine vendor/ supplier EMP

- Determine what the physical and non-physical factors are (see 5.1)

- Determine in which ways the asset could affect the social and how this could be avoided

- Determine main parts and spare parts

- Determine preventative maintenance amount and costs

- Determine criticality of the asset

8 Risk

management

- Determine the risks according to the TECCO principle (Ruitenberg et al., 2016)

- Determine if the asset affects any part of the culture (as defined in chapter 4.4)

- Determine if the asset fits in the communities culture

- Determine which new tasks would be created when installing the asset

- Determine training needed to learn new tasks - Determine a linkage map between asset and stakeholders

- All previous characteristics must be clear, else move back to 1.1

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Table 5.6 characteristics per element continued

- Determine Asset life cycle management - Determine the glide path from installation to production

- Create a key for determined risks (come with extended version of example in appendix) - Use lessons learned from previous projects - Determine the KPI’s for the asset

- Determine other indicators of the asset - Determine the value improving practices - Determine preliminary Equipment lists - Make process flow diagrams

- Determine room layout

- Determine equipment standardization - Determine cash flow projections

- Economic sustainable checklist (must contain all aspects as discussed in chapter 5.1 and table in 2.1.2)

6 Social checklist

- Social checklist (the EHS checklist good be used as start and complement with elements from section 5.1 and table 2.1.2)

7 Environmental checklist

- Go through checklist that assures that the asset will have minimal effect on the environment (the utility excellence checklist is a good basis and this must be complemented by aspects from table 2.1.2 and section 5.1)

- Determine training plan

o Determine who needs training

o Determine when the training needs to be provided

o Determine what the follow-up training steps are - All previous characteristics must be clear, else move back to 4.1

- Updated Project execution Plan

- Detailed project schedule (Monte Carlo #2) - Preliminary layout & Specs

- Utility loads requirements - Building plans

- Golden Standard

- Determine detailed trainings plan o Determine who needs training

o Determine who is responsible for providing the training

o Determine what happens when one fails o Determine the setting in which should be trained o Determine how often trained people should be retrained and if there are changes in that training program

- Determine when the checklists are checked again - Determine when audits will be

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Tables 5.4, 5.5 and 5.6 help clarifying figure 5.1. Table 5.4 shows which stakeholders should be involved in which step, this could differ per organization. The real purpose of table 5.4 is that people in other organizations with the same responsibilities as shown in table 4.1 will be involved in the right steps. An organization with the aim of designing a sustainable asset should follow the steps in the order as presented in table 5.5 and 5.6. It is important that all characteristics (table 5.5 and 5.6) are considered when designing an asset, otherwise crucial parts could be overlooked which could cause a not sustainable asset. These characteristics will ensure that all parts of table 2.1 are integrated in the design of the asset.

New in the proposed framework are the parts of the management system. It is crucial that these aspects are seen as individual parts that need thoughtful handling instead of being subject to the project., the part of the management system can make or break the design of an asset.

Different in the proposed framework to the currently used FEP, is that all three parts of sustainability are embedded from the asset requirement phase; environmental and social sustainability were embedded in the conceptual design in the current FEP of BottleFood. The proposed framework thus assures that these aspects are thought of earlier in the process.

People could say that the proposed framework takes more time and resources than the current FEP, but this will be repaid in the long-term by having a sustainable asset. Having a sustainable asset means that stakeholders are satisfied with the asset, following the proposed framework will make this happen. It will be difficult integrating the management system the first time in the framework, but the first time will pave the way for the next asset design.

6. Solution Validation

The validity of this framework was checked for both its’ internal and external validity. First the internal validity was tested by several interviews with stakeholders and via a workshop with the head of the maintenance department and MEE’er. To validate the model was applied on the de-humidifier. Second, the external validity was tested via interviews with employees of BottleFood who have a lot of experience in organizations like DSM, Philips and Shell.

6.1 Internal validity

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Information about parts of economic sustainability are missing within the site, this is because of the different silo’s (see chapter 4.1.1) in the organization (not only within the plant but also between site, division and general management). The leadership roles tend to be the same for every machine that must be designed, but it can do no harm by just checking (this will make sure that the right leadership will be used); the same can be said for the stakeholders’ goals, these are pretty much the same for every asset but it could differ and if this is the case you want to be prepared. The LTAP is not explained very thoroughly, this model assumes that the process and importance of an LTAP is understood before using the proposed model. Also, things that are mentioned in the requirement phase for economic, environmental and social sustainability will be repeated in phase 4, this seems like redundancies, but these are repeated to make sure these different aspects are considered and are integrated within the design of the machine.

Using this model revealed shortcomings in information needed to design a sustainable de-humidifier, the model helps to identify these gaps and make sure that these are filled before the asset will be installed. The effect of integrating the management system in the model is not really shown by applying this model on the de-humidifier, but these parts are expected to have impact on the installation and production phase. By using this model, sustainability will be integrated within the design of the asset, but the effect the management system is in this phase a bit unclear, since these choices will have effect in later life-phases.

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6.2 External validity

Interviews were held with former employees of DSM, Phillips and Shell. These interviews showed that the management system had a big impact on the design of the asset. Though, these organizations are further along the way with becoming sustainable, they recognized that in the past economic outcomes were more important than environmental and social sustainability and these organizations were steered on outcomes (lagging indicators) instead of leading indicators. All aspects important to the design phases were integrated within this model and the framework made complementary with the three parts of sustainability. Who to include as defined in 3.3 of the framework is filled in differently in these organizations since the organizations have different organization charts. But these persons said that this framework will work in other organizations in the manufacturing industry.

7. Solution Implementation

The last part of the design science is the solution implementation. The solution of integrating sustainability in the design phase is integrated in the framework presented earlier (fig. 5.1). This framework should become the new standard for organizations and thus the policy of the organizations should be changed, since without a change in policy, the environmental and social part of sustainability will still be subject to economical and then the purpose of the framework will be missed. Moulton and Sandfort (2017) came with a framework that assists in changing a policy (table 7.1). This framework consists out of three components that are at the ground of policy (Program intervention, Scale of analysis and Drivers of change and stability).

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Table 7.1 Implementation framework of a policy Moulton and Sandfort 2017

8. Discussion

This research started with the main question: How could environmental and social sustainability be

embedded in the management system next to economic sustainability during the design phase of an asset in the food processing industry?, this answer will be provided by answering the nine sub-questions first.

The answers to these sub-questions can be found in table 8.1.

The conceptual framework showed that economic, social and environmental sustainability have a positive influence on the organizational performance (Figge et al., 2002). In the framework, which is used by BottleFood, the social and environmental parts are not used for their intentional purpose. The purpose of these parts is not to harm the environment and to not suffer from social degradation (Sarkis, 2001; Tsai et al., 2009). The proposed framework uses the three parts of sustainability as proposed by literature (Abdul-Rashid et al. 2008; Elkington, 1994)), so for example focus on reducing CO2

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environmental aspects will only be designed when the investment has a ROI of 25% or higher with a PBT of 2.2 years or shorter (safety aspects do not have to fulfill these requirements), in the proposed framework the overall ROI must be positive (ROI of a single part does not need to be positive) and the PBT is longer (since these investments are for the long-term). Investments in environmental and social aspects of the asset will lead to higher organizational performance (Figge et al., 2002), thus there is no point that a single investment should make a profit on its own performance, while the whole organizations performance could be increased by it and thus more profit will be made.

Even doing investments in environmental aspects that do not directly have a positive ROI could lead to increased organization value, since by doing these investments in environmentally friendly assets will be seen as acting on climate change. Climate change is sees as a public policy issue (Epstein & Roy, 2001), organizations that perform in an environmentally friendly way will thus aim to tackle this issue and therefore will be seen in higher regard by the public (which could lead to higher stock value). All parts of the management system, as discussed in section 2.3, where recognized within BottleFood. When looking at table 2.3, leadership and commitment influences the rest of the management system. Currently, within BottleFood the leadership is not sufficient, capable or does not have the time to be the leaders during the design phase of an asset that is need, this goes at the cost of the rest of the management system (Gilley et al., 2008). When the management system is not working as it should, departments could work separately instead of collaborating according to the ISO55000; this is also the case within BottleFood (example of project for savings, section 4.1.1). When the proposed framework is implemented and the conditions (table 6.1) are met, leadership and commitment will be ensured in the framework; in step 3.3 in figure 5.1 it will be clear who will be involved and in step 3.4 it will be determined which kind of leadership is necessary for the remaining management system parts to complete the design phase successfully. Steps 1 and 2 of figure 5.1 are performed by higher management and not at plant level, so it can be stated that early in the process the focus will be on the management system by the SMT. Returning to the conceptual model, one sees that without a properly functioning management system, the integration of sustainability cannot have a positive influence on the organizations’ performance. The proposed framework assures that leaders must be committed throughout the design phase and all other aspects are integrated within the framework form the beginning of the design process.

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design phase and further in preliminary design phase, this will assure that the asset has a holistic approach.

Currently, decisions at BottleFood are based on lagging indicators instead of leading indicators, which is according to the literature not a good representation of the performance of an organization (Muchiri et al., 2010). The proposed framework enables to steer the asset, based on leading indicators. Since more aspects are integrated in an earlier phase in the design phase (e.g. maintenance, environment, social, training, but also more people are involved), a better understanding about these aspects provides insights in how parts of the asset will work and leading kpi’s can be created (so kpi’s during the production/ design that enable leaders to make changes in advance of outcomes). The performance of the KPI’s summarized in table 2.4 (Chan et al., 2004) in the production phase will also increase after an asset has been designed with the proposed framework. Since table 2.4 is a representation of KPI’s of most organization, it can be stated that most organizations’ will see an improvement in these KPI’s after using the proposed framework. This is caused by well-integrated sustainability, management system, risk management and LTAP (all considered at steps 3 and 4 of figure 5.1).

Looking forward to phases after the design phase, the proposed framework will make sure that the cost for different groups, as presented in table 2.2, will be minimized by implementing sustainability, cost that are not all controlled at BottleFood currently. The proposed framework will improve all influencing parts of the conceptual framework, by adjusting these parts the lagging kpi’s will also be positively influenced.

Currently there is a gap between practice and theory, design science helps to bridge this gap (Holmström et al., 2009). The existing framework could be complemented with theoretical knowledge. Using this method assures that a lot of aspects that are important to the business are integrated within the model. So, this research shows that using the design science is a useful tool for bridging gaps between practice and theory, via adding practical knowledge to literature.

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This research shows the bottlenecks that are causing the difficulties organizations have for integrating all parts of sustainability. These bottlenecks can function as basis for further research, so that these bottlenecks do not need to become bottlenecks in the first place. Also, the effect of the bottlenecks on sustainability can be researched separately and more thoroughly.

9. Conclusion

This research tried to quantify the effect of sustainability has on the management system via a questionnaire and via interviews (resulted in table 4.8). This is a way how organizations can measure this relationship, but it would be smart if a measurement for this is also incorporated within the framework, so management can see how the management system is performing. For this, new measurement needs to be developed in further research so this can become a leading KPI starting from the design phase.

In this research a framework is created that helps integrating all three parts of sustainability equally. This framework does not only helps integrating the three parts of sustainability during the design phase of an asset, it also helps changing the attitude and impacts of employees towards sustainable asset management.

Sustainable asset management