Organizational responsibility framework for compliance management in sustainable management of assets

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Organizational responsibility framework for compliance

management in sustainable management of assets

Subir Singh Thakur

S2921790

thakur.subir@gmail.com

26-06-2017

Master Thesis

MSc Technology & Operations Management

Faculty of Economics and Business

University of Groningen

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Abstract

Purpose

Asset intensive industries are obliged to comply with various legislation and regulation received from different governmental bodies over the entire lifecycle of assets. In an organization multiple stakeholders are involved in the entire process of compliance. However, organizations struggle in effectively processing compliance requirements and conveying it between the stakeholders. In asset management literature no standard guidelines or protocols are mentioned for implementing these requirements. The aim of the thesis is to have a clear structure for the implementation of the legislation and the regulations that are received from external regulatory requirements.

Methodology

In this research study a design science methodology is used to design a model for implementation of the regulatory requirements at the asset level. This method was used because of the practical nature of the problem and the output was a generalized design. The data collection was done through interviews and document analysis at a case company. The main output of the research was a generic model design, so that it can be used by other companies also.

Findings

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Preface

This thesis is my final work for the degree of MSc in Technology & Operations Management at the Faculty of Economics & Business, University of Groningen. The thesis was aimed at contributing to asset management literature and at the same time contributing to a practical problem. The implementation methods of compliance requirements in asset management literature is negligibly mentioned. With my internship at AkzoNobel, Delfzijl I learnt about handling compliance from an organization’s perspective and how compliance requirements are implemented at an asset level. I would like to thank my first supervisor Wilfred Alsem for the guidance throughout and providing constructive feedback. Also thanks to my second supervisor Jasper Veldman for the support especially in the proposal phase and for the joint sessions in the starting phase of the thesis.

I would like to thank AkzoNobel Delfzijl and the supervisor Piet Drijfhout for the detailed knowledge on asset management and how processes are handled at the company and Jan van Kammen for his inputs on compliance from a company’s perspective.

A major part of my time in the internship and the research study was spent with my fellow mate Gerard Wolters. Special thanks to him for his help in language translations and for the collaboration throughout this research study.

Lastly, I want to thank my family for their support.

Subir Singh Thakur

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List of Figures

Figure Page Number

Figure 2.1 Drivers for incorporation of sustainability in business practice (Labuschagne &

Brent, 2005, p161)

12

Figure 2.2 Levels within an organization's management system (Pudney, 2010) 15

Figure 2.3 Asset Management for Sustainable performance of assets(Ratnayake,2013) 16

Figure 2.4 Governance Risk Management in Organizations (Racz et al., 2010) 17

Figure 2.5 Process model to ensure compliance 19

Figure 2.6 Conceptual Model 20

Figure 4.1 Stakeholder analysis of AkzoNobel, Delfzijl (Based on Bryson, 2011) 33

Figure 4.2 Analyzing the current process of handling compliance and the workflow according to Lawrence (1997)

34

Figure 5.1 Design of steps for AM for being compliant (Own Creation) 37

Figure 5.2a Protocol for workflow to implement compliance requirements 43

Figure 5.2b Sub-process of figure 5.2a 43

Figure 5.3 RASCI matrix for responsibilities at each step of design 44

List of Tables

Table Page Number

Table 2.1 Four drivers for incorporating sustainability in Business practices 13

Table 3.1 List of the department and personnel interviewed for primary data collection

23

Table 3.2 The documents read as part of research at AkzoNobel, Delfzijl for secondary data collection

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Table 4.1 Goals of the Stakeholders 31

Table 4.2 List of Critical Success Factors 32

Table 5.1 Steps in being compliant (Own Creation) 35

Table 5.2 Checklist to be filled by every department involved in the process of compliance (Own Creation with guidelines from ISO 55002 :2014 standards)

38

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Chapter 1 Introduction

Growing pressure and awareness about the depletion of resources, carbon footprints, human use of raw materials, energy requirements has led companies to reorganize their business policies and make sustainability one of their goals. ‘Sustainability’ has become a catchword in natural resource dependent industries (Ratnayake, 2013). Although there has been an increase in demand for inculcating the sustainability aspect in asset management, there is lack

of clear direction and guidance in the literature about the process of achieving it (Niekamp,

Bharadwaj, Sadhukhan, & Chryssanthopoulos, 2015).

Ratanyake and Markeset (2011) define asset management as “the set of disciplines, methods,

procedures and tools derived from business objectives aimed at optimizing the whole life business impact of costs, performance and risk exposures associated with the availability, efficiency, quality, longevity and regulatory/safety/environmental compliance of an organization’s assets”. According to Van Dongen (2011) asset management usually focuses

on technical and financial aspects of the asset, and misses out on other important aspects during the entire life cycle of the asset. Sustainability is one of the aspect which is least mentioned in asset management policies of companies and literature (Ratnayake, 2013). Wagner & Gelder (2014) emphasize that asset management (apart from financial and technical aspect) for large industries and infrastructure companies should include RAMSHEEP elements or risk areas (Reliability, Availability, Maintainability, Supportability, Health, Environment, Economics and Politics). RAMS analysis can be used in all phases of asset management whereas SHEEP analysis considers the sustainability part in lifecycle of assets. However, companies tend to miss out some elements of SHEEP in their asset management policies (Wagner & Gelder, 2014).

Labuschagne and Brent (2005, p161) mention that “Some companies have started to define

sustainable development for their businesses, while others endorse international agreements or include the principles of sustainable development in the company’s vision and mission statements. No matter how sustainable a group of assets may have been in the original design and construction, they must be operated responsibly and maintained properly to continue to function as designed”. The sustainable performance of the assets over their lifecycle is

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regulations are defined as the regulatory requirements from the government (Foorthuis, 2012). These legislations and regulations consist of aspects like sustainability, safety, working conditions, industry norms and are to be continuously complied with. Industries in Netherlands are subjected to legislations from three main stakeholders namely - the federal government, the provincial government and the EU regulations. To give an example, the different regulations and legislations a company in the chemical industry has to comply with are the control limits for leakages from the production plant and tanks, specific limits of thickness of walls of tanks that store chemicals, limits for emissions from the plant etc. This compliance is essential for any company’s business operations and the company’s

existence (Governatori & Sadiq, 2008). Compliance can be defined “as a state of accordance

between an actor’s behavior or products on the one side, and predefined explicit rules, procedures, conventions, standards, guidelines, principles, legislation or other norms on the other” (Foorthuis & Bos, 2011). To define compliance management Abdullah, Sadiq and Indulska (2010, p3) mention that, “Compliance management involves ensuring that business

processes, operations and practice are in accordance with a prescribed and/or agreed set of norms”. To manage its assets sustainably an organization has to adopt these compliance

requirements into their internal practices (Governatori & Sadiq, 2008).

A compliance management system is the one that includes compliance implementing structures and processes in an organization (Abdullah et al., 2010). Substantive, elementary compliance management systems that organizations can use for achieving internal (organizational) compliance have been described in a fragmented manner (Foorthuis, 2012). Also the compliance management structure related to asset level implementation is very scantily described in literature. Most research is limited to the development of a corporate compliance strategy and not the implementation processes (Ratnayake, 2013; Liyanage, 2007).

Compliance management efforts are often time consuming and costly (Tallberg, 2002).

Delays may occur in the identification of stakeholders within an organization and also the proper translation of the regulations and legislations so that it can be implemented at an asset

level (Tallberg, 2002). Non-compliance carries heavy risks in the forms of sanctions,

penalties and the risks of losing the customer base (Liyanage, 2007). Moreover, studies have

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lead to judiciary pursuits (El Kharbili, Stein, Markovic & Pulvermüller, 2008). Another reason for lack of compliance is that often companies fail to identify and make a proper organizational responsibility framework to implement compliance management on a continuous basis (El Kharbili et al., 2008). An organizational responsibility framework is used to identify the concerned stakeholder at different stages in the process of implementation of a task (Foorthuis, 2012; Hall, 1993). The task here is the implementation of regulatory requirements at the asset level. This makes compliance a strategic and operational issue for companies.

Apart from creating awareness for compliance with sustainability requirements, companies often experience difficulties in implementing their compliance management approaches (Abdullah et al., 2008). This is due to failure to create awareness about the totality of actions that are to be taken (Buksa, 2014). With new regulations being introduced frequently or changes in current regulations it is unclear who is responsible for identification and implementation at asset level. Here a need for an organizational responsibility framework arises.

The intent of this research is to design a framework for process industries to classify the organizational actors at different stages to implement the requirements of legislations and

regulations at the asset level. An actor here is defined as personnel or an entity acting within

an organization with some degree of autonomy and has cognitive capabilities, preferences and beliefs (Foorthuis & Bos, 2011; Jones, 1991). This research study will focus on compliance with regulatory requirements from external stakeholders (legislations and regulations from the government). The organizational responsibility framework developed in this research will act as a guiding step to ensure effective compliance management at asset level for process industries. Therefor the following research question is established:

What is an effective organizational responsibility framework for compliance management with respect to sustainability of assets?

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Chapter 2 Literature Review

The aim of this chapter is to give a literature background on the research subject. The chapter starts with the need to include sustainability in the business of companies and also the need that sustainability should be handled at all levels in an organization. Further the compliance management and the need for an organizational responsibility framework will be discussed. The chapter ends with possible gaps in literature and the conceptual model for this research study.

2.1 Drivers for sustainability

The concept of sustainable business largely concentrates on broader economic, social, and environmental criteria as the basis to define the quality and standard of business activity (Liyanage, 2007). In order to define explicitly what drives a company to include sustainability and the reasons for enacting numerous regulations in their business practices,

Labuschagneand Brent (2005) identified four indicators (Figure 1).

Figure 2.1 Drivers for incorporation of sustainability in business practice (Labuschagne& Brent, 2005, p161)

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and the civil society. Table 2.1 below presents an in depth insight into the need for these drivers.

Table 2.1 Four drivers for incorporating sustainability in Business practices

Driver Need

Push drivers The model describes Push drivers as the license to exist. This can be because of the need of investors (or financing institutions) who prefer to invest in sustainable organizations

Pressure drivers Pressure drivers are drivers that force a change into the organization, either by laws that ban some work processes, societal pressure and expectations that could lead to a boycott of the organization or damage to its reputation, or the respect of various international standards and guidelines.

Pull drivers The pull drivers are drivers that companies can use to show and sell the company’s good sustainable actions. They are used by companies to prove to the outside world what they do in the area of sustainability and can help create or maintain their reputation.

Support drivers Support drivers will support the organization to achieve its goals, such as the framework that the organization chooses to use for the path towards to sustainable goals.

In a manufacturing environment the sustainability in the business should be reflected at three levels of the organization which is the product level, asset level and process level (Liyanage, 2007; Niekamp et al., 2014) which is in conjunction with the drivers of sustainability by

Labuschagne and Brent (2005). Process industries are asset intensive organizations. These

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Over the past years industrial disasters have caused considerable social, economic and environmental impacts. This rise in the number of accidents has led to increase in the regulations for the plant level asset management and operations (Ratnayake, Samarakoon & Gudmestad, 2011). To give an example of a regulation, the process industry companies are mandated by the Dutch government to describe and declare the age of their operational assets and suitability for continued operations (de Jong, 2008). The purpose of this kind of regulation is to keep a check if the operational assets are not being used beyond their designed life.

The next two sections will focus on the sustainable asset management and the need to comply with the legislations and regulations respectively.

2.1 Sustainable Asset Management

Sustainability is a much discussed topic in business policies and board level agenda of companies, but there is little done to see the impacts on the plant and asset level of business operations Elkington (1998). Liyanage et al. (2009, p668) define sustainable asset management as “Sustainable asset management focuses on prolonging the useful life of the

assets and ensuring higher productivity from the systems they are part of, through methods that achieve economic, eco-friendly and socially equitable goals”. The most common way of

studying sustainability is the Triple Bottom Line (TBL) perspective that includes the environmental, societal and economical perspective. The increased pressure for TBL concerns on day to day operations of an industry, is forcing corporations to align with the principles of sustainable development (Keeble et al., 2003).

To achieve the required level of sustainable performance of assets, a company has to make and adopt policies to regulate its internal practices (Liyanage, 2007). These policies should help support or guide internal decisions and activities at various levels of an organization. For this the organizations need a proper cascading structure that takes into account the business

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Figure 2.2 Levels within an organization's management system (Pudney, 2010)

To manifest sustainability in the organization Labuschagne and Brent (2005) and Pudney (2010) in figure 2.2 describe three levels within an organization’s management system which are the strategic level, methodological level (also called tactical) and the operational level. Strategic level includes the top management that is responsible for forming the business strategies and the business goals for the organization. This level represents the leadership of the organization and its commitment to sustainability and being compliant. Methodological level includes the strategy, policies, guidelines that are formed to implement actions in the organization. Operational level includes the team that implements various strategies, policies at an operational level (production level) in an organization. Implementing legislative requirements at the asset level is done by the operational team in coordination with the tactical team (Pudney, 2010).

The publically available specification (PAS) published by British Standards Institution (BSI) provides specification (PAS 55-1) and guidelines (PAS 55-2) for managing integrity of physical assets towards sustainable performance. ISO 55000 is an updated version of PAS55, with an updated definition of an asset. ISO 55000 extends the definition of an asset to anything that has potential or actual value to an organization. In ISO 55000 the intangible assets and intellectual property are also taken into account in the scope of an asset.

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Figure 2.3 Asset Management for Sustainable performance of assets(Ratnayake,2013)

Ratnayake (2013) analyzed the PAS 55 1&2 standards and mentioned the need for organizational alignment (vertically or horizontally) for regulations and standards. This alignment is meant for a deep level of internal commitment to a goal or a cause which in this case is sustainability. However, the specifications and guidelines provided in model of Ratnayake (2013) and PAS 55 1&2 are prescriptive only to the extent that they define what has to be done, not how it has to be carried out. The model emphasizes within the dotted line at the bottom of figure 2.3 the control loop which can be associated with compliance management. It focusses on the organizational alignment (vertically or horizontally) for regulations and standards. This is in conjunction to the figure 2.2 where the three levels of planning in the organization are involved for a process implementation. Vertical organizational alignment is successfully achieved when all three levels in an organization act in a coordinated manner for achieving set objectives (Sender, 1997) whereas the horizontal alignment here refers to the day to day operations of assets with respect to the sustainable requirements. Although the need for horizontal organizational alignment exists in the above discussed literature, the process on how to achieve it is rarely mentioned in asset management literature.

2.2 Compliance Management and Organizational Responsibility

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corporate governance, risk and compliance ensuring that an organization acts in accordance with its self-imposed rules, its risk appetite and external regulations through the alignment of strategy, processes, technology and people, thereby leveraging synergies and driving performance”.

Figure 2.4 Governance Risk Management in Organizations (Racz et al., 2010)

GRC is an organizations initiative to collaborate its strategic objectives and the operational working (Racz et al., 2010) and reflects the organization’s commitment to strengthen the governance structures. Compliance management is sometimes related and mixed with risk

management and quality management. According to Flynn, Schroeder & Sakakibara (1995)

quality management is a program used to measure and evaluate whether the quality of various processes in an organization is as per the defined standards. Whereas risk management is the organizational process of risk analysis, risk assessment and risk control (Knegtering, 2002). The above definitions clearly distinguish the three terms and they should not be intermixed.

Production and manufacturing operations are formally bounded by legislations and regulations for their assets in all phases of the asset lifecycle. These regulatory demands can be either locally (e.g. rules and regulations from governments at a national level) regionally or globally (e.g. regulations from European Union) (Liyanage, 2007). These rules and regulations define frames and conditions under which activities must be conducted in production and manufacturing settings.

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line with the sustainable performance goals (external legislations and company’s own goals). Woodhouse (2001) mentions that the greatest danger lies when the human capital fails to adapt to sophisticated needs in asset management. Sometimes although the techniques known already exist in the company’s policies, it requires those to be adapted to produce the systems needed for effective asset management (Woodhouse, 2001).

Aguinis (2011) defines organizational responsibility as “context-specific organizational

actions and policies that take into account stakeholders’ expectations and the triple bottom line of economic, social, and environmental performance”. Organizational responsibility

starts with commitment to a goal. In this research the intention is to investigate what is

required for an organization to become and remain compliant with external legislations. With

respect to the role of human responsibilities in asset management for sustainable performance Ratnayake (2013) mentions that one core part of implementing asset management is adopting changes in procedures and regulations regularly. If the responsibilities towards these regulations are developed at multiple levels across the organization, it would lead not only to

sustainable management of assets but also to sustainable competitive advantage (Figge,

Hahn, Schaltegger & Wagner, 2002; Maxwell, Rothenberg, Briscoe & Marcus, 1997). 2.3 Literature Gap

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Figure 2.5 Process model to ensure compliance

In the above figure 2.5, a process model is envisaged for ensuring compliance. Organization’s commitment to compliance is a reason for push driver as mentioned by

Labuschagneand Brent (2005) and discussed in Table 2.1. Initiation is the part which refers

to the identification of assets, stakeholders and the legislation (Ramezani, Fahland, van der Werf & Mattheis, 2011). Initiation also involves identifying what is expected out of the legislation or regulation and what it means for the assets. Execution and verification of compliance management can be compared to the support driver as mentioned by

Labuschagne and Brent (2005), which ultimately leads to an organization being compliant

with the regulatory requirements.

2.4 Conceptual Model

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for compliance. Often theories regard that actors need to comply as united agents. But because an organization comprises of different actors in the form of different departments’ employees and structural units, these actors might have different compliance related behavior which ultimately leads to non-compliance or delay in implementing activities for compliance (Foorthuis & Bos, 2011; Chayes & Chayes, 1993).

A conceptual model is given below in Figure 2.6. The objective of this research is to develop a framework with which it is possible to translate and implement regulations in an organization. This would be possible when a framework for responsibilities (for example who would initiate for implementation of a new regulation) is in place. The first box in the Figure

2.6 is concerned with the needs in Figure 2.1 as mentioned by Labuschagne and Brent

(2005). The second box in Figure 2.6 represents management system elements which are involved in compliance management. These management system elements relate to the Governance (internal policies) part of the GRC. The third box corresponds to the required output (desired) which is being compliant with the external regulations and legislations.

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Chapter 3 Methodology

The literature review outlined the necessity of framework to implement compliance management for sustainable performance of assets. The research methods define what techniques are applied to collect and analyze data for the research (Karlsson, 2016). This chapter will elaborate on the method that will be used to find an answer to the research question.

3.1 Research Method

The main research question developed is given below –

What is an effective organizational responsibility framework for compliance management with respect to sustainability of assets?

The above research question will be answered by doing a design science research study at company AkzoNobel who have indicated that they require such methodology. The production plants of AkzoNobel, Delfzijl will be the unit of analysis in this research study. The second objective is generalizing this framework to process industries. To achieve these two goals a structured research methodology is required (Holmström, Ketokivi, & Hameri, 2009).

Design Science research is used where a practical and theoretical problem are addressed (Wieringa, 2009; Karlsson, 2016). A real world day to day improvement problem is best studied by making use of the design science research methodology (Karlsson, 2016). Holmström et al. (2009) mentions that practical problems are the strength of a design study. Design science can be described as a problem solving approach for the development of new artifacts (Holmström et al., 2009; Hevner, March, Park & Ram, 2004). The data from the company will be used to do in depth study of the artefact in a business environment (Hevner et al., 2004). According to Hevner et al. (2004) there are four steps for design science research which are as follows - Problem identification, design & development of solution, solution validation and implementation. These steps will be elaborated in the next sections.

3.1.1 Problem Identification

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investigation is a solution driven investigation. The following sub questions are designed for problem identification:

Sub Question 1: What kind of legislations play a role in sustainable performance of assets? Sub Question 2: Who are the stakeholders in compliance management?

Sub Question 3: What are the goals of all the stakeholders? Sub Question 4: What are the CSFs of stakeholders?

Sub Question 5: How are regulations and legislations currently translated and communicated to implement at the asset level?

The first sub question is designed to study some examples of legislations which play role in the sustainable performance of assets in the context of a process industry.

In a solution driven research it is important to identify the stakeholders and the goals concerning the stakeholders (Wieringa, 2009). Sub question 2 and sub question 3 are framed to identify the stakeholders and the goals of the stakeholders in this research. After the identification of goals, the Critical Success Factors (CSFs) are identified that act as criteria to achieve goals. The sub question 4 is framed to identify the CSFs. The sub questions 2, 3 & 4 are the questions which cover the stakeholder analysis and a part of the problem diagnosis. For further problem diagnosis in the process of compliance, sub question 5 is framed which is aimed at investigating the current process of understanding and implementing the legislation at an asset level. These above sub questions should result in the identification of stakeholders and their problems and desires and how compliance management is handled currently.

3.1.1.1 Data Collection

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related requirements. Not all details and factors about compliance are known by the researcher related to compliance management and thus semi structured interviews help in a way that more subjects are brought by the interviewee during the conversation. Table 3.1 below gives the details about the personnel interviewed for primary data collection at the case company.

Table 3.1 List of the department and personnel interviewed for primary data collection

Department Personnel

Site Leadership Team, Delfzijl Site Director

Asset Management (Engineering Department) Engineering Manager, Reliability Engineer, Discipline Engineer Health Safety Environment (HSE) HSE Manager,

Environment Specialists (Two) Compliance & Quality Assurance (CQA) CQA Manager,

Compliance Officer

Production Cluster Cluster Maintenance Engineer

AkzoNobel, Hengelo Engineering Manager,

CQA Manager, HSE Manager, Reliability Engineer

Secondary Data can be gathered through documents, records analysis and informal conversations (McCutcheon & Meredith, 1993). The documents of the company accessible to the researcher and relevant to research was reviewed and are given in table 3.2 below.

Table 3.2 The documents read as part of research at AkzoNobel, Delfzijl for secondary data collection

Document Type Description

Engineering (Reliability Engineering) These documents are the maintenance reliability management (MRM) documents for risk and reliability management.

ISO Certificates These ISO Certificates are obtained by the company in the fields of Energy Management, Organizational Health & Safety, Environmental Management etc. These certificates are obtained by the company to show about the best practices that company undertake in day to day operations

Heath Safety Environment (HSE) Documents These documents have HSE procedures, HSE corporate guidelines and HSE reporting guidelines

Organograms & Departmental Responsibility documents

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Department)

Plant Annual Operation Documents The documents on the plans for the whole year about maintenance, investment and production etc.

3.1.2 Design & Development of Solution

The next important step of the design science research is the solution design phase. In this phase a model is to be developed for the organizational responsibilities of implementing the regulatory requirements. The first five sub questions will be the basis to design a new framework that satisfies all the design objectives. The following sub questions are designed for the development of solution -

Sub Question 6: What is the effective way of implementing Compliance Management for sustainability and in general?

Sub Question 7: What are the characteristics of an organizational responsibility framework? Sub Question 8: How can the proposed Organizational Responsibility Framework be implemented?

3.1.3 Solution Validation

In this phase the validity of the designed framework will be checked. According to Wieringa (2009) internal and external validity measurement is necessary to see if the solution is developed for stakeholder’s goal and if the solution can be generalized to other industries also. The validity in design science determines whether stakeholders are able to achieve their goals if the new artifact is implemented correctly (Wieringa, 2009). Internal validity refers to whether all requirements are met with the implementation of the new artifact and whether the artifact successfully supports stakeholders in achieving their goals. External validity refers to whether the artifact can be implemented in another similar context organization, which are the process industries here.

Following sub questions are developed for the validity:

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The internal validity is to be assessed on the response and satisfaction of the AkzoNobel employees and the practical applicability of the model to the AkzoNobel. The designed solution is presented to stakeholders and discussed to improve the validity of the model. The feedback from these stakeholders is incorporated continuously in the model. For checking the external validity, the framework is research output is presented to other plant of the case company. The framework is also presented to two other experts who are working with a company in process industry and the other with a electronics manufacturing organization.

3.1.4 Solution Implementation

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Chapter 4 Problem Investigation

A case company analysis is performed to identify the problems of Compliance Management perceived in practice. In this chapter the problems of the case company will be elaborated and discussed. In a design science problem where the aim is a solution based investigation the stakeholders are identified and analyzed. Thereafter the goals are explained. These goals can be achieved by defining the Critical Success Factors (CSFs) which are also explained in this chapter.

4.1 Case Company

The case company in this research is AkzoNobel Industrial Chemicals BV. AkzoNobel is a Dutch multinational divided into two core businesses of paints & coatings and industrial chemicals. The company has a wide range of consumer and industrial products manufactured in different plants around the world. AkzoNobel Delfzijl has following production factories called as clusters - Delesto (Produces electricity and steam), salt, mono choloroacetic acid (MCA), membrane electrolysis factory (MEB). The headquarters of AkzoNobel are situated in the city of Amsterdam and the central service unit is based in Arnhem. All corporate directives, business goals are formed in the Amsterdam and Arnhem offices. This study is based at the Delfzijl plant of AkzoNobel located at the “Chemiepark Delfzijl”. This thesis will focus on the assets of the four clusters at AkzoNobel, Delfzijl. To investigate more about the problems experienced by the company, interviews were also done at the Hengelo plant of the company. AkzoNobel Hengelo is a salt production plant of the company.

4.2 Stakeholders

In this section the stakeholders of the proposed problem will be discussed. This research has been initiated by the Engineering Department (which falls under the Asset Management department). The Asset Management department is headed by an Asset Manager and under this department comes the engineering department, maintenance management department, maintenance support department and project management department. Each of these department is headed by an individual manager.

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coordination with the maintenance department of different clusters. The engineering department is responsible for the planning part of the maintenance whereas the maintenance department of different clusters is responsible for to-do part of the maintenance. The reliability engineers are responsible for the reliability of the assets over a longer term. The reliability engineer designs and plans the technical part of maintenance that is to be implemented at an asset level. The engineering department receives information about any new regulation from the Compliance department through their internal communication tools (a software bought from an external company).

The Compliance & Quality Assurance Delfzijl department has the task of developing, improving, introducing and managing the information flows of the AkzoNobel departments at the Delfzijl site. Hereby the conditions are created to bring these departments together to function as one excellent company. The work of the Compliance & Quality Assurance department aims to facilitate the conditions for employees of the departments at the Delfzijl site to provide the best possible information flows with their required information. This involves having access to work procedures, registrations, task descriptions. Compliance department acts as a reception and archiver for all the legislations and regulations at a plant. The Health, Safety and Environment (HSE) department is responsible for checking the critical procedures against regulations and legislation and AkzoNobel Corporate Directives. The department is also responsible for revisions to the local procedures. HSE Department has specialists who are specialized in environmental permits or occupational health and safety or BRZO (Besluit risico's zware ongevallen – BRZO). The department also functions as a mediating channel between the government and the engineering department if any clarifications are required on any regulations. The HSE department provides assistance and

guidance to all plant personnel relating to safety. The department mainly works in an

advisory role to the engineering department when it comes to legislation and regulations.

4.3 Management Problem

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from government or different governmental bodies to be implemented at the asset level. However, the company struggles with implementing these requirements. These problems are like the late involvement of the engineering department in the process of compliance or problems with workflow in the organization. The engineering department sometimes even receives legislation which is difficult to understand because of the formal administrative governmental language.

The compliance department and the HSE department keep track of regulations. They hand over information about the regulations to the engineering department for implementation. Then the process of understanding the legislation starts. This is followed by translating the need of the legislation (what is expected out of the legislation, what are the minimum requirements that are to be met) that is to be implemented at an asset level. However, the engineering department is unable to start the planning processes with the received information, because of the governmental language of the legislation and also sometimes it is not clear what is expected from the legislation. The received information should be in technical terms and actionable terms for the engineering department. This relates to what is mentioned by El Kharbili (2008) about the regulations in context to the problems faced by the persons who implement it that “the specifications and requirements are abstract as the

writers and framers of these regulations are very different from the users of these regulations”. The regulations are sometimes interpreted and implemented in different

manners across the same organization. This is what happens in the case company also. To gain a deeper insight into the problem further interviews were done at AkzoNobel, Hengelo. AkzoNobel, Hengelo plant is another salt manufacturing plant of the company. This plant doesn’t have an exact similar management structure. The difference is that the maintenance and the reliability engineering departments are combined in this plant.

To understand more on the regulatory requirements for sustainability (sub question 5), below are some of the areas in which the process industries receive the legislations and regulations:

 Emissions

 Release to water (Groundwater contamination)

 Release to land (Soil Contamination)

 Use of raw materials and natural resources

 Use of energy

 Emitted energy (electricity, steam and heat)

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 Legislations for safety procedure

 Emergency response

4.4 Problem Diagnosis

This section will focus on the possible causes of the problems that are identified in the process of compliance at case company. This section is based out of the several interviews done as part of the internship at AkzoNobel Delfzijl plant and AkzoNobel Hengelo plant and also the documents read as part of the research study at AkzoNobel, Delfzijl. The sections below represent the root causes identified with respect to the research problem at the case company.

4.4.1 Organizational Restructuring

Compliance at AkzoNobel was handled by the respective production clusters till 2015. An organizational restructuring was done at the Delfzijl in the year 2015 and the compliance was made a central department. This was part of a restructuring plan called as “One Delfzijl”. Earlier all the production clusters had their own register which was used to keep a track of the legislations, which were of concern to that particular production cluster. Each of the four production clusters had a person assigned for Compliance. These persons worked in close coordination with the reliability engineering and maintenance teams to implement the requirements of a new legislation at an asset level.

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4.4.2 Introduction of New Archiving tool

In 2016 AkzoNobel purchased a software from an external company that is used as an archiving tool for all the legislations. This tool has some of the legislations archived in it. But before implementing the new tool in the company it wasn’t made clear within AkzoNobel, which kind of legislations will be included in this tool and how the system will be implemented. From the interviews it was also clear that not all stakeholders (departments) had the knowledge about the working of new tool.

4.4.3 Unclear what previous department has done

From the interviews done with different stakeholders it was concluded that when the legislation is passed on to the next stakeholder, the stakeholder was not clear about the work done by the previous stakeholder. This gives rise to a demand of having a real time checklist to know what has been done by the current stakeholder and what is expected from the next stakeholder.

4.5 Goals of the stakeholders

All stakeholders have goals regarding the implementation of a new legislation or regulation. The ultimate aim of the organization is to be compliant to all these legislations and regulations and not face any penalties.

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Table 4.1 Goals of the Stakeholders

Stakeholder (Person / Department)

Goals Persons Involved

Asset Management Department  The framework should be able to walk through the process of implementing a new regulation,

 The engineering department should be indicated at early stages in the process of compliance

 The information received by the Engineering Manager should be in clear actionable terms (not in governmental language),

 Information should be fit to be usable by the Engineering Department

Engineering Manager, Reliability Engineer, Discipline Engineers

HSE Department  The ultimate aim should be that the organization is compliant,

 HSE’s role should be advisory

HSE Manager, HSE Specialists

Compliance Department  Right interpretation,

 Right person assignment,

 Support the right

department/person with the right information

Compliance Manager, Compliance Officer

Production Department  The information received from the engineering department should be clear and guide the steps about what is to be implemented and at which asset,

 Reliability and Availability of the asset should be maintained

Process Technologists, Maintenance Engineers

4.6 Critical Success factors

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Table 4.2 List of Critical Success Factors

Functional CSFs (What the model should do) & Explanation

Non-functional CSFs (How the model should behave) & Explanation

The steps to be compliant should be well defined - The

model should be able to explicitly mention the steps that are to be followed by each stakeholder

Enforceability - The model should be enforceable in the

organization and should support the day to day working in the organization

Proper information exchange between departments - The

model should facilitate information exchange between stakeholders

Generalizable - The model should be able to be used by

other plants of the case company and other companies of similar context

Involvement of different departments in the process - The

model should involve all stakeholders considerably in the process

Adaptability - The model should be able to be adapted in the

current working procedures of the company

4.7 Analyzing the organizational workflow

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Figure 4.1 Stakeholder analysis of AkzoNobel, Delfzijl (Based on Bryson, 2011)

From the stakeholder analysis and the interviews of the stakeholders it was found that there is a problem with the information in the workflow between the stakeholders (departments) themselves. Workflow can be defined as “which tasks need to be executed and in which

order” (van der Aalst, 2000). Information here refers to what has already been done

concerning a new legislation by the initial departments (Compliance & HSE) and what is expected from the Technology Departments (Asset Management department & Production department) To investigate more about this problem, organizational workflows were studied from an academic point of view and it was found that such an organization can be termed as a loosely coupled organization based on the criteria given by Lawrence (1997) (Criteria given in Appendix A). This is characterized by the type that each department has a role to some extent in a process and then it is passed onto the other department. High level of synchronization, information sharing and open communication between various departments is required at different stages in this type of organizational workflow (Lawrence, 1997). Lawrence (1997) defines five perspectives to understand and control the workflow in an organization:

 Process - The overall process to achieve a goal. The process here is implementation of

compliance requirements.

 Resource - Resources required to achieve the goal. The resources are divided into manpower, assets & financial resources.

 Data (Information) - The information required to achieve the goal. What needs to be

done by each stakeholder is the information here.

 Tasks - Specifying the tasks that need to be performed by stakeholders. Specifying the

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 Operation - Performing the tasks on the asset 4.8 Conclusion

This conclusion is to give a quick overview of the problems identified in this chapter and is presented by figure 4.2. The figure encapsulates the current problems encountered at the case company and gives a flow scheme of current way of handling compliance requirements. The blue boxes correspond to the current process of handling compliance requirements in the company. The upper part of figure is used to analyze the workflow according to criteria of Lawrence (1997) and which also reflects on the problems encountered. Goals of the stakeholders concerning the problem and the solution design were described in this chapter. The common goal of all stakeholders was that the organization should be compliant at all times with the regulatory requirements and the required model should help in processing information by improvising the workflow routing in the organization.

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Chapter 5 Solution Design

In this chapter the steps to find a solution to the problem will be presented. These steps have been determined in a dyadic way. The first part includes insights from theory on compliance and asset management. The output of the first part is a design which gives insight on the steps about being compliant. The second design is a protocol which is based on the inputs from the stakeholders and the desires of the stakeholders and is a continuation of the first design. This is designed in the form of a workflow diagram and modelled in the form of a business process diagram (BPMN) diagram in Bizagi modeler.

5.1 Building blocks of a framework

In the section below the different elements from literature search are deduced which should be in a compliance management system. These are given in order of their implementation steps. These are the steps deduced as part of literature search and also includes insight from the ISO 55000, ISO 55001 & ISO 55002 standards for Asset Management and the interviews done at the case company. The steps are mentioned in the table with explanation of each step thereafter in the next section. These are the activities that are mentioned in literature for compliance in banking or IT industry. ISO 55000 guidelines and asset management literature is used to complement and combine that what is expected out of each step in an asset intensive process industry.

Table 5.1 Steps in being compliant (Own Creation)

Step Elements in that particular step from an Asset Management View

Steps for compliance in Banking & IT Industry (Elgammal et al., 2016, Ramezani et al ., 2011)

Initiation Identification of the regulation, Identification of Departments Involved, Identification of Assets Involved

Compliance Elicitation

Compliance Responsibilities Decision Making for the responsibilities of the departments involved, Criticality Requirements

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Prioritization Prioritization for implementing the regulation based on Risk, Time, Current State Analysis, Long Term Asset Plan, Checking Remaining Useful Life , Capacity analysis, Impact Analysis

Compliance Formalization

Specifying Compliance Requirements & Making Asset Tactics Plan

Making the plan for implementing in Asset Tactics , Technical Viability of the interpretation of the regulation or legislation

Compliance Implementation

Implementation Implementation of the plan at the asset level, Checking the asset reliability

Compliance Implementation

Review & Monitor This step entails checking whether the regulation is implemented as per the desired requirements or not, The effectiveness of the implemented actions is checked

Compliance Checking

The steps for compliance in the banking and IT industry are described as below (Elgammal et

al., 2016; Ramezani et al, 2011):

 Compliance Elicitation - Determine the constraints that need to be satisfied (i.e., rules

defining the boundaries of compliant behaviour).

 Compliance Formalization - To interpret from legislations and regulations and then to

formulate the precise compliance requirements.

 Compliance Implementation - For the regulations and legislations to be incorporated

in the systems so that they fulfil the requirements.

 Compliance Checking - Investigate whether the minimum conditions are met or not.

 Compliance Improvement - modify the processes and systems based on the diagnostic

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Figure 5.1 Design of steps for AM for being compliant (Own Creation)

5.2.1 Initiation

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5.2.2 Compliance Responsibilities

This is one big step El Kharbili (2008) mentions in the process of compliance. This process requires synergistic coordination between different departments to lay out a plan on what the responsibilities of each department would be. Responsibilities can be department wise or personnel wise. As discussed earlier in the stakeholder analysis the organization is identified as a loosely coupled organization. This means that organizational workflow needs to be designed in a manner that when a stakeholder receives a regulation or legislation from the previous stakeholder, it should be clear that what has been done by the previous stakeholder and what is expected of the new stakeholder. The table 5.2 below has a set of questions that is developed to be used as a checklist to be passed on from one department to the other. Each department needs to identify what are its end deliverables, when it delivers a new legislation to the next department. Based on ISO 55001:2014 standards (guidelines for planning to achieve asset management objectives) at each step (Step according to design in figure 5.1) the information received from the preceding department can be divided into small subsections and this is also the aim of the checklist developed in this research.

Table 5.2 Checklist to be filled by every department involved in the process of compliance (Own Creation with guidelines from ISO 55002 :2014 standards)

Sr No. Question Description

1 What will be done by the current department and the subsequent department?

Each Department is expected to fill out in detail what has been done by it for the new regulation or legislation it received. Also the department has to mention what it expects from the next department when it passes on the regulation to the next department.

2 What resources will be required ? Starting from the Compliance department all departments in the process have to fill out what will be resources required by each department to comply to a new regulation or legislation.

3 Who will be responsible? Each department has to identify the person who will be the responsible person from that department

4 When will it be completed ? A time line of the work plan of each department

5 A clear plan for extent of collaboration between the departments

The extent of collaboration in terms of expectancy and resources required between the departments

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organization and its assets needs to be elaborated from each department’s perspective

7 Review This refers to the involvement of each department in

the process of review and monitor(not to be filled by all departments as usually the production department and compliance department are the only ones involved)

5.2.3 Prioritization

In order to implement the and start planning what the prioritization step comes. Usually the prioritization is done on the basis of risk and the time (Taylor, 1981). Time here refers to the time as a deadline to implement the legislation and secondly the time required for the overall planning, resource mobilization and implementation at the asset level. Risk here can be classified from two perspectives i.e. the risk of penalty from the government for non-implementation (Schuman & Brent, 2005) or the risk from the asset perspective. Risk of penalty from the government for non-compliance to the regulation or legislation may lead to suspension or losing the license to operate. From an asset perspective the companies use their own risk calculation methods. AkzoNobel has its own risk calculation matrices. These matrices are based on the consequence of severity of risk.

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activity performed on the assets which is a result arising from the regulation or legislation Ruitenburg et al. (2014). Ruitenburg et al. (2014, p204) mention that events in the lifecycle of the assets “may have a positive or negative influence on the remaining useful life of the

asset”. Identification of impact of any process that is an important step in the lifecycle of

assets. (Ruitenberg et al. 2014). The impact analysis of the activities performed on the asset can be done by the TECCO (Technological, Economical, Compliance, Commercial, Organizational) Analysis (Ruitenburg et al., 2014).

 Technological perspective is for checking the technical details and specifications and

the amount to which the asset complies to these specifications.

 Economical aspects concern to the Total costs of ownership (TCO). This entails the

costs for operating, maintaining, refurbishing also.

 Compliance aspect related to all the licenses that a company has to exist, to produce

and to sell

 Commercial - The impact of the regulation implementation on customer’s or the

market demand

 Organizational - This aspect looks on the company’s willingness to operate according

to the expected regulation or legislation

5.2.4 Specifying Compliance Requirements for Asset Tactics

This is the step that is between the Asset Management department and the Production department. The overall aim of the Asset Management department is to ensure reliability at a level that meets business goals and at the same time drive down the sum of cost of reliability loss and cost of maintenance (Campbell et al., 2010). This step includes making the plans for asset tactics keeping in mind the reliability and the technical viability of the requirements of legislation for the assets.

5.2.5 Implementation

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5.2.6 Review & Monitor

This step entails assessing what has been done, is it rightly done and what more needs to be done. This part may also include audits and evaluations (checking with what was expected). Reviewing is done by the production department first that if everything is implemented at the asset level as per the plans. Then it is apprised to the Compliance department about the compliance to the requirements.

5.3 Execution

This subsection will discuss about the execution of the model designed as an output of the research study. As part of the design science process the last step is the execution of the

designed model (Weiringa, 2009). For implementing a model in an organization Radnor,

Rubenstein & Tansik (1970, p978) defined three ways of implementing a design model:

 “Implementation for a transition process that takes place between successive stages in

a workflow pattern”

 Implementation as a special case change

 Implementation as a continuous improvement process (in all phases of a project

lifecycle)

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 Initiation - As soon as a new regulation/legislation is received it is sent to the production department as well as asset management department to know more about the type of assets involved. The Production department and the asset management department have the responsibility of replying to this initial indication. This initial indication makes clear for the Compliance Department whose domain does the regulation lies. If everything is clear (Clear in terms of the persons involved and what is expected from the legislation) from the initial stages to the Compliance department,

it marks the responsibilities of the concerned person. (This step is marked in yellow in

figure 5.2a)

 Compliance Responsibilities - If the regulation legislation is not clear Compliance department reaches out to HSE department for more information and clarifications. HSE department usually comprises of experts specialized in different kinds of legislations. HSE department has the task of interpreting the legislation and make clear what is expected out of it. HSE department may ask Asset Management department for more information on the subject areas of Rotating, Civil, Mechanical, Electrical or Mining (Asking the Reliability Engineers). If HSE department feels that the governmental language is not clear, HSE department may contact the government which is the source of the legislation for clarifying the doubts about the legislation (This step is marked in green in figure 5.2a & figure 5.2b).

 Prioritization & making plans for asset tactics - Once HSE is clear it sends the legislation to the Asset Management department. Asset Management department can directly check the checklist for what it has to do regarding the legislation and whether it is in actionable terms or not? If not, then it reverts back to HSE department for more clarifications (Only in very few cases after implementation of this protocol) Asset Management department then makes plans for actions. This can be in the form of preventive maintenance or other activities to be included in the LTAP. Asset Management department is required to make plans that are fit for purpose and can be

implemented by the production teams (This step is marked in red in figure 5.2a).

 Implementation - Production department are responsible for the implementation of the

plans onto the assets (This step is marked in blue in figure 5.2a).

 Review- Once the Production department implements the requirements at asset level,

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Figure 5.2a Protocol for workflow to implement compliance requirements

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Chapter 6 Discussion

This chapter will focus on the discussion of the design solution. The discussion is divided into two parts which are the theoretical contribution of the design and the practical relevance of the design. This would be followed by the limitations of this research study.

6.1 Theoretical Contribution

In this research study, steps are designed for the compliance requirements so that it reaches the asset management department and the production department in simplified and fit for use terms. In the design (figure 5.1) the overall steps in the process of compliance are determined for a process industry. These different steps are based on the literature on what is the procedure an organization needs to follow to be compliant from different industry sectors like banking and information technology sector. Further the steps are elaborated using the asset management literature and ISO standards for asset management. After the solution design steps to implement the model are given.

Design Science is used to tackle the problem practically by using the case from the company and at the same time contribute to literature by bridging the gap. The research is based on the case company AkzoNobel. There was an in-depth analysis of the current working procedures of the company. This is done by interviews (table 3.1) and analysis of documents (table 3.2). Further the goals were determined and desires of how a practical design should look like were defined.

The steps that are to be followed by the departments are generalized so that they can be used by other companies which are other companies of process industries. The model was validated externally outside the case company and this gave more concrete validation for its usability by other industries too.

6.1.1 Validity

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suggestions from the stakeholders was continuously adapted into the solution. Questions were asked about the goals and CSFs. The goals of the Compliance department and Asset Management department were satisfactorily met via this research as this research intends to bring change in the current processes and standardize the process of handling compliance. From the non-functional CSFs it was found out that the model is adaptable and enforceable in the company. However, for generalizability the model is best suited for organizations that have similar workflow patterns and similar organizational structures.

External validation which is required for the generalization of the design was tested by interviewing employees of two other companies (a process industry and an electronics manufacturing company). These companies have implemented comparable frameworks. In the interviews it was compared what different steps these companies have in their implementation system. The process industry had a similar management system for implementing compliance related requirements, however no such protocol exists. Thus this kind of protocol could be helpful in the process of compliance. For the electronics manufacturing company, a strategic team that comprises of legal experts, technical, compliance officers and HSE personnel work jointly as a small department to implement compliance related requirements. For this company this joint team works as a task force for handling compliance at the production level.

6.2 Practical Contribution

The model designed in this research study can add great value to the case company AkzoNobel. Currently the company faces the problem with regards to implementation of a legislation or regulation. The design steps, protocol and the checklist can help in the collaboration between the departments. Other companies which are process industries also have similar functional departments (Compliance, HSE, Asset Management, Production) for implementing the compliance requirements.

Organizational responsibility framework for compliance management in sustainable management of assets