Benchmark Progress towards Sustainability - Case Study Example

Benchmark Progress towards Sustainability of the of the No. Executive Summary In the contemporary world, both corporate and non corporate entities have become highly conscious about protecting and preserving the external environment. At this juncture, most of the companies operate on the principles of “Triple Bottom Line”, by virtue of which they try to improve their services towards planet, people and profit in business. This paper tries to analyze the sustainable activities of two famous automobile giants, Toyota and General Motors. The paper will analyze the leader among the two companies in terms of sustainable activities through Stuart M. Hart’s Sustainability Framework. Under the regime of this framework the eco friendly initiatives of each company will be analyzed in terms of four dimensions, namely pollution prevention, product stewardship, clean technology and sustainability vision. Finally, after the analysis the paper will prove that Toyota is a leader in terms of sustainable activities, when compared with General Motors. This is because the former company has greater financial reserves to spend for such purposes than the latter. Contents 1 Executive Summary 3 In the contemporary world, both corporate and non corporate entities have become highly conscious about protecting and preserving the external environment. At this juncture, most of the companies operate on the principles of “Triple Bottom Line”, by virtue of which they try to improve their services towards planet, people and profit in business. This paper tries to analyze the sustainable activities of two famous automobile giants, Toyota and General Motors. The paper will analyze the leader among the two companies in terms of sustainable activities through Stuart M. Hart’s Sustainability Framework. Under the regime of this framework the eco friendly initiatives of each company will be analyzed in terms of four dimensions, namely pollution prevention, product stewardship, clean technology and sustainability vision. Finally, after the analysis the paper will prove that Toyota is a leader in terms of sustainable activities, when compared with General Motors. This is because the former company has greater financial reserves to spend for such purposes than the latter. 3 Contents 4 Introduction 5 Harts’ Sustainability Framework 5 Company Profile General Motors 6 Company Profile Toyota Motor Corporation 6 Sustainability Strategy for General Motors 7 Sustainability Strategy for Toyota Motor Corporation 8 Hart’s Sustainability Analysis of GM 8 Hart’s Sustainability Analysis of Toyota 9 Leader among Both 10 Stakeholder’s Analysis 11 Conclusion 12 12 References 13 Appendix 15 Introduction Dr. Brundtland claimed that health and economic status of a nation and its individuals is highly dependent on quality of the environment. Such rising eco-friendly awareness in the contemporary era has helped to augment the value of sustainability among modern multinational companies. The companies, at present, operate on the basis of “Triple Bottle Line (TBL)” approach. Under the regime of this policy, companies aim to improve and not harm People, Planet and Profit relating to business. If an organization abides by the norms of TBL in its business, then it is known as a social enterprise in the business world (Butje, 2005). It is found that brand value of a company remarkably improves with the essence of environmentally sustainable commercial activities. As a result, modern corporate organizations always allocate a lot of finances for conducting corporate social responsible activities (Assael, 2005). This helps firms to increase their base of potential customers and hence, substantially aids in enhancing economic surpluses of the corporations. This paper will focus on the sustainability approaches followed by two giant multinational competitors in the automobile industry. These two companies are General Motors and Toyota Motor Corporation. The context of the paper will study the leader among these two companies, in terms of its sustainable activities. The analysis would be done with the help of Hart’s (1997) Sustainability Framework model. Harts’ Sustainability Framework Stuart L. Hart’s Sustainability Framework Model was formulated long back in 1979 for helping the companies to associate challenges that they faced in maintaining global sustainability with factors that could enhance utilities of shareholders in business (Hart, 1997). The model of sustainability that was created through Hart’s Sustainability Theory is in the form of a Cartesian coordinate framework. The vertical axis helps to measure various factors that are requisites of modern corporations for managing business operations in present times and also for expanding business in new markets in future through implementation of superior technologies (Brauer &Tatos, 2000). On the other hand, horizontal axis of the framework includes all those factors that are required by corporations to enhance and preserve existing internal skills and opportunities in business. The new perspectives that would help modern firms to gather productive knowledge in business are also mentioned in the horizontal axis of the framework. Thus, Hart’s (1997) framework for sustainability is subdivided into four quadrants (Hart, 1997). Each quadrant comprises a specific corporate intended pay off and strategy for the concerned company. These four corporate pay offs and their respective strategies are: Pollution Prevention (Cost and Risk Reduction) Product Stewardship (Reputation and Legitimacy) Clean Technology (Repositioning and Innovation) Sustainability Vision (Growth Trajectory) (Hart, 2011) Figure 1 in the Appendix shows the Harts Sustainability Framework model. Company Profile General Motors General Motors (GM) is a famous American multinational automobile company that is publicly traded in the business world. The company operates in almost all nations of the world and the headquarters are located in Detroit, Michigan (GM, 2014). The company manufactures designs and distributes various models of vehicles and their parts in the market. The firm also engages in financial service trainings in recent times. The company sells its products across various marketplaces in the international market under the name of several popular brands, like, Buick, GMC, Chevrolet, Cadillac,Vauxhall, Wuling, Baojun, Opel and many more (GM, 2014). The company was founded in September 16th, 1908. Tim Solso is the present chairman of the organization. Mary Barra is the CEO of the company and Dan Ammann in the President (GM, 2014). As estimated in 2011, the net operating income level of the company was US$ 9.287 billion (GM, 2014). As the giant organization is a publicly traded company, it is listed in New York Stock Exchange. As of 2012, the aggregate employment generated by the organization was 212000 (GM, 2014). Company Profile Toyota Motor Corporation The company of Toyota Motors Corporation is a renowned Japanese multinational automotive organization. The company like, GM, is another multinational firm whose scope and scale of business internationalization is massive in the global context. However, headquarters of the company is in Toyota, Aichi (Toyota Motors, 2011). The company was founded on 28th August 1937 and is listed in Tokyo, London as well as New York Stock Exchanges. The aggregate employee of the company, as of 2012, was 333498, much more than that of GM. At the same time, in 2013, the operating income of the organization was 1.320 trillion (Toyota Motors, 2011). The organization is the fourteenth largest company in terms of revenue generation. The huge revenue earned by organization and its high level of output generation signify the fact that it experiences a wider business than GM in the present scenario. Apart from manufacturing automobiles, the company also engages in providing banking, financial and leasing services in the market (Toyota Motors, 2011). Sustainability Strategy for General Motors The company claims that it is committed to constantly improving its business as this successfully reduces the harmful impact of its manufactured vehicles on the environment. The company has claimed that in the recent years, it has received the EPA Energy Star award and thus, manufactures vehicles with landfill free facilities (GM Sustainability, 2014). The organization claims to seek higher efficiency, innovation and creativity for maintaining an eco-friendly consciousness in business. Producing cars that are fuel efficient, reducing manufacturing wastes, attaining energy efficiency and preserving rare resources are the primary business objectives of the organization. The company has introduced several types of environmental friendly initiatives in business and has also maintained superior websites, whereby customers are made aware of such initiatives undertaken by the concern (GM Sustainability, 2014). The company claims to recycle its manufacturing waste products and utilize recycled items for further manufacturing process. Nonetheless, various eco-friendly authorities in the market have accused the company of not being sustainable to the environment. These organizations have claimed that the company is simply an egregious polluter in the automobile industry. The company had realized that vehicles that run on crude petroleum are harmful to the environment. In order to combat such negativity, the company has introduced flexible fuel vehicles in the market that uses ethanol or gasoline, which are lesser harmful to the environment (GM Sustainability, 2014). Therefore, from the above context, it can be claimed that GM have taken active measures to introduce sustainable manufacturing approaches in its business. Sustainability Strategy for Toyota Motor Corporation The company of Toyota is considered to be a leader in manufacturing eco-friendly cars in the automobile industry. The manufacturing plants of the organization are well-equipped with vehicle recycling technologies. The company regularly conducts special “eco-driving” educational programs (Sustainability Report, 2013). Reforestation is another crucial initiative undertaken by the organization. The company aims to create a “low carbon society” and desires to harmonize societal activities with the nature. Special eco-friendly technological innovations introduced by the firm are RAV4 EV and Toyota Prius (Sustainability Report, 2013). The company invests large amount of money for introducing eco-friendly initiatives in business. The company introduces five years plan that is framed for achieving a revitalized and recycled society. The fourth Environmental Action Plan was introduced by the company in 2005. The efficient Eco-Vehicle-Assessment (Eco-VAS) system of the company aims to assess the impact of each of its manufactured vehicle on the environment (Sustainability Report, 2013). Some of the vehicles manufactured by the company contain special Eco Drive Indicators; these cars are capable of generating automatic less polluting transmissions. The company has also introduced Toyotas Environmental Activities Grant Program in 2008, which had aimed to counter the extensive negativities of global warming as well as to preserve biodiversity across nations. The company donates funds worth millions for multiple environmental purposes (Mankiw, 2011). After analyzing the claims and basic sustainable initiatives undertaken by both the companies, it is difficult to judge the leader among the both. This is because both of them have claimed to reduce the environmental impact of their vehicle development, design, procurement, manufacture and logistic process. At the same time, both the companies invest large amount of money for such activities. The leader among both can be judged after examining their sustainability through Hart’s sustainability framework (Bigler, 2001). Hart’s Sustainability Analysis of GM The following context will elaborate the “sustainable value” creation that has been achieved by the company of GM, in terms of four strategic dimensions of Hart’s framework. Pollution Prevention (lowering risk and cost): The Company through participation in the Waste Wise program has introduced modern methods of waste prevention and recycling. Figure 2 in the Appendix shows the waste prevention initiative of GM. The chart shows that the company has saved large costs of business through its waste management activities. If such waste disposals were not reduced, then the organization could have experienced high risk of losing brand reputation in the market. Figure 3 in the Appendix shows the amount of recycled materials used by GM (in tons). The chart shows the large quantities of materials recycled by the company. Product Stewardship (increasing legitimacy and reputation): The company claims that through its stewardship programs, it generates high value to shareholders in business. The factors indicate the primary stewardship initiatives undertaken by GM are shown in figure 4 in the Appendix. Clean Technology (improving repositioning and innovation): GM has jointly allied with the company of Honda to invent new hydrocarbon fuel cells for its cars (GM Sustainability, 2014). These new type of fuel cells introduced by the company would help to reduce the dependence on gasoline, that is claimed to generate extensive carbon emissions. This initiative has been undertaken by the company for introducing clean technologies in business. The company had introduced the largest and biggest solar power installation rooftop in the world. A sum of about $ 7.5 million was invested by GM for this project, which helped to generate solar energy in the market (GM Sustainability, 2014). Base of the Pyramid (crystallizing growth): The company donates large amount of money for improving quality of education provided to underprivileged students in South Africa. GM promotes awareness of drinking clean water through its sites on social media. GM China and its SAIC-GM-Wuling (SGMW) have formed a joint venture through which the two companies aim to enhance the level of facilities provided to rural hospitals in China. Hart’s Sustainability Analysis of Toyota Following context will elaborate the “sustainable value” creation that has been achieved by the company of Toyota, in terms of the four strategic dimensions of Hart’s framework. Pollution Prevention (lowering risk and cost): The recycling of waste products of the company is done through The Recycling Working Group, which is governed by TMME Environmental Committee. Waste and emission related activities of the company are managed through annual meetings held in European Environmental Meetings. Nevertheless, it is found that Toyota is facing certain problems under this regime as claimed by End of Life Vehicle (ELV) regulations in Europe. The company is now trying to rectify emission and waste management problems faced by it across nations since 2000, according to the responses of ELV. Product Stewardship (increasing legitimacy and reputation): The product stewardship programs of the company are almost similar to that of GM. Even so, in addition, the company has combined with the Federal Government to check carbon emissions, even of its newly manufactured hybrid cars, thereby sufficing the standards of National Average Carbon Emissions (NACE) (Hawkins, 2006). Clean Technology (improving repositioning and innovation): The company claims to be the most superior provider of hybrid technology. For the near future, the company has introduced the new Fleet of Plug-In Prius vehicles containing batteries that can be charged every time the car is parked. These batteries would generate less carbon emission than the normal hybrid cars (Toyota, 2014). Base of the Pyramid (crystallizing growth): Several social services are provided by Toyota. Figure 5 in the Appendix shows the framework by adhering to which Toyota conducts social welfare activities across nations. Leader among Both Pollution Prevention (lowering risk and cost): If performance of the two companies is analyzed on the basis of this strategic dimension, then it can be stated that performance of GM is superior to that of Toyota. Toyota is facing some problems in this aspect according to ELV regulatory authorities (CQI, 2014). Product Stewardship (increasing legitimacy and reputation): From the above context, it can be stated that both the companies offer good value to business stakeholders through their product stewardship programs. However, Toyota is more cautious about carbon emissions of its hybrid cars, unlike GM. Clean Technology (improving repositioning and innovation): Both the companies are found to invest large amounts of money for inventing superior eco-friendly technologies, which would substantially help to lower the pollution level generated from petroleum and even hybrid cars. Even so, among the two concerns, GM seems to the leader on this ground, given that the company along with Honda claims to introduce hydrocarbon batteries that would generate least carbon emissions (Jamali, 2008). Base of the Pyramid (crystallizing growth): Both the companies invest large amount of money for lowering misery of underprivileged classes of the societies. By summing up all the information, it can be claimed that the company of Toyota Motor Corporation is a leader in providing sustainability through business operations, when compared with GM. Although both the companies are highly aware about maintaining 3BL norms in business, GM still fails to compete with Toyota due to lack of adequate financial reserves (Friedman & Miles, 2006). The company of Toyota earns higher revenue than GM and generates higher profits through scale economies (Toyota, 2014). Such accumulated fund of the company is utilized for matters relating to environmental sustainability. GM for such issues needs to enter in joint ventures with other companies like, Honda. Hence, among the two, the leader is Toyota. Nonetheless, on grounds of waste management, Toyota still falls behind GM as overall mass of production of the firm is higher than that of GM (Quazi, 2001). Stakeholder’s Analysis Since the emergence of the global financial crisis, the productivities U.S. and Japan have decreased significantly. With the fall in industrious capacities of these economies, the costs of investments have also increased at an alarming rate. At this juncture, the amounts of employment opportunities available to the middle class group of individuals have fallen in most of the economies. Low employment opportunities have increased the prevalence of underemployment in the global job market. Under this regime, young educated students from the middle class are found to join low salaried jobs, where they cannot exploit their complete knowledge and skills at work. Thus, the term “vanishing middle class” has become a common jargon in the current days that signify that underprivileged middle income group of individuals, who are not able to get jobs of their own choice (More, 2009). The brand value and business surplus generation of a firm significantly depends on the utilities and value it serves to all its stakeholders. The stakeholders of GM and Toyota are its customers, employees, government, business support groups, media companies and shareholders in business. Both the companies are a multinational firm that abides the norms of business settled by the governments in all the economies where it operates. By doing so, the firms help to augment the welfare of the other stakeholders in its business like consumers, employees and shareholders. However, since the recession of 2007, both the companies have reduced its employments across several branches. Even so when the performance of Toyota and GM is compared in terms of stakeholder’s analysis, then it can be claimed that GM’s business is more affected by the economic downturn than Toyota (More, 2009). Thus, it can be stated that the company of GM has contributed more than Toyota in creating “vanishing middle class”, through greater job cuts in its business. Both the companies should set business goals and objectives in ways through which they can enhance their stakeholder’s utilities in the long run (More, 2009). Conclusion Over time, development of mankind and their commercial activities on the global forum have increased the level of pollution in nearly all economies of the world. Extensive pollution and environmental destruction have significantly influenced quality of human health in modern economies. Detrimental impacts on health have ultimately generated dampening effects on levels of economic growth across nations. Even so, it is found that the automobile industry on the whole has become successful in incorporating eco-friendly activities. Perhaps, growth of the industry, since the last few years, is experienced only because companies within it could satisfy the values and requirements of stakeholders in context of sustainable issues. In this paper, through Hart’s Sustainability Framework analysis, it would be correct to conclude that Toyota Motors Corporation is a leader in providing sustainable services, when compared with activities of General Motors. However, it is also analyzed that due to lack of adequate finances, the company of GM is not able to pursue extensive sustainable activities as much as Toyota (Ascoli & Benzaken, 2009). References Ascoli, K. & Benzaken, T. (2009). Public Policy and the Promotion of Corporate Social Responsibility. BSR. Retrieved from https://www.bsr.org/reports/Public_Policy_Promotion_of_CSR%20final.pdf Assael, H. (2005). Consumer Behavior A Strategic Approach. Indian. Delhi: Dreamtech. Bigler, W.R. (2001). The New Science Of Strategy Execution: How Incumbents Become Fast, Sleek Wealth Creators. Strategy and Leadership, 29(3), 29-34. Brauer, J. &Tatos, M. (2000). Challenges of Becoming a Social Enterprise. TGCI. Retrieved from http://www.tgci.com/sites/default/files/pdf/The%20Challenges%20of%20Becoming%20a%20Social%20Purpose%20Enterprise_0.pdf Butje, M. (2005). Product Marketing For Technology Companies. London: Routledge. CQI. (2014). Stakeholders. Retrieved from http://www.thecqi.org/Knowledge-Hub/Knowledge-portal/Customers-and-stake-holders/Stakeholders/ Friedman, A. L. & Miles, S. (2006). Stakeholders: Theory And Practice: Theory And Practice. Oxford: Oxford University Press. GM Sustainability. (2014). GM Sustainability. Retrieved from http://gmsustainability.com/. GM. (2014). General Motors. Retrieved form http://www.gm.com/ Hart, S. L. (1997). Beyond Greening: Strategies for a Sustainable World. Harvard Business Review, 1-12. Hart, S. L. (2011). Sustainable Value. Retrieved from http://www.stuartlhart.com/sustainablevalue.html Hawkins, D. E. (2006). Corporate Social Responsibility: Balancing Tomorrows Sustainability and Todays Profitability. Basingstoke: Palgrave Macmillan. Jamali, D. (2008). A Stakeholder Approach to Corporatesocial Responsibility: A Fresh Perspective into Theory and Practice. Journal of Business Ethics, 82, 213-231. Mankiw, N. (2011). Principles of economics. Connecticut: Cengage Learning. More, R. (2009). How General Motors’ lost its focus – and its way. Retrieved form http://iveybusinessjournal.com/topics/strategy/how-general-motors-lost-its-focus-and-its-way#.Ux7DfM6dbFw. Quazi, H.A. (2001). Sustainable Development: Integrating Environmental Issues into Strategic Planning. Industrial Management & Data Systems, 101(2), 64-70. Sustainability Report. (2013). Innovative Products. Toyota. Retrieved from http://www.toyota.com.au/toyota/sustainability/cms/download/Innovative_Products_12-15.pdf Toyota Motors. (2011). Toyota’s Social Contribution Activities. Corporate Citizenship. Retrieved form http://www.toyota-global.com/sustainability/report/citizenship/pdf/citizenship.pdf Toyota. (2014). Toyota. Retrieved form http://www.toyota-global.com/ Appendix Figure 1: Harts Sustainability Framework (Source: Hart, 2011) Figure 2: Waste Prevention Initiative of GM (Source: GM Sustainability, 2014) Figure 3: GM Recycled Product Parts in Tons (Source: GM Sustainability, 2014) Figure 4: Stewardship Steps Undertaken by GM (Source: GM Sustainability, 2014) Figure 5: CSR Activities of Toyota (Source: Toyota, 2014) Read More