Social and Environmental Sustainability of Toyota and Starbucks - Assignment Example

Management Accounting Name: Tutor: Course: Date: Social and environmental sustainability of Toyota and Starbucks 1. Environmental and social responsibility of suppliers Many businesses and organizations today have embraced Six Sigma and total quality management which stipulates that suppliers inculcate socially and environmentally friendly operations. Their standards of business practice require them to extend their values to suppliers. Their business relationship with suppliers is based on the belief that these suppliers complies with domestic laws or international conventions on employment, corporate social responsibility, business ethics, environmental protection and labor standards (Murphy 2000). The expectation from suppliers is to comply with social and environmental responsibility similar to the ones valued by the organization. It is important that suppliers commit to maintenance of safe operations and facilities while providing safe goods and mitigating environmental burdens across the life cycle. Codes of supplier standards are company’s total supply chain initiatives which are expected to be channel down to suppliers so as to conform across the supply chain (Toyota Annual report 2001). Companies are upbeat in implementing environmental and social responsibility in their supply chain through frequent, early and proactive participation with principal suppliers in developing partnerships for improvement. 2. Environmental and social terms and conditions on Toyota and Starbucks suppliers Toyota has Basic Policies, CSR Promotion Activities and supplier CSR Guidelines to be followed by suppliers. One principle is working closely with suppliers in manufacturing and recycling of metals and rubber. They share similar issues in building a harmonious and mutual society (Tennenbaum 2008). The ties are also important in promoting the First Customer Policy. The company’s global procurement activities are; fair competition founded on open door policy, mutual benefits founded on mutual trust and good corporate citizenship for local economic vitality. Toyota Supplier CSR Guidelines are mandatory to every supplier. These include procurement or usage materials lawful or obtained ethically. Suppliers should strive for material procurement that is ethically responsible. Toyota ensures usage and procurement of minerals is free from environmental destruction, human rights violations and illegal exploitation (Tennenbaum 2008). An internal team was set in 2011 dubbed Conflicts Minerals Task Force that considered and studied suitable responses regarding conflict minerals while cooperating with overseas and Japanese bodies. Toyota suppliers are mandated to execute own autonomous CSR activities in line with Toyota Supplier CSR Guidelines. If Toyota finds out that materials procured were either unlawful or produced in contravention of human rights, it reserves the right to discontinue its procurement. Starbucks Coffee has taken a holistic approach in ensuring responsible procurement practices, forest conservation programs and farmers loans. The objective is to ensure its coffee is 100% ethically sourced by 2015 (Tennenbaum 2008). The company buys and serves high-quality coffee ethically traded and responsibly grown. Farmer support centers, loan programs, coffee buying practices and forest conservation efforts must be responsible to mitigate the effects of climate change. The approach used is Coffee and Farmer Equity (C.A.F.E). It collaborates with Conservation International (CI) to address environmental concerns and plight of millions of workers. A comprehensive scorecard is used to evaluate Farms and mills complying with social and environmental standards. This is done by SCS Global Services. Suppliers must submit payment evidence across the coffee supply chain to show their markup up to the farmer (Tennenbaum 2008). Third party verifiers hired to ensure protection of workers’ rights, waste management, water quality protection, biodiversity protection and compliance with minimum wage laws. Information received from suppliers, farmers and stakeholders enable improvement of C.A.F.E practices so as to make the participation of farmers more relevant and meaningful. The social and environmental programs are also modified to entail practices that support long-term coffee farm productivity by way of replanting and renovation (Tennenbaum 2008). Suppliers should also ensure that sourced coffee mitigate the impacts farmers experience from climate change. The prerequisites are coffee quality and economic accountability by suppliers. Third parties evaluate the environmental leadership and social responsibility of suppliers. 3. Environmental management accounting system (EMA) EMA is generation and analysis of non-financial and financial information that supports internal environmental management procedures. The purpose is to obtain suitable mechanisms that aid allocation and identification of environmentally associated costs (Vos 2007). The areas of interest are; budgeting, investment appraisal, cost computation, product pricing and environmental project savings. The system is a multi-dimensional framework comprising past and future timeframes, monetary versus physical classifications, external versus internal, long-term versus short-term and ad hoc versus routine. If environmental audit is a principal feature of the system, Environmental management system is achievable (Vos 2007). Toyota in FY2002 promoted a number of initiatives globally including enlargement of environmental improvement expertise starting from production to sales in all locations in the world. Toyota supported activities of firms with respect to consolidated EMS through Toyota Global EMS Liaison (Toyota Annual report 2012). These are firms that shared best practices, promoted cooperation with control firms and hosting training programs for key persons. InFY2000, Toyota engaged in full-scale work of consolidating Japanese and overseas firms participating in sales and production of Toyota automobiles. The initiatives built are reduction of environmental impact undertaken by related companies in the whole lifecycle. Consolidated EMS reinforces risk management through proper monitoring and support depending on production and sales awareness. Consolidate EMS comprises 613 firms comprising overseas distributors, key production companies and others that are not subject (Toyota Annual report 2012). These include; 184 subsidiaries under direct control of TMC and are financially consolidated. 397 were financially consolidated subsidiaries, 5 corporations from other businesses and 27 key leading firms. Toyota Management Corporation jointly adopts draft environmental policies and Toyota Earth Charter. These are based on Toyota guidelines detailing the reduction of CO2 and substances such as waste, water consumption and environmental concerns. Finally, it has to achieve top category environmental responses regarding real conditions in every region and country. Toyota’s Guiding principles comprises of Toyota Earth Charter, Toyota Environmental Action Plan and Annual Environmental policy covering products, production and recycling (Toyota Annual report 2012). By carrying out environmental accounting, Toyota reduces environmental impact due to business actions and associated expenses. Its accounting is classified into maintenance costs and environmental investments. The customer effect which is essential real effects is computed within economic effects while environmental efficiency is based on economic efficiency (Jasch 2006). Likewise, Environmental investments constitute environmental costs extending from the present into the future. Maintenance costs are other environmental costs. In FY2002, Toyota spent 166.3billion yen which was an increase from FY2001 amounting to 1.9% of net sales. R&D expenses on fuel cell vehicles increased leading to this rise. In FY2001, Toyota disclosed environmental accounting information for 6 of its body part manufacturers and increased to 7 in FY2002 (Toyota Report 2001). The same year saw environmental accounting extended to overseas body parts manufacturers. In 2012, the company invested heavily in environmental protection as shown in the table below; Table 1: Toyota sustainability report 2012 Source: Toyota Sustainability report 2012 The table shows that in comparison to the FY2011, water quality improved while Co2 emission reduced. However, there was a remarkable increase in generation of waste products (Toyota Annual report 2012). Toyota endeavors to re-use and recover steam drainage water from any washing equipment, reduce wastes and increase resource efficiency for DC-DC converters. It has also adopted the new piston coating method, soil and groundwater counter measures. Starbucks on the other hand (see Appendix) is greatly proactive in environmental management but do not have any EMS in place. The department of environmental affairs takes a non-traditional approach to sustainability and environmental issues (Inman 2002). In 1992, the company adopted environmental mission comprising waste reduction, energy conservation, green house gas reduction and environmental procurement policies. All the employees are taught on Starbucks environmental commitment (Starbucks 2002). It has a Green Team that implements and develops the Starbucks environmental initiatives. Team members provide feedback on ways to lower environmental impact. Suppliers are given Starbucks Supplier Handbook with environmental policies and goals which are anchored on energy conservation, moderation of engineered products, moderate packaging, paperless administration and wood use efficiency (Inman 2002). The firm is leading in reduction of herbicide and pesticide use. The company consistently assesses compliance with formal regulations and own standards. In place of Environmental Accounting measures, the company instead undertakes audits on suppliers on an on-going basis (Handbook of National Accounting 2003). This is through compliance in environmentally conscious eventual disposal and regulatory environments. There are guidelines on procurement of environmentally friendly products mainly focused on unbleached fiber content, post-consumer recycled materials, energy efficiency, minimum packaging and certified forest products. Starbucks produced discounted commuter mugs to lower paper cup usage (Starbucks Annual Report 2001). The company is also a member of Climate Wise Program that reduces and voluntary tracks greenhouse gas emission. The company also implements a waste reduction policy dubbed ‘reduce, reuse and recycle’ through paperless administration systems. The company has a long-term plan of customer recycling through product design and stewardship (Inman 2002). It is funding the Conservation International's (CI) Conservation Coffee™ and generates resources for five model projects in Africa, Asia and Latin America. An estimated $200,000 is spent annually for 3 years to preservation of high biodiversity areas. The company also implemented the food labeling regulations adopted by NewZealand/Australia Food Association which demands that any genetically modified product be labeled (Handbook of National Accounting 2003). Starbucks has to verify the genetically modified protein presence in highly refined minor elements. An audit in 2011 identified new energy conservation initiatives for manufacturing locations and retail stores, aimed at reducing energy consumption to about 10%. 4. Influence of stakeholders on social and environmental interests of Toyota and Starbucks Companies Since the early 21st century, stakeholders have witnessed increased influence on the firm’s business activities. Consistently integrated have been social responsibility and community citizenship into business management. Toyota and Starbucks communities, customers, business partners, and employees are among principal stakeholder groups that bear the weight in firm’s activities and decisions. Comprehending the impact these stakeholders have on business is critical to Toyota and Starbucks. Based on the recent propagation of terms such as; sustainable development (SD), sustainability, corporate social responsibility (CSR), corporate responsibility (CR),and corporate citizenship, these concepts may not inevitably applied consistently or well understood by associated stakeholders and industry. Close partnership of all the stakeholders helps in addressing the management of all social, environmental, and economic aspects of automobile and beverage business while retaining a business focus through raising financial performance (Goodland 2005). To a portion of the wider public, the concept of Toyota brands and coffee as beverage development is cast in positive light since they are associated with affluence and good life. On the contrary, some in this segment can opt to think of motor vehicles and beverage within the discourse of sustainable development. Nevertheless, Toyota company along with its stakeholders in the vehicle manufacturing industry have embraced sustainable development in striving to produce more accessible, affordable, and increasingly cleaner energy automobiles (Markusson 2009). Moreover, the beverage industry is struggling to produce coffee in more responsible and ethical ways. Consequently, Toyota being a large and more diversified automobile company is communicating on how stakeholder concerns should be addressed through issuance of CSR reports. The selection of suitable performance indicators provided the scope, scale, and complexity of the industry. This is not a surprise since CSR report content is currently a subject of debate. Community and Customers are major stakeholders after taking over as central influence for Toyota and Starbucks companies (Markusson 2009). Though these companies are interested in making profits, they have holistically recognized that long-term relationships and delighted customers are critical in profiting over time and building sustainable success. The two organizations apply a data-driven business marketing process such as customer relationship management (Goodland 2005). They collect customer data for more efficient and targeted sales efforts and marketing. Employees of Toyota and Starbucks comply with social responsibility needs and prioritize on community citizenship which puts employee interests at the center of their business operations. They treat their employees as their most valued assets, active involvement of employees in crucial decisions and promoting a nondiscriminatory work environment. Stakeholder influence affects important decisions that are why these companies have been emphasized on employee environment (Vos 2007). Toyota and Starbucks points out on employee retention through better compensation, work environment and good leadership. The company philosophy is anchored on the awareness that delighted employees give strong customer service. These companies value business partners through popular logistics management system. The supply chain management system (SCM) has emerged in the early 21st century when the social and corporate responsibility issues emerged. SCM constitutes close collaboration between business buyers and suppliers and close working relationship in delivering the best value to end customers and communities (Goodland, 2005). This collaboration between the industry, employees, communities and suppliers has become integral in distribution and logistics as Toyota and Starbucks strengthen focus on customer value, cost reduction, environmental preservation improvement and establishing meaningful relationships among trusted business partners. Reference list Goodland, R 2005, The Concept of Environmental Sustainability, Annual Review of Ecological Systems, 26 (1995): 1-24. Handbook of National Accounting, 2003, Integrated Environmental and Economic Accounting. United Nations, European Commission, International Monetary Fund, Organization for Economic Co-operation and Development and World Bank. Jasch, C 2006, How to perform an environmental management cost assessment in one day, Journal of Cleaner Production 14 (14): 1194–1213. Inman, M 2002, Coffee, Certification, and Consumers. Whole Earth, 108: 25-27. Odum, H.T. (2006) Environmental Accounting: Energy and Environmental Decision Making, Wiley, U.S.A Markusson, N 2009, The Championing of Environmental Improvements in Technology Investment Projects. The Journal of Cleaner Production. New York Murphy, E C 2000, Social Dimensions of Organic Coffee Production in Mexico: Lessons for EcoLabeling. Earth News, 15 (5): 16-18. Starbucks, 2002, Megan Behrbau, Public Affairs. Starbucks Annual Report 2001 Tennenbaum, S E 2008, Network Energy Expenditures for Subsystem Production, MS Thesis. Gainesville, FL: University of FL, 131 pp. (CFW-88-08) Toyota Annual report 2001 Toyota Annual report 2012 Vos, R O 2007, Defining Sustainability: A Conceptual Orientation, Journal of Chemical Technology and Biotechnology, 82: 334-339. Appendix: Starbucks sustainability report 2012 Read More